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PAPER – 3 : TAXATION

Part - II

SECTION A: INCOME TAX LAW

Question No.1 is compulsory.
Candidates are also required to answer any two questions from the remaining
three questions.
Working notes should form part of the respective answers.
All questions relate to Assessment Year 2024-25, unless otherwise stated.

Question 1
(a) Mr. Sahil, resident Indian aged 40 years, a Manufacturer at Chennai, gives
the following Manufacturing, Trading and Profit & Loss Account for the year
ended 31.03.2024.
Manufacturing, Trading and Profit & Loss Account
for the year ended 31.03.2024

Particulars ` Particulars `
To Opening Stock 71,000 By Sales 43,50,000
To Purchase of Raw By Closing Stock 2,00,000
Materials 17,20,500
To Manufacturing
Wages & Expenses 5,80,500
To Gross Profit 21,78,000
Total 45,50,000 Total 45,50,000
To Administrative By Gross Profit 21,78,000
Charges 2,90,000 By Dividend From
To SGST Penalty Paid Domestic Companies 15,000
(It is not compensatory 7,000 By Winning from
nature)
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To GST Paid 1,10,000 Lotteries (Net of TDS) 10,500

(TDS 4,500)
To General Expenses 55,000 By Profit on Sale of
To Miscellaneous Shares 45,000
Expenses 1,50,500
To Loss on Sale of Shares 20,000
To Interest to Bank (on 60,000
Machinery term loan)
To Depreciation 2,00,000
To Net Profit 13,56,000
Total 22,48,500 Total 22,48,500

Following are the further information relating to Financial Year 2023-2024:

(i) Administrative Charges include ` 46,000 paid as commission to brother
of Assessee. The Commission amount at the market rate in ` 36,000.
(ii) The assessee paid ` 33,000 in cash to a Transport Carrier on 26.12.2023.
This amount is included in Manufacturing Expenses. (Assume that the
provisions relating to TDS are not applicable on this payment.)
(iii) A Sum of ` 4,000 per month was paid as salary to a staff throughout the
year and this has not been recorded in books of account.
(iv) Bank Term Loan Interest actually paid upto 31.03.2024 was ` 20,000 and
the balance was paid in October 2024.
(v) Miscellaneous Expenses include ` 10,000 contributed to Prime Minister's
Relief Fund.
(vi) Loss on Sale of Shares represents shares sold within a period of 6 months
from the date of purchase.
(vii) Profit on Sale of Shares represents shares held for 2 years & Securities
Transaction Tax was paid on it.
(viii) Housing Loan Principal repaid during the year was ` 50,000 and it relates
to residential property occupied by him. Interest on Housing Loan was
` 2,60,000. Housing Loan was taken from Canara Bank. (Value of house
property is ` 45 Lakhs, loan value ` 25 Lakhs and sanction date 31.03.2017).

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These amounts were not dealt with in the Profit and Loss Account given
above. (Assume this housing loan is eligible for 80EE deduction).
(ix) Deprecation allowable under the Act to be computed on the basis of
following information:

Plant & Machinery (Depreciation Rate @15%) `

Opening WDV (as on 01.04.2023) 12,00,000
Additions During the year (Used for more than 180 Days) 2,00,000
Total Additions during the year 4,00,000
Note: Ignore Additional Depreciation u/s 32(1)(iia)

Compute the total income and tax liability of Mr. Sahil for the A.Y. 2024 -25
if he has exercised the option of shifting out of the default tax regime
provided under Section 115BAC(1A). (15 Marks)
Answer
Computation of total income and tax liability
of Mr. Sahil for A.Y. 2024-25
Particulars ` `
I Income from house property
Annual value of self-occupied property Nil
Less: Deduction under section 24(b)
Interest on housing loan of ` 2,60,000 2,00,000
restricted to ` 2,00,000
(2,00,000)
II Profits and gains of business or profession
Net Profit 13,56,000
Add: Expenses debited to Profit and loss
A/c but not allowable as deduction or to be
considered under other head
- Commission paid to brother [Commission 10,000
paid to a related person/relative to the
extent it is excessive to market rate is
disallowed under section 40A(2)]

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- Cash payment to a Transport Carrier [Not Nil

disallowed under section 40A(3) since the
limit for one time cash payment is
` 35,000 in respect of payment to
transport operators]
- Interest to bank on term loan [Interest 40,000
paid to bank after the due date of filing of
return under section 139(1) is disallowed
as per section 43B]
- Contribution to Prime Minister’s Relief 10,000
Fund [Not allowable since the same is not
incurred wholly and exclusively for
business purpose]
- SGST Penalty paid [SGST penalty paid is 7,000
not compensatory in nature and
therefore, not allowable]
- Loss on sale of shares 20,000
- Depreciation as per books of account 2,00,000
16,43,000
Less: Incomes credited to profit and loss
account but not taxable as business income
- Dividend from Domestic Companies 15,000
- Winnings from lotteries 10,500
- Profit on sale of shares 45,000
15,72,500
Less: Depreciation allowable as per Income-
tax Rules,1962
- On Plant & Machinery [@15% on
` 14,00,000, being opening WDV of
` 12 lakhs and additions put to use for more
than 180 days of ` 2 lakhs + @7.5% on
` 2,00,000, being additions put to use for
less than 180 days] 2,25,000
13,47,500

