PAPER – 3: TAXATION

Case Scenario based MCQs

Case Scenario 1:
Mr. Shashikant, aged 45 years, is an Indian citizen and a member of the crew of a Singapore
bound Indian ship engaged in carriage of passengers in international traffic departing from
Chennai port on 29th May, 2024.
Particulars Date
Date entered into the Continuous Discharge Certificate in respect of 29th May, 2024
joining the ship by Mr. Shashikant
Date entered into the Continuous Discharge Certificate in respect of 19th December,
signing off the ship by Mr. Shashikant 2024

He stayed in India in the last 4 previous years preceding the P.Y. 2024-25 for 400 days and for a
period of 750 days in the last 7 previous years preceding to P.Y. 2024-25. He received salary of
₹7,20,000 in his NRE account maintained with State Bank of India, Chennai Branch.

He also furnished details of other income earned by him during the previous year 2024-25:
[Link] Particulars Amount (₹)
1. Dividend declared by X limited, a Singapore company. The 1,00,000
same was received by him in Singapore
2. Agriculture income from land in Pakistan, received in India 2,50,000
3. Rent received from house property in Chennai (Gross) 3,60,000

Based on the facts of the case scenario given above, choose the most appropriate answer to the
following questions:

Multiple Choice Questions:

1. What is Mr. Shashikant’s residential status for the P.Y 2024-25?
(A) Resident and ordinarily resident
(B) Resident but not ordinarily resident
(C) Non-resident
(D) Deemed resident

2. What would be the total income of Mr. Shashikant for A.Y.2025-26?

(A) ₹ 7,10,000
(B) ₹ 11,72,000

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 (C) ₹ 5,02,000
(D) ₹ 6,02,000

3. Mr. Shashikant would like to minimize his tax liability and consulted you to compute the
amount of same for the P.Y. 2024-25. Accordingly, his tax liability (rounded off) would be –
(A) ₹ 13,420
(B) ₹ 13,210
(C) ₹ 10,500
(D) Nil (3 x 2 = 6 Marks)

4. Mr. Lala is engaged in supply of tiles and marbles in the State of Telangana. He is not
registered under GST. He commenced his business from the month of July. He availed go
down construction services for business from his brother-in-law who was dependent on him.
He also availed professional consultancy services for the purpose of business from his son
who is a Company Secretary, and his son is not dependent on him. Mr. Lala did not pay
anything for both the services as both were his relative / family member respectively.

In respect of services availed by Mr. Lala, which of the following is a correct statement?
(A) Godown construction service availed from his brother-in-law free of cost is considered as
a deemed supply
(B) Professional service availed from his son free of cost is considered as a deemed supply
(C) Neither of the services is a deemed supply
(D) Both services are deemed supply (2 Marks)

5. Manavtaa Trust (‘trust’) is a charitable trust registered under section 12AB of the Income tax
Act, 1961. The trust is well known for its educational, charitable and religious activities. The
trust became liable to registration under GST in the current financial year since it exceeded
the threshold limit for registration and thus, registered in the State of Gujarat in the month
of May. In the month of June, a multinational company, Dhruvtara Ltd., gifted 500 laptops
worth ₹ 50 lakh to the trust free of cost for charitable purposes, without any intention of
seeking any benefit by way of business promotion from such activity. The trust distributed
these laptops for free of cost in the same month to the deprived students for assisting them
in their higher studies.

The trust provided the following information in respect of the services provided by it during
the month of August:

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 (i) It runs an old age home for citizens aged 65 years or more. Nominal monthly charges of
₹ 15,000 for boarding, lodging and maintenance are charged from each member. The
total number of members is 20.
(ii) It rents out a community hall situated within the precincts of a temple managed by it on
15th August for a religious function in the first half for ₹ 5,000 and for an art exhibition in
second half for ₹ 6,000.
(iii) It rents out the rooms in the precincts of said temple to the devotees for a rent of ₹ 950
per room per day. Total rent collected in August amounts to ₹ 35,000.

All the figures given above are exclusive of taxes wherever applicable.

Which of the following activities of the trust does not amount to supply under the GST law?
(A) Free laptops distributed to the deprived students
(B) Boarding, lodging and maintenance of the senior citizens by the old age home run by the
trust
(C) Renting of community hall situated within the precincts of the temple managed by the
trust
(D) Renting of rooms in the precincts of the temple managed by the trust (2 Marks)

Answers:
1. Option (C) Non-resident
Reason:
Mr. Shashikant is an Indian citizen who is leaving India as a member of the crew of an Indian
ship. He is non-resident during the A.Y. 2025-26 since he is staying in India only for 160 days
during the P.Y. 2024-25. Days from 29.5.2024, being the date entered into the Continuous
Discharge Certificate in respect of joining the ship by Mr. Shashikant till 19.12.2024, being the
date entered into the Continuous Discharge Certificate in respect of signing off the ship by
Mr. Shashikant are to be excluded.

2. Option (C) ₹ 5,02,000

Reason:
In case of non-resident, income accrued or arisen or deemed to accrue or arise in India or
received or deemed to be received in India is taxable. Accordingly, agriculture income from
land in Pakistan, received in India and rent from house property in India is taxable in his hand
after providing deduction of 30% u/s 24(a) from rental income.

3. Option (C) ₹ 10,500

Reason:

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 Total Income as computed in MCQ 2 = ₹ 5,02,000
Tax liability under default tax regime
Tax = ₹ 10,100
Add: HEC @ 4% = ₹ 404
Tax Liability = ₹ 10,500 (Rounded off)

Tax liability under normal provisions of the Act

Tax = ₹ 12,900
Add: HEC @ 4% = ₹ 516
Tax liability = ₹ 13,420 (Rounded off)

4. Option (B) Professional service availed from his son free of cost is considered as a deemed
supply
Reason:
Deemed supply as per Schedule I of the CGST ACT, 2017 covers transactions with related
persons when made in the course or furtherance of business and as per the definition of
“Family”, Mr. Lala’s son is a related person, but the definition of family excludes “brother-in-
law” even if he is dependent on Mr. Lala. Therefore, the transaction between Mr. Lala and
his brother-in-law is not a deemed supply.

5. Option (A) Free laptops distributed to the deprived students

Reason:
As per the provisions of Section 7 of the CGST Act, 2017, the activity of distribution of laptops
to deprived students is not a supply as the same does not involve any flow of consideration
from such students to the trust. Further, the activity is not covered under Section 7(a)(a) of
the CGST Act, 2017 or under Schedule I of the CGST ACT, 2017.

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