INTERMEDIATE COURSE

GROUP – I

REVISION TEST
PAPERS JANUARY,
2025

BOARD OF STUDIES
THE INSTITUTE OF CHARTERED ACCOUNTANTS
OF INDIA
(Set up by an Act of Parliament)
New Delhi
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

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Edition : November, 2024

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 Contents
Page Nos.
Objective & Approach.......................................................i –
vii Objective of RTP..........................................................................
......................................................................................................... i
Planning & Preparing for Examination..................................................ii
Subject-wise Applicability......................................................................iv
Paper-wise RTPs
Paper 1: Advanced Accounting......................................................1 – 23
Paper 2: Corporate and Other Laws............................................24 – 42
Paper 3: Taxation.........................................................................43 – 69
Section A: Income-tax Law.............................................43 – 58
Section B: Goods and Services Tax................................59 – 69
Applicability of Standards/Guidance Notes/Legislative
Amendments etc. for January, 2025 – Intermediate
Examination...................................................................70 –
74
 REVISION TEST PAPER, JANUARY 2025 – OBJECTIVE &
APPROACH
(Students are advised to go through the following
paragraphs carefully to derive maximum
benefit out of this RTP)
I. Objective of Revision Test Paper
Revision Test Papers are one among the many educational
inputs provided by the Board of Studies (BOS) to its students.
Popularly referred to as RTP by the students, it is one of the
very old publications of the BOS whose significance and
relevance from the examination perspective has stood the test of
time.
The primary objectives of the RTP are:
 To help students get an insight of their preparedness for
the forthcoming examination;
 To update them on the latest developments relevant for
the forthcoming examination in select subjects;
 To enhance the confidence level of the students adequately.
Students must bear in mind that the RTP contains a variety of
questions based on different topics of the syllabi and thus a
comprehensive study of the entire syllabus is a pre-requisite
before answering the questions of the RTP. In other words, in
order to derive maximum benefit out of the RTPs, it is advised
that before proceeding to solve the questions given in the RTP,
students ought to have thoroughly read the Study Materials and
Statutory Update, wherever applicable.
The topics on which the questions are set herein have been
carefully selected and meticulous attention has been paid in
framing different types of questions. Detailed answers are
provided to enable the students to do a self-assessment and
have a focused approach for effective preparation.
Live Virtual Classes by renowned subject experts conducted free
of charge for the students of Foundation, Intermediate and Final
levels provide the students much required support in preparing
for their exams conveniently at home as these classes can be
accessed live or viewed later as recorded lectures through
hand-held devices such as smart phones, laptops, I-pads,
tablets, etc. anytime anywhere. Further,
REVISION TEST
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students are advised to attempt the Multiple-Choice Questions
(MCQs) at MCQ Paper Practice Portal which is a holistic platform
for self- assessment within the stipulated timeframe.
Students are welcome to send their suggestions for fine tuning
the RTP to the Joint Director, Board of Studies, The Institute of
Chartered Accountants of India, A-29, Sector-62, Noida 201309
(Uttar Pradesh). RTP is also available on BOS Knowledge Portal
at https://boslive.icai.org for downloading.
II. Planning and preparing for examination
Ideally, when the RTP reaches your hand, you must have finished
reading the relevant Study Materials of all the subjects (along
with the Statutory Update in case of Paper 3A and Paper 3B)
available at the BoS Knowledge Portal. Get a good grasp of the
concepts/ provisions/ amendments/ cases discussed therein.
After reading the Study Materials alongwith Statutory Update
thoroughly, then, proceed to solve the questions given in the
RTP on your own. RTP is an effective tool to revise and refresh
the concepts and provisions discussed in the Study Material. RTPs
are provided to you to help you assess your level of preparation.
Hence you must solve the questions given therein on your own
and thereafter compare your answers with the answers given
therein.
Examination tips
How well a student fares in the examination depends upon the
level and depth of his preparation. However, there are certain
important points which can help a student better his
performance in the examination. These useful tips are given
below:
 Reach the examination hall well in time.
 As soon as you get the question paper, read it carefully and
thoroughly. You are given separate 15 minutes for reading
the question paper.
 Plan your time so that appropriate time is awarded for each
question.

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 First impression is the last impression. The question which
you can answer in the best manner should be attempted
first.
 Always attempt to do all questions. Therefore, it is
important that you must finish each question within
allocated time. Keep sometime for checking the answers as
well.
 Read the question carefully more than once before starting
the answer to understand very clearly as to what is
required.
 Answer all parts of a question one after the other; do not
answer different parts of the same question at different
places.
 Write in a neat and legible hand-writing.
 Always be concise and write to the point and do not try to
fill pages unnecessarily.
 There must be logical expression of the answer.
 In case a question is not clear, you may state your
assumptions and then answer the question.
 Check your answers carefully and underline important
points before leaving the examination hall.
 In case of case scenario based MCQs, read the facts
given in the case attentively. Also, read each MCQ based
thereon and all the options carefully, before choosing the
correct answer.
III. Subject-wise Applicability

PAPER – 1 : ADVANCED ACCOUNTING

The April, 2023 edition of the Study Material, comprising of
three modules, is applicable for the students appearing for
January, 2025 Examination. For understanding the coverage of
syllabus, it is important to read the Study Material carefully.
You must read the study material thoroughly to attain conceptual
clarity. The tables, diagrams and flow charts in study material
have been extensively prepared to facilitate easy understanding
of concepts. Likewise, examples and illustrations given in the
Study Material would enable you to grasp the application of

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theoretical concepts in real-world EXAMINATION

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scenarios. After covering the concepts and illustrations, work out
the exercise questions at the end of each chapter and then
compare your answers with the answers given to test your
level of understanding. Also, solve the MCQs and case scenario
based MCQs uploaded in MCQ Practice Dashboard. This will help
you to maximize your speed and accuracy in solving
independent MCQs and case scenario based MCQs in the
Examination.
The RTP consists of twenty questions together with their answers
on different topics discussed in the study material. Answers to the
questions have been given in detail along with the working notes
for easy understanding and comprehending the steps in solving
the problems. Moreover, the answers have been presented in the
same manner as expected from the students in the examination.
The students are expected to solve the questions under
examination conditions and then compare their solutions with the
solutions given in the RTP. This will facilitate them to further
strategize their preparation for scoring good marks in the
examination.

PAPER – 2: CORPORATE AND OTHER LAWS

The April 2023 edition of the Study Material is applicable for
Intermediate Course Paper 2: Corporate and Other Laws. The
Study Material has been divided into three modules (Modules 1,
2 & 3) for ease of handling by students.
The Study Material is based on the provisions of the Companies
Act, 2013, the Limited Liability Partnership Act, 2008, the General
Clauses Act, 1897 and the Foreign Exchange Management Act,
1999, as amended upto 30th April, 2023.
The amendments in the Companies Act, 2013 for the
period 1st May, 2023 to 30th June, 2024 are given under the Part I
of the RTP. These amendments have been uploaded on the
website at https://resource.cdn.icai.org/82859bos66938.pdf.
The students are advised to read the Study Material thoroughly to
attain conceptual clarity. Tables, diagrams and flow charts have
been extensively used to facilitate easy understanding of
concepts. Examples

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and Illustrations given in the Study Material would help the
students to understand the application of concepts. Work out
the exercise questions at the end of each chapter and then
compare your answers with the answers given to test your level
of understanding. Thereafter, solve the MCQs and case scenarios
based MCQs uploaded in MCQ Paper Practice Dashboard and
assess your level of understanding.
Finally, solve the questions given in this RTP independently and
compare the same with the answers given to assess your level of
preparedness for the examination.

PAPER – 3: TAXATION
Section A: Income-tax Law (50 Marks)
The Income-tax law, as amended by the Finance Act, 2023 and
significant notifications, circulars and other legislative
amendments upto 30.06.2024 are relevant for January, 2025
Examination. The relevant assessment year for January, 2025
examination is A.Y. 2024-25.
The June, 2023 edition of the Study Material, comprising of two
modules (Modules 1 & 2), is based on the provisions of income-
tax law, as amended by the Finance Act, 2023 and significant
notifications and circulars issued upto 30.04.2023. Hence, the
same is applicable for January, 2025 Examination. Further, a
list of topic-wise exclusions from the syllabus and inclusions
with reference to section 10 in the syllabus has been specified
by way of “Study Guidelines” and the same has been
webhosted at https://resource.cdn.icai.org/76864bos61928.pdf
at BoS Knowledge Portal.
The above referred study material has to be read along with
Statutory Update for January, 2025 Examination webhosted at
https://resource.cdn.icai.org/81242bos65468.pdf at BoS
Knowledge Portal, which contains the significant
notifications/circulars issued between 01.05.2023 and
30.06.2024, which are also relevant for January, 2025
Examination.
You have to read the Study Material thoroughly to attain
conceptual clarity. Tables, diagrams and flow charts have been
extensively used to facilitate easy understanding of concepts.
The amendments made by the

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Finance Act, 2023 and latest notifications and circulars have
been given in italics/bold italics. Examples and Illustrations
given in the Study Material would help you understand the
application of concepts. Work out the exercise questions at the
end of each chapter and then compare your answers with the
answers given to test your level of understanding. Thereafter,
solve the MCQs and case scenarios based MCQs uploaded in MCQ
Paper Practice Dashboard and assess your level of
understanding.
After that, solve the questions given in RTP for May 2024 and
September, 2024, examinations keeping in mind the
amendments contained in Statutory Update for January, 2025
Examination.
Finally, solve the questions given in this RTP independently and
compare the same with the answers given to assess your level of
preparedness for the examination.

Section B: Goods and Services Tax (50 Marks)

For Section B: Goods and Services Tax of Paper 3: Taxation,
the provisions of the CGST Act, 2017 and the IGST Act, 2017 as
amended by the Finance Act, 2023, including significant
notifications and circulars issued and other legislative
amendments made, up to 30th June, 2024, are applicable for
January, 2025 examination.
Further, a list of topic-wise exclusions from the syllabus has
been specified by way of “Study Guidelines for January,
2025 Examination”. The same is given as part of
“Applicability of Standards/Guidance Notes/Legislative
Amendments etc. for January, 2025 - Intermediate
Examination” appended at the end of this Revision Test
Paper.
The June, 2023 edition of the Study Material alongwith the
Statutory updates for January, 2025 examination is applicable for
Intermediate Course Paper 3: Taxation, Section B: Goods and
Services Tax. The Study Material has been divided into two
modules for ease of handling by students.
Study Material is based on the provisions of the CGST Act, 2017
and the IGST Act, 2017 as amended upto 30.04.2023. The
amendments in the GST law made between 01.05.2023 and
30.06.2024 are covered in the
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Statutory Updates for January, 2025 examination web-hosted at
https://resource.cdn.icai.org/81538bos65769.pdf at BoS
Knowledge Portal. For the ease of reference, the amendments
have been grouped into Chapters which correspond with the
Chapters of the Study Material.
You have to read the Study Material alongwith the Statutory
Update thoroughly to attain conceptual clarity. You are advised to
solve the questions given in this RTP independently and
compare the same with the answers given to assess your level
of preparedness for the examination.

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PAPER – 1:
ADVANCED ACCOUNTING

QUESTIONS

PART – I: Multiple Choice Questions based on Case Scenarios

1. Surya Ltd. Has a two fixed asset, FA1 is being carried in the
balance sheet for ` 600 lakhs and FA 2 is being carried at ` 300
lakhs
As at 31st March 2024, the value in use for FA 1 is ` 500
lakhs and the net selling price is ` 550 lakhs. The Company did
upward revaluation last year for ` 20 lakhs for FA 1.
As at 31st March 2024, the value in use for FA 2 is ` 350
lakhs and the net selling price is ` 320 lakhs.
(a) How much is the total Impairment loss for current year for FA
1:
(i) ` 100 Lakhs
(ii) ` 50 Lakhs
(iii) ` 30 lakhs
(iv) Nil
(b) How much impairment loss will be charged to profit and
loss for current year for FA1:
(i) ` 100 Lakhs
(ii) ` 50 Lakhs
(iii) ` 30 lakhs
(iv) Nil

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(c) How much is the total Impairment loss for current year for FA
2:
(i) ` 50 Lakhs
(ii) ` 30 Lakhs
(iii) ` 20 lakhs
(iv) Nil
(d) What will be the carrying value on 1st April 2024 for FA 1:
(i) ` 550 Lakhs
(ii) ` 530 Lakhs
(iii) ` 520 lakhs
(iv) ` 500 lakhs
General MCQs
2. The debit or credit balance of “Foreign Currency Monetary Item
Translation Difference Account”
(a) Is shown as “Miscellaneous Expenditure” in the Balance
Sheet
(b) Is shown under “Reserves and Surplus” as a separate line
item
(c) Is shown as “Other Non-current” in the Balance Sheet
(d) Is shown as “Current Assets” in the Balance Sheet
Part II - Descriptive Questions
Applicability of Accounting
Standards AS 1
3. ABC Ltd. was making provision for non-moving inventories
based on no issues for the last 12 months up to 31.3.2023.
The company wants to provide during the year ending
31.3.2024 based on technical evaluation:
Total value of inventory ` 100 lakhs
Provision required based on 12 months issue ` 3.5 lakhs
Provision required based on technical ` 2.5 lakhs
evaluation

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Does this amount to change in Accounting Policy? Can the
company change the method of provision?
AS
3
4. Classify the following activities as (1) Operating Activities, (2)
Investing Activities, (3) Financing Activities (4) Cash Equivalents.
a. Proceeds from long-term borrowings.
b. Proceeds from Trade receivables.
c. Trading Commission received.
d. Redemption of Preference Shares.
e. Proceeds from sale of investment
f. Interim Dividend paid on equity shares.
g. Interest received on debentures held as investment.
h. Dividend received on shares held as investments.
i. Rent received on property held as investment.
j. Dividend paid on Preference shares.
k. Marketable Securities
AS 5
5. During the course of the last three years, a company owning
and operating Helicopters lost four Helicopters. The company’s
accountant felt that after the crash, the maintenance provision
created in respect of the respective helicopters was no longer
required, and proposed to write it back to the Profit and Loss
account as a prior period item.
Is the company’s proposed accounting treatment correct?
Discuss.
AS 7
6. Rose Constructions undertake to construct a·bridge for the
Government of Uttar Pradesh. The construction commenced
during the financial year ending 31.03.2024 and is likely to be
completed by the next financial year. The contract is for a fixed
price of ` 12 crore with an escalation clause. You are given the
following information for the year ended 31.03.2024:

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Cost incurred upto 31.03.2024 ` 4 crore
Cost estimated to complete the contract ` 6 crore

Escalation in cost was by 5%. Hence, the contract price is

also increased by 5%.
You are required to ascertain the stage of completion and
compute the amount of revenue and profit to be recognized
for the year as per AS 7.
AS
9
7. Mithya Ltd. entered into agreement with Satya Ltd. for sale of
goods costing ` 8 lakh at a profit of 20% on cost. The sale
transaction took place on 1st February, 2024. On the same day,
Satya Ltd. entered into another agreement with Mithya Ltd. to
resell the same goods at ` 10.80 lakh on 1st August, 2024. State
the treatment of this transaction in the financial statements of
Mithya Ltd. as on 31.03.2024. The pre- determined re-selling
price covers the holding cost of Satya Ltd. Give the Journal
Entries as on 31.03.2024 in the books of Mithya Ltd.
AS 10
8. MS Ltd. has acquired a heavy machinery at a cost of `
1,00,00,000 (with no breakdown of the component parts). The
estimated useful life is 10 years. At the end of the sixth year, one
of the major components, the turbine requires replacement, as
further maintenance is uneconomical. The remainder of the
machine is perfect and is expected to last for the next four
years. The cost of a new turbine is ` 45,00,000. The discount
rate assumed is 5%.
Can the cost of the new turbine be recognised as an asset, and,
if so, what treatment should be used?
AS 11
9. Bansal Company Ltd. imported raw material worth US Dollars
12,000 on 15th January, 2024 when the exchange rate was ` 68
per US Dollar. The payment for the transaction was made on 5 th
May, 2024 when exchange rate was ` 64 per US Dollar. At the
year end, 31st March, 2024, the rate of exchange was ` 65 per
US Dollar. The accountant of the company

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passed entry on 31st March, 2024 adjusting the cost of raw
material consumed for the difference between ` 64 and ` 68 per
US Dollar. Discuss whether this treatment is justified as per the
provisions of AS-11 (Revised).
AS 14
10. Astha Ltd. is absorbed by Nistha Ltd.; the consideration being
the takeover of liabilities, the payment of cost of absorption
not exceeding
` 10,000 (actual cost ` 9,000); the payment of the 9%
debentures of
` 50,000 at a premium of 20% through 8% debentures issued at
a premium of 25% of face value and the payment of `15 per
share in cash and allotment of three 11% preference shares of `
10 each and four equity shares of `10 each at a premium of
20% fully paid for every five shares in Astha Ltd.
The number of shares of the vendor company are 1,50,000 of `
10 each fully paid. Calculate purchase consideration as per AS
14.
AS 16
11 How will interest be capitalized when qualifying assets are funded
by borrowings in the nature of bonds that are issued at a
discount?
X Ltd. issued in year 1, a 3 year 10% p.a. (interest paid
annually) bond with a face value of ` 1,00,000 at a price of `
90,000 to finance a qualifying asset which is ready for intended
use at the end of year 2. Compute the amount of borrowings
costs to be capitalized if the company uses for amortization of
discount straight line basis
AS 17
12. A Company has an inter-segment transfer pricing policy of
charging at cost less 5%. The market prices are generally 20%
above cost.
You are required to examine whether the policy adopted by the
company is correct or not?
AS 18
13. Will transactions with related parties, for services
provided/received free of cost, be required to be disclosed?

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A Limited has a corporate communications department, which
centralises the public relations function for the whole group of A
Limited and its subsidiaries. No charges are, however, levied by A
Limited on its subsidiaries and accordingly, these transactions
are not given accounting recognition. Would these constitute
related party transactions requiring disclosure under AS 18 in the
standalone financial statements of A Limited?
AS 19
14. Money Limited leased a machine to Hello Limited on the
following terms:
(` in lakh)
(i) Fair value of the machine 24.00
(ii) Lease term 5 years
(iii) Lease rental per annum 4.00
(iv) Guaranteed residual value 0.8
(v) Expected residual value 1.5
(vi) Internal rate of return 15%

Discounted rates for 1st year to 5th year are 0.8696, 0.7561,
0.6575, 0.5718, and 0.4972 respectively.
Ascertain Unearned Finance Income.
AS 20
15. XYZ Limited has a wholly owned subsidiary BC Limited. The
Group prepares consolidated Financial Statements for the
year ended 31st March, 2024. XYZ Limited (in its separate
financial statements) has incurred a loss of ` 2 crore during the
year, while the consolidated profit for the group during the year
is ` 40 lakh.
XYZ Limited has 5,00,000 shares outstanding as at 31st March,
2024. Further, it has granted options to issue equity shares as at
that date. In respect of such options, 1,00,000 shares are
considered to be the shares issued for no consideration. There
are no changes in income or

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expenses that are expected from the issue of equity shares on
exercise of these options.
Calculate Basic and Diluted EPS for XYZ Limited for separate
financial statements and for the Group.
AS 22
16. ABC Ltd. prepares its accounts annually on 31st March. On 1st
April, 2022, it purchases a machine at a cost of ` 1,50,000. The
machine has a useful life of three years and an expected scrap
value of zero. Although it is eligible for a 100% first year
depreciation allowance for tax purposes, the straight line
method is considered appropriate for accounting purposes. ABC
Ltd. has profits before depreciation and taxes of ` 2,00,000
each year and corporate tax rate is 40 percent each year.
The purchase of machine at a cost of ` 1,50,000 in 2022 gives
rise to a tax saving of ` 60,000. The corporate tax rate has been
assumed to be same in each of the three years. Calculate
deferred tax and pass necessary journal entries.
What will be the amount of deferred tax, if the substantively
enacted tax rates for 2022, 2023 and 2024 are 40%, 35% and
38% respectively.
AS 23
17. A Ltd. invested ` 1,00,000 to acquire 10% stake (Investment I)
in B Ltd. and later invested ` 3,00,000 to acquire additional 20%
(Investment II). The net asset value of the B ltd. at the
respective investment dates was
` 7,50,000 and ` 12,50,000 respectively. Determine whether B
Ltd. is an associate of A Ltd. Also, calculate goodwill arising on
the acquisition of the associate.
AS 24
18. What are the disclosure and presentation requirements of AS 24
for discontinuing operations?
Give four examples of activities that do not necessarily satisfy
criterion
(a) of paragraph 3 of AS 24, but that might do so in
combination with other circumstances.

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AS 26
19. During 2023-2024, an enterprise incurred costs to develop and
produce a routine, low risk computer software product, as
follows:
Amount
(`)
Completion of detailed programme and design 25,000
(Phase 1)
Coding and Testing for establishing technical 20,000
feasibility
(Phase 2)
Other coding costs (Phase 3) 42,000
Testing costs (Phase 4) 12,000
Product masters for training materials (Phase 5) 13,000
Duplication of computer software and training 40,000
materials, from product masters (2,000 units)
(Phase 6)
Packing the product (1,000 units) (Phase 7) 11,000

After completion of phase 2, it was established that the

computer software is technically feasible for the market. What
amount should be capitalized as software costs in the books of
the company, on the Balance Sheet date?
AS 29
20. During the year, QA Ltd. delivered manufactured products to
customer
K. The products were faulty and on 1st October, 2023 customer K
commenced legal action against the Company claiming damages
in respect of losses due to the supply of faulty product. Upon
investigating the matter, QA Ltd. discovered that the products
were faulty due to defective raw material procured from supplier
F. Therefore, on 1st December, 2023, the Company commenced
legal action against F claiming damages in respect of the
supply of defective raw materials.
QA Ltd. has estimated that it's probability of success of both
legal actions, the action of K against QA Ltd. and action of QA
Ltd. against F, is very high.
On 1st October, 2023, QA Ltd. has estimated that the damages it

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would have to pay K would be ` 5 crore. This estimate was
revised to ` 5.2

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crore as on 31st March, 2024 and ` 5.25 crore as at 15th May,
2024. This case was eventually settled on 1 st June, 2022, when
the Company paid damages of ` 5.3 crore to K.
On 1st December, 2023, QA Ltd. had estimated that it would
receive damages of ` 3.5 crore from F. This estimate was
revised to ` 3.6 crore as at 31st March, 2024 and ` 3.7 crore
as on 15th May, 2024. This case was eventually settled on 1st
June, 2022 when F paid ` 3.75 crore to QA Ltd. QA Ltd. had, in
its financial statements for the year ended 31st March, 2024,
provided ` 3.6 crore as the financial statements were approved
by the Board of Directors on 26th April, 2024.
(i) Whether the Company is required to make provision for the
claim from customer K as per applicable AS? If yes, please
give the rationale for the same.
(ii) If the answer to (a) above is yes, what is the entry to be
passed in the books of account as on 31st March, 2024?
(iii) What will the accounting treatment of the action of QA Ltd.
against supplier F as per applicable AS?

SUGGESTED ANSWERS/HINTS
Case Scenario and MCQ
Q. No. Hints
1. (a) (ii)
(b) (iii)
(c) (iv)
(d) (i
)
2. (b)

Descriptive Question
3. The decision of making provision for non-moving inventories on
the basis of technical evaluation does not amount to change in
accounting policy. Accounting policy of a company may require
that provision for non-moving inventories should be made. The
method of estimating the amount of

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provision may be changed in case a more prudent estimate can
be made. In the given case, considering the total value of
inventory, the change in the amount of required provision of non-
moving inventory from ` 3.5 lakhs to
` 2.5 lakhs is also not material. The disclosure can be made for
such change in the following lines by way of notes to the accounts
in the annual accounts of ABC Ltd. for the year 2023-24:
“The company has provided for non-moving inventories on the
basis of technical evaluation unlike preceding years. Had the
same method been followed as in the previous year, the profit for
the year and the corresponding effect on the year end net
assets would have been lower by ` 1 lakh.”
4. Operating Activities: b,
c. Investing Activities: e,
g, h, i. Financing
Activities: a, d, f, j. Cash
Equivalents: k
5. The balance amount of maintenance provision written back to
profit and loss account, no longer required due to crash of the
helicopters, is not a prior period item because there was no error
in the preparation of previous periods’ financial statements. The
term ‘prior period items’, as defined in AS 5 (revised) “Net Profit
or Loss for the Period, Prior Period Items and Changes in
Accounting Policies”, refer only to income or expenses which
arise in the current period as a result of errors or omissions in
the preparation of the financial statements of one or more prior
periods. The balance amount left in the provision created earlier
is not as a result of error in the past. So it will not be considered
as prior period item. Such write back of provision is not an
ordinary feature of the business, it shall be considered as an
extra-ordinary item.
As per paragraph 8 of AS 5, extraordinary items should be
disclosed in the Statement of Profit and Loss as a part of net
profit or loss for the period. The nature and the amount of
each extraordinary item should be separately disclosed in the
Statement of Profit and Loss in a manner that its impact on
current profit or loss can be perceived. Hence, the amount so
written-back (if material) should be disclosed as an extraordinary
item as per AS 5 rather than as prior period items.

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6.
` in crore
Cost of construction of bridge incurred upto 4.00
31.3.2024
Add: Estimated future cost 6.00
Total estimated cost of construction 10.00
Contract Price (12 crore x 1.05) 12.60 crore

Stage of completion
Percentage of completion till date to total estimated cost
of construction
= (4/10)100 = 40%
Revenue and Profit to be recognized for the year ended
31st March, 2024 as per AS 7:
Proportion of total contract value recognized as revenue
= Contract price x percentage of completion
= ` 12.60 crore x 40% = ` 5.04 crore
Profit for the year ended 31st March, 2024 = ` 5.04 crore – ` 4
crore
= 1.04 crore.
7. In the given case, Mithya Ltd. concurrently agreed to
repurchase the same goods from Satya Ltd. on 1st February,
2024. Also the re-selling price is pre-determined and covers
purchasing and holding costs of Satya Ltd. Hence, the
transaction between Mithya Ltd. and Satya Ltd. on 1st February,
2024 should be accounted for as financing rather than sale. The
resulting cash flow of ` 9.60 lakh received by Mithya Ltd., cannot
be considered as revenue as per AS 9 “Revenue Recognition”.
Journal Entries in the books of Mithya Ltd.
` in
lakh
1.2.2024 Bank Account Dr. 9.60

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To Advance from Satya Ltd. 9.60
(Being advance received
from Satya Ltd. amounting [` 8
lakh + 20% of ` 8 lakh = 9.60
lakh] under sale and re-
31.3.2024 purchase agreement) Dr. 0.40
Financing Charges 0.40
Account To Satya
Ltd.
31.3.2024 (Financing charges for 2 months Dr. 0.40
[(10.80 – 9.60) x 2/6] 0.40
Profit and Loss Account
To Financing Charges
Account
(Being amount of finance
charges transferred to P& L
Account)
8. The new turbine will produce economic benefits to MS Ltd., and
the cost is measurable. Hence, the item should be recognised as
an asset. The original invoice for the machine did not specify the
cost of the turbine; however, the cost of the replacement `
45,00,000 can be used as an indication (usually by discounting)
of the likely cost, six years previously.
Statement showing cost of new turbine and machine after
6th year
`
Cost of machines 1,00,00,00
recognized on 0
purchase

Less:
Depreciation
charged for [(1,00,00,000/ 10) (60,00,000
6 x 6] )
years
40,00,000

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
The balance of Satya Ltd.’s account will be disclosed as an advance under the
heading liabilities in the balance sheet of Mithya Ltd. as on 31st March, 2024.