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[8% of sales i.e. ` 43,50,000 x 8%1 assuming 3,48,000

entire amount of sales are not received by A/c
payee cheque or A/c payee draft or ECS or
other electronic prescribed modes]
Business Income 13,47,500
[As per section 44AD, in case of Mr. Sahil, being
an eligible assessee, a sum equal to ` 3,48,000
(8%1 of total turnover i.e., ` 43,50,000) or as
the case may be, a sum higher than the
aforesaid sum claimed to have been earned by
him would be deemed to be the business
income. In this case, since Mr. Sahil has
maintained books of account, he can claim the
higher sum actually earned ` 13,47,500 as his
income from business.] (See Note below the
solution for alternate answer)
Less: Set off of loss from house property as 2,00,000
per section 71(3A)
11,47,500
Add: Salary paid to staff not recorded in the 48,000
books [Assuming the expenditure is in the 11,95,500
nature of unexplained expenditure, the same
is deemed to be income as per section 69C of
Mr. Sahil. No deduction would be allowed in
respect of such expenditure.]
Alternatively, it is possible to assume that the
salary not recorded in the books of account was
an erroneous omission and the assessee has
offered satisfactory explanation about the
source of such expenditure. In such a case, it
would not be considered as deemed income
and the same would be allowed as deduction

1
If it is assumed that the entire sales are received by A/c payee cheque or A/c payee draft or
ECS or other electronic prescribed modes on or before due date of filing return of income, the
presumptive rate would be 6%.

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while computing business income on the basis

of books of accounts. In such a case, business
income, total income and tax liability (rounded
off) would be ` 10,99,500, ` 10,44,500 and
` 1,23,080.
III Capital Gains
Long term capital gains taxable u/s 112A 45,000
[Since shares are held for 2 years and STT has
been paid]
Less: Set off of short term capital loss as per 20,000 25,000
section 70(2)
IV Income from Other Sources
Dividend from Domestic Companies 15,000
Winning from lotteries (` 10,500 + ` 4,500) 15,000
30,000
Gross Total Income 12,50,500
Less: Deduction under Chapter VI-A
Deduction under section 80C
Principal repayment of housing loan 50,000
Deduction under section 80EE
Interest on housing loan of ` 60,000 50,000
[` 2,60,000 – ` 2,00,000, allowed u/s 24(b)]
allowable under section 80EE upto ` 50,000
Deduction under section 80G
Contribution to Prime Minister’s Relief Fund 2 10,000 1,10,000
Total Income 11,40,500
Tax Liability
Tax on LTCG of ` 25,000 u/s 112A [Exempt Nil
upto ` 1 lakh]
Tax on winning from lotteries of ` 15,000 4,500
@30%

2
Assuming contribution is made otherwise than by way of cash

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Tax on unexplained expenditure of ` 48,000 28,800

@60%
Tax on balance income of ` 10,52,500 at slab
rate
Upto ` 2,50,000 Nil
From ` 2,50,001 to ` 5,00,000 @5% 12,500
From ` 5,00,001 to ` 10,00,000 @20% 1,00,000
From ` 10,00,001 to ` 10,52,500 @30% 15,750 1,28,250
1,61,550
Add: Surcharge @25% on tax on unexplained
expenditure of ` 28,800 7,200
1,68,750
Add: Health and education cess @4% 6,750
Tax Liability 1,75,500

Note – Alternatively, if Mr. Sahil claims his business income as ` 3,48,000 i.e.,
8%3 of total turnover under section 44AD, his total income and tax liability would
undergo a change.
Question 2
(a) Mr. Tilak aged 35 years, furnishes the following information regarding his
income for the assessment year 2024-25. Compute the total income if he is:
(1) Resident and Ordinarily Resident.
(2) Resident but Not Ordinarily Resident
(Ignore the provisions of Section 115BAC).
(a) Remuneration of ` 50,000 for service rendered in Malaysia, credited to
his bank account in Malaysia and immediately remitted to his bank
account in India.
(b) Profits from a business in England controlled from Bombay ` 3,00,000
(out of which ` 25,000 is received in India).

3
If it is assumed that the entire sales are received by A/c payee cheque or A/c payee draft or
ECS or other electronic prescribed modes on or before due date of filing return of income, the
presumptive rate would be 6%.

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(c) Amount brought to India out of past untaxed profits earned in Singapore
` 1,00,000.
(d) Capital gain on sale of land in India but received in Malaysia
` 2,00,000.
(e) Income from agriculture land at Nepal of ` 18,000, received there and
then brought to India.
(f) He paid ` 50,000 towards principal payment of loan taken for
construction of his self-occupied house in India.
(g) Interest on saving bank deposit in State Bank of India of ` 12,000.
(6 Marks)
(b) Examine the applicability of Tax Deduction at Sources (TDS) or Tax Collection
at Source (TCS) as per the Income Act, 1961 for the assessment year 2024-
25 in the following independent situations.
(i) ABC Limited paid rent of ` 75,000+18% GST per month to Mr. Ram for
the office premises from 01.04.2023 to 31.03.2024. Mr. Ram has
furnished his PAN and also filed his return of income before due date
regularly.
(ii) XYZ Pvt. Ltd sells two cars to Mrs. Anju costing ` 4,00,000 and
` 12,00,000 respectively on 01.05.2023 and 25.12 2023. Mrs. Anju has
furnished her PAN and filed her return of income regularly before the
due date. (4 Marks)
Answer
(a) Computation of total income of Mr. Tilak for the A.Y. 2024-25
(if he is Resident and Ordinarily Resident - ROR)

Particulars `
(a) Remuneration for services rendered in Malaysia 50,000
Global income is taxable in case of a ROR.
[Note – Alternatively, remuneration for services
rendered in Malaysia can be taxable as “Salaries”. In such
case standard deduction of ` 50,000 would be reduced.]

