ICWAI

Objective Type questions and Answers on Indirect Tax

1. Multiple Choice Questions

(1) Excise duty can be levied on those goods which are
(a) Manufactured in India
(b) Sold in India
(a) Removed from the factory
(b) None of the above
(2) Dutiable goods means
(a) Goods are subject to Central Excise duty
(b) Goods which are exempted from excise duty
(c) Non excisable goods
(d) Goods not at all mentioned in the Central Excise Tariff
(3) Place of Removal under Central Excise means
(a) Removing the goods from the place of distributor
(b) Removing the goods from the place of customs station
(c) Removing the goods from the place of factory
(d) None of the above
(4) Non-Dutiable goods means
(a) Name of the product not mentioned in the Tariff Act
(b) Name of the product mentioned in the Tariff Act
(c) Name of the product mentioned in the Tariff Act with the Rate of Duty
(d) Name of the product mentioned in the Tariff Act with the Zero Rate
(5) Payment of Central Excise Duty depends up on
(a) Removal goods from the place of removal
(b) Manufacture of goods in the factory
(c) Deemed manufacture of goods
(d) Removal goods for branch transfer
(6) The excise duty on alcoholic goods manufactured by the manufacturer is payable to
(a) State Government
(b) Central Government
(c) Corporation
(d) Local authority
(7) Which of the following duties is covered under the First Schedule of the Central Excise Tariff Act?
(a) Basic Excise duty
(b) Special Excise Duty
(c) Additional Excise Duty
(d) Education Cess
(8) Which of the following duties is under the purview of the State Government?
(a) Central Excise duty
(b) Customs duty
(c) Service tax
(d) VAT
(9) Which are the goods still under the physical control?
(a) Plastic products
(b) Cigarette products
(c) Apparel products
 (d) Glass products
(10) At the time of manufacture of product X attracts 14% BED. At the time of removal the rate of duty is 8%.
Which is the duty attracts for the product X
(a) 14%
(b) 8%
(c) 11% (Average)
(d) Zero (Because the rate has changed)
Answer:
(1) (a), (a), (c), (d), (a), (a), (a), (d), (b), (b)
2. Fill in the Blanks
(1) Central Excise duty can be levied at the time of____________
(2) Goods at the time of manufacture, not mentioned in the Central Excise Tariff Act, can be
called ______________
(3) Central Excise Tariff Act, 1985 contains_________sections
(4) Goods are classified under Central Excise Tariff Act based on the___________of Nomenclature
having_______________digit classification
(5) The goods included in the third____Schedule of Central Excise Act are same as those on which
excise duty is payable under section 4A of the Act.
(6) Goods at the time of manufacture, mentioned in the Central Excise Tariff Act, can be
called_______________
(7) Goods are classified under Central Excise Tariff Act based on the__________________system
(8) There are 96 chapters under the Central Excise classification
(1) Labelling and relabelling comes under Third Schedule of Central Excise
(9)
(10) Service tax came into force from____________Finance Act
Answer:
(1) Manufacture of goods in India
(2) Non excisable goods
(3) 20-sections
(4) Harmonized System Eight
(5) Third.
(6) Excisable goods
(7) Harmonized System of Nomenclature
(2) 96 chapters
(3) Third Schedule of Central Excise
(4) 1994
3. Say Yes or No, Give Reasons
(1) All goods manufactured are subject to central excise duty.
(2) All Excisable goods are dutiable goods
(3) No duty can be levied if the goods manufactured by the manufacturer is not movable but marketable
(4) Goods has been defined in the Central Excise Act
(5) Manufacturer includes deemed manufacturer
(6) There is no difference between levy and collection
(7) Duty can also be collected even if the goods are non-excisable at the time of manufacturer, but are
excisable at the time of removal of goods from the place of removal.
(8) Duty rates are specified in the Central Excise Act, 1944
(9) Central Excise Duty Rate is indicated against each tariff item and not against heading or sub-heading.
(10) Manufacture includes any process incidental or ancillary to the completion of a manufactured product.
(11) Marketability is essential to levy the central excise duty
(12) Goods mentioned in the First Schedule or Second Schedule to the Central Excise Tariff Act, 1985 are
called non-excisable goods.
(13) Manufacturer is not defined under Central Excise Tariff Act.
(14) Brand name owner is a manufacturer even though under contract a third party completely manufactures
the product
(1) Classification is irrelevant, since all products attract 14% duty
(2) Circulars can be issued by the Government of India
Answer:
(1) No. Goods manufactured in India may be excisable goods or non-excisable goods. No central excise
duty, if the goods are non-excisable.
(2) No. Excisable goods may be dutiable or non-dutiable goods.
(3) Yes. No duty can be levied if the goods manufactured by the manufacturer is not movable but
marketable as per the decision of the Supreme court of India in the case of Union of India v Delhi Cloth
and General Mills Ltd.
(4) No. The term goods has not been defined in the Central Excise Act, 1944.
(5) Yes. Manufacturer includes deemed manufacturer
(6) No. The term "LEVY" means imposition of tax/duty. Collection of duty is postponed to the stage of
removal of goods. [Rule 4 of the Central Excise Rules, 2002]
(7) No. Duty can not be collected if the goods are non-excisable at the time of manufacture, but are
excisable at the time of removal.
(8) No. Duty rates are specified in the Central Excise Tariff Act, 1985.
(9) Yes. Duty Rate is indicated against each tariff item and not against heading or sub-heading.
(10) Yes. Manufacture includes any process incidental or ancillary to the completion of a manufactured
product.
(11)
(12) Yes. Marketability is essential to levy the central excise duty.
(13) No. Goods mentioned in the First Schedule or Second Schedule to the Central Excise Tariff Act, 1985
is called excisable goods.
(14) No. The term manufacturer has been defined under section 2(f) in the Central Excise Act, 1944. The
definition under section 2(f) is not exhaustive but inclusive.
(15) No. Brand name owner is not a manufacturer even though under contract a third party completely
manufactures the product.
(16) No. Classification is relevant, even though all products attract 14% duty.
(17) No. Circulars can be issued by the Central Board of Excise and Customs (CBEC).