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Less:Current cost
of turbine to
be
derecognized:
Cost of Turbine [45,00,000 33,57,900
before 6 years x
{1 /
(1.05)6}]
Less: [(33,57,900 / 10) x (20,14,740 (13,43,160
Depreciation 6] ) )
for 6 years
Add:Cost of new
turbine to be 45,00,000
recognised

Revised 71,56,840

carrying amount
of machine
9. As per AS 11, ‘The Effects of Changes in Foreign Exchange Rates’,
initial recognition of a foreign currency transaction is done in the
reporting currency by applying the exchange rate at the date of
the transaction. Accordingly, on 15th January, 2024, the raw
material purchased and its creditors will be recorded at US dollar
12,000 × ` 68 = ` 8,16,000.
Also, on balance sheet date such transaction is reported at
closing rate of exchange, hence it will be valued at the closing
rate i.e. ` 65 per US dollar (USD 12,000 x ` 65 = ` 7,80,000) at
31st March, 2024, irrespective of the payment made for the same
subsequently at lower rate in the next financial year.
The difference of ` 3 (65 – 68) per US dollar i.e. ` 36,000 (USD
12,000 x
` 3) will be shown as an exchange gain in the profit and loss
account for the year ended 31st March, 2024 and will not be
adjusted against the cost of raw materials.
In the subsequent year on settlement date, the company
would recognize or provide in the Profit and Loss account an
exchange gain of
` 1 per US dollar, i.e. the difference from balance sheet date to
the date of settlement between ` 65 and ` 64 per US dollar i.e. `
12,000.
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Hence, the accounting treatment adopted by the Accountant of
the company is incorrect i.e. it is not in accordance with the
provisions of AS 11.

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10. As per AS 14 ‘Accounting for Amalgamations’, the term
‘consideration’ has been defined as the aggregate of the shares
and other securities issued and the payment made in the form of
cash or other assets by the transferee company to the
shareholders of the transferor company.
The payment made by transferee company to discharge the
Debenture holders and outside liabilities and cost of winding up
of transferor company shall not be considered as part of
purchase consideration.
Computation of Purchase Consideration

`
Cash payment `15 x 1,50,000 22,50,000
11% Preference Shares of ` 10 each [(1,50,000 x 9,00,000
3/5) x
` 10]
Equity shares of ` 10 each @ 20%
premium [(1,50,000 x 4/5) x ` 12] 14,40,000
Total Purchase consideration 45,90,000

11. As per AS 16, “Borrowing costs are interest and other costs
incurred by an enterprise in connection with the borrowing of
funds”. Further, as per para 4 (b) of the standard, “amortization
of discounts or premiums relating to borrowings” as a
component of borrowing costs. Thus, the borrowing costs
comprise the periodic interest payable on the bonds in question
and the amount of discount amortised during the period.
Paragraph 6 of the Statement, inter-alia, states that
“Borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset should be
capitalized as part of the cost of that asset”.
Further, paragraph 19 states that “Capitalisation of borrowing
costs should cease when substantially all the activities
necessary to prepare the qualifying asset for its intended use or
sale are complete”. Thus, only that portion of the amortised
discount should be capitalised as part of the cost of a qualifying
asset which relates to the period during which acquisition,
construction or production of the asset takes place.

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Straight line basis
(Amount in
`)
Years Interes Amortisation of Total borrowing
t discount costs
Year 1 10,000 3,333 13,333
Year 2 10,000 3,333 13,333
Year 3 10,000 3,334 13,334

In the above case, the amount of borrowing costs capitalized

would be
` 13,333 in Year 1 and Year 2. The borrowing costs of ` 13,334
incurred in Year 3 would be expensed since the asset is ready
for its intended use at the end of Year 2.
12. AS 17 ‘Segment Reporting’ requires that inter-segment
transfers should be measured on the basis that the enterprise
actually used to price these transfers. The basis of pricing inter-
segment transfers and any change therein should be disclosed in
the financial statements. Hence, the enterprise can have its own
policy for pricing inter-segment transfers and hence, inter-
segment transfers may be based on cost, below cost or market
price. However, whichever policy is followed, the same should be
disclosed and applied consistently. Therefore, in the given case
inter- segment transfer pricing policy adopted by the company is
correct if followed consistently.
13. These transactions would require disclosure under AS 18 in the
standalone financial statements of A Limited. As per paragraph
10 of AS 18, a related party transaction is “a transfer of resources
or obligations between related parties, regardless of whether or
not a price is charged”. In the given situation, there is a transfer
of resources from A Limited to its subsidiaries, though no price
is charged for the same. Hence, it will constitute as related party
transaction and will require disclosure in the financial statements
of A Ltd.
14. As per AS 19 on Leases, unearned finance income is the
difference between (a) the gross investment in the lease and
(b) the present value of minimum lease payments under a
finance lease from the standpoint

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of the lessor; and any unguaranteed residual value accruing to
the lessor, at the interest rate implicit in the lease.
Where:
(a) Gross investment in the lease is the aggregate of (i)
minimum lease payments from the stand point of the lessor
and (ii) any unguaranteed residual value accruing to the
lessor.
Gross investment = Minimum lease payments +
Unguaranteed residual value
= [Total lease rent + Guaranteed residual value (GRV)]
+ Unguaranteed residual value (URV)
= [(` 4,00,000 5 years) + ` 80,000] + ` 70,000
= ` 21,50,000 (a)
(b) Table showing present value of (i) Minimum lease
payments (MLP) and (ii) Unguaranteed residual value (URV).
Yea MLP inclusive of Internal rate Presen
r URV of return t
` (Discount Value
factor @ 15%) `
1 4,00,000 0.8696 3,47,840
2 4,00,000 0.7561 3,02,440
3 4,00,000 0.6575 2,63,000
4 4,00,000 0.5718 2,28,720
5 4,00,000 0.4972 1,98,880
80,000 (GRV) 0.4972 39,776
20,80,000 13,80,656
(i)
70,000 (URV) 0.4972 34,804 (ii)
21,50,000 (i)+ (ii) 13,45,852(b
)
Unearned Finance Income (a) - (b) = ` 21,50,000 – `
13,45,852 =
` 8,04,148.

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15. Computation of earnings per share
Particulars Consolidated Standalone
financial statements financial
statements of
XYZ Limited
Basic ` 8 (` 40)
earnings/(loss) per [40,00,000/5,00,000] [2,00,00,000/
share 5,00,000]

Diluted ` 6.66 (` 40)

[40,00,000/ [2,00,00,000/
earnings/ (loss) 6,00,000] 5,00,000]
per share
As per paragraph 39 of AS 20 “Potential equity shares should
be treated as dilutive when, and only when, their conversion to
equity shares would decrease net profit per share from
continuing ordinary operations.
In the above case, if the exercise of options was considered for
separate financial statements of XYZ Limited, the diluted loss
per share would have reduced to ` 33.33
[2,00,00,000/6,00,000]. As this is antidilutive, the options would
not be treated as potentially dilutive equity shares. Accordingly,
in the separate financial statements of XYZ Limited, the Diluted
EPS would be same as Basic EPS.
16. If the cost of machine is spread over three years of its life for
accounting purposes, the amount of the tax saving should also be
spread over the same period as shown below:
Statement of Profit and Loss
(for the three years ending 31st March, 2022, 2023,
2024)
(` in thousand)
2022 2023 2024
Profit before depreciation and 200 200 200
taxes
Less: Depreciation for accounting 50 50 50
purposes
Profit before taxes 150 150 150
Less: Tax expense

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Current tax:
0.40 x (200 -150) 20

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0.40 x 200 80 80
Deferred tax:
Tax effect of timing differences
originating during the year
leading to DTL

0.40 (150-50) 40
Tax effect of timing
differences reversing during the
year
0.40 (0-50) - (20) (20)
Tax expense 60 60 60
Profit after tax 90 90 90
Net timing differences 100 50 0
Deferred tax liability balance 40 20 0

In 2022, the amount of depreciation allowed for tax purposes

exceeds the amount of depreciation charged for accounting
purpose by
` 1,00,000 and, therefore, taxable income is lower than the
accounting income. This gives rise to a deferred tax liability of
` 40,000. In 2023 and 2024 accounting income is lower than
taxable income because the amount of depreciation charged for
accounting purposes exceeds the amount of depreciation allowed
for tax purposes by ` 50,000 each year. Accordingly, deferred tax
liability is reduced by ` 20,000 each in both the years. As may
be seen, tax expense in based on the accounting income of
each period.
In 2022, the profit and loss account is debited and deferred tax
liability account is credited with the amount of tax on the
originating timing difference of ` 1,00,000 while in each of the
following two years, deferred tax liability account is debited and
profit and loss account is credited with the amount of tax on
the reversing timing difference of
` 50,000.
The following Journal entries will be passed:
Year 2022
Profit and Loss A/c Dr. 20,000

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To Current tax A/c 20,000
(Being the amount of taxes payable
for the year 2022 provided for)

Profit and Loss A/c Dr. 40,000

To Deferred tax liability A/c 40,000
(Being the deferred tax liability created
for originating timing difference of `
1,00,000)
Year 2023
Profit and Loss A/c Dr. 80,000
To Current tax A/c 80,000
(Being the amount of taxes payable
for the year 2023 provided for)

Deferred tax liability Dr. 20,000

A/c To Profit and 20,000
Loss A/c
(Being the deferred tax liability
adjusted for reversing timing
difference of ` 50,000)
Year 2024
Profit and Loss A/c Dr. 80,000
To Current tax A/c 80,000
(Being the amount of taxes payable
for the year 2024 provided for)

Deferred tax liability Dr. 20,000

A/c To Profit and 20,000
Loss A/c
(Being the deferred tax liability
adjusted for reversing timing
difference of ` 50,000)
Presentation:
In the year 2022, the balance of deferred tax account i.e. `
40,000 would be shown separately from the current tax
payable for the year in terms of paragraph 30 of AS 22. In the
year 2023, the balance of deferred tax liability account would be `
20,000 and be shown separately from the current tax payable for
the year as in year 2022. In year 2024, the balance of

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deferred tax liability account would be nil.

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If the rate of tax changes, it would be necessary for the
enterprises to adjust the amount of deferred tax liability
carried forward by applying the tax rate that has been enacted
or substantively enacted by the balance sheet date on
accumulated timing differences at the end of the accounting year
The amount of deferred tax liability would be computed as
follows:
The deferred tax liability carried forward each year would appear
in the balance sheet as under:
31st March, 2022 = 0.40 (1,00,000) = ` 40,000
st
31 March, 2023 = 0.35 (50,000) = ` 17,500
31st March, 20224 = 0.38 (Zero) = ` Zero
Accordingly, the amount debited (credited) to the profit and
loss account (with corresponding credit or debit to deferred tax
liability) for each year would be as under:
31st March, 2022 Debit = ` 40,000
st
31 March, 2023 (Credit) = `
(22,500) 31st March, 2024 (Credit) = `
(17,500)
17. As per para 3 of AS 23 an associate is an enterprise in which
the investor has significant influence and which is neither a
subsidiary nor a joint venture of the investor. Significant
influence may be gained by share ownership, statute or
agreement. As regards share ownership, if an investor holds,
directly or indirectly through subsidiary(ies), 20% or more of the
voting power of the investee, it is presumed that the investor has
significant influence, unless it can be clearly demonstrated that
this is not the case. In this case, A Ltd. has invested 30 % in B
Ltd. so B Ltd. is to be considered as an associate of A Ltd.
The goodwill arising on the acquisition of the associate will be
computed as follows:
`
Investment I 1,00,00
Share of net assets (10 percent of ` 7,50,000) 0
(75,000)

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Goodwill (A) 25,000
Investment II 3,00,000
Share of net assets (20 percent of ` (2,50,000)
12,50,000)
Goodwill (B) 50,000
Total goodwill (A + B) 75,000

18. (i) An enterprise should include the following information

relating to a discontinuing operation in its financial
statements beginning with the financial statements for the
period in which the initial disclosure event (as defined in
paragraph 15) occurs:
(a) a description of the discontinuing operation(s);
(b) the business or geographical segment(s) in which it is
reported as per AS 17, Segment Reporting;
(c) the date and nature of the initial disclosure event;
(d) the date or period in which the discontinuance is
expected to be completed if known or determinable;
(e) the carrying amounts, as of the balance sheet date,
of the total assets to be disposed of and the total
liabilities to be settled;
(f) the amounts of revenue and expenses in respect of
the ordinary activities attributable to the discontinuing
operation during the current financial reporting period;
(g) the amount of pre-tax profit or loss from ordinary
activities attributable to the discontinuing operation
during the current financial reporting period, and the
income tax expense related thereto; and
(h) the amounts of net cash flows attributable to the
operating, investing, and financing activities of the
discontinuing operation during the current financial
reporting period.
(ii) Para 3 of AS 24 “Discontinuing Operations” explains the
criteria for determination of discontinuing operations.
According to Paragraph 9 of AS 24, examples of activities
that do not necessarily

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satisfy criterion (a) of paragraph 3, but that might do so in
combination with other circumstances, include:
(i) Gradual or evolutionary phasing out of a product line
or class of service;
(ii) Discontinuing, even if relatively abruptly, several
products within an ongoing line of business;
(iii) Shifting of some production or marketing activities for
a particular line of business from one location to
another; and
(iv) Closing of a facility to achieve productivity
improvements or other cost savings.
An example in relation to consolidated financial statements is
selling a subsidiary whose activities are similar to those of the
parent or other subsidiaries.
19. As per para 44 of AS 26, costs incurred in creating a computer
software product should be charged to research and development
expense when incurred until technological feasibility/asset
recognition criteria has been established for the product.
Technological feasibility/asset recognition criteria have been
established upon completion of detailed programme design or
working model. In this case, ` 45,000 would be recorded as an
expense (` 25,000 for completion of detailed program design
and
` 20,000 for coding and testing to establish technological
feasibility/asset recognition criteria). Cost incurred from the point
of technological feasibility/asset recognition criteria until the time
when products costs are incurred are capitalized as software
cost (` 42,000 +
` 12,000 + ` 13,000) ` 67,000. Duplication of computer software
and training materials, from product masters and packing the
products are the cost incurred after development phase. Hence,
the same shall be expensed off during the year it is incurred.
20. (i) Yes, QA Ltd. is required to make provision for the claim
from customer K as per AS 29 since the claim is a present
obligation as a result of delivery of faulty goods
manufactured. Also, it is probable that an outflow of
resources embodying economic benefits will be required to
settle the obligations. Further, a reliable estimate of ` 5.2
crore can be made of the amount of the

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obligation while preparing the financial statements as on
31st March, 2024.
(ii) Statement of Profit and Loss A/c Dr. ` 5.2 crore
To Current Liability A/c ` 5.2 crore
(iii) As per para 30 of AS 29, QA Ltd. shall not recognise a
contingent asset. Here the probability of success of legal
action is very high but there is no concrete evidence which
makes the inflow virtually certain. Hence, it will be
considered as contingent asset only and shall not be
recognized.