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(b) Profit from business in England controlled from 3,00,000

Bombay
Global income is taxable in case of a ROR.
(c) Past untaxed profits earned in Singapore and Nil
brought to India in current year
(d) Capital gain on sale of land in India but received in 2,00,000
Malaysia
Deemed to accrue or arises in India, since the property is
situated in India.
(e) Income from agricultural land in Nepal, received 18,000
there
Global income is taxable in case of a ROR
(f) Interest on saving bank deposit in SBI
Taxable since it is deemed to accrue or arises in India. 12,000
Gross Total Income 5,80,000
Less: Deduction under Chapter VI-A
Deduction under section 80C - For repayment of 50,000
housing loan
Deduction under section 80TTA - Interest on savings
bank account subject to a maximum of ` 10,000 10,000
Total Income 5,20,000

Computation of total income of Mr. Tilak for the A.Y. 2024-25

(if he is Resident but Not Ordinarily Resident - RNOR)

Particulars `
(a) Remuneration for services rendered in Malaysia Nil
In case of RNOR, remuneration would not be taxable in
India since neither services are rendered in India nor
remuneration received in India.
(b) Profit from business in England controlled from 3,00,000
Bombay
In case of RNOR, whole profits of ` 3,00,000 from
business in England is taxable since business is
controlled from India.

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(c) Past untaxed profits earned in Singapore and Nil

brought to India in current year
(d) Capital gain on sale of land in India but received in 2,00,000
Malaysia
Deemed to accrue or arises in India, since the property is
situated in India.
(e) Income from agricultural land in Nepal, received Nil
there
In case of RNOR, it would not be taxable in India, since
neither it is deemed to accrue or arise in India nor
received in India.
(f) Interest on saving bank deposit in SBI
Taxable since it is deemed to accrue or arises in India. 12,000
Gross Total Income 5,12,000
Less: Deduction under Chapter VI-A
Deduction under section 80C - For repayment of 50,000
housing loan
Deduction under section 80TTA - Interest on savings
bank account subject to a maximum of ` 10,000 10,000
Total Income 4,52,000
(b) (i) ABC Limited is required to deduct tax at source under section 194-I
@10% on rent of ` 75,000 per month exclusive of GST component,
since the aggregate rent of ` 9,00,000 during the financial year exceeds
the threshold limit of ` 2,40,000.
Tax has to be deducted at the time of payment or credit, whichever is
earlier.
(ii) XYZ Pvt. Ltd. is not required to collect tax at source on sale of car of
` 4,00,000 to Mrs. Anju since its value does not exceed ` 10 lakhs.
However, it is required to collect tax at source u/s 206C(1F) @1% on
the total sale consideration of ` 12 lakhs since the value of this car
exceeds ` 10 lakhs.
Tax has to be collected at the time of receipt of ` 12 lakhs.

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Question 3
(a) (i) Mr. Ravi received an advance of ` 2,00,000 on 10.5.2023 from a closely
held manufacturing company (private company in which the public are
not substantially interested) in which he holds 22% shareholding. The
company had an accumulated profit of ` 1,00,000 at the time of giving
the advance. Compute the amount of income to be included in the hands
of Mr. Ravi for the assessment year 2024-25 and also state the head
under which it is to be included. (2 Marks)
(ii) Mr. Rao finished the following information regarding the payments
made towards Scientific Research during the financial year 2023-24:
(i) Revenue expenditure on Scientific Research incurred during the year
` 1,00,000.
(ii) Capital Expenditure for Scientific Research ` 3,00,000.
(iii) Contribution to Notified approved research association ` 1,50,000.
(iv) Amount paid to H Limited an Indian company which has as its main
object scientific research and approved by the prescribed authority
` 2,50,000.
(v) Expenditure of ` 2,50,000 towards purchase of Land for scientific
research.
(vi) He also incurred revenue expenditure of ` 2,00,000 towards salary
of research staff in the F.Y.2022-23 (before commencement of
business) and certified by the prescribed authority.
Compute the deduction allowable u/s 35 for the assessment year 2024-25,
assuming that he has not opted for default tax regime u/s 115BAC.
(b) Mr. Surinder furnishes the following particulars for the previous year ending
31.03.2024. He had a Residential House, inherited from his father in
December 2009, the Fair Market Value of which on 01.04.2001 is ` 13 lakhs.
In the year 2013-2014, further construction and improvements costing of
` 10 lakhs. The House was originally purchased by his father on 01.03.2000
for ` 10 Lakhs. On 10.05.2023, the House was sold for ` 75 Lakhs. Expenditure
in connection with transfer is ` 50,000. On 20.12.2023, he purchased a
Residential House for ` 12 lakhs and he does not own any other house.
Compute the taxable Capital Gain for the assessment year 2024-25.

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(Cost Inflation Index: F.Y. 2013-14=220, F.Y.2023-24=348, F.Y. 2009-10

= 148 and F.Y. 2001-02=100) (4 Marks)
Answer
(a) (i) In the present case, the amount of advance of ` 2,00,000 received by
Mr. Ravi from closely held manufacturing company would be deemed
as dividend to the extent of accumulated profit of ` 1,00,000, since Mr.
Ravi holds 22% shareholding in the company which is not less than
10% of the voting power in the company.
Accordingly, deemed dividend of ` 1,00,000 would be taxable in the
hands of Mr. Ravi under the head “Income from Other Sources” for the
A.Y. 2024-25.
(ii) Computation of deduction allowable u/s 35 for the A.Y. 2024-25

