FINAL EXAMINATION SET - 1

MODEL QUESTION PAPER TERM – JUNE 2024

PAPER – 15 SYLLABUS 2022
DIRECT TAX LAWS AND INTERNATIONAL TAXATION
Time Allowed: 3 Hours Full Marks: 100
The figures in the margin on the right side indicate full marks.
Where considered necessary, suitable assumptions may be made and
clearly indicated in the answer.

SECTION – A (Compulsory)

1. Choose the correct option: [15 x 2 =30]

i. Kumar Industries is engaged in manufacture of leather products. It was set up in

backward area and became eligible for subsidy @ 25% for the generator, to be used
in guest house, acquired by it for ₹ 12 lakhs on 15.12.2023. It received the subsidy
in March 2024. The amount of depreciation for the year at the applicable rate would
be _____________.
a. ₹ 67,500
b. ₹ 90,000
c. ₹ 1,80,000
d. Nil

ii. In the year of restructuring, depreciation shall be:

a. available to the successor company fully
b. apportioned between successor and predecessor on the basis of number of days
c. available to the predecessor company fully
d. None of the above

iii. Uncontrolled transaction means a transaction between ____________, whether

resident or non-resident.
a. enterprises other than associated enterprises
b. associated enterprises
c. any enterprises
d. none of the above

iv. The provisions of sec. 92 will apply only if the aggregate value of specified
domestic transactions entered into by the taxpayer during the year exceeds a sum
of ₹_____.
a. 100 crore
b. 5 crore

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Directorate of Studies, The Institute of Cost Accountants of India
 FINAL EXAMINATION SET - 1
MODEL QUESTION PAPER TERM – JUNE 2024
PAPER – 15 SYLLABUS 2022
DIRECT TAX LAWS AND INTERNATIONAL TAXATION
c. 10 crore
d. 20 crore

v. In respect of DTAA, generally, India follows:

a. UN Model
b. UK Model
c. OECD Model
d. US Model

vi. ICDS is applicable in case of income under the head:

a. Profits and gains from Business or Profession
b. Capital Gains
c. Income from House Property
d. All heads of income

vii. Auddy Fertilisers P Ltd., is a manufacturer. A factory building has been constructed
for ₹ 40 lakhs and occupied on 12.02.2023. Additional depreciation allowable for
the said factory building is ______.
a. Nil
b. ₹ 4,00,000
c. ₹ 2,00,000
d. None of the above

viii. MSP Ltd., has spent a sum of ₹ 20 lakhs towards meeting its corporate social
responsibility (CSR) under the Companies Act, 2013. The amount of deduction
available while computing the business income is ___________.
a. Nil
b. ₹ 10 lakhs
c. ₹ 15 lakhs
d. ₹ 20 lakhs

ix. Napa Ltd. earned ₹ 15 lakhs by way of transfer of carbon credit. The tax liability in
respect of carbon credit is ____________.
a. ₹ 1,56,000
b. ₹ 2,34,000
c. ₹ 4,68,000
d. Nil

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Directorate of Studies, The Institute of Cost Accountants of India
 FINAL EXAMINATION SET - 1
MODEL QUESTION PAPER TERM – JUNE 2024
PAPER – 15 SYLLABUS 2022
DIRECT TAX LAWS AND INTERNATIONAL TAXATION

x. Vikash has advertised on Facebook to promote his business of coaching. He is

required to pay ₹ 20,000 in the previous year 2023-24 to Facebook for the
advertising services availed. What amount is required to be deducted as
equalisation levy?
a. ₹ 1,200
b. ₹ 800
c. ₹ 400
d. Nil

xi. When an assessee fails to furnish any information relating to a specified domestic
transaction, the quantum of penalty as a percentage of value of the transaction
would be —
a. 2%
b. 1%
c. 5%
d. 3%

xii. A is using a motor car for his personal purposes, but charges as business
expenditure. This is the case of __________.
a. Tax Avoidance
b. Tax Planning
c. Tax Evasion
d. Tax Management