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PAPER – 2:
CORPORATE AND
OTHER
LAWS

PART – I: ANNOUNCEMENTS STATING APPLICABILITY FOR

JANUARY, 2025 EXAMINATIONS
Applicability for January, 2025 examinations
The Study Material (April 2023 edition) is applicable for January, 2025
examinations. This study material is updated for all amendments till
30th April, 2023.
Further, all relevant amendments/ circulars/ notifications etc. in the
Company law part for the period 1st May, 2023 to 30th June, 2024, are
mentioned below:
THE COMPANIES ACT, 2013
I. Chapter 3: Prospectus and Allotment of Securities
Notification S.O. 4744(E) dated 30th October, 2023
The Central Government has inserted sub- section (3) and sub- section
(4) to section 23 of the Companies Act, 2013, through the Companies
(Amendment) Act, 2020.
Amendment:
In section 23, the following sub- sections to be included:
“(3) Such class of public companies may issue such class of securities
for the purposes of listing on permitted stock exchanges in permissible
foreign jurisdictions or such other jurisdictions, as may be prescribed.
(4) The Central Government may, by notification, exempt any class
or classes of public companies referred to in sub-section (3) from
any of the provisions of this Chapter, Chapter IV, section 89, section
90 or section 127 and a copy of every such notification shall, as soon
as may be after it is issued, be laid before both Houses of
Parliament.”

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[Enforcement Date: 30th October, 2023]

Pg 3.6
Sub- section (3) and sub- section (4) to section 23 have been
inserted through the Companies (Amendment) Act, 2020. However,
the said sub- sections have been enforced w.e.f. 30th October, 2023.

II. Chapter 7: Management and Administration

Notification S.O. G.S.R. 801(E) dated 27th October, 2023
The Central Government has amended the Companies (Management
and Administration) Rules, 2014, through the Companies (Management
and Administration) Second Amendment Rules, 2023.
Amendment:
in Rule 9, after sub-rule (3), the following sub- rules shall be
inserted, namely:-
“(4) Every company shall designate a person who shall be responsible
for furnishing, and extending co-operation for providing, information to
the Registrar or any other authorised officer with respect to beneficial
interest in shares of the company.
(5) For the purpose of sub-rule(4), the company may designate-
(i) a company secretary, if there is a requirement of appointment of
such company secretary under the Act and the rules made
thereunder; or
(ii) a key managerial personnel, other than the company secretary; or
(iii) every director, if there is no company secretary or key
managerial personnel.
(6) Until a person is designated as referred under sub-rule (4), the
following persons shall be deemed to have been designated person;
(i) company secretary, if there is a requirement of appointment of
such company secretary under the Act and the rules made
thereunder; or
(ii) every Managing Director or Manager, in case a company
secretary has not been appointed; or

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(iii) every director, if there is no company secretary or a Managing
Director or Manager.
(7) Every company shall inform the details of the designated person
in Annual return.
(8) If the company changes the designated person at any time, it
shall intimate the same to the Registrar in e-form GNL-2 specified
under the Companies (Registration Offices and Fees) Rules, 2014.”

Pg 7.13
Sub- rule (4), (5), (6), (7) and (8) of Rule 9 is newly inserted.

PART – II: Question and Answers

QUESTIONS

DIVISION A: MULTIPLE CHOICE QUESTIONS

Case Scenario
ABC Limited, was incorporated on 1st January, 2023. It operates in the
manufacturing sector and aims to expand its business model to include
e- commerce operations. ABC Limited’s first financial year ended on
31st March, 2024, and the board is preparing for its first Annual General
Meeting (AGM) to present the financial statements and discuss the new
business model. ABC Limited’s current board consists of five directors,
including two independent directors appointed in line with best
corporate governance practices.
The company has a wholly owned subsidiary, XYZ Limited, which is
primarily involved in research and development for new products.
XYZ Limited's financial year also ended on 31st March, 2024.
Additionally, ABC Limited has a 30% stake in an associate company,
MNO Limited, which provides logistics and distribution services. The
board is assessing if it is required to prepare consolidated financial
statements (CFS) that combine the financials of ABC Limited, XYZ
Limited, and MNO Limited, considering the exemptions available under
the Companies Act, 2013.

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The AGM agenda includes:
1. Approval of the financial statements for the financial year 2023-
24.
2. Discussion of a special resolution to adopt a new e-commerce
business model, which requires a threefold majority approval.
3. Approval of consolidated financial statements, if required.
4. Appointment of auditors and other general meeting proceedings.
The board has provided notice to all members about the AGM
agenda, including the proposal for the special item requiring special
resolution. This notice was sent by email and registered post to
ensure compliance with statutory notice requirements. All
shareholders, including minority stakeholders, received this notice
with proof of delivery available with the company.
Solve the MCQs (1-5) on the basis of the Companies Act, 2013.
1. Given that ABC Limited’s first financial year ended on 31st
March, 2024, and it was incorporated on 1 st January, 2023, what is
the latest date by which ABC Limited must hold its first AGM?
(a) 30th September, 2024.
(b) 31st December, 2024.
(c) 31st March, 2025.
(d) 30th June, 2025.
2. Suppose ABC Limited holds its first AGM on 15th December,
2024. By when must it hold its subsequent AGM to remain
compliant?
(a) 15th December, 2025.
(b) 30th September, 2025.
(c) 30th June, 2025.
(d) 31st March, 2025.
3. Under the Companies Act, 2013, does ABC Limited need to
prepare consolidated financial statements (CFS) to present at
the AGM?
(a) Yes, because it has one wholly owned subsidiary and an
associate company.

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(b) No, because it qualifies for exemption as a wholly owned
subsidiary.
(c) Yes, only if XYZ Limited and MNO Limited are listed
companies.
(d) No, if shareholders provide written consent exempting it
from CFS preparation.
4. What must ABC Limited ensure to pass the special resolution
approving the adoption of a new e-commerce business model at
the AGM?
(a) The resolution must have more than 50% of votes in favor.
(b) The resolution must be stated as special in the notice, and
votes in favor must be three times the votes against.
(c) The resolution can be passed if votes in favor exceed votes
against without being stated as special.
(d) The resolution must have unanimous support from the board
of directors.
5. Under which conditions would ABC Limited be exempt from
preparing consolidated financial statements?
(a) If ABC Limited is a wholly owned subsidiary, all members
agree in writing to the exemption, and proof of delivery of
this intimation is available.
(b) If XYZ Limited’s shareholders unanimously agree to waive
CFS requirements.
(c) If MNO Limited’s financials are not significant to ABC
Limited’s overall financial position.
(d) If ABC Limited’s board decides to skip CFS preparation with
a simple majority vote.
Independent MCQs
6. XYZ LLP is a consulting firm where four partners—A, B, C, and D—
are responsible for various functions. Partner B, without
consulting the other partners, enters into a contract with a third
party, Mr. P, for a high-value procurement deal on behalf of XYZ
LLP. It is later found that Partner B did not have authority to
engage in such deals, and XYZ LLP has no

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history of involvement in procurement. Mr. P, who is an
experienced business- person, was aware that Partner B was not
authorized to enter into procurement deals for XYZ LLP.
In this scenario, which of the following is correct based on the
Limited Liability Partnership Act, 2008?
(a) XYZ LLP is bound by the contract because partner B is a
partner in the LLP.
(b) XYZ LLP is bound by the contract as Mr. P believed
partner B was authorized to act on behalf of the LLP.
(c) XYZ LLP is bound by the contract because Mr. P is a third
party and was not aware of the internal matters of XYZ LLP.
(d) XYZ LLP is not bound by the contract as partner B lacked
authority, and Mr. P knew of this lack of authority.
7. ABC LLP was incorporated with two partners, Mr. Raj and Ms.
Rani. Due to certain differences, Ms. Rani resigned from the LLP
on 1st January, 2024, leaving Mr. Raj as the sole partner. Mr. Raj
continued running the business without admitting a new partner
and was aware that he was the only remaining partner. On 1st
August of the same year, ABC LLP incurred a debt of ` 5 lakh
from a vendor. Given the provision in the Limited Liability
Partnership Act, 2008, which of the following statements correctly
describes Mr. Raj's liability in this situation?
(a) Mr. Raj will not be personally liable for the ` 5 lakh debt
as the debt was incurred by the LLP.
(b) Mr. Raj will be personally liable for the ` 5 lakh debt since
he was the sole partner of the LLP for more than six
months.
(c) Mr. Raj and Ms. Rani will both be liable for the ` 5 lakh
debt as they were originally partners.
(d) The LLP will be automatically dissolved after six months, and
no personal liability will arise for Mr. Raj.
8. Mr. Amit, a Chartered Accountant, is the appointed auditor of
Grey Limited. Mrs. Anita, Mr. Amit’s wife, recently acquired
equity shares in Grey Limited with a face value of ` 1 lakh.
Which of the following

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statements is correct regarding M/s Amit & Co. eligibility to
continue as the auditor of Grey Limited?
(a) M/s Amit & Co. must vacate the position of auditor
immediately due to the disqualification arising from his
wife’s holding of shares.
(b) M/s Amit & Co. can continue as the auditor only if Mrs.
Anita divests her shares within 30 days.
(c) M/s Amit & Co. can continue as the auditor since the
shares held by Mr. Amit's wife do not exceed the limit
specified under the Companies (Audit and Auditors) Rules,
2014.
(d) M/s Amit & Co. cannot continue as the auditor, as any
acquisition of shares by a relative leads to automatic
disqualification.
9. XYZ Limited is a company with 51% of its equity shares held by
the State Government of Maharashtra and 49% by private
investors. The Board of XYZ Limited seeks to appoint an auditor
for the upcoming financial year. As per the Companies Act, 2013,
which of the following statements is correct regarding the
appointment of the auditor?
(a) The Board of XYZ Limited has the authority to appoint the
auditor through a board resolution.
(b) The Comptroller and Auditor General (CAG) of India will
appoint the auditor for XYZ Limited.
(c) The shareholders of XYZ Limited will appoint the auditor in
the annual general meeting.
(d) The State Government of Maharashtra, holding the
majority stake, will appoint the auditor.
10. X purchased a car from Y, believing that Y was the legitimate
owner. Although X paid the full purchase price and took
possession of the car, he did not check the Registration
Certificate (RC) of the car to verify the authenticity of Y’s
ownership. Later, it was discovered that Y was not the rightful
owner, and the car had been stolen. In the context of “good
faith” as defined in the General Clauses Act, 1897, determine
the validity of X’s ownership claim over the car.

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(a) X holds valid ownership of the car because he paid the
full price and believed Y to be the legitimate owner.
(b) X does not hold valid ownership because his purchase
was made without due care and attention, even though he
acted honestly.
(c) X holds valid ownership because he had no knowledge of
the car being stolen, showing he acted in “good faith.”
(d) X’s ownership is valid because he did not act negligently,
and his actions were deemed “in good faith.”
Descriptive Questions
11. XYZ Limited issued a prospectus to raise funds for a new
manufacturing project. After successfully raising the funds, the
company identified an investment opportunity in a different
industry six months later, requiring a significant portion of the
funds. The proposed investment involved trading in equity
shares of other listed companies.
The board of directors suggested varying the original objectives
for which the funds were raised to allow this new investment and
recommended passing a special resolution in the company’s
general meeting. While the promoters and controlling
shareholders supported this change, some shareholders
expressed concerns, particularly regarding the deviation from
the initially stated purpose of the funds.
Based on the provisions of the Companies Act, 2013, advise on
the validity of the proposal to redirect the funds toward this
new investment.
12. XYZ Tech Solutions Limited is a growing technology company
that has seen significant contributions from its employees and
directors in the development of a ground breaking software
product. To reward these key contributors, the board proposed
issuing sweat equity shares to certain employees and directors.
XYZ Tech Solutions Limited already has issued ordinary equity
shares but has never issued sweat equity shares before.

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The company has a paid up equity share capital ` 20 crore. The

company has proposed to issue sweat equity shares worth ` 4
crore of face value. The company’s board has drafted a special
resolution outlining the proposed issuance of sweat equity shares
and including specific details, such as the number of shares, the
current market price, consideration (if any), and the classes of
directors and employees eligible to receive the shares.
The company has approached you to advise them about the issue
of the said sweat equity shares, in line with the provisions of
the Companies Act, 2013.
13. PQR Limited, a manufacturing company, is in the process of
expanding its operations. To support this expansion, PQR
Limited has acquired a plot of land along with the buildings on it
from ABC Limited, another company in the same industry. The
property, however, is subject to an existing charge, created in
favor of a bank as security for a loan taken by ABC Limited. This
charge had been registered by ABC Limited at that time. The
directors of PQR Limited are of the opinion that as the charge
for the property was already created, there is no further
obligation to be fulfilled from the side of PQR Limited.
After negotiations, the bank, as the charge holder, consents to
the sale and transfer of the property to PQR Limited with the
condition that PQR Limited must register a new charge over the
acquired property as security for its own loan obligations.
Advise whether the contention of directors of PQR Limited is
correct. Give your answer in terms of the provisions of the
Companies Act, 2013.
14. Vishal Limited is an unlisted public company, having five directors
in its board which includes two independent directors.
Sam (P) Limited, is subsidiary company of Vishal Limited,
actively carrying on its business, having paid up capital of ` 1.5
crore with 40 members and turnover of ` 18 crore, respectively
and the said company is not a start-up company.