Particulars `
(i) Revenue expenditure on scientific research 1,00,000
allowable as deduction u/s 35(1)(i), assuming such
expenditure is related to his business.
(ii) Capital expenditure allowable as deduction u/s 3,00,000
35(1)(iv), assuming such expenditure is incurred
for his business.
(iii) Contribution to notified approved research 1,50,000
association for scientific research – 100% of the
amount paid is allowed as deduction u/s 35(1)(ii).
(iv) Amount paid to H Ltd., an Indian company 2,50,000
approved by the prescribed authority - 100% of
the amount paid is allowed as deduction u/s
35(1)(iia)
(v) Expenditure towards purchase of land – not Nil
allowed as deduction
(vi) Revenue expenditure towards salary of research 2,00,000
staff incurred in the F.Y. 2022-23 (before
commencement of business) – allowed as
deduction u/s 35(1)(i) in the P.Y. 2023-24 as it was
expended within the 3 years immediately

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preceding the commencement of business

(assuming business is commenced during the P.Y.
2023-24).
Note - Since the date of commencement of
business is not given, an alternative view is possible
that the business is commenced during the F.Y.
2022-23 itself. In that case, deduction for revenue
expenditure incurred towards salary of research
staff in F.Y. 2022-23 before commencement of
business would have been allowed in the F.Y.
2022-23 and accordingly, no deduction would be
available in F.Y. 2023-24.
Total deduction allowable 10,00,000

(b) Computation of Taxable Capital Gains for A.Y.2024-25

Particulars `
Full Value of Consideration 75,00,000
Less: Expenditure in connection with transfer 50,000
Net Sales Consideration 74,50,000
Less: Indexed cost of acquisition [` 13,00,000 (higher of 45,24,000
actual cost to the previous owner of ` 10 lakhs and Fair
market value as on 1.4.2001 of ` 13 lakhs) x 348/100]
Less: Indexed cost of improvements [` 10 lakhs x 348/220] 15,81,818
13,44,182
Less: Exemption u/s 54 – in respect of residential house 12,00,000
purchased on 20.12.2023
Taxable Long Term Capital Gains 1,44,182

Note – The above answer is on the basis of the view expressed by Bombay High
Court in CIT v. Manjula J. Shah 16 Taxman 42, wherein it was held that
Indexed cost of acquisition in case of gifted asset has to be computed with
reference to the year in which the previous owner first held the asset and not
the year in which the assessee became the owner of the asset.
Alternative answer is possible on basis of the plain reading of the provisions
of section 48 wherein the indexed cost of acquisition would be determined by
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taking the Cost Inflation Index (CII) for the year in which the asset is first held
by the assessee i.e. F.Y.2009-10. In such a case, the Indexed cost of acquisition
would ` 30,56,757 (` 13,00,000 x 348/148) and taxable long term capital
gains would be ` 16,11,425.
Question 4
(a) Mr. Joshi, resident Indian, aged about 58 years, furnished the following
details of his income for the previous year 2023-24:
(i) Income from House property (computed) ` 2,00,000.
(ii) Income from Proprietary Business ` 3,00,000.
(iii) Short Term Capital Gain on sale of Land ` 2,00,000.
(iv) Short Term Capital loss on sale of equity shares listed in recognized stock
exchange (STT paid) ` 75,000.
(v) Interest on Bank fixed deposit ` 50,000 received by his son, aged 21
years, out of money gifted by Mr. Joshi in 2022.
(vi) Loss from Speculation Business ` 40,000.
(vii) Loss from Owning and Maintenance of Race Horses ` 50,000.
Following are the brought forward losses:
(a) Brought forward House property loss of assessment year 2021 -22
` 2,50,000.
(b) Brought forward business loss of Proprietary business from assessment
year 2013-14 ` 50,000.
(c) Unabsorbed Depreciation relating to assessment year 2014-15
` 1,00,000.
(d) Brought forward Long Term Capital Loss from assessment year
2018-19 ` 90,000. Return of income for that year was filed on
31.01.2019, after due date of filing the return.
Compute the total income of Mr. Joshi for the assessment year 2024-25 and
show the items eligible for carry forward, assuming that he exercises the
option of shifting out of the default tax regime provided under Section
115BAC(1A). (6 Marks)

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(b) State with reason whether the following persons are required to file their
return of income as per the provisions of the Income Tax Act, 1961 for the
assessment year 2024-25:
(i) Mr. Aneesh aged 31 years, who opted for default tax regime u/s
115BAC(1A) had a total income of ` 2,90,000 for the previous year
2023-24.
(ii) Smt. Patel, aged 65 years, has a TDS credit of ` 55,000 during the
previous year 2023-24.
(iii) The gross receipts of Mr. Ajit, aged 45 years, an architect for the previous
year 2023-24 was ` 12,00,000, but his profit from profession was only
` 2,25,000 and he has no other income. (4 Marks)
OR
(b) CBDT has vide Notification No. 37/2022 dated 21.04.2022, inserted Rule
12AB, notified which are all the person other than a company or firm who is
not required to file return of income under Section 139(1) must file the return
of Income. State who are required compulsorily to file return of Income.
(4 Marks)
Answer
(a) Computation of total income of Mr. Joshi for the A.Y.2024-25

Particulars `
Income from house property 2,00,000
Less: Set-off of brought forward loss from 2,00,000 Nil
house property of A.Y. 2021-22 is allowed, since
8 years period not yet lapsed
Profits and gains from business or
profession
Income from proprietary business 3,00,000
Less: Set off of brought forward business loss of Nil
A.Y. 2013-14 not allowable as 8 years’ time has
already lapsed in the A.Y. 2021-22
Less: Set off of unabsorbed depreciation of A.Y. 1,00,000 2,00,000
2014-15

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[Note – Alternatively, unabsorbed depreciation

can be set-off against short-term capital gains]
Capital Gains
Short-term capital gain on sale of land 2,00,000
Less: Set-off of short-term capital loss on sale 75,000 1,25,000
of listed equity shares
Brought forward long-term capital loss is not
allowed to be carried forward and set-off, since
return of income for the A.Y. 2018-19 was filed
after the due date of filing return of income.
Income from Other Sources
Interest on fixed deposit not includible in the Nil
hands of Mr. Joshi since his son is major
Gross Total Income 3,25,000
Less: Deduction under Chapter VI-A Nil
Total Income 3,25,000

Items eligible for carried forward

(i) Loss from speculation business of ` 40,000 can be set-off against
income from speculation business only. Hence, such loss would be
carried forward to subsequent assessment year.
(ii) Loss from owning and maintenance of race horses ` 50,000, can be
set-off against income from income from owning and maintenance
of race horses only. Thus, such loss would be carried forward to
subsequent assessment year.
(iii) Brought forward loss from house property can be set off only against
income of house property. Hence, remaining loss of ` 50,000 has to
be carried forward to subsequent assessment year.