4. Multiple Choice Questions
(1) As per Rule 15 the Central Excise Rules, 2002, the option of paying duty is available to those manufacturers
who manufacture
(a) Aluminium circles
(b) Plastic Products
(c) Gold Products
(d) Agriculture Products
(2) Goods specified under Standards of Weights and Measures Act, 1976 as well as in the notification issued by
the Government of India along with rate of abatement can be assessed under
(a) Maximum Retail Price
(b) Transaction Value
(c) Retail Price
(d) Whole Sale Price
(3) Captively Consumed Goods means
(a) Goods manufactured and consumed with in the factory
(b) Goods manufactured
(c) Goods purchased and used in the factory
(d) Goods received from branch
(4) Interconnected undertakings means
(a) Head office and Branch office
(b) Holding and subsidiary companies
(c) Group of companies
(d) Companies under the same management
(5) Which one of the following will come under the Specific Rate of Duty?
(a) Cigarette product= length of the ciearette
(b) Wood product
(c) Plastic product
(d) Diesel product
(6) What percentage should be added to the cost of production in the case of captive consumption?
(a) 15%
(b) 10%
(c) 0%
(d) 20%
(7) MRP product Assessable value will be calculated as
(a) Transaction basis
(b) MRP less abatement
(c) Percentage of tariff value
(d) None of the above
(8) Which one of the following will form part of transaction value
(a) Transportation charges from the place of removal to the place of buyer
(b) Transportation charges from the place of factory to the place of branch
(c) Transportation charges from the place of distributor to the place of buyer
(d) Transportation charges from the place of buyer to any other place
(9) Assessable does not include one of the following
(a) Cost of material
(b) Cost insurance
(c) Cost of transportation
(d) Interest on delayed payment
(10) As per Rule 10 of the Central Excise Valuation Rules, the concept of interconnected undertakings means
(a) Associate companies
(b) Group companies
(c) Holding and Subsidiary companies
(d) None of the above
Answer:
(1) (a)
(2) (a)
(3) (a)
(4) (b)
(5) (a)
(6) (b)
(7) (b)
(8) (b)
(9) (d)
(10) (c)
5. Fill in the Blanks
(1) Specific Duty means duty is payable based on the____________and__________by the assessee
(2) Provisions under section 4A have___________effect over section 4 of the Central Excise Act
(3) Production 1500 units, quantity sold 510 units @ 250 per unit, 840 units @ 200 per unit, sample clearances
35 units and the balance 150 units are in stock. Hence, the assessable value is Rs._________
(4) Excisable goods consumed within the factory for the manufacture of final product is
called___________
(5) X Ltd (Holding Company) sold goods to Y Ltd (Subsidiary Company) at Rs. 1, 00,000. In turn Y Ltd sold
goods to Z Ltd (unrelated person) at Rs. 1, 10,000, then the assessable value in the hands of X Ltd________.
(6) Assessable in case of captive consumption is the cost of production plus_______
(7) The transaction value cannot be considered as assessable value if, any one or part of the
conditions____________.
(8) MRP provisions are not applicable for packaged commodities meant for________.
(9) Compound Levy Scheme is an optional___________schemes.
(10) Dharmada Charges recovered from the buyer is form part of_assesable value_________.
Answer:
(1) Length and weight of the product
(2) Overriding
(3) Rs. 3, 02,500
(4) Captive consumption
(5) Rs. 1, 10,000
(6) @10%
(7) Not satisfied
(8) Industrial or institutional consumers.
(9) Optional
(10) Assessable Value
6. Say Yes Or No, Give Reasons
(1) Specific Duty means duty is payable by the assessee on excisable goods based on the value of goods.
(2) Compound levy scheme means an optional scheme
(3) Maximum Retail Price means not exclusive of duties and taxes
(4) Transaction value is applicable only when conditions specified in the provisions are satisfied.
(5) Dharmada charges collected from the buyer are not includible in the assessable value.
(6) Excise duty and sales tax has to be included in the assessable value
(7) There is no basis of valuation under Central Excise Law
(8) Insurance charges from the place of depot to the place of buyer shall form part of assessable value
(9) Captive consumption goods need not be certified by the Cost Accountant
(10) Cash discount does not form part of assessable value.
Answer:
(1) No. Specific Duty means duty is payable by the assessee on excisable goods based on the length and
weight of the products.
(2) Yes. Compound levy scheme means an optional scheme
(3) Yes. Maximum Retail Price means not exclusive of duties and taxes
(4) Yes. Transaction value is applicable only when conditions specified in the provisions are satisfied.
(5) No. Dharmada charges collected from the buyer are includible in the assessable value.
(6) No. Excise duty and sales tax has to be excluded in the assessable value
(7) No. There are five basis of valuation under Central Excise Law
(8) No. Insurance charges from the place of depot to the place of buyer shall not form part of assessable
value
(9) No. Captive consumption goods need be certified by the Cost Accountant
(10) Yes. Cash discount does not form part of assessable value.
7. Multiple Choice Questions
(1) ARE -1 Form should have following colors
 (a) White; Buff; Pink and Green
(b) White; Buff; Red and Green
(c) White; Buff; Black and Green
(d) White; Buff; Rose and Green
(2) CT- 1 form will be issued by the Merchant exporter to the Manufacturer for clearing the goods
(a) Without payment of Central Excise
(b) Avoidance of Central Excise duty
(c) With payment of reduced rate of Central Excise Duty
(d) With payment of full amount of Central Excise Duty.
(3) Certificate of procurement of goods under procedure for export Warehousing can be done under the
(a) CT-3 Form
(b) CT-2 Form
(c) ARE -1
(d) Bond -1
(4) The Letter of Undertaking is valid for a period of
(a) 12 months from the date of acknowledgement by the department.
(b) 15 months from the date of acknowledgement by the department
(c) 24 months from the date of acknowledgement by the department
(d) 6 months from the date of acknowledgement by the department
(5) Excisable goods removed for re-warehousing and export therefrom without payment of duty by using the
(a) B-3 Bond
(b) B-2 Bond
(c) B-4 Bond
(d) B-7 Bond
(6) Some times; if in the view of the Central Excise Department the manufacturer carries risk (namely
discrepancies) the Department may ask him to submit the Bond in.
(a) B-l with security or surety
(b) B-2 with security and surety
(c) B-3 with security
(d) B-4 with surety
(7) CT-1 form received by the manufacturer from
(a) Merchant exporter
(b) EOU unit
(c) Manufacturer
(d) First stage dealer
(8) The Export Oriented Units can procure indigenous material without payment of central excise duty. These
units have to issue
(a) CT -3 certificate
(b) CT-4 certificate
(c) CT-1 certificate
(d) CT-2 certificate
(9) If proper invoice for export along with the packing list and ARE -1 form in
(a) Sixtuplicate
(b) Duplicate
(c) Triplicate
(d) Quadruplicate
(10) No rebate is allowed if the rebate amount is less than
(a) Rs. 500
 (b) Rs. 1,000
(c) Rs. 2,000
(d) Rs. 4,000
Answer:
(1) (a)
(2) (a)
(3) (b)
(4) (a)
(5) (a)
(6) (a)
(7) (a)
(8) (a)
(9) (a)
(10) (a)
8. Fill in the Blanks
(1) No rebate is allowed if the rebate amount is less than________
(2) Goods can be removed by executing a bond in case of merchant exporter with____________or without
(3) Proof of export which is issued by the customs authorities by certifying the_______________
(4) ________________certificate is required only when bond is executed by the merchant exporter.