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It is also provided that Sam (P) Limited is not a start up company.
In the context of aforesaid case-scenario, please answer to the
following question(s):-
Whether Sam (P) Limited is mandatorily required to prepare
cash flow statement for the financial year as a part of its financial
statements?
Provide your answer by analyzing Sam (P) Limited into
following category of companies:-
(i) Small company, and
(ii) Dormant company, respectively.
15. Pran Limited is an unlisted company, having its registered office
at Agartala. The company scheduled its Annual General Meeting
(AGM) on 31st July, 2024 in Goa. The meeting commenced at
3:00 PM and concluded at 6:00 PM.
It is also provided that by 1st July, 2024, the company had
obtained written consent from all members via email, agreeing
to hold the AGM at this out-of-state location. As per the
Companies Act, 2013, evaluate whether the AGM was validly
conducted.
16. HD Software Limited is engaged in the business of providing
software services. The company appointed its statutory auditors
(not the first auditor). The Board of directors of the company
informed the auditor that the fees shall be fixed by the Board of
directors only.
But the auditor objected to the same. Now the directors have
approached you to advise them whether they can solely fix the
remuneration of the auditor.
The Limited Liability Partnership Act, 2008
17. Amit and Priya are partners in XYZ LLP, a consulting firm.
Recently, Priya moved to a new address but forgot to notify the
LLP within the required period. A month later, Amit’s cousin,
Ramesh, expressed interest in joining XYZ LLP as a partner, and
after a few discussions, he was accepted as a new partner.

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However, XYZ LLP did not immediately update the Registrar of
Companies (RoC) regarding Priya’s address change or
Ramesh’s admission as a partner. Two months after Ramesh
joined, the LLP filed a notice with the RoC about these changes.
Advise the LLP about the default on part of LLP about the non
compliance in respect to not informing the ROC about:
(i) Priya’s address change
(ii) Ramesh’s admission as a partner.
The General Clauses Act, 1897
18. The Parliament recently passed the Environment Protection
Amendment Act, 2024, to strengthen regulations on industrial
waste disposal. The Act specified the commencement date as 1 st
September, 2024. The President gave assent to the Act on 15th
July, 2024.
Green Earth Limited, an industrial company, is uncertain about
when the provisions of the Environment Protection Amendment
Act, 2024, will start to apply. The company’s legal team has
raised question on whether they need to immediately comply
with the new regulations or if they have a grace period until
the commencement date. Give your answer in reference to the
provisions of the General Clauses Act, 1897.
Interpretation of Statutes
19. At the time of interpreting a Statute what will be the effect of
‘Usage’ or ‘customs and Practices’?
The Foreign Exchange Management Act, 1999
20. Ravi, an Indian citizen, works as a software engineer for an
international company. During the previous financial year (2023-
2024), Ravi resided in India for 200 days. However, in April of the
current financial year, he accepted a job offer in Canada and left
India with a long-term work visa, planning to settle in Canada
indefinitely.
Analyse the residential status of Ravi for the financial year 2024-
2025, as per the provisions of the Foreign Exchange
Management Act, 1999.

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SUGGESTED ANSWERS/HINTS

Multiple Choice Questions

MCQ No. Most Appropriate
Answer

1. (b
)
2. (b
)
3. (a
)
4. (b
)
5. (a
)
6. (d
)
7. (b
)
8. (c)
9. (b
)
10. (b
)
Descriptive questions
11. According to section 27(1) of the Companies Act, 2013, the terms
of a contract referred to in the prospectus or objects for which
the prospectus has been issued can be varied, but only with
the authority of the company given by it in general meeting by
way of special resolution.
The second proviso to sub-section (1) prescribes that such
company is not to use any amount raised by it through the
prospectus for buying, trading or otherwise dealing in equity
shares of any other listed company.
In the given question, XYZ Limited, is planning to use the
amount initially raised for investing in a different industry, which

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also involves trading in equity shares ofEXAMINATION
other listed companies.

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Though XYZ Limited has passed a special resolution for the
said proposal but it cannot use any amount raised by it through
the prospectus for buying, trading or otherwise dealing in equity
shares of any other listed company. Hence, the said proposal
for new investment is not valid.
12. According to section 54(1) of the Companies Act, 2013, a
company may issue sweat equity shares if all of the following
conditions are fulfilled:
a. Share of that class must be already issued
b. Issue is authorised by a special resolution passed by the
company;
c. Resolution specifies the details regarding the number of
shares, the current market price, consideration, if any, and
the class or classes of directors or employees to whom
such equity shares are to be issued;
The special resolution authorising the issue of sweat equity
shares shall be valid for making the allotment within a period of
not more than 12 months from the date of passing.
During a year, the maximum amount/limit for which sweat
equity shares can be issued is higher of:
a. 15% of the existing paid up equity share capital or
b. Shares of the issue value of rupees 5 crore.
The issuance of sweat equity shares (cumulative, including all
previous issues, if any) shall not exceed 25% of the paid-up
equity capital of the company at any time.
In the given question, the company has proposed to issue sweat
equity shares to the tune of ` 4 crore. However, the maximum
limit to which it can issue such shares is- Higher of:
a. 15% of the issued paid up share capital, i.e. ` 3 crore, or
b. 5 crore
Thus, company can issue sweat equity shares to the tune of ` 5
crore. However, the company cannot issue such shares more than
25% of the paid-up equity capital= 25% of ` 20 crore= ` 5 crore.

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Hence, the company can issue sweat equity shares of ` 4 crore.
13. The provisions of section 77 relating to registration of charges
shall, so far as may be, apply to:
a. a company acquiring any property subject to a charge within
the meaning of that section; or
b. any modification in the terms or conditions or the extent or
operation of any charge registered under that section.
According to section 79(a) of the Companies Act, 2013, in case of
a property where charge is already registered and if it is sold with
the permission of the holder of charge, it shall be the duty of the
company acquiring it to get the charge registered in accordance
with section 77.
According to the provisions of section 77, when a company
acquires property that is subject to an existing charge, it is the
duty of the acquiring company (PQR Limited in this case) to
register the charge as its own. This means that PQR Limited
must create a fresh charge over the acquired property and
register it with the Registrar of Companies (RoC) as per section
77.
Now upon acquisition, it is PQR Limited’s responsibility to
ensure that the previous charge is effectively discharged and
that the new charge is registered in its name, reflecting PQR
Limited as the current owner and debtor of the charge. Hence,
the contention of directors of PQR Limited that since the charge
for the property was already created, there is no further
obligation on part of PQR Limited, is not correct.
14. According to section 2(10) of the Companies Act,
2013, Financial statement in relation to a
company, includes:
(i) a balance sheet as at the end of the financial year;
(ii) a profit and loss account, or in the case of a company
carrying on any activity not for profit, an income and
expenditure account for the financial year;
(iii) cash flow statement for the financial year;
(iv) a statement of changes in equity, if applicable; and

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(v) any explanatory note annexed to, or forming part of, any
document referred to in sub-clause (i) to sub-clause (iv):
Provided that the financial statement, with respect to one
person company, small company, dormant company and private
company (if such private company is a start-up) may not include
the cash flow statement.
For considering the applicability of preparation of cash flow
statement in case of Sam (P) Limited, it is required first to
analyze that Sam (P) Limited does not fall in the following
categories:
(i) Small company – A company which is a subsidiary
company cannot be categorized as a small company as per
proviso to section 2(85). Thus, even though its paid up
capital and turnover are within the prescribed limits, as Sam
(P) Limited is a subsidiary company of Vishal Limited, it
cannot be considered as small company.
(ii) Dormant company – It is given that the company is
actively carrying on its business, so it cannot be also
categorized as a dormant company based upon the facts
given.
So, Sam (P) Limited shall be deemed to be a public company as it
is subsidiary of Vishal Limited, an unlisted public company and
so it will not fall into this category of exemption as well.
Thus, it can be concluded that Sam (P) Limited is mandatorily
required to prepare cash flow statement for the financial year as
a part of its financial statements as it does not fall in any of the
categories of companies mentioned under proviso to section
2(10) of the Companies Act, 2013.
15. Section 96(2) of the Companies Act, 2013, states that every
annual general meeting shall be called during business hours,
that is, between 9 AM and 6 PM on any day that is not a
National Holiday and shall be held either at the registered office
of the company or at some other place within the city, town or
village in which the registered office of the company is situated.

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Provided that annual general meeting of an unlisted company
may be held at any place in India if consent is given in
writing or by electronic mode by all the members in advance.
In the given question, Pran Limited is an unlisted company and
consent of all members to conduct the AGM at Goa has been
received in advance (by 1st July, 2024). Also, the meeting was
started well within the prescribed time i.e. at 3.00 PM. Hence,
the meeting was validly called.
16. Section 142 of the Companies Act, 2013, provides for
remuneration of auditors. According to this section the
remuneration of the auditors of a company shall be fixed by the
company in general meeting or in such manner as the company
in general meeting may determine. However, the Board may
fix remuneration of the first auditor appointed by it.
The remuneration shall, in addition to the fee payable to an
auditor, include the expenses, if any, incurred by the auditor in
connection with the audit of the company and any facility
extended to him but does not include any remuneration paid to
him for any other service rendered by him at the request of the
company.
As per the facts of the question and stated provision,
remuneration of the appointed statutory auditors of a company
shall be fixed by the company in general meeting or in such
manner as the company in general meeting may determine as
they are not the first auditor.
Hence, the contention of the Board of directors that they can fix
the remuneration of the auditor on their own is not valid.
17. According to section 25 of the Limited Liability Partnership Act,
2008,
(1) Every partner shall inform the LLP of any change in his name
or address within a period of 15 days of such change.
(2) A LLP shall—
(a) where a person becomes or ceases to be a partner,
file a notice with the Registrar within 30 days from the
date he becomes or ceases to be a partner; and
(b) where there is any change in the name or address of
a partner, file a notice with the Registrar within 30 days
of such change.

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(3) A notice filed with the Registrar under sub-section (2)—
(a) shall be in such form and accompanied by such fees
as may be prescribed;
(b) shall be signed by the designated partner of the LLP
and authenticated in a manner as may be prescribed;
and
(c) if it relates to an incoming partner, shall contain a
statement by such partner that he consents to
becoming a partner, signed by him and authenticated
in the manner as may be prescribed.
(i) Priya’s Address Change: Under the provision, Priya was
required to inform XYZ LLP of her address change within 15
days of the move. Following that, XYZ LLP was required
to file a notice with the RoC within 30 days of being
notified of Priya's new address. As Priya did not inform the
LLP about change of address and consequently LLP did not
file a notice regarding the change in address of Priya with
the Registrar, XYZ LLP is not in compliance with the
required timeline.
(ii) Ramesh’s Admission as a Partner: For new partners,
XYZ LLP must file a notice with the RoC within 30 days of a
person becoming a partner. This notice should include
Ramesh’s consent statement, signed by him and
authenticated as prescribed. The delay in filing means XYZ
LLP did not meet the 30-day requirement.
18. According to section 5 of the General Clauses Act, 1897, where
any Central Act has not specifically mentioned a particular date to
come into force, it shall be implemented on the day on which it
receives the assent of the Governor General in case of a Central
Acts made before the commencement of the Indian Constitution
and/or, of the President in case of an Act of Parliament.
In the given question, the Environment Protection Amendment
Act, 2024, received assent of President of India on 15th July,
2024. The commencement date is prescribed as 1st September
2024. Accordingly, the Environment Protection Amendment Act,
2024, shall come into enforcement 1st September, 2024.

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19. Effect of usage: Usage or practice developed under the statute
is indicative of the meaning recognized to its words by
contemporary opinion. A uniform notorious practice continued
under an old statute and inaction of the Legislature to amend
the same are important factors to show that the practice so
followed was based on correct understanding of the law. When
the usage or practice receives judicial or legislative approval it
gains additional weight.
In this connection, we have to bear in mind two Latin maxims:
(i) 'Optima Legum interpres est consuetude' (the custom is the
best interpreter of the law); and
(ii) ‘Contemporanea Expositio est optima et fortissinia in lege’
(the best way to interpret a document is to read it as it
would have been read when made).
Therefore, the best interpretation/construction of a statute or any
other document is that which has been made by the
contemporary authority. Simply stated, old statutes and
documents should be interpreted as they would have been at the
time when they were enacted/written.
Contemporary official statements throwing light on the
construction of a statute and statutory instruments made under it
have been used as contemporanea expositio to interpret not only
ancient but even recent statutes in India.
20. As per section 2(v) of the Foreign Exchange Management Act,
1999, the term ‘person resident in India’ means the following
entities:
A person who resides in India for more than 182 days during the
preceding financial year.
The following persons are not persons resident, in India even
though they may have resided in India for more than 182 days.
A. A person who has gone out of India or stays outside India
for any of the three purposes given below,
B. A person who has come to or stays in India otherwise than
for any of the three purposes given below;
Three Purposes

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(1) For or on taking up Employment
(2) For carrying on a business or Vacation
(3) For any other purpose in such circumstances as would
indicate stay for an uncertain period.
Ravi's Residential Status: Ravi resided in India for more
than 182 days in the preceding financial year, which would
typically qualify him as a "person resident in India." However, his
decision to leave India for long- term employment in Canada
changes his status. According to the provision, a person who has
left India for the purpose of employment abroad is not considered
a "person resident in India" even if they meet the 182-day
requirement. Thus, Ravi does not qualify as a resident for the
current financial year.