(b) [First Alternative]

(i) In this case, Mr. Aneesh is not required to file return of income, since
his total income does not exceed ` 3,00,000, being the basic exemption
limit as per the default tax regime u/s 115BAC, assuming Mr. Aneesh

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has not claimed any deduction u/s 54/54D/54EC or 54F and deduction
allowable under Chapter VI-A.
(ii) In the present case, since Smt. Patel, a senior citizen has a TDS credit
of ` 55,000, which exceeds the threshold limit of ` 50,000, she is
required to file her return of income even if it is assumed that her total
income does not exceed the basic exemption limit.
(iii) In this case, since Mr. Ajit’s gross receipts from the profession of
architect was ` 12,00,000 for the P.Y. 2023-24, which is in excess of
` 10 lakhs, hence, he is required to file his return of income though his
total income is ` 2,25,000 which does not exceed the basic exemption
limit.
[Second Alternative]
The CBDT has, vide Notification No. 37/2022 dated 21.4.2022, inserted Rule
12AB to provide that a person, other than a company or a firm, who is not
required to furnish a return under section 139(1), and who fulfils any of the
following conditions during the previous year has to file their return of
income on or before the due date in the prescribed form and manner –
(i) if his total sales, turnover or gross receipts, as the case may be, in the
business > ` 60 lakhs during the previous year; or
(ii) if his total gross receipts in profession > ` 10 lakhs during the previous
year; or
(iii) if the aggregate of TDS and TCS during the previous year, in the case
of the person, is ` 25,000 or more; or
However, a resident individual who is of the age of 60 years or more,
at any time during the relevant previous year (or senior citizen) would
be required to file return of income only, if the aggregate of TDS and
TCS during the previous year, in his case, is ` 50,000 or more
(iv) the deposit in one or more savings bank account of the person, in
aggregate, is ` 50 lakhs or more during the previous year.

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SECTION B: GOODS AND SERVICES TAX

1. Section B comprises of questions from 5-8. In Section B, answer question no.
5 which is compulsory and any two questions from question nos. 6-8.
2. Working notes should form part of the answer.
3. All questions in Section B should be answered on the basis of position of GST
law as amended by Finance Act, 2023 and the significant notifications/
circulars issued upto 31 st October, 2023.

Question 5
(a) Evershine Pvt. Ltd., a GST registered supplier located in Jaipur, Rajasthan is
engaged in taxable supply of packaging goods and consultancy services. It
provides following details of various activities undertaken during the month
of September, 2023:
(A) Details of Outward Supplies:
(1) Supply of goods of ` 18,00,000 to Vaidehi Enterprises, a registered
person of Udaipur, Rajasthan. Further, received ` 50,000 from
Vaidehi Enterprises towards freight charges (as agreed to deliver the
goods at Vaidehi Enterprises' premises) which was not included in
above value of supply.
(2) Supply of goods worth ` 35,00,000 to Calc. Exim, a registered person
of Prayagraj, Uttar Pradesh. Further, the amount of ` 60,000
charged separately (not included above) from Calc. Exim on account
of municipal taxes levied in relation to such outward supply.
(3) Supply of services to Sunshine Ltd., a registered person in Jodhpur,
Rajasthan before discount worth ` 6,00,000. Further, discount of
` 30,000 which has been given at the time of supply of service and
duly recorded in the invoice.
(4) It delivered the goods worth ` 2,00,000 to Jeevan Solutions, a
registered person located at Bikaner, Rajasthan on the direction of
Raghu Enterprise, a registered person of Mumbai, Maharashtra and
tax invoice was issued by Evershine Pvt. Ltd. to Raghu Enterprise of
Mumbai, Maharashtra.

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(B) Details of Inward Supplies:

(1) Purchased raw material goods worth ` 20,00,000 from PQR Ltd; a
GST registered dealer, located at Kanpur, Uttar Pradesh. Goods
worth ` 1,00,000 out of total purchases were not received during the
month.
(2) Purchased machinery for manufacturing process worth ` 2,00,000
from MPQ Pvt. Ltd., a GST registered dealer, located at Bengaluru,
Karnataka. Company has claimed depreciation under Income Tax
Act 1961 on full value of the machine, including the GST component.
(3) Purchased truck worth ` 15,00,000 from GST registered dealer,
located at Ajmer, Rajasthan for transportation of its goods. GST rate
on truck is: CGST 14%, SGST 14%, IGST 28%.
(4) Purchased car (having seating capacity of 7 persons) costing to
` 10,00,000 excluding GST from Mihir Automobiles Pvt. Ltd., a GST
registered dealer, located at Ajmer, Rajasthan for use of its director
for official purpose. GST rate on car: CGST 14%, SGST 14%, IGST
28%
(5) Purchased goods worth ` 5,00,000 from DEF Buildwell Pvt. Ltd., a
registered person of Jaipur, Rajasthan for construction of an
additional floor of factory building, of Evershine Pvt. Ltd.
Opening balance of Input tax credit as on the beginning of
September 2023-CGST ` 20,000, SGST ` 50,000 and IGST ` 75,000.
Rate of GST applicable on both inward and outward supply of goods
& services: CGST 9%, SGST 9% and IGST @18%, except where
otherwise provided.
Notes:
(i) All the figures mentioned above are exclusive of taxes.
(ii) Subject to the information given above, conditions necessary for
claiming ITC were complied with.
(iii) All inward supplies are used for taxable goods only.
(iv) Brief and suitable notes should form part of your answer.