(5) The goods exported to_______________and_________not eligible for rebate
(6) An exporter who executes a bond to exempt himself from payment of excise duty will not be eligible to
claim___________
(7) Bond is executed by the Merchant Exporter he may be required to obtain a_________from his banker
for a specified amount.
(8) __________is called as general bond with Surety/Security for removal of goods without payment of
duty
(9) In case of security bond in the form of cash deposit no________can be allowed
(10) If goods are sealed by excise officer such a sealing is called __________
Answer:
(1) Rs. 500
(2) with sealing or without sealing
(3) ARE-1 Form
(4) CT-1
(5) Nepal and Bhutan
(6) Rebate
(7) Bank Guarantee
(8) B-l Bond
(9) Interest
(10) One Time Bottle Seal
9. Say Yes or No, Give Reasons
(1) Export of goods with invoice but without the packing list can be exported
(2) ARE -1 Form need not be prepared if the goods are exported under Bond.
(3) Merchant exporter means a person engaged in manufacturing of goods for exporting or intending to
export goods.
(4) CT-1 forms will be issued by the superintendent of Customs to the merchant exporter on execution of
bond (namely B - 1)
(5) ARE-1 Form is to be prepared by the exporter in quadruplicate
(6) Bonds under Central Excise are always secured
(7) No duty is payable on exported goods. Therefore there is no need of valuation and classification
(8) Self-sealing can be done by any person of the unit
(9) ARE-1 form is not required to be prepared by the exporter.
(10) Export has to be completed within 3 months from the date of removal from the factory
Answer:
(1) No. Export of goods with invoice and with the packing list can be exported
(2) No. ARE -1 Form need to be prepared even if the goods are exported under Bond.
(3) No. Merchant exporter means a person engaged in purchase of excisable goods for the purpose of exporting or
intending to export goods.
(4) No. CT-1 forms will be issued by the superintendent of central excise to the merchant exporter on
execution of bond (namely B-l)
(5) No. ARE-1 form is to be prepared by the exporter in sixtuplicate
(6) No. Bonds under Central Excise may be secured or unsecured.
(7) No. classification and valuation is required for the purpose of determining the duty draw-back or DEPB
license etc.
(8) No. Sealing of Goods for Export which may be self-sealing or under seal of Central Excise.
(9) No. ARE-1 form is required to be prepared by the exporter.
(10) No. Export has to be completed within 6 months from the date of removal from the factory
10. Multiple Choice Questions
(1) The unutilized CENVAT Credit can be carried forward
(a) Up to 6 months
(b) Up to 8 years
(c) Without any time limit
(d) Up to 10 years.
(2) Cenvat Credit on capital goods can be claimed in the year in which it is purchased
(a) Up to 50%
(b) Up to 100%
(c) Up to 25%
(d) Up to 75%
(3) Cenvat Credit on goods other than capital goods can be utilized
(a) As soon as goods received into the factory
(b) Only after payment actually made
(c) Only after the goods actually sold
(d) As soon as manufacture takes place
(4) Cenvat Credit is not applicable if the following goods are purchased
(a) Light Diesel Oil
(b) Steel products
(c) Plastic products
(d) Wood products
(5) Cenvat Credit can be adjusted against
(a) Dutiable goods manufactured
(b) Non-dutiable goods manufactured
(c) Non-excisable goods manufactured
(d) All excisable goods manufactured
(6) Which of the following items is a capital goods
(a) Tools, hand tools
(b) Raw materials
(c) Consumables
(d) Accessories
(7) Depreciation under section 32 of the Income-tax Act, 1961 should not have been claimed
 (a) On the cost portion of the Capital Goods
(b) On the excise portion of the Capital Goods.
(c) On the portion of other than Capital Goods
(d) On the portion of Factory Building
(8) Cenvat credit can be utilized for payment of excise duty levied on any
(a) Final products
(b) Input products
(c) Exempted products
(d) Intermediary non-dutiable products
(9) Personal Ledger Account must be prepared in
(a) Triplicate
(b) Single
(c) Double
(d) Quadruplicate
(10) Cenvat credit on inputs other than capital goods can be allowed at
(a) 100%
(b) 50%
(c) 25%
(d) 0%
(11) A unit availing SSI exemption can avail of CENVAT credit on capital goods but such credit can be utilized
only
(a) if the value of capital goods exceeds Rs. 100 lakh
(b) after clearance of Rs. 150 lakh
(c) if the capital goods are exported
Answer:
(1) (c)
(2) (a)
(3) (a)
(4) (a)
(5) (a)
(6) (a)
(7) (b)
(8) (a)
(9) (a)
(10) (a)
(11) (b)
11. Fill in the Blanks
(1) Motor vehicles are not___capitol__________goods for purpose of Manufacture
(2) In respect of capital goods sent for job work these should be brought back within_________days from
the date of dispatch.
(3) The Second Stage Dealer means a dealer who purchases goods from a_______________
(4) The PLA is credited when duty is deposited in bank by_________challan
(5) Depreciation should not be claimed by the manufacturer who avails the Cenvat credit on___________
(6) The term ___________ means raw-materials, consumables, accessories used to manufacture the
finished product.
(7) Don't maintain separate set of accounts but pay an amount equal to ___________of the value of
exempted goods and forego the Cenvat credit of inputs utilized exclusively for manufacture of exempted final
product.
(8) Balance of CENVAT Credit Receivable (inputs) Account and PLA Account are shown as
____________in the Assets side of the Balance Sheet.
(9) Due date of payment of Central Excise Duty for the month of March is______________
(10) Input tax credit on capital goods can be______________against the duty payable final products.
Answer:
(1) Capital
(2) 180 days.
(3) First Stage Dealer
(4) GAR-7
(5) Capital Goods
(6) In the manufacture
(7) 10%
(8) Current Assets.
(9) 31st March
(10) Claimed.