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PAPER – 3: TAXATION

SECTION A: INCOME TAX LAW

The Income-tax law, as amended by the Finance Act, 2023,
including significant notifications/ circulars issued upto 30 th June, 2024,
is applicable for January, 2025 examination. The relevant assessment
year for January, 2025 examination is A.Y.2024-25. The June, 2023
edition of the Study Material is based on the provisions of Income-tax
law as amended by the Finance Act, 2023 and significant
notifications/circulars issued upto 30.04.2023, and hence, the same is
relevant for January, 2025 examination. The Statutory Update
containing significant notifications/circulars issued between 1.5.2023
and 30.6.2024 which are relevant for January, 2025 is webhosted at
https://resource.cdn.icai.org/81242bos65468.pdf

QUESTIONS

Case scenario
Sagar LLP is an LLP unit set up in Special Economic Zone (SEZ) in the
financial year 2018-19 for manufacture of textiles. The unit fulfils all
the conditions under section 10AA of the Income-tax Act, 1961. The
details of this unit for the financial year 2023-24 are given:
Particula `
rs
Profits of unit located in SEZ 58,00,000
Export sales of above unit received in India in 1,00,00,00
convertible foreign exchange on or before 30.9.2024 0
Domestic sales of above unit 60,00,000

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EXAMINATION
Sagar LLP has three partners, Mr. Ram, Mr. Shyam and Mr.
Ganesh. Mr. Ram and Mr. Shyam are working partners while Mr.
Ganesh is a non-working partner. All the three partners are receiving
remuneration of ` 1 lakh per month from the LLP which is already
debited to the profits and loss account of the LLP.
Apart from this, Mr. Ganesh was employed in XYZ Ltd. till 30.9.2023
and having a salary of ` 80,000 per month. He resigned then and
decided to start his own business. He set up a warehousing facility in
Pune for storage of agricultural produce, fulfilling the conditions for
claim of deduction under section 35AD. Capital expenditure in
respect of warehouse amounted to
` 90 lakhs (including cost of land ` 30 lakhs) was incurred
during the
P.Y. 2023-24. The warehouse became operational with effect from
1st December 2023. The profit from operation of warehousing facility
(before considering deduction under section 35AD) during the
F.Y. 2023-24 is
` 1,10,00,000.
He pays lumpsum premium of ` 90,000 towards health insurance for
self and his wife (age 43 years) for 36 months on 01.10.2023 by
account payee cheque. He also contributes ` 1,50,000 towards PPF.
From the information given above, choose the most appropriate
answer to the following questions –
1. What is the amount of remuneration allowable as deduction to
the LLP for A.Y.2024-25 under the head “Profits and gains of
business or profession”?
(a) ` 36.00 lakhs
(b) ` 57.30 lakhs
(c) ` 35.70 lakhs
(d) ` 24.00 lakhs
2. What is the amount of deduction available under section 10AA
to Sagar LLP and under section 35AD to Mr. Ganesh while
computing income under the regular provisions of the Income-
tax Act, 1961 for A.Y.2024-25?
(a) ` 36.25 lakhs and ` 60 lakhs, respectively

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(b) ` 21.875 lakhs and ` 60 lakhs, respectively
(c) ` 18.125 lakhs and ` 60 lakhs, respectively
(d) ` 21.875 lakhs and ` 90 lakhs, respectively
3. What is the total income of Mr. Ganesh under the regular
provisions of the Income-tax Act, 1961 for A.Y.2024-25?
(a) ` 52,57,500
(b) ` 52,55,000
(c) ` 53,05,000
(d) ` 64,55,000
4. What is the tax liability (rounded off) of Mr. Ganesh under
default tax regime under section 115BAC for A.Y.2024-25?
(a) ` 37,42,280
(b) ` 40,18,560
(c) ` 36,34,640
(d) ` 40,65,200
5. What is the tax liability (rounded off) of Mr. Ganesh if he has
opted out of the default tax regime for A.Y.2024-25?
(a) ` 15,89,870
(b) ` 24,24,460
(c) ` 15,89,020
(d) ` 24,90,280
6. Mr. Akshay (aged 59 years), an Indian citizen, travelled frequently
out of India for his business trip as well as for his outings. He
left India from Delhi airport on 20th April 2023 and returned on
15th October 2023. He has been in India for less than 700 days
during the 7 years immediately preceding the previous year.
Determine his residential status and his total income for the
assessment year 2024-25 from the following information:

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(1) Long term capital gain on sale of shares of Shama India
Ltd., a listed Indian company, amounting to ` 1,12,000. The
sale proceeds were credited to his bank account in UK.
(2) Dividend amounting to ` 40,000 (gross) received from RIL
Ltd., an Indian company. He had borrowed money from Mr.
Abhay, a non- resident Indian, for the above-mentioned
investment on 2nd April, 2023. Interest on the borrowed
money for the P.Y. 2023-24 amounted to ` 10,000.
(3) Interest on post office saving bank account amounting to `
9,500.
Mr. Akshay has shifted out of the default tax regime and wants
to pay tax under normal provisions of the Act.
7. Mr. Rohan, an employee of ABC Ltd. is posted at Mumbai. He was
appointed on 1st March 2023 on the scale of ` 60,000 - ` 2,000
-
` 80,000. Details of his other income for the previous year
2023-24 are as follows:
(i) Dearness allowance: 40% of basic salary (60% forms part of
pay for retirement benefits)
(ii) Telephone allowance @`500 per month
(iii) Both Mr. Rohan and the company contribute 15% of basic
salary to RPF. Interest accrued in this Fund@12% p.a.
amounted to
` 25,800.
(iv) The company has provided him with the rent free
unfurnished accommodation in Mumbai owned by the
company.
(v) The salary of ` 2,500 p.m. of domestic servant is reimbursed
by the company.
(vi) Rohan has used his own motor car of 1.8 ltr engine
capacity for both official and personal purposes. The
running and maintenance costs of ` 50,000 are borne by
the company.
(vii) Professional tax paid ` 2,500 of which ` 1,500 was paid by
the employer.
(viii) During the year 2022-23, Mr. Rohan gifted a sum of `
6,00,000 to Mrs. Rohan. She started a business by
introducing such amount as

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her capital. On 1st April, 2023, her total investment in
business was
` 10,00,000. During the previous year 2023-24, she has
suffered a loss of ` 1,20,000 from such business
Determine the gross total income of Mr. Rohan for the A.Y.
2024-25 under normal provisions of the Act.
8. Mr. Mayank, a resident individual, furnished the following
information in respect of income earned and losses
incurred by him for the F.Y. 2023-24
Particula Amount (`)
rs
Income from Salary (Computed) 27,40,000
Long term capital loss on sale of shares of (1,25,000)
Reliance Ltd. STT has been paid both at the
time of acquisition and sale

Income from let out property in Kanpur 5,50,000

Loss from let out property in Delhi (3,75,000)
Interest on self-acquired property in Mumbai (1,50,000)
Net winnings from online games (Net of TDS) 35,000
Profit and gains from manufacturing business 36,86,000
(after deducting normal depreciation of `
2,00,000 and additional depreciation of `
50,000)
The other details of losses and unabsorbed depreciation
pertaining to
A.Y. 2023-24 are as follows:
Particula Amount
rs
Business loss from manufacturing business (5,35,000)
Unabsorbed normal depreciation (2,10,000)
Loss from the activity of owning and (1,50,000)
maintaining the race horses

Loss from let out property in Delhi (2,10,000)

Mr. Mayank filed his return of income for A.Y. 2023-24 on

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28.7.2023 and opted for section 115BAC. Compute the Gross
total income of

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Mr. Mayank for the A.Y. 2024-25 and the amount of loss, if any,
that can be carried forward if he wants to continue with the
provisions under section 115BAC.
9. Examine the applicability of Tax deduction at source (TDS) or
Tax collection at source (TCS) as per the Income-tax Act, 1961
for the
A.Y 2024-25 in the following situations
(i) Mr. Arjun, a resident Indian, is in retail business in Delhi and
his turnover for F.Y.2022-23 was ` 9.90 crores. He regularly
purchases goods from another resident, Mr. Saurabh, a
wholesaler in Noida. GST rate on such goods is 5%. The
aggregate amount of sales made by Mr. Saurabh to Mr.
Arjun during the F.Y.2023-24 was ` 49 lakhs (without GST).
Mr Arjun made the payment for consideration of goods (`
21 lakhs on 8.7.2023, ` 26.25 lakhs on 27.8.2023 and
` 4.2 lakhs on 11.3.2024). Mr. Saurabh’s turnover for
F.Y.2022-23 was ` 10.10 crores.
(ii) Mr. Raja paid ` 12 lakhs on 1.11.2023 to M/s. Thomas Cook
for a holiday package to Singapore for a week with his
family, comprising of his wife and two children, being twins
aged 22 years, in the last week of November. Mr. Raja also
remitted ` 10 lakhs on 28.3.2024, out of his personal
savings, under LRS through Bank of India, as gift to his
sister residing in London, on the occasion of her 50th
birthday.
10. Mr. Ramesh is an authorized wholesale distributor of fertilizers
and other agricultural products. An analysis of his trading and
profit & loss account for the previous year 31.3.2024 revealed
the following information:
(1) Net Profit ` 75,43,000.
(2) The following incomes were credited in the profit and loss
account
(a) Rent received ` 5,40,000
(b) Income-tax refund ` 15,000
(c) Dividend from Indian companies ` 2,50,000 (Gross)

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(3) Rates and taxes debited to profit and loss account include `
1,000 paid towards late filing of his IT return for A.Y. 2023-
24 under section 234F of Income-tax Act.
(4) Salaries debited to profit and loss account include `
35,000 paid on single day by way of cash to his
accountant.
(5) Interest of ` 1,20,000 paid on loan of ` 10,00,000 taken from
NBFC. Out of the loan, amount of ` 2 lakhs was used for
personal purposes and the balance was used for business
purposes. No TDS was deducted while paying interest.
Interest of ` 1,20,000 is debited to profit and loss account.
(6) Municipal Taxes of ` 10,000 paid for the building was
debited to profit and loss account.
Additional Information
(1) Closing stock was undervalued by ` 40,000
(2) Income-tax refund includes ` 2,000 towards interest.
(3) An amount of ` 45,000 was paid by cheque during the
year towards health insurance policy covering himself, his
spouse and his children.
(4) Advance Tax paid during the year is ` 15 lakhs.
(5) Half of the building is used for business purpose and
remaining half let out to Mr. Anshul for residential purpose.
(6) He also sold his vacant land on 10.11.2023 for ` 10 lakhs.
The stamp duty value of land at the time of transfer was `
14 lakhs. The FMV and stamp duty value of the land as on 1 st
April, 2001 was ` 4 lakhs and ` 3 lakhs, respectively. This
land was acquired by him on 05.08.1995 for ` 1.80 lakhs.
He had incurred registration expenses of ` 10,000 at that
time. The cost of inflation index for the years 2023-24 and
2001-02 are 348 and 100, respectively.
(7) Mr. Ramesh’s turnover for the P.Y. 2022-23 was ` 3 crores
You are required to compute the total income and tax
payable by Mr. Ramesh for the A.Y. 2024-25 under regular
provisions of the Act.

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SUGGESTED ANSWERS/HINTS

Answer Key
Questi Answ
on No. er
1. (d) ` 24.00 lakhs
2. (b) ` 21.875 lakhs and ` 60 lakhs,
respectively
3. (a) ` 52,57,500
4. (c) ` 36,34,640
5. (b) ` 24,24,460

6. Determination of residential status

An individual is said to be resident in India in any previous year, if
he satisfies any one of the following conditions:
(i) He has been in India during the previous year for a total
period of 182 days or more, or
(ii) He has been in India for at least 60 days in the previous
year and has been in India during the 4 years immediately
preceding the relevant previous year for a total period of
365 days or more.
If the individual satisfies any one of the conditions mentioned
above, he is a resident. If both the above conditions are not
satisfied, the individual is a non-resident.
Mr. Akshay, an Indian citizen, has satisfied the first basic
conditions for being a resident, since he was in India for 189 days
(20+17+30+31+31+29+31) during the previous year 2023-24.
Hence, he is a resident in India for A.Y.2024-25.
An individual would be resident but not ordinarily resident if he
satisfies either one of the following conditions:
(i) He has been non-resident in India in any 9 out of 10
previous years preceding the relevant previous year, or

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(ii) He has, during the 7 years immediately preceding the
relevant previous year, been in India for a period of 729
days or less.
Since Mr. Akshay has been in India for less than 700 days during
the 7 years immediately preceding the previous year, he would
be a resident but not ordinarily resident for A.Y. 2024-25
Computation of total income of Mr. Akshay for A.Y.2024-
25
Particula Amount
rs (`)

(1) Long-term capital gain on sale of shares 1,12,000

of an
Indian listed company is chargeable to tax
in the
hands of Mr. Akshay, since it has accrued
and
arisen in India even though the sale
proceeds
were credited to bank account in UK.
(2) Dividend received from an Indian
40,000
company taxable in the hands of the
Akshay as Income from other sources
since the income has accrued or arisen
in India
Less: Interest expenditure restricted to 32,000

8,000 20% of dividend

(3) Interest on post office saving bank
9,500
account is taxable in the hands of
Mr. Akshay as Income from other
sources, since it has accrued and arisen
in India and is also received in India.
Less: Exemption under section 10(15) 3,500 6,000
Gross Total Income 1,50,00
0

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Less: Deduction under section 80TTA 6,000
Total Income 1,44,00
0

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7. Computation of gross total income of Mr. Rohan
for the A.Y.2024-25
Particula Amoun Amoun
rs t (`) t (`)
I Salaries
Basic Salary (` 60,000 x 11 + ` 62,000 7,22,000
x 1)
Dearness Allowance (40% of ` 2,88,800
7,22,000)
Telephone allowance (` 500 x 12) 6,000
Employer’s contribution to RPF (15% 1,08,300
of
` 7,22,000)
Less: Exempt [12% of salary i.e., 12% 1,07,434 866
x 8,95,280 (7,22,000 + 60% of
2,88,800)
Interest accrued in the RPF@12% 25,800
Less: Exempt @9.5% p.a. 20,425 5,375
Value of Rent Free accommodation
From April 2023 to August 2023 56,175
[15% of ` 3,74,500 i.e., ` 3,00,000
(60,000 x
5) + 72,000 (` 3,00,000 x 40% x
60%) +
` 2,500 (` 500 x 5)]
From September 2023 to March
2024
[10% of ` 5,26,780 i.e., ` 4,22,000 52,678 1,08,853
(60,000 x
6 + 62,000 x 1) + 1,01,280 (`
4,22,000 x
40% x 60%) + ` 3,500 (` 500 x 7)]
Reimbursement of salary 30,000
of domestic servant
[` 2,500 x 12]
Perquisite value of motor car
Running and maintenance costs 50,000
incurred by employer

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Less: Specified as per Rule 3 [` 2,400 x 28,800 21,200
12]
Professional tax paid by employer 1,500
Gross Salary 11,84,59
4

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Less: Deduction under section 16
Standard deduction 50,000
Professional tax paid 2,500 52,50
0
Taxable Salary 11,32,09
4
II
Profit and gains from business
or profession
Where the amount of Mr. Rohan (` 6
lakh, in this case) is invested by Mrs.
Rohan in a business as her capital,
proportionate share of profit or loss,
as the case may be, computing taking (72,000
into account the value of the ) -
investment as on 1.4.2023 to the total
investment in the business (` 10
lakhs) would be included in the
income of Mr. Rohan [loss of `
1,20,000 x 6/10]
[Business loss of ` 72,000 cannot be
set off against salary income. It has to
be carried forward to next year]

Gross Total Income 11,32,09

4
8. Computation of gross total income of Mr. Mayank for A.Y.
2024-25
Particula Amoun Amoun
rs t (`) t (`)
Income from Salary (Computed) 27,40,00
Income from house property 0

Income from let out property in Kanpur 5,50,000

Less: Set off of loss from let out (3,75,000)
property in Delhi
Less: Interest u/s 24(b) is not allowed in -
case of self-occupied property since Mr.
Mayank is paying tax under section

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115BAC]
Less: Loss from let out property in -
Delhi of

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A.Y. 2023-24 cannot be set off against
income from house property of A.Y.
2024-25 since Mr. Mayank has paid tax
under section 115BAC during the A.Y.
2023-24 and no deduction in respect of
loss of house property of that year will
be allowed in any subsequent year. 1,75,000

Profits and gains from business

or profession
Profits from manufacturing business 36,86,000
Add: Additional depreciation not 50,000
allowable in case of section 115BAC

37,36,00
Less: Brought forward business loss
0
of A.Y. 2023-24 29,91,000
(5,35,00
Less: Unabsorbed normal depreciation
0)
Capital Gains -
Long term capital loss on sale of shares (2,10,00
of Reliance Ltd. on which STT has been 0)
paid can be set off only against long
term capital gains. Hence, it has to be
carried forward (1,25,00
0) 50,000
Income from Other Sources
Net winnings from online
games [` 35,000/70%]

Gross Total Income 59,56,00

0
Losses to be carried forward to A.Y. 2025-26
Particula Amount
rs (`)
Brought forward loss from the activity of owning 1,50,00
and maintaining the race horses of A.Y. 2023-24 can 0
be set off only against the income from the activity

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of owning and maintaining race horses. Hence, it
has to be carried forward.