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Calculate the amount of net minimum GST payable in cash by Evershine Pvt.
Ltd. for the month of September, 2023. (10 Marks)
(b) Mr. Ravindra, a registered person in Bhopal, Madhya Pradesh has provided
the following information regarding outward transactions made during the
month of January, 2024:
(1) He was appointed by recognized sports body as a chief selector of
hockey team and received ` 5,00,000 as remuneration.
(2) Services of pure labour contract was provided for construction of
independent residential unit for ` 1,80,000.
(3) He rented out his warehouse for warehousing of sugarcane and
received rental income of ` 75,000.
(4) Provided services to Municipal Corporation of Bhopal for slum
improvement and upgradation for ` 6,50,000.
(5) He has charged consideration of ` 1,25,000 against western music
dance performance in an event.
You are required to compute the taxable value of supply on which GST is to
be paid by Mr. Ravindra for the month of January, 2024. All the amount
stated above are exclusive of GST, wherever applicable.
Suitable Notes should form part of answer. (5 Marks)
Answer
(a) Computation of minimum net GST payable in cash by Evershine Pvt.
Ltd. for the month of September 2023

Particulars Value of CGST @ SGST @ IGST @

supply (`) 9% (`) 9% (`) 18% (`)
Output tax payable
Intra-State Place of 18,50,000 1,66,500 1,66,500 Nil
supply of goods supply is
to Vaidehilocation
Enterprises where
[Since arranging movement
freight is the of goods
liability of terminates

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supplier, it is a
composite
supply and thus,
freight charges
are added to the
value of
principal
supply.]
Inter-State 35,60,000 Nil Nil 6,40,800
supply to Calc.
Exim
[Municipal tax is
includible in
value since it is a
tax levied under
a law other than
GST law and is
charged
separately.]
Intra-State supply to 5,70,000 51,300 51,300 Nil
Sunshine Ltd.
[Place of supply is location of
recipient. Discount given at
the time of supply is
deductible from the value
since duly recorded in the
invoice.]
Inter-State supply to Raghu 2,00,000 Nil Nil 36,000
Enterprise
[Place of supply in case of bill
to ship model is principal
place of business of a third
person at whose instructions
the goods are delivered by
supplier to recipient. Thus, it

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is considered as Inter State

supply.]
Total output tax 2,17,800 2,17,800 6,76,800
Less: ITC available [Refer Nil Nil (4,17,000)
note below]
[IGST credit to be utilized
first towards payment of
IGST.]
CGST credit utilized for (2,17,800) Nil (12,200)
payment of CGST and IGST in
that order
SGST credit utilized for Nil (2,17,800) (42,200)
payment of SGST and IGST in
that order
Minimum net GST payable Nil Nil 2,05,400
in cash

Working Note:
Computation of ITC available

Particulars Value CGST SGST IGST

(`) (`) (`) (`)
Opening balance 20,000 50,000 75,000
Inter-State 19,00,000 Nil Nil 3,42,000
purchase of raw Place of [19,00,000
material supply is × 18%]
[ITC is not location
available on where
goods worth movement
` 1,00,000 since of goods
not received terminates.
during the
month.]
Purchase of 2,00,000 Nil Nil Nil
machinery

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[ITC is not
available since
depreciation has
been claimed on
the GST
component.]
Intra-State 15,00,000 2,10,000 2,10,000 Nil
purchase of [15,00,000 [15,00,000
truck1 × 14%] × 14%]
[ITC on motor
vehicles used for
transportation
of goods is
available.]
Purchase of car 10,00,000 Nil Nil Nil
[ITC on motor
vehicles for
transportation
of persons with
seating capacity
up to 13 persons
(including
driver), is
blocked, except
when used for
specified
purposes.]
Purchase of 5,00,000 Nil Nil Nil
goods for
construction of
an additional
floor2

1
It is logically assumed that depreciation is not claimed on trucks.
2
It is logically assumed that amount spent on purchase of goods is capitalized in the books.

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[ITC on goods
used in
construction of
immovable
property (other
than plant or
machinery) on
one’s own
account is
blocked if
capitalized in the
books.]
Total 2,30,000 2,60,000 4,17,000
Note – In above answer, where location of supplier and place of supply are
in two different States, it is an inter-State supply and where location of
supplier and place of supply are in same State, it is an intra-State supply.

(b) Computation of taxable value of supply on which GST is to be paid by

Mr. Ravindra

Particulars Amount
(`)
Remuneration received as a chief selector of hockey team. 5,00,000
[Taxable since services provided to a recognised sports body
by an individual only as a player, referee, umpire, coach or
team manager are exempt.]
Service of pure labour contract for construction of NIL
independent residential unit
[Services of pure labour contracts of construction of original
works pertaining to a single residential unit otherwise than
as a part of a residential complex are exempt.]
Rental income from warehousing of sugarcane NIL
[Warehousing of sugarcane being an agricultural produce is
exempt.]