12. Say Yes or No, Give Reasons
(1) Cenvat credit can be taken as soon as the inputs are dispatched by the supplier
(2) Cenvat cannot be utilized for payment of duty on waste
(3) Cenvat credit on capital goods is restricted to 50% of the duty in the year of the receipt
(4) If there is no excise duty final products, cenvat credit cannot be claimed in the case of sale in DTA
(5) When credit has been taken on input goods and the same is removed for home consumption, excise duty is
not payable
(6) In September 2008, the Government came out with the Cenvat Credit Rules, 2004 by merging the Cenvat
Credit Rules, 2002 and the Service Tax Credit Rules, 2002.
(7) The term "Capital goods" under Cenvat Rules is DIFFERENT from the term capital goods as understood in
accounting or in income-tax
(8) In the case of goods cleared for DTA for input credit to be claimed, the finished product should suffer at least
Re 1 of excise duty
(9) If a single invoice covers goods falling under different sub-heading, separate entries shall be made for each
of such sub-heading
(10) In case of inputs and capital goods Cenvat credit is available as soon as input is received in the factory.
Answer:
(1) Yes. Cenvat credit can be taken as soon as the inputs are received by the manufacturer.
(2) No. Cenvat can be utilized for payment of duty on waste
(3) Yes. Cenvat credit on capital goods is restricted upto 50% of the duty in the year of the receipt and the balance
in the subsequent year or years.
(4) Yes. Cenvat credit cannot be claimed in the case of sale in DTA if the final products are non-dutiable.
(5) No. Cenvat credit not allowed on those goods which are cleared as such for domestic tariff area.
(6) No. In September 2004, the Government came out with the Cenvat Credit Rules, 2004 by merging the Cenvat
Credit Rules, 2002 and the Service Tax Credit Rules, 2002
(7) Yes. The term "Capital goods" under Cenvat Rules is DIFFERENT from the term capital goods a: understood
in accounting or in income-tax
(8) Yes. goods cleared for DTA for input credit to be claimed, the finished product should suffer at least Re 1 of
excise duty
(9) Yes. Single invoice covers goods falling under different sub-heading, separate entries shall be made for
each of such sub-heading
(10) Yes. Input goods and capital goods Cenvat credit is available as soon as input is received in the
factory.
13. Multiple Choice Questions
(1) A manufacturer being eligible for SSI related exemptions is linked to his turnover in the previous year
(a)Less than Rs. 400 Lakhs
 (b) Less than Rs. 150 Lakhs
(c)Less than Rs. 90 Lakhs
(d) Less than Rs. 350 Lakhs
(2) SSI Exemption scheme adopted by the manufacturer he is not required to pay the central excise duty up
to
(a)Rs. 150 Lakhs on dutiable goods
(b) Rs. 300 Lakhs on dutiable goods
(c)Rs. 400 Lakhs on dutiable goods
(d) Rs. 100 Lakhs on dutiable goods
(3) Value of captive consumption goods is forming part of the Rs.400 Lakhs turnover, if the final product
(a)Exempt in any notification
(b) Not exempt in any notification
(c)Exempt under Notification 8/2003
(d) None of the above
(4) Industries are not eligible for SSI exemption irrespective of their turnover.
(a) Automobiles
(b) Plastic
(c)Paper
(d) Electronic and Electrical
(5) The due date for filing Quarterly return ER -3 under Central Excise is
(a)20th of the following month.
(b) 10th of the following month
(c)5th of the following month
(d) 15th of the following month
(6) The due date for payment of Central Excise Duty by the SSI unit for the month of April is
(a) 15th of the following month
(b) 15th of October
(c)10th of the following month
(d) 5th of the following month
(7) Frequency of audit for SSI unit paying central excise duty is less than Rs. 10 Lakhs.
(a) Once in 2 years
(b) Once in 5 years
(c) Once in 10 years
(d) Every year.
(8) Job worker is exempt from basic excise duty if the supplier of raw material had undertaken payment of
excise duty under
(a) Notification 24/86 Central Excise Law
(b) Notification 214/86 Central Excise Law
(c) Notification 8/2003 Central Excise Law
(d) Notification 18/2003 Central Excise Law
(9) Registration is not required if the turnover for small scale units
(a)Less than Rs. 15 0 Lakhs
(b) Less than Rs. 90 Lakhs
(c)Less than Rs. 100 Lakhs
(d)Less than Rs. 10 Lakhs

(10)What is to be done if turnover exceeds Rs 90 lakhs but is less than Rs 150 lakhs?
(a) Declaration to be filed
 (b) No Declaration to be filed
(c)Declaration may be filed
(d) Declaration must be filed after attaining Rs. 150 Lakhs
Answer:
(1) (a)
(2) (a)
(3) (a) ..
(4) (a)
(5) (a)
(6) (a)
(7) (b)
(8) (b)
(9) (a)
(10) (a)
14. Fill in the Blanks
(1) SSI exemption is available only when the turnover in the previous year turnover is less than
(2) SSI unit can clear the excisable goods upto_____________without payment of duty.
(3) Quarterly return_______________to be filed before the due date_________of the following
month by the SSI units claiming the exemption notification
(4) Payment of duty is on monthly basis and has to be made on or before________of the following
month
(5) No declaration needs to be given to the department if the previous year turnover is less than
(6) A Job worker is exempt from basic excise duty if the supplier of raw material had undertaken payment
of excise duty under Notification_____________of Central Excise
(7) SSI units will get the Cenvat Credit only over and above_________taxable turnover during the
current year.
(8) Registration is not required for SSI units if the turnover during the previous year is less than
______________of taxable turnover.
(9) Audit of SSI units is conducted once in______________number of years
(10) Export turnover is______________for the calculation of turnover under the notification 8/2003.
Answer:
(1) Rs. 400 Lakhs
(2) Rs. 150 Lakhs
(3) ER-3, 20 th
(4) 15th of the following month
(1) Rs. 90 Lakhs
(2) 214/1986
(3) Rs. 150 Lakhs.
(4) Rs. 150 Lakhs.
(5) Two to five
(6) Exempted.
15. Say Yes or No, Give Reasons
(1) The Government of India issued Notification No. 8/2003 providing relaxation from central excise duty,
without any conditions.
(2) If in a previous year the turnover of a manufacturer is equal to Rs.4 crores then he can in the current
year claim the exemption benefits available to a SSI.
(3) SSI units opted the exemption notification benefit can pay duty if the dutiable goods cleared from the
factory exceeds Rs.150 lakhs and claim Cenvat credit on inputs.
(1) Manufacturers who have Cenvat credit (on capital goods plus on other than capital goods) which is
more than the duty payable on exempted turnover will opt for SSI exemption benefit.