xiii. Countries that employ explicit policies designed to attract international trade
oriented activities by minimization of taxes and reduction or elimination of other
restrictions on business operations is described as ________.
a. Tax Havens
b. Tax Planning
c. Tax Evasion
d. Tax Management

xiv. During the course of survey in the premises of Ratan & Co. on 10.01.2024, stocks
of goods purchased for ₹ 10 lakhs were found to be not recorded in the books of
account. The firm has brought forward loss of ₹ 5 lakhs and incurred business loss
of ₹ 2 lakhs for the year ended 31.03.2024 without considering the unaccounted

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Directorate of Studies, The Institute of Cost Accountants of India
 FINAL EXAMINATION SET - 1
MODEL QUESTION PAPER TERM – JUNE 2024
PAPER – 15 SYLLABUS 2022
DIRECT TAX LAWS AND INTERNATIONAL TAXATION
stock. The tax liability of the firm including the said unaccounted purchase would
be _______.
a. ₹ 7,80,000
b. ₹ 3,12,000
c. ₹ 93,600
d. Nil

xv. GAAR provisions shall not apply to:

a. an arrangement where the tax benefit in the relevant assessment year arising, in
aggregate, to all the parties to the arrangement does not exceed a sum of ₹ 3
crore
b. an arrangement where the tax benefit in the relevant assessment year arising, in
aggregate, to all the parties to the arrangement does not exceed a sum of ₹ 5
crore
c. an arrangement where the tax benefit in the relevant assessment year arising, in
aggregate, to all the parties to the arrangement does not exceed a sum of ₹ 1
crore
d. None of the above.

SECTION – B
(Answer any five questions out of seven questions given. Each question carries 14 Marks)
[5x14=70]

2. Following is the profit and loss account of Z Ltd. for the year ended on 31-3-2024:
Particulars Amount Particulars Amount
To Raw material 23,25,000 By Sale 1,60,00,000
consumed
To Rent 3,50,000 By Closing Stock 10,00,000
To Salary & Wages 12,00,000 By Revaluation Reserve 25,000
To Depreciation 5,00,000 By General Reserve 1,00,000
To Provision for 75,000
contingencies
To Wealth Tax 50,000
To Provision for bad debts 40,000

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Directorate of Studies, The Institute of Cost Accountants of India
 FINAL EXAMINATION SET - 1
MODEL QUESTION PAPER TERM – JUNE 2024
PAPER – 15 SYLLABUS 2022
DIRECT TAX LAWS AND INTERNATIONAL TAXATION

To Proposed dividend 1,00,000

To Provision for Income 1,05,000
tax
To Net Profit 1,23,80,000
1,71,25,000 1,71,25,000
Additional Information:
(1) The amount of depreciation includes depreciation on revaluation of assets ₹ 50,000.
Further, for the purpose of Income tax, depreciation is ₹ 4,00,000.
(2) Turnover of the company during the previous year was ₹ 530 crores. However, during
the financial year 2021-22, turnover of the company was ₹ 250 crores only.
(3) In past few years, company had suffered losses, following balances are still
unabsorbed:
As per Income tax Act As per books of Accounts
Depreciation ₹ 66,00,000 Nil
Losses ₹ 35,50,000 Nil
Compute tax liability of the company. [14]