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Long term capital loss on sale of shares of Reliance 1,25,00
Ltd. on which STT has been paid 0

9. (i) Since Mr. Arjun’s turnover for the F.Y. 2022-23 does not
exceed
` 10 crores, TDS provisions under section 194Q would not be
attracted. However, TCS provisions under section 206C(1H)
would be attracted in the hands of Mr. Saurabh since his
turnover for the
P.Y. 2022-23 exceeds ` 10 crores and his sales
consideration (including GST) from Mr. Arjun exceeds ` 50
lakhs.
No tax is to be collected under section 206C(1H) on 8.7.2023
and 27.8.2023 since the aggregate receipts till that date
i.e., ` 47.25 lakhs, has not exceeded the threshold limit of
` 50 lakhs.
Tax of ` 145 i.e., 0.1% of ` 1.45 lakhs has to be collected
under section 206C(1H) on 11.3.2024 (` 4.20 lakhs - ` 2.75
lakhs, being the balance threshold limit)
(ii) M/s. Thomas Cook, being a seller of an overseas tour
programme package has to collect tax at source under
section 206C(1G) from Mr. Raja on receiving amount for
purchase of package. For the amount received on or after
1.10.2023, tax has to be collected @5% on upto ` 7 lakhs
received and @20% on amount received above ` 7 lakhs.
M/s Thomas Cook has to collect tax of ` 1,35,000, being `
35,000 (5% of ` 7 lakhs) and ` 1 lakh (20% of ` 5 lakhs).
Bank of India, being an authorized dealer has to collect tax
at source under section 206C(1G) @20% on amount in
excess of ` 7 lakhs remitted under the LRS on or after
1.10.2023 since the remittance of ` 10 lakhs is not for the
purpose of education and medical treatment.
Bank of India has to collect tax of ` 60,000 i.e., 20% of ` 3
lakhs, being the amount remitted in excess of ` 7 lakhs.

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10. Computation of total income of Mr. Ramesh for A.Y.
2024-25 under normal provisions of the Act
Particula Amount Amount
rs (`) (`)
Income from house property
Rent received (Rent received has been 5,40,000
taken as gross annual value, due to
absence of information relating to
expected rent)
Less: Municipal tax paid by 5,000
(` 10,000 x ½)
Ramesh
3,74,50
Net Annual Value 5,35,000 0
Less: Deduction u/s 24(a) – 30% of NAV 1,60,500
Profits and from business or
gains
profession
Net profit as per profit and loss account 75,43,000
Add: Expenses/Payments debited to
profit and loss account but not
allowed
- Fee for late filing of income-tax 1,000
return for A.Y. 2023-24 –
disallowed
- Salary paid to an accountant in cash 35,000
exceeding ` 10,000 – disallowed
under section 40A(3)

- Interest paid to NBFC on loan which 24,000

is used for personal purposes (`
1,20,000 x 2,00,000/10,00,000) –
not allowed as per section 37

- Interest paid to NBFC on which tax 28,800

is not deducted attracts
disallowance @30% of ` 96,000
under section 40(a)(ia) [Since Mr.
Ramesh’s turnover for the
immediately preceding previous
year i.e., P.Y. 2022-23 exceeds ` 1
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crore, he is required to deduct
tax at source.

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Disallowance @30% of interest is
attracted for non-deduction of tax
at source]
- Municipal taxes paid for let out
portion [` 10,000 x ½] 5,000

76,36,800
Add: Undervaluation of Closing stock
40,000
Less: Income chargeable under other 76,76,800
heads and income not chargeable
to tax but credited to profit and
loss account
- Rent received (Taxable under the 5,40,000
head “Income from house
property”)
- Income-tax refund 15,000
- Dividend received from Indian 2,50,000
companies (Taxable under the
head “Income from other sources”)
68,71,80
Capital Gains 0
Long-term capital gains on sale of
land (since held for more than 24
months)
Full Value of Consideration [Higher of 14,00,000
stamp duty value of ` 14 lakhs and Actual
consideration of ` 10 lakhs, since stamp
duty value exceeds actual consideration
by more than 10%]
Less: Indexed Cost of acquisition [`
10,44,000 3,56,000
3,00,000 x 348/100]
Cost of
acquisition
Higher of –
- Actual cost ` 1.80 lakhs + ` 0.10
lakhs
= ` 1.90 lakhs and
- Fair Market Value (FMV) ` 4 lakhs as

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on

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1.4.2001 restricted to stamp duty
value of
` 3 lakhs as on 1.4.2001 = ` 3 lakhs
Income from Other Sources
Interest on income-tax refund 2,000
Dividend from Indian companies 2,50,000 2,52,000
Gross Total Income 78,54,30
0
Less: Deduction under Chapter VI-A
Section 80D - Health insurance
premium paid
for self, spouse and his children 25,000
allowable as deduction to the extent `
25000
Total Income 78,29,30
0
Computation of tax payable by Mr. Ramesh for the A.Y.2024-
25
Particula Amount
rs (`)
Tax on ` 3,56,000@20% under section 112 71,200
Tax on balance income of ` 74,73,300
Upto ` 2,50,000 Nil
` 2,50,001 - ` 5,00,000 [i.e., ` 2,50,000 12,500
@5%]
` 5,00,001 - ` 10,00,000 [i.e., ` 5,00,000 1,00,000
@20%]
Above ` 10,00,000 [i.e., ` 64,73,300 19,41,99 20,54,49
@30%] 0 0
21,25,69
0
Add: Surcharge @10%, since total
income
exceeds ` 50,00,000 but does not 2,12,569
exceed ` 1 crore
23,38,25
9
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Add: Health and Education cess@4%EXAMINATION 93,530
Tax liability 24,31,78
9
Less: Advance Tax 15,00,00
0
Tax Payable 9,31,789
Tax Payable (Rounded off) 9,31,790

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SECTION B: GOODS AND SERVICES TAX

(1) All questions should be answered on the basis of the

position of GST law as amended up to 30.06.2024.
(2) The GST rates for goods and services mentioned in
various questions are hypothetical and may not
necessarily be the actual rates leviable on those goods
and services. Further, GST compensation cess should be
ignored in all the questions, wherever applicable.

QUESTIONS

Case Scenario
Vintage Cinemas Pvt. Ltd. (VCPL) is a leading chain of multiplexes
operating in several States across India. The company has its
corporate office in Mumbai, Maharashtra and is registered under GST
in multiple States including Maharashtra. The company offers movie
tickets, food and beverages and other entertainment-related
services.
The turnover of the company in the preceding financial year as per
the audited financial statements was ` 175 crore. The company
crossed the aggregate turnover of ` 35 crore till June in the current
year.
In July, VCPL opened a new multiplex in Gujarat wherein the
commercial operations will commence from August 1.
Due to operations in multiple States, the finance and accounts
operations are handled by a centralized team at the corporate office.
The same team is also responsible for filing the GST returns for all the
GST registrations of the company.
The company is also engaged in leasing of space to independent
vendors in its food court against rental charges for the purpose of
increasing the source of revenue.

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The company obtained a new office building in Mumbai under a rental
agreement and paid an amount of ` 5 crore as refundable security
deposit to the owner of the premises. The term of the rental
agreement is 5 years.
The company also dispatched advertisement material worth ` 35 lakh
from Maharashtra to Gujarat Multiplex for the upcoming movies by
way of transport through road in September. The company claimed
input tax credit on such advertisement material at the time of receipt
in Maharashtra.
The rate of tax applicable on all inward and outward supplies is 18%
IGST, 9% CGST and 9% SGST unless otherwise specified.
On the basis of the facts given above, choose the most appropriate
answer to
Q.1 to Q.5 below -
1. Which of the following statements is correct under GST law in
relation to the registration requirements of the company (VCPL)
in relation to its operations to be commenced in the State of
Gujarat?
(a) VCPL is not required to take GST registration for Gujarat
multiplex till turnover of Gujarat multiplex does not cross `
20 lakh.
(b) VCPL is required to take GST registration in Gujarat while
commencing business in Gujarat as aggregate turnover of
VCPL has already exceeded ` 20 lakh in the current
financial year.
(c) VCPL is allowed to add Gujarat multiplex as additional place
of business under the existing GST registration in
Maharashtra.
(d) VCPL is required to take GST registration only from next
financial year subject to the condition that turnover of
current financial year for Gujarat multiplex exceeds ` 20
lakh.
2. Which of the following statements is true in relation to filing of
return by VCPL?
(a) VCPL is required to file a single consolidated GST return for
all States.
(b) VCPL is required to file separate GST return for each State

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where it is registered.

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(c) VCPL is required to file returns only for the Maharashtra
State where its corporate office is located.
(d) VCPL has an option to file return in the State with the
highest turnover.
3. VCPL is required to levy GST on rental charges_________.
(a) only if the turnover of tenant exceeds ` 20 lakh.
(b) only if the turnover of tenant exceeds ` 1.5 crore.
(c) only if the total rental charge collection in hands of VCPL
exceeds
` 20 lakh.
(d) irrespective of the turnover of the tenant or the amount
of rental charge collection in the hands of VCPL.
4. In respect of the refundable security deposit given by VCPL,
____________________.
(a) GST is payable on the deposit amount by the owner of
the premises.
(b) GST is payable on the deposit amount by VCPL.
(c) there is no requirement to pay GST by the owner or VCPL.
(d) GST is payable in equal proportion over the term of rent
agreement by the owner of premises.
5. VCPL is ___________________for the advertisement material sent
from Maharashtra Office to Gujarat office in relation to the
upcoming movies.
(a) not liable to issue any document as the transaction is
between entities having same PAN.
(b) liable to issue only a delivery challan.
(c) liable to issue only a bill of supply.
(d) liable to generate a tax invoice as well as an E-Way Bill.
6. M/s Consultease Services Private Limited, a company registered
under GST in Mumbai, Maharashtra, offers business consultancy,
digital

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marketing and project management services across India. The
company recorded the following transactions in October:
1. Consultancy services for market analysis: Provided
consultancy services for market analysis to XYZ Ltd., a
registered client in Chennai, Tamil Nadu (Inter-State), for `
4,50,000. Additionally, the company paid an amount of `
4,500 as professional tax applicable in the State of
Maharashtra as per requirement of local state legislation.
The amount of professional tax was recovered separately
from XYZ Ltd.
2. Digital Marketing Services for Launch Event:
Conducted digital marketing for an upcoming product launch
for Mr. A based in Rajasthan, who is an unregistered
person under GST. The agreed fee for the said services is `
3,00,000. Out of the agreed fee, an amount of ` 25,000 is
incurred by Mr. A. The company was liable to pay the
same in relation to the supply and the net payment received
by the company was ` 2,75,000 (exclusive of any tax).
3. Travelling payment for the team: The employees
incurred an amount of ` 50,000 on travel to Kolkata for
client project and claimed a reimbursement of the same
from the company. As a policy, company charged such
expenses from the clients on actual basis.
4. Discount passed on to customer: Post supply discount
was offered to a customer amounting to ` 50,000 against a
supply for which invoice was issued in September. The
customer has not reversed the input tax credit relating to
such discount.
5. Recovery of late payment charges: The company
received an amount of ` 1,00,000 as late payment charges
for delay in payment for consideration from a client
whose service contract was completed in June.
6. Purchase of car: A car was purchased in the name of
company for use by the director. The total cost of car was `
10,50,000 (inclusive of IGST amounting to ` 1,50,000).