(2) Clearance of excisable goods without payment of duty to 100% EOU unit will form part of turnover to
calculate the threshold limit of Rs.4 crores.
(3) Sales to Nepal and Bhutan is considered as an export sales.
(4) Export procedures are very tough for SSI units.
(5) Exempted units from central excise duty are also exempted from registration.
(6) Audit of SSI unit is conducted every year.
(7) There is no difference between method of calculation of Rs.400 Lakhs and Rs.150 Lakhs.
Answer:
(1) No. The Government of India issued Notification No. 8/2003 providing relaxation from central excise
duty, with conditions.
(2) No. Previous year the turnover of a manufacturer is equal to Rs.4 crores then he cannot claim in the
current year exemption benefits available to a SSI.
(3) Yes. SSI units opted the exemption notification benefit can pay duty if the dutiable goods cleared from
the factory exceeds Rs. 150 lakhs and claim Cenvat credit on inputs.
(4) No. Manufacturers who have Cenvat credit (on capital goods plus on other than capital goods) which is
more than the duty payable on exempted turnover may not opt for SSI exemption benefit.
(5) No. Clearance of excisable goods without payment of duty to 100% EOU unit will not form part of
turnover to calculate the threshold limit of Rs.4 crores.
(6) No. Sales to Nepal and Bhutan considered as home clearance.
(7) No. Export procedures are not tough for SSI units.
(8) Yes. Exempted units from central excise duty are also exempted from registration.
(9) No. Audit of SSI unit is conducted not on yearly basis.
(10) Yes. There is a difference between method of calculation of Rs.400 Lakhs and Rs.150 Lakhs.
16. Multiple Choice Questions
(1) Registration is compulsory for the dealer who intends to act as
(a) First Stage Dealer
(b) Third Stage Dealer
(c) Dealer
(d) Purchaser
(2) An application for registration under central excise law is required to be made in
(a) Form A-l
(b) Form B-1
(c) Form CT-1
(d) Form ARE-1
(3) The DSA shall be preserved for
(a) Five Years
(b) Two Years
(c) One Year
(d) Six Months
(4) The excise duty payable by the manufacturer is based on
(a) Invoice
(b) Gate Pass
(c) Lorry receipt
(d) Debit Note
(5) Which one of the following is to be submitted by the manufacturer on a monthly basis
(a) ER - 1
(b) ER - 3
(c) ER - 5
(d) ER - 7
(6) Original invoice has to be issued to the
 (a) Buyer
(b) Transporter
(c) Central Excise Department
(d) Consignment Agent
(7) The penalty for non-registration is
(a) Amount of duty of contravening goods or Rs 10,000 whichever is higher
(b) Amount of duty of contravening goods or Rs 10,000 whichever is less
(c) Amount of duty of contravening goods or Rs 1,000 whichever is higher.
(d) Amount of duty of contravening goods or Rs 5,000 whichever is higher
(8) The due date of payment of tax through e-payment is
(a) 6th of the following month
(b) 5th of the following month
(c) 31 st of every month
(d) 15th of the following month
(9) LTU will be headed by
(a) Chief Commissioner of CBDT or of CBEC
(b) Chief Commissioner of CBEC
(c) Commissioner of Central Excise
(d) Commissioner of Income Tax.
(10) CIN stands for
(a) Challan Identification Number
(b) Cash Identification Number
(c) Commission Identification Number
(d) Central Information Number.
Answer:
(1) (a)
(2) (a)
(3) (a)
(4) (a)
(5) (a)
(6) (a)
(7) (a)
(8) (a)
(1) (a)
(2) (a)
17. Fill in the Banks
(1) The 15 dig
(2) it PAN based registration number is called____________________
(3) Registration under Central Excise can be granted in the name of a minor, provided a legal guardian
undertakes to_______________
(4) The penalty for delayed submission of return can extend upto_____
(5) The term GAR means____________
(6) A LTU is an undertaking which has paid central excise or service tax of more than____during
the previous year.
(6) The first page and the last page of the DSA shall be duly authenticated by the _______
or__________person
(7) LTUs will get facilities of payment of tax through____system.
(8) Every assessee compulsorily files the annual installed capacity statement before 30th April of the
 succeeding financial year in the_________Form
(7) The due date of payment of tax through e-payment is 6th of the following month by the manufacturers
and by 16th of the following month in the case of SSI units. In the case of March month the due
is_________
(8) When goods are removed from the factory of the manufacturer to some other premises for purposes of
"Testing" or for "any other process not amounting to manufacture", excise duty need not be paid
provided the permission of___________of Central Excise is obtained.
Answer:
(1) Excise control code
(2) Conduct the business
(3) Rs. 5,000
(4) Government Account (Receipt and Payment) Rules
(5) Rs. 5 crore.
(6) manufacturer or his authorized person
(7) single window
(8) ER - 7
(9) 31st March
(10) Commissioner
18. Say Yes or No, Give Reasons
(1) Application for registration as a manufacturer should be made Form A-l
(2) A 5 digit PAN based registration number (ECC) will be allotted to the assessee
(3) There is no penalty for non-registration, even when registration under the statute is compulsory
(4) Daily Stock Account can be updated once in month
(5) Invoice under central excise law is required to be made in triplicate
(6) Payment of duty can be made once in six months
(7) E-payment is mandatory for those manufactures who have paid central excise duty is Rs 50 lacs or
more during the preceding financial year.
(8) If the assessee mentions CIN in the Return, it is not necessary to attach the copy of challan with the
Return.
(9) Challan Identification Number (CIN) has three parts.
(10) 100% EOU has to submit the monthly return in ER-2 Form.
Answer:
(1) Yes. Application for registration as a manufacturer should be made in Form A-l
(2) No. A 15 digit PAN based registration number (ECC) will be allotted to the assessee
(3) No. There is penalty for non-registration which is Rs. 10,000 or duty on contravening goods whichever
is higher
(4) No. Daily Stock Account should be updated on daily basis, two days delay is allowed.
(5) Yes. Invoice under central excise law is required to be made in triplicate
(6) No. Payment of duty can be made on monthly basis
(7) Yes. E-payment is mandatory for those manufactures who have paid central excise duty is Rs 50 lacs or
more during the preceding financial year.
(8) Yes. If the assessee mentions CIN in the Return, it is not necessary to attach the copy of challan with
the Return.
(9) Yes. Challan Identification Number (CIN) has three parts.
(10) Yes. 100% EOU has to submit the monthly return in ER-2 Form.