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Services to Municipal Corporation of Bhopal for slum NIL

improvement and upgradation*
[Services provided to a Local Authority by way of slum
improvement and upgradation are exempt.]
Consideration received against western music dance 1,25,000
performance in an event
[Taxable, since the amount received for western music dance
performance but the exemption is available for performance in
folk or classical art forms of music or dance. if the
consideration charged for such performance is not more than
` 1,50,000.]
Value of taxable supply on which GST is to be paid by Mr. 6,25,000
Ravindra

*Note: It has been assumed that either the services provided are pure services or
composite supply where value of supply of goods is upto 25% of value of such supply
and consequently, said supply has been considered as exempt from GST.

However, it is also possible to assume that it is a composite supply with value of

supply of goods more than 25% of value of such supply. In that case, said supply
will be liable to GST.

Question 6
(a) As per the CGST Act 2017, Vishnu Limited was not mandatorily required to
get registered, however it opted for voluntary registration and applied for
registration on 12 thFebruary 2024. Registration certificate has been granted
by the Department on 24 th February 2024, Vishnu Limited is not engaged in
making inter-State outward taxable supplies. The CGST and SGST liability for
the month of February, 2024 is ` 31,000 each. Vishnu Limited provides the
following information of goods held in stock on 23 rd February 2024:

Sr. Particulars Amount

No. (`)
1. Capital goods procured on 5th February 2024, (Rate of 2,00,000
CGST and SGST @ 6% each) being intra State supply.

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2. Inputs contained in finished goods stock held were 3,00,000

procured on 13th February 2023
(Rate of IGST @18%) being inter-State supply.
3. Value of Inputs received on 10th October, 2023 contained 2,50,000
in semi–finished goods held in stock
(Rate of CGST and SGST @ 6% each) being intra-State
supply.
4. Inputs procured on 1st February 2024 lying in stock of 1,50,000
semi -finished goods
(Rate of CGST and SGST @ 7.5 % each) being intra-State
supply.
5. Inputs procured on 8th February 2024 lying in stock of 60,000
finished goods.
(Rate of IGST @ 18%) being inter-State supply.

You are required to determine the eligible ITC available and amount of net
minimum GST to be paid in cash by Vishnu Limited for the month of
February 2024. (5 Marks)
(b) Examine the following independent cases and determine the place of supply:
(1) Mr. Joy, an unregistered person of Kolkata, West Bengal sends a
courier through Kolkata, West Bengal based Mohan Courier Agency
to his sister in Mumbai, Maharashtra.
(2) Mr. Nitin, an unregistered person, resides at Rewa, Madhya Pradesh
books a two way air journey ticket from Prayagraj, Uttar Pradesh to
Jaipur, Rajasthan on 6 September and back. He leaves Prayagraj on
11 September in a morning flight and land in Jaipur the same day. He
leaves Jaipur on 15 September in a late night flight and lands in
Prayagraj the next day.
(3) Rimjhim Pvt. Ltd, located at Lucknow, Uttar Pradesh, purchases a
manufacturing machine from Manav Steel Industries Ltd., located at
Jaipur, Rajasthan, for being installed in its factory located at
Haridwar, Uttarakhand. (5 Marks)

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Answer
(a) Computation of minimum net GST to be paid in cash by Vishnu Limited
for the month of February 2024

Particulars CGST (`) SGST (`)

Output tax liability for the month 31,000 31,000
Less: Input tax credit (ITC) [Refer 5,400 (IGST) 5,400 (IGST)
note below]
25,600 (CGST) 25,600 (SGST)
IGST credit is utilized first for
payment of CGST and SGST liability
in equal proportion. CGST credit is
utilized for payment of CGST
liability and SGST credit is utilized
for payment of SGST liability.
Net GST payable (in cash) Nil Nil

Note: Person taking voluntary registration can avail ITC on inputs

contained in semi-finished or finished goods held in stock on the day
immediately preceding the date of grant of registration, i.e. on 23.02.2024,
only within 1 year from date of issue of tax invoice by supplier.
Computation of eligible ITC available3

Particulars CGST SGST IGST

(`) (`) (`)
Capital goods Nil Nil Nil
[Person taking voluntary registration cannot
avail ITC on capital goods held on the day
immediately preceding the date of grant of
registration.]
Inputs procured on 13 th February 2023 Nil Nil Nil

3
It is assumed that amounts mentioned in the question are exclusive of GST. However,
it is also possible to solve the question by assuming the amounts given in the question
to be inclusive of tax.

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Inputs procured on 10 th October 2023 15,000 15,000 Nil

Inputs procured on 1 st February 2024 11,250 11,250 Nil
Inputs procured on 8 th February 2024 Nil Nil 10,800
Total ITC 26,250 26,250 10,800

Note: In the above answer, minimum net GST to be paid in cash has been computed by
setting off the IGST liability in equal proportion so as to minimize the amount of CGST
and SGST payable in cash. Resultantly, Net GST payable (in cash) is Nil each under
CGST and SGST.
However, 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
other possible ways as well.