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7. Insurance services: The company paid for insurance of the
above new car amounting to ` 25,000 which includes IGST
amounting to
` 2,300.
8. Procurement of services: The company received inter-
State supply of services used for business purpose on
which GST paid was Rs. 45,000. Said credit was not
restricted under any provision of GST laws.
9. Sponsorship: The company sponsored a sports event
wherein it paid an amount of ` 2,00,000 to the event
organizers.
You are required to compute the following for the month of
October:
(a) Total value of supply
(b) output tax payable by the Company.
(c) net GST payable in cash.
Note
(i) Rates of CGST, SGST and IGST are 9%, 9% and 18%
respectively.
(ii) All the amounts given above are exclusive of taxes.
(iii) There was no opening balance of input tax credit.
(iv) The turnover of the company was ` 10 crores in the
previous financial year.
(v) All the transactions are inter-State, unless otherwise
specified.
7. Mr. Bholuram, a supplier located in Meerut, U.P. supplied the
bedsheets, pillow covers and blankets to a Governmental agency,
registered in U.P. under a contract. The total contract value is
` 4,61,000 excluding GST. The value of supply is bifurcated as
below:
400 Blankets for ` 600 each ` 2,40,000
850 Bed Sheets for ` 180 each ` 1,53,000
1700 Pillow Covers for ` 40 each ` 68,000

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Is Governmental agency required to deduct tax at source (while
making the payment to Mr. Bholuram) under section 51 of the
CGST Act, 2017 and if yes, determine the amount of tax to be
deducted source?
8. Blue Panda Pvt. Ltd. is a manufacturing company that supplies
goods to various registered dealers across India. The company
had an aggregate turnover of ₹ 6 crore in the financial year
2023-24. The finance team of the company is not sure whether
e-invoicing provisions are applicable to the company and is of the
view that under e-invoicing system, invoices need to be
generated directly on the e-invoicing portal instead of its ERP
system.
You are required to advise the finance team on the following questions:-
(a) What is e-invoicing, and whether it would apply to Blue Panda Pvt.
Ltd.?
(b) Does Blue Panda Pvt. Ltd. need to create its invoices directly on
the e-invoicing portal?
9. Briefly examine the place of supply in the following independent
cases.
(a) Ms. Shanti (unregistered resident of Gujarat) went to meet
her parents at the native place Patna, Bihar and buys a
medical insurance policy for her parents from an
insurance company – MNT Insurers- of Patna (registered in
Bihar). The location of the recipient of services in the
records of the MNT Insurers is Patna.
(b) Lakhan Singh Transports Pvt. Ltd., a Goods
Transportation Agency registered in Noida, Uttar Pradesh, is
hired by Ram Trade Links (registered supplier in New Delhi)
to transport its consignment of goods from its warehouse
in Delhi to the house of a buyer located in Roorkee, Uttar
Pradesh.
(c) Mr. Karan (Mumbai) takes a post-paid mobile connection
in Mumbai from the service provider - Freesia Ltd. and gives
his residence address at Mumbai as the address for billing
with the said company.

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10. List the accounts and records which are not required to be
maintained by a supplier who has opted for composition scheme,
as per the provisions of the GST laws.

SUGGESTED ANSWERS

MCQ No. Most Appropriate

Answer

1. (b
)
2. (b
)
3. (d
)
4. (c)
5. (d
)
6. (a) Computation of total value of supply
Particulars IGST (`)
Consultancy services provided to XYZ Ltd. 4,54,500
(As per section 15 of the CGST Act, 2017, the
value of supply includes the amount of any tax
paid under any law other than GST.
Accordingly, the amount of professional tax is
includible in the value of services.)

Digital marketing services provided to Mr. A 3,00,000

(The amount incurred by the recipient on
behalf of the supplier is includible in the value
of supply.)
Travelling expenses recovered from the client 50,000
(Incidental expenses like travelling
expenses incurred in course of
supply is includible in value of supply.)

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Post supply discount -
(No adjustment of post supply discount is
allowed as the customer has not reversed the
input tax credit.)

Late payment charges 1,00,000

(The late payment charges recovered are
includible in GST and liable to tax at the time
of receipt of amount.)

Total value of supply for October 9,04,50

0
(b) Computation of output tax payable
Particulars IGST (`)
Total value of outward supply 9,04,500
Total output tax payable @ 18% 1,62,810
(Company is liable to pay GST on sponsorship
services under reverse charge, but the tax payable
under reverse charge is not included in the value
of output tax.)
(c) Computation of net GST payable in cash
Particulars IGST (`)
Total output tax 1,62,810
Less: Input Tax Credit [Refer Working Note (81,000)
below]
Net GST payable (A) 81,810
Add: GST payable under reverse charge for 36,000
receipt of sponsorship services (B)
[Tax on sponsorship services availed by a
body corporate from any person is payable
under reverse charge. Since the tax payable
under reverse charge is not an output tax, ITC
cannot be utilized to pay GST payable under
reverse charge. Thus, it has to be paid in
cash.]
Total GST payable in cash (A) +(B) 1,17,810

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Working Note:
Computation of ITC available
Particulars IGST (`)
Purchase of car for use by director -
(ITC on motor vehicles for transportation of persons
with seating capacity ≤ 13 persons (including the
driver) is blocked except when the same are used
for (i) making further taxable supply of such motor
vehicles (ii) making taxable supply of
transportation of passengers (iii) making taxable
supply of imparting training on driving such motor
vehicles. Purchase of car for use by director is
not a specified purpose.)
Insurance of car -
(ITC is not allowed on services of insurance
relating to the motor vehicles on which ITC is
blocked.
Since, the car is not used for any of the eligible
purposes, ITC thereon is blocked and thus, ITC on
insurance taken on such car is also blocked)
ITC on receipt of services 45,000
(ITC is available on services used in the course or
furtherance of business.)

ITC on sponsorship services 36,000

(ITC is available on services used in the course or
furtherance of business.)

Total ITC available 81,000

7. As per section 51 of the CGST Act, 2017, it is mandatory for

the following persons to deduct tax at source from payments
made to the suppliers of taxable goods and/or services:-
(a) Central/State Government department or establishment;
(b) local authority; or
(c) Governmental agencies; or
(d) such notified persons

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The tax would be deducted @ 1% (each under CGST and SGST) of
the payment made to the supplier of taxable goods and/or
services, where the total value of such supply, under a contract,
exceeds ` 2,50,000 (excluding the amount of Central tax, State
tax, Union Territory tax, Integrated tax and cess indicated in the
invoice). Thus, individual supplies may be less than ` 2,50,000/-,
but if total value of supplies under a contract is more than `
2,50,000/-, TDS has to be deducted.
In the given case, Mr. Bholuram has made supplies to a
Governmental agency and total value of supply under a
contract exceeds ` 2,50,000, it is mandatory for Governmental
agency to deduct TDS @1% each under CGST and SGST on the
net value of taxable supplies.
The amount of TDS required to be deducted each under CGST
& SGST each is ` 4,610.
8. (a) E-invoicing is a system for electronically reporting Business-
to- Business (B2B) invoices to the GST system for certain
notified taxpayers whose turnover exceeds ` 5 crore in any
financial year from 2017-18 onwards. Since Blue Panda Pvt.
Ltd. had an aggregate turnover of ` 6 crore in FY 2023-2024,
it is required to issue e-invoices for its B2B transactions.
(b) No, Blue Panda Pvt. Ltd. does not need to create invoices
directly on the e-invoicing portal. The company will continue
generating its GST invoices using its own
Accounting/Billing/ERP system. The only requirement is that
these invoices must be reported to the Invoice Registration
Portal (IRP) for validation and issuance of a unique Invoice
Reference Number (IRN).
9. (a) The place of supply of insurance services provided to a person
other than a registered person, be the location of the
recipient of services on the records of the supplier of
services. Thus, in the given case, the place of supply is the
location of the recipient of services in the records of the
supplier, i.e. Patna.
(b) The place of supply of services by way of transportation of
goods, including by mail or courier to a registered person,
is the location of such person. Thus, in the given case,
the recipient being

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registered, the place of supply is the location of recipient,
i.e. New Delhi.
(c) The place of supply of telecommunication services including
data transfer, broadcasting, cable and direct to home
television services to any person in case of mobile
connection for telecommunication and internet services
provided on post-paid basis, be the location of billing
address of the recipient of services on the record of the
supplier of services. Thus, in the given case, the place of
supply is the location of billing address of the recipient, i.e.
Mumbai.
10. A supplier who has opted for composition scheme is not required
to maintain following records:
(a) Stock of goods: Accounts of stock in respect of goods
received and supplied by him, and such accounts shall
contain particulars of the opening balance, receipt, supply,
goods lost, stolen, destroyed, written off or disposed of by
way of gift or free sample and the balance of stock including
raw materials, finished goods, scrap and wastage thereof.
(b) Details of tax: Account, containing the details of tax
payable (including tax payable under reverse charge), tax
collected and paid, input tax, input tax credit claimed,
together with a register of tax invoice, credit notes, debit
notes, delivery challan issued or received during any tax
period.

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Applicability of Standards/Guidance Notes/Legislative
Amendments etc. for January, 2025 Examination
Intermediate Level

Paper 2: Corporate and

Other Laws
The provisions of the Companies Act, 2013 and the Limited Liability
Partnership Act, 2008 along with significant Rules/ Notifications/
Circulars/ Clarification/ Orders issued by the Ministry of Corporate
Affairs, and the laws covered under Part II: Other Laws, as amended by
concerned authority, including significant notifications and circulars
issued up to 30.06.2024 are applicable for January 2025 examination.
The Study Material has to be read along with the 'Relevant Legislative
amendments for January 2025 examinations' for the period of 1.5.2023
to 30.06.2024.

Paper 3: Taxation

Section A: Income-tax Law

The provisions of income-tax law, as amended by the Finance Act,
2023, including significant circulars, notifications, press releases
issued and legislative amendments made upto 30.06.2024, are
applicable for January, 2025 examination. The relevant assessment
year for income-tax is A.Y. 2024-25.
The Study Material for Intermediate Paper 3A, based on the provisions
of income-tax law, as amended by the Finance Act, 2023, is relevant
for January, 2025 examination. The Study Material has to be read along
with the Statutory Update covering significant notifications and
circulars issued between 1.5.2023 to 30.06.2024. Statutory Update for
January, 2025 examination has been webhosted at
https://resource.cdn.icai.org/81242bos65468.pdf
Note –The Study Guidelines specifying the list of topic-wise exclusions
from the scope of syllabus and topic-wise inclusion of clauses of
section 10 in the syllabus is webhosted at
https://resource.cdn.icai.org/76864bos61928.pdf

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Section B: Goods and Services Tax

Applicability of the GST law

The provisions of the CGST Act, 2017 and the IGST Act, 2017 as
amended by the Finance Act, 2023 including significant notifications
and circulars issued and other legislative amendments made, which
have become effective up to 30.06.2024, are applicable for January
2025 examination.
The amendments made by the Annual Union Finance Acts in the
CGST Act, 2017 and IGST Act, 2017 are made effective from the
date notified subsequently. Thus, only those amendments made by
the relevant Finance Acts which have become effective till 30.06.2024
are applicable for January 2025 examination.
Accordingly, all the amendments made by the Finance Act, 2023
are applicable for January2025 examination. Further, since the
amendments made by the Central Goods and Services Tax
(Amendment) Act, 2023 and Integrated Goods and Services
Tax (Amendment) Act, 2023, (enacted as on 18.08.2023) have
become effective from 01.10.2023, the same are also
applicable for January 2025 examination.
The Study Guidelines given below specify the exclusions from the
syllabus for January 2025 examination.

List of topic-wise exclusions from the

(1) (2 syllabus
(3)
)
S. No. Topics of Exclusions
in the the (Provisions which are excluded
syllabus syllabus from the corresponding topic of
the syllabus)
2(iii) Charge of tax CGST Act, 2017
including (i) Rate of tax prescribed for supply
reverse charge of
goods*
(ii) Rate of tax prescribed for supply
of
services*
(iii) Categories of supply of goods, tax
on which is payable on reverse
charge basis under section 9(3)

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IGST Act, 2017
(i) Rate of tax prescribed for supply
of
goods
(ii) Rate of tax prescribed for supply
of
services
(iii) Categories of supply of goods, tax
on which is payable on reverse
charge basis under section 5(3)
2(iv Exemption CGST Act, 2017 & IGST Act, 2017
) Exemptions for supply of goods
from tax
3(ii) Basic concepts IGST Act, 2017 & IGST Rules, 2017
of place of (i) Place of supply of goods imported
supply into, or exported from India
(ii) Place of supply of services where
location of supplier or location of
recipient is outside India
(iii) Special provision for payment of
tax by a supplier of online
information and database access or
retrieval [OIDAR] services
(iv) Refund of integrated tax paid on
supply of goods to tourist leaving
India
(v) Special provision for specified
actionable claims supplied by a
person located outside taxable
territory
3(iii Basic concepts CGST Act, 2017 & CGST Rules, 2017
) of time of Provisions relating to change in rate
supply of tax in respect of supply of goods or
services
3(iv Basic concepts CGST Act, 2017 & CGST Rules, 2017
) of value of Chapter IV: Determination of
supply Value
of Supply
[Rules 27-35] of CGST Rules, 2017
3(v) Basic concepts CGST Act, 2017 read with CGST
of input tax Rules, 2017
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credit

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(i) Claim of credit by a banking
company or a financial institution
[Rule 38]
(ii) Manner of determination of input
tax credit in respect of inputs or
input services and reversal thereof
[Rule 42]
(iii) Manner of determination of input
tax credit in respect of capital
goods and reversal thereof in
certain cases [Rule 43]
(iv) Input tax credit provisions in
respect of inputs and capital goods
sent for job work.
(v) Input tax credit provisions relating
to distribution of credit by Input
Service Distributor [ISD]
(vi) Manner of recovery of credit
distributed in excess
(vii)Manner of reversal of credit of
additional duty of customs in
respect of Gold dore bar

*Rates specified for computing the tax payable under composition levy
are included in the syllabus.
Note: The syllabus includes select provisions of the CGST Act, 2017
and IGST Act, 2017 and not the entire CGST Act, 2017 and the IGST
Act, 2017. The provisions covered in any topic(s) of the syllabus which
are related to or correspond to the topics not covered in the syllabus
shall also be excluded.
In the above table, in respect of the topics of the syllabus specified in
column
(2) the related exclusion is given in column (3). Where an exclusion
has been so specified in any topic of the syllabus, the provisions
corresponding to such exclusions, covered in other topic(s) forming
part of the syllabus, shall also be excluded. For example, since
provisions relating to ISD are excluded from the topics “Input tax
credit”, the provisions relating to (i) registration of ISD and
(ii) filing of returns by an ISD are also excluded from the topics
“Registration” and “Returns” respectively.

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The entire content included in the Study Material and the Statutory
Update for January 2025 examination shall alone be relevant for the
said examination. The amendments in the GST law made after the
issuance of the Study Material
- to the extent covered in the Statutory Update for January 2025
examination shall be relevant for the said examination.
Though the Statutory Update for January 2025 examination shall
provide the precise scope and coverage of the amendments, for the
sake of clarity, it may be noted that the amendments made in the
various provisions of the GST law for providing relief to the taxpayers
of Manipur shall not be applicable for January 2025 examination.

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