19. Multiple Choice Questions
(1) Desk Review audit is a part of
(a) Special Audit
(b) C & AG Audit
(c) Excise Audit 2000
(d) Investigation
(2) In the case of Excise Audit 2000, selection of assessee is based on
(a) Risk factor
(b) Non-risk factor
(c) Merit of assessee
(d) Value of goods
(3) Time period to issue notice before commencing the audit.
(a) 20 days
(b) 5 days
(c) 25 days
(d) 15 days
(4) Cenvat credit audit can be ordered by
(a) The Chief Commissioner of Central Excise.
(b) The Commissioner of Central Excise
(c) The Assistant Commissioner of Central Excise
(d) The Deputy Commissioner of Central Excise
(5) Yearly audit is applicable for those units who paid the central excise duty by way of cash more than
(a) Rs.300 Lakhs
(b) Rs. 150 Lakhs
(c) Rs. 100 Lakhs
(d) Rs.90 Lakhs
Answer:
(1) (c)
(2) (a)
(3) (d)
(4) (b)
(5) (a)
20. Fill in the Blanks
(1) Units paying duty more than Rs 3 crore has audit___________
(2) C & A G submits the report to the_______________, who causes these to be laid before each House
of Parliament.
(3) Valuation Audit carried out by________________.
(4) The expenses of Cenvat credit audit and audit fees shall be paid by_____________.
(5) The maximum time limit for submission of such cost audit report is________days from the date of
receipt of cost audit order by the manufacturer
(6) C & AG submits the report to the______________, who causes these to be laid before each House
of Parliament.
(7) The audit plan should be documented in the___________.
(8) The Cost Accountant has to submit his audit report within the time specified by the______________.
(9) Road checks are carried out by the department authorities to check whether all goods moving are
accompanied by_____________documents or not.
(10) A minimum of_____________notice should be given to the assessee before commencing the audit.
(11) Stock taking can be done by the superintendent or Inspector of central excise for
______________and___________.
Answer:
(1) Yearly
(2) The President of India.
(3) Cost Accountant
(1) Excise Department
(2) 180 days
(3) The President of India.
(4) Working papers
(5) Commissioner or Commissioner of Central Excise.
(6) Duty paying.
(7) 15 days.
(8) Finished goods and Cenvat goods
21. Say Yes or No, Give Reasons
1. Excise audit is compulsory every year if the payment of excise duty is more than 3 crores.
2. There are three types of excise audits under Central Excise Law.
3. Desk review audit can be conducted by a practicing Chartered Accountant or a practicing Cost
Accountant in the premises of manufacturer.
4. Valuation audit can be ordered by the Superintendent of Central Excise
5. The expenses and audit fees shall be paid by Assessee
6. Returns are filed by the assessee without verification by the Excise department. Hence no audit is
required to be conducted.
7. Central Excise Revenue Audit (known as CERA Audit) conducted by the Cost Accountant or Chartered
Accountant.
8. The desk review is a part of the internal audit procedure and the services of the professionals are taken to
help the department.
9. Valuation Audit can be ordered only with the prior approval of Chief Commissioner of Central Excise.
10. The desk review audit should be completed in 5-7 working days
Answer:
(1) Yes. Excise audit is compulsory every year if the payment of excise duty is more than 3 crores.
(2) Yes. There are three types of excise audits under Central Excise Law.
(1) No. Desk review audit can be conducted by a practicing Chartered Accountant or a practicing Cost
Accountant in the premises of Department.
(2) No. Valuation audit can be ordered by the Assistant or Deputy Commissioner of central excise after
getting the prior permission of Chief Commissioner of Central Excise.
(3) No. The expenses and audit fees shall be paid by the department.
(3) No. Returns are filed by the assessee without verification by the Excise department. Hence audit is
required to be conducted.
(4) No. Central Excise Revenue Audit (known as CERA Audit) conducted by the C and A G department.
(4) Yes. The desk review is a part of the internal audit procedure and the services of the professionals are
taken to help the department.
(5) Yes. Valuation Audit can be ordered only with the prior approval of Chief Commissioner of Central
Excise.
(5) Yes. The desk review audit should be completed in 5-7 working days.
22. Fill in the Blanks
(1) Service Tax is a tax on__________.
(2) Service Tax is applicable to the whole of India except the statue of_____.
(3) Registration is mandatory if the value of taxable services exceeds Rs._______during the financial
year.
(4) Form________________is used for applying for registration under Service Tax.
(5) The Due date of payment of service tax for the month is________________of the succeeding month.
(6) The effective rate of service tax including Education Cess is ________________.
(7) Registered premises means all premises from where an assessee is providing____________________.
(8) The present rate of service tax is___________ plus_______________plus.
(9) The Service tax provider is required to issue (within 14 days of completion of service) an _____________
signed by him or a person authorized by him.
(10) If service tax payment is made through internet banking, such e-payment can be made by__________
of the following month or following quarter as the case may be.
Answer:
1. Value of taxable services
2. Jammu and Kashmir
3. Rs.9,00,000
4. ST-1
5. 5th
6. 12.36%
7. Taxable services
8. 12% plus 2% plus 1%
9. Invoice.
10. 6th
23. Say Yes Or No, Give Reasons
(1) The list of records needs to be maintained is not provided in the Service Tax Rules
(2) Single registration in the case of multiple services rendered is possible subject to conditions
(3) The due date for monthly return for service tax is the 25th of the succeeding month in the case of a
company
(4) A service provider is the person who renders the service
(5) GAR-7 is the form used to pay Service tax
(6) Service tax records are to be maintained at the registered premises of the service provider.
(7) For any delayed payment of service tax, interest cannot be levied.
(8) If Service tax paid during the previous year is in excess of Rs. 50 lakhs then e-payment is mandatory
(9) Single Registration is possible with the permission from Department, only when the assessee maintains
centralized billing or centralised accounting for multiple services provided from more than one
premises.
(10) If the last day of payment and filing return is a public holiday, tax should be paid and return filed on the
previous working day.
Answer:
(1) No. This list is to be submitted once at the time of filing his first S.T.3 return. Sales register, Purchase
register, Cash book, Petty cash book, General ledger, etc.
(2) Yes. Single registration in the case of multiple services rendered is possible subject to conditions
(3) No. The due date for submitting the return is half yearly 25th October and 25th April. There is no
monthly return concept in the service tax provisions.
(4) Yes. A service provider is the person who renders the service
(5) Yes. GAR-7 is the form used to pay Service tax
(6) Yes. Service tax records are to be maintained at the registered premises of the service provider.
(7) No. For any delayed payment of service tax, interest mandatory.