3. (a) On 01-10-2023, Mr. Shah of Surat is offered an employment by Vimal & Co. Ltd.,
Surat on a basic salary of ₹ 55,500 p.m. Other allowances are dearness allowance
(not forming part of salary for retirement benefits) ₹ 50,000 p.m., medical
allowance ₹ 10,000 p.m. and bonus being 1 month’s basic salary. The company
gives an option to Mr. Shah either to take a rent-free accommodation in Surat of the
fair rental value of ₹ 20,000 p.m. or to accept house rent allowance of ₹ 20,000 p.m.
Mr. Shah join the job with house rent allowance and takes a house in Surat at a
monthly rent of ₹ 20,000.
Analyse whether he has made a wise choice from tax advantage view (old regime).
[7]
(b) Smile Ltd. is a wholly-owned subsidiary company of Happy Ltd., an Indian
company. Smile Ltd. owns Plant-A and Plant-B (depreciation rate 40%, depreciated
value of the block ₹ 3,00,000 on 1st April, 2023). Plant-B was purchased and put to
use on 10th November, 2021 (cost being ₹ 70,000). Plant-B is transferred by Smile
Ltd. to Happy Ltd. on 14th December, 2023 for ₹ 20,000. It is put to use by Happy
Ltd. on the same day. Happy Ltd. owns Plant-C on 1st April, 2023 (depreciation rate
40%, depreciated value ₹ 60,000). Find out the amount of depreciation in the hands
of Smile Ltd. and Happy Ltd. for the assessment year 2024-25. [7]

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Directorate of Studies, The Institute of Cost Accountants of India
 FINAL EXAMINATION SET - 1
MODEL QUESTION PAPER TERM – JUNE 2024
PAPER – 15 SYLLABUS 2022
DIRECT TAX LAWS AND INTERNATIONAL TAXATION
4. (a) X Ltd. has several undertakings carrying on several businesses. During the year
2023-24, the company sold one of its undertaking (as it was continuously
generating loss since last 5 years) for a lump sum value of ₹ 300 lacs without
assigning value to individual asset and liabilities. The fair market value of the
capital asset of that unit is ₹ 350 lacs. Book value of sundry assets and liabilities of
the undertaking as on the date of sale is as under:
Items Book Value
Land ₹ 50 lacs (Value for the purpose of Stamp duty ₹ 70,00,000)
Machinery ₹ 70 lacs (WDV as per IT Act ₹ 60 lacs)
Furniture ₹ 50 lacs (WDV as per IT Act ₹ 90 lacs)
Stock ₹ 30 lacs
Debtors ₹ 40 lacs
Creditors ₹ 50 lacs
Brokerage on transfer paid @ 5%. Compute capital gain. [7]

(b) USA Airlines incorporated as a company in USA operates its flights to India and
vice versa during the year 2023-24 and collects charges of ₹ 150 lakh for carriage
of passengers and cargo out of which ₹ 90 lakh were received in US Dollars for the
passenger fare booked from New York to Mumbai. The total expenses for the year
on operation of such flights were ₹ 195 lakh. Income chargeable to tax of the foreign
airlines may please be computed. [7]

5. (a) Summarize a comparison between revision u/s 263 and revision u/s 264. [7]

(b) Mr. Goswami submitted his return on 25th July, 2024 for the assessment year
2024-25. The following particulars are furnished by him for the previous year
2023-24:
₹
Tax payable on assessed income 1,03,950
Tax deducted at source 36,450
Advance taxes paid as under:
15th June, 2023 Nil
15th September, 2023 18,500
15th December, 2023 16,125
15th March, 2024 25,250
You are required to examine and compute the interest, if any, payable by the
assessee at the time of filing return of income. [7]

6. (a) Analyze, in brief, the different models of tax convention in DTAA. [7]

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Directorate of Studies, The Institute of Cost Accountants of India
 FINAL EXAMINATION SET - 1
MODEL QUESTION PAPER TERM – JUNE 2024
PAPER – 15 SYLLABUS 2022
DIRECT TAX LAWS AND INTERNATIONAL TAXATION

(b) Amar, an individual, resident of India, receives the following payments after TDS
during the previous year 2023-24:
(i) Professional fees on 17.08.2023 2,40,000
(ii) Professional fees on 04.03.2024 1,60,000
Both the above services were rendered in country X on which TDS of ₹ 50,000 and
₹ 30,000 respectively has been deducted. He had incurred an expenditure of ₹
2,40,000 for earning both these receipts / income. His income from other sources
in India is ₹ 5,00,000 and he has made payment of ₹ 70,000 towards LIC. Compute
the tax liability of Amar and also the relief u/s 91, if any, for A.Y.2024-25. [7]