(b) (1) The place of supply of services by way of transportation of goods by

courier provided to an unregistered person is the location at which such
goods are handed over for their transportation.
Therefore, the place of supply, in the given case is Kolkata, West Bengal.
(2) The place of supply of passenger transportation service to an
unregistered person is place where the passenger embarks on the
conveyance for a continuous journey wherein the return journey is
treated as a separate journey, even if the tickets for onward and
return journey is issued at the same time.
Therefore, the place of supply for the outward and return journey
are the locations where Mr. Nitin embarked on the conveyance for
the continuous journey, i.e. Prayagraj, Uttar Pradesh for outward
journey and Jaipur, Rajasthan, for return journey.
(3) If the supply involves goods which are to be installed at site, the
place of supply is the place of such installation.
Therefore, the place of supply, in the given case is Haridwar,
Uttarakhand.
Question 7
(a) GSTR 3B for the month of January 2024 has been filed by M/s Avisha Limited,
a registered person, within the due date prescribed by the CGST Act 2017
which is on February 20 th, 2024. It came to the notice of the Co. that tax due

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for the month of January, 2024 has been paid short by ` 16,000. The short
fall of ` 16,000 has been paid through cash ledger and credit ledger at the
time of filing GSTR 3B for the month of February 2024 on March 20 th, 2024
in the following manner:

Particulars Cash Ledger Credit Ledger

Shortfall ` 12,000 ` 4,000
Assume that electronic cash ledger and credit ledger carry sufficient balance
for the above short fall.
(i) You are required to calculate the amount of interest payable if any
under section 50 of the CGST Act 2017 and rule 88B of the CGST rules
2017.
(ii) Give the effect if GSTR3B for the month of January 2024 had been
filed belatedly on March 20, 2024 and all other conditions remaining
same.
Calculation should be rounded off to nearest rupee. As 2024 is leap year, give
effect of same. (5 Marks)
(b) Who is liable to collect TCS (collection of tax at source) under Section 52 of
the CGST Act, 2017. Briefly explain the provisions relating to registration,
filing of return and deposit of TCS to Government as per the provisions of
section 52 of the CGST Act, 2017 and rule 12 of the CGST Rules, 2017.
(5 Marks)
Answer
(a) Interest is payable in case of delayed payment of tax @ 18% per annum
from the date following the due date of payment to the actual date of
payment of tax.
Above interest is payable on the net tax liability paid in cash only if return
in Form GSTR-3B for a tax period has been filed after the due date to furnish
such return. Otherwise, interest is payable on gross tax liability.
(i) Since Avisha Limited has furnished Form GSTR-3B for the month
within the prescribed due date, interest is payable on the gross tax
liability deposited with a delay of 29 days [21.02.2024 - 20.03.2024
(both inclusive)] as under:

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= ` 16,000 x 18% x 29/366 = ` 228 (rounded off)

(ii) If Avisha Limited has filed Form GSTR-3B for the month after the due
date, i.e. on 20.03.2024, interest is payable on the net tax liability
paid through Electronic Cash Ledger only, for a delay of 29 days, as
under:
= ` 12,000 x 18% x 29/366 = ` 171 (rounded off)
(b) Every Electronic Commerce Operator (ECO), not being an agent, is liable to
collect tax at source (TCS).
Such ECO is required to submit a registration application in prescribed form
through the common portal. The proper officer shall, after due verification,
grant registration within 3 working days from the date of the application.
On a request or upon an enquiry or pursuant to any other proceeding under
GST law, if the proper officer is satisfied that a person is no longer liable to
collect the tax at source, he may cancel his registration.
Such ECO shall furnish a monthly statement in prescribed form containing
the details of the outward supplies of goods and/ or services effected
through it, including supplies returned through it and the amount collected
by it as TCS during the month within 10 days after the end of each month
in which tax has been collected at source.
They also required to file annual statement4 on or before 31st December
following the end of the financial year.
The TCS amount collected by the ECO has to be deposited by 10 th of the
month succeeding the month in which TCS has been collected.
Question 8
(a) Describe the conditions to be satisfied for availing deduction of post supply
discounts from the value of supply as per the provisions of section 15(3) of
the CGST Act 2017.
OR

4
It may be noted that the annual statement (Form GSTR-9B) is yet to be notified.

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(a) Examine the existence of "consideration" for donation received by charitable

institutions from individual donors, without quid pro quo an important
feature as defined in section 2(31) of the CGST Act, 2017. (5 Marks)
(b) Mohan Enterprise is a registered person having principal place of business in
Gandhinagar, Gujarat. They received services of Advocate Sameer, a
registered person from Ahmedabad, Gujarat. Shekhar, an unregistered
person provided services of labour to Mohan Enterprise. Explain the
provisions relating to issue of invoice by recipient Mohan Enterprise if he is
liable to pay tax under reverse charge under Section 9(3) or 9(4) of the CGST
Act, 2017. (5 Marks)
Answer
(a) Conditions to be satisfied for availing deduction of post supply discounts
from the value of supply as per the provisions of section 15(3) of the CGST
Act, 2017 are as follows:
(i) Discount is in terms of an agreement entered into
(ii) at or before the time of supply.
(iii) Discount can be specifically linked to relevant invoices.
(iv) Input tax credit as is attributable to the discount on the basis of
document issued by supplier is reversed by the recipient of the
supply.
(a) Alternative
Donations received by the charitable institutions from individual donors are
treated as consideration only if there exists, quid pro quo, i.e., there is an
obligation on part of recipient of the donation or gift to do anything.
If the name of the donor is displayed in charitable institution’s premises as
an expression of gratitude and public recognition of his act of philanthropy
and is not aimed at advertising or promotion of his business, there is no
supply for the payment in the form of donation.
(b) A registered person shall issue an invoice in respect of goods and/or
services received by him provided:
(i) he is liable to pay tax under reverse charge [under section 9(3) or
9(4) of the CGST Act, 2017] on such supplies, and

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(ii) supplies are received from the supplier who is not registered on the
date of receipt of goods and/or services.
In the given case, tax on services received from advocate Sameer by Mohan
Enterprise is payable under reverse charge 5.
However, Mohan Enterprises is not required to issue an invoice with respect
to said supply as supplier Sameer is registered.
Further, tax on labour services received from unregistered person-Shekhar
is not payable under reverse charge.
Therefore, Mohan Enterprises is not required to issue an invoice with
respect to said supply.

5
It has been assumed that service provided by Mr Sameer is legal service.

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