(8) Yes. If Service tax paid during the previous year is in excess of Rs. 50 lakhs then e-payment is
mandatory
(9) Yes. Single Registration is possible with the permission from Department, only when the assessee maintains
centralized billing or centralised accounting for multiple services provided from more
than one premises.
(10) No. If the last day of payment and filing return is a public holiday, tax can be paid and return can be
filed on the next working day.
24. Multiple Choice Questions
(1) Service tax can be levied on the
(a) Taxable services
(b) Exempted services
(c) Partly exempted and partly taxable services
(d) On purchase of input goods
(2) Value of works contract includes
(a) Cost of consumables, electricity
 (b) Value of transfer of property in goods
(c) Value of VAT or Sales Tax on the above
(d) None of the above
(3) A person who neither intends to hold nor holds any title to the goods or services is called
(a) Pure Agent
(b) Dealer
(c) Service tax provider
(d) Manufacturer
(4) Under Service Tax (Determination of Value) Rules, 2006, Act means
(a) The Finance Act, 1994
(b) The Central Excise Act, 1944
(c) Central Excise Tariff Act, 1985
(d) Central Sales Tax Act, 1956
(5) Service tax is not applicable to the state of
(a) Jharkhand
(b) Himachal Pradesh
(c) Tripura
(d) Jammu and Kashmir
(6) The importer of service is liable to pay service tax only when the service provider having
(a) No place of business in India
(b) Place of business in India
(c) Permanent address in India
(d) None of the above
(7) The service tax paid on input services claimed as Cenvat credit after the export of service
(a) Can be claimed rebate (i.e. duty drawback)
(b) Cannot be claimed any rebate
(c) Can be claimed as refund
(d) None of the above
(8) If the immovable property in respect of which service is rendered outside India the service is considered
an export
(a) Irrespective of where the payment has come from
(b) Only when payment came from overseas.
(c) Partly from overseas
(d) Even without payment received from an importer.
(9) The value of any taxable service, as the case may be, does not include
(a) The rail fare collected by rail travel agent
(b) Value of services collected by rail travel agent
(c) Services provide by the consultant
(d) None of the above
(10) Which of the following services does not come under export of service?
(a) Air transport of passengers embarking for international travel
(b) Export of services with respect to immovable property
(c) Export of services with respect to management consultancy services
(d) None of the above.
Answer:
(1) (a)
(2) (a)
(3) (a)
(4) (a)
(5) (d)
(6) (a)
(7) (b)
(8) (a)
(9) (a)
(10) (a)
25. Fill in the Blanks
1. Service tax liability is dependent upon the type of the________who provides the taxable service
2. Service tax can be levied on the_________and______________
3. Services provided by Central or State Government are taxable unless these services are statutory services
4. If the value is not ascertainable then_________________should be referred for arriving the value of
such services.
5. Out of pocket expenses incurred are___________in the value of taxable service.
6. The expenditure or costs incurred by the service provider as a__________of the recipient of service
shall be excluded from the value of the taxable service
7. Receipt of advance money is not_________
8. Taxable event in the case of import is the date of_________
9. Service tax is payable on_______________of taxable service actually received and not on amount
billed, even though taxable event arises.
10. The costs incurred by the service provider as a________________of the recipient of service shall
be excluded from the value of the taxable service
Answer:
(1) Person.
(2) Taxable Service and Value of Taxable Service
(3) "statutory services"
(4) Service Tax (Determination of Value) Rules, 2006.
(5) Includible.
(6) Pure Agent
(7) a taxable event
(8) actual import
(9) The value.
(10) Pure Agent
26. Say Yes or No, With Reasons
(1) If a service is rendered free service tax is not payable because the value of the service is zero and no
amount is received from the customer.
(2) There is concept of pure agent that exists for the purpose of service tax valuation.
(3) The value of goods transferred to the job worker is not included in the assessable value of service.
(4) Service Tax can be levied on an advance payment received.
(5) The central excise officer has the power to determine the value of the services after providing an
opportunity to be heard to the assessee.
(6) Services delivered by a person having a place of business in Jammu and Kashmir to a person having a
place of business in Andhra Pradesh is subject to service tax.
(7) Statutory services are also taxable services.
(8) Some services are taxable when provided to "any person". If a service falls in that category, service
provided on sub-contract basis will be liable to pay service tax.
(9) A person having a place of business in Andhra Pradesh provides to a person having a place of business
in Jammu and Kashmir. Such service is liable to service tax law.
(10) The airfare collected by air travel agent in respect of service provided by him does not include in the
value of services.
Answer:
(1) Yes. If a service is rendered free service tax is not payable because the value of the service is zero and
no amount is received from the customer.
(2) Yes. There is concept of pure agent that exists for the purpose of service tax valuation.
(3) Yes. The value of goods transferred to the job worker is not included in the assessable value of
service.
(4) Yes. Service Tax can be levied on an advance payment received.
(5) Yes. The central excise officer has the power to determine the value of the services after providing an
opportunity to be heard to the assessee.
(6) Yes. Services delivered by a person having a place of business in Jammu and Kashmir to a person
having a place of business in Andhra Pradesh is subject to service tax, place of delivery of service is
important.
(7) No. Statutory services are not taxable services
(8) Yes. Some services are taxable when provided to "any person". If a service falls in that category,
service provided on sub-contract basis will be liable to pay service tax.
(9) No. A person having a place of business in Andhra Pradesh provides to a person having a place of
business in Jammu and Kashmir. Such service is liable to service tax law.
(10) Yes. The airfare collected by air travel agent in respect of service provided by him does not include in
the value of services.
27. Multiple Choice Questions
1. Service tax liability arises only when the taxable turnover of the previous year exceeds
(a) Rs. 10,00,000
(b) Rs. 9,00,000
(c) Rs. 8,00,000,
(d) Rs. 7,00.000
2. No service tax will be levied on value of goods and material supplied to the service recipient while
providing service, provided Cenvat Credit on such goods and material is
(a) not taken
(b) taken
(c) partly reversed
(d) none of the above
3. One of the following services is a "reverse charge"
(a) Mutual Fund distributors services
(b) Management consultancy services
(c) Telecommunication services
(d) Information Technology services
4. Services rendered to the Reserve Bank of India is
(a) taxable service
(b) exempted service
(c) partly exempted
(d) none of the above
5. Importer of service is liable to pay service tax only when
(a) provider of service has no place of business in India
(b) provider of service has place of business in India
(c) import of service is not taxable in India
(d) provider of service is related to the importer
6. Services are taxable only when defined under
(a) Section 65( 105) of Finance Act, 1994
(b) Section 64( 105) of Finance Act, 1994
(c) Service Tax Rules
 (d) Section 4 of the Central Excise Act, 1944
7. Which one of the following service is called reverse charge
(a) Service provider is liable to pay service tax
(b) Service receiver is liable to pay service tax
(c) No one is liable to pay service tax
(d) Whose services are exempted from service tax
8. Services provided to United Nations employees for their personal purposes is
(a) Liable to pay service tax
(b) Not liable to pay service tax
(c) Partly liable to pay service tax
(d) None of the above
9. ACA firm had a turnover of Rs. 17 lakhs in Yl. Its turnover was Rs. 5 lakhs in Y2, Rs. 8 lakhs in Y3
and Rs. 5 lakhs in Y4. In which years is the firm liable to pay service tax?