7. (a) Brain Inc. London has 35% equity in Salem Ltd. The company Salem Ltd. is
engaged in development of software and maintenance of customers across the
globe, which includes Brain Inc.
During the year 2023-24, Salem Ltd. spent 2000 men hours for developing and
maintaining a software for Brain Inc. and billed at ₹ 1,000 per hour. The cost
incurred for executing maintenance work to Brain Inc. for Salem Ltd. amount to ₹
15,00,000. Similar such work was done for unrelated party Try Ltd. in which the
profit was at 50%.
Brain Inc. gives technical support to Salem Ltd. which can be valued at 8% of gross
profit. There is no such functional relationship with try Ltd.
Salem Ltd. gives credit period of 90 days the cost of which is 3% of the normal
billing rate which is not given to other parties.
Compute ALP under cost plus method in the hands of Salem Ltd. and the impact of
the same on the total income. [7]

(b) SD Ltd., an Indian Company, has borrowed ₹ 100 crores on 01-04-2023 from M/s.
SM Inc., a company incorporated in UK, at an interest rate of 10% p.a. The said
loan is repayable over a period of 10 years. Further, this loan is guaranteed by M/s
MSPL Inc. incorporated in UK. M/s. MM Inc., a non-resident, holds shares carrying
35% of voting power both in M/s SD Ltd. and M/s MSPL Inc. Net profit of M/s. SD
Ltd. for P.Y. 2023-24 was ₹ 11 crores after debiting the above interest, depreciation
of ₹ 5 crores and income-tax of ₹ 4 crores.
Calculate the amount of interest to be allowed to be claimed under the head "Profits
and gains of business or profession" in the computation of M/s SD Ltd. Also explain
allowability of such disallowed interest, if any. [7]

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Directorate of Studies, The Institute of Cost Accountants of India
 FINAL EXAMINATION SET - 1
MODEL QUESTION PAPER TERM – JUNE 2024
PAPER – 15 SYLLABUS 2022
DIRECT TAX LAWS AND INTERNATIONAL TAXATION
8. (a) Roma purchases 600 equity shares in XY (P) Ltd. on 1-04-2023 @ ₹ 150 each. On
31-12-2023, XY (P) Ltd. is demerged. In the scheme of demerger, division Y was
transferred to Y (P) Ltd. (resulting company). On that date balance sheet of XY (P)
Ltd. is as follow –
Division Division
Liabilities Total Asset Total
X Y X Y
6,000 E. 6,00,000 Land - 2,50,000 2,50,000
Shares
General 4,00,000 Plant 1,75,000 1,00,000 2,75,000
Reserve
Loan 2,00,000 Investm 2,50,000 - 2,50,000
(General) ent
Loan 60,000 75,000 1,35,000 Stock 1,95,000 2,30,000 4,25,000
(Specific)
Creditors 25,000 40,000 65,000 Debtors 55,000 45,000 1,00,000
Cash 25,000 75,000 1,00,000
and
Bank
14,00,000 14,00,000
Y (P) Ltd., in consideration of the demerger, issued equity share of ₹ 100 each (at
par) to the shareholders of XY (P) Ltd. on proportionate basis. You are required to
compute –
- Number of shares of Y (P) Ltd. received by Roma and cost thereof.
- Cost of acquisition of shares held by Roma in XY (P) Ltd. after demerger.
Capital gain, if Roma sold 200 shares of XY (P) Ltd. @ ₹ 125 & 100 shares of Y(P)
Ltd. @ ₹ 110 on 31-03-2024. [7]

(b) Explain when two enterprises will be considered as an associated enterprise?

Examine the different circumstances when two enterprises are treated as deemed
associated enterprises. If X Inc. holds 30% equity shares in Y Ltd. as well as in Z
Inc., does Y Ltd. And Z Inc. considered as associated enterprise? Justify. [7]

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Directorate of Studies, The Institute of Cost Accountants of India