(a) Yl and Y2
(b) Yl,Y2andY3
(c) Y2 and Y3
(d) None of the above
10. Exemption turnover of Rs. 10 lakhs for previous year it is the value of taxable service rendered and for
the curr
ent year
(a) Value of taxable service received
(b) Value of taxable services rendered
(c) Value of taxable services partly received and partly rendered
(d) None of the above.
Answer:
(1) (a)
(2) (a)
(3) (a)
(4) (b)
(5) (a)
(6) (a)
(7) (b)
(8) (b)
(9) (a)
(10) (a)
28. Fill in the Blanks
1. If the taxable services exceed_____________but is less than____________then the service provider will have to
register with the Superintendent of Central Excise under the Service Tax provisions.
2. For certain services service tax liability is to be paid by the service receiver is called_________
3. Services provided to Special Economic Zones (or) services provided by Special Economic Zones
are_____________
4. Service tax liability is exempted if the turnover is less than or equal to______
5. If the taxable turnover during the current year 2008-09 exceeds 10 lakhs then there is no exemption
limit in the year 2009-10.
Answer:
(1) Rs. 9,00,000 but less than Rs. 10,00,000
(2) Reverse charge
(3) Non Exempted Services
(4) Rs. 10,00,000
(5) Rs. 10,00,000.
29. Multiple Choice Questions
1. What is the due date for payments of service tax in the case of a partnership firm?
(a) 5th day of the month immediately following every month
(b) 25th day of the month immediately following every quarter
(c) 5th day of the month immediately following every quarter
(d) 25th day of the month immediately following every month
2. 'A Ltd' enters into an advertising contract with 'B Ltd.' for a sum of Rs. 15,000 on 5-6-2006. 'A Ltd.'
receives an advance of Rs. 10,000 on 06.06.2006 and the balance amount on the completion services of
service on 12.07.2006. The service tax payable by 'AB Ltd.' is:
(a) Rs. 1836 by 25-8-2006
(b) Rs. 1224 by 25-6-2007 and Rs. 612 by 25-8-2006
(c) Rs. 1836 by 5-8-2006
(d) Rs. 1224 by 5-7-2006 and Rs. 612 by 5-8-2006
3. 'Y Ltd' provides management consultancy services to 'X' for a consideration of Rs. 20,000 . 'Y Ltd.'
raises the bill on 'X' on 05.06.2006. 'Y Ltd." receives the payment from 'X" on 15.07.2006. When
should 'Y Ltd.' pay the service tax?
(a) on or before 5-8-2006
(b) on or before 5-7-2006
(c) on or before 31 -7-2006
(d) on or before 30-6-2006
4. Service tax is payable to the credit of the Central Government in:
(a) Form ST-3
(b) GAR -7 challan
(c) Form F
(d) None of the above
5. Adjustment of excess of service tax can be allowed on the basis of
(a) Pro-rata
(b) Total amount at time
(c) Only 80%
(d) Only 50%
6. Penalty for not maintaining the proper books of accounts may extend to
(a) Rs. 5,000
(b) Rs. 50,000
(c) Rs. 2,500
(d) Rs. 1,000
7. An assessee is allowed to rectify mistakes and file revised return
(a) Within 90 days from the date of filing of the original return
(b) Within 180 days from the date of filing of the original return
(c) Without any time limit
(d) None of the above
8. E- payment of service tax is mandatory only when the payment of service tax exceeds
(a) Rs. 50 Lakhs
(b) Rs. 5 Lakhs
(c) Rs. 10 Lakhs
(d) Rs. 15 Lakhs
9. How much abatement will be allowed to Mandap Keeper, Hotels and Convention Services providing
full catering services
(a) 40%
 (b) 60%
(c) 100%
(d) 50%
10. Cenvat credit is not allowed if the input services are exclusively used in the output services
(a) Exempted service
(b) Export of services
(c) Taxable export of services
Answer:
(1) (c)
(2) (d)
(3) (a)
(4) (b)
(5) (a)
(6) (a)
(7) (a)
(8) (a)
(9) (a)
(10) (b)
30. Fill in the Blanks
1. Abatement is an amount that can be___________from the value of the service.
2. In the case of Individuals the due date for payment of service tax for the III quarter is_____
3. In the case of companies the service tax for October is payable on or before _____of
4. For all assessees the due date for payment of service tax for the service rendered in the month of
March is_________
5. E-payment of service tax has been made mandatory for assessees who have paid service tax of more
than Rs.__________during the last financial year or during the current financial year
6. Half yearly return has to be filed using Form_______; The number of copies should be _____
7. The time limit for filing revised return is_______days from the date of_______
8. Penalty for not obtaining registration is Rs. ___ per day for every day of default or
Rs.__________whichever is higher.
9. The penalty will be reduced to______%, if tax, interest and penalty are paid within 30 days from
the date of receipt of order of Central Excise Officer.
10. The facility of e-payment of service tax has also been introduced from_______
Answer:
(1) Deducted
(2) 5th of January
(3) 5th of November
(4) 31st March
(1) Rs. 50,00.000
(2) ST - 3 , triplicate
(3) 90 days from the date of filing the original return.
(4) Rs. 200 per day or Rs. 5, 000.
(5) 25%.
(6) 11.05.2005
31. Say Yes or No, Give Reasons
(1) It is necessary to specify the heading under which the service being provided is falling.
(2) Service provided from India with respect to immovable property situated abroad is called export of
services.
(1) There can be no reversal of Cenvat credit on input service towards Interior decorator services used to
 produce partly dutiable goods as well as non dutiable goods.
(2) There can be no reversal of Cenvat credit on input services for an output service provider if the final
services are deemed exports.
(3) Due date of payment of service tax for e-payer is the 6th of following month including the dues for March
month.
(4) Service tax will be paid by an individual on monthly basis
(5) Due date of submission of half yearly return ST - 3 is 30th September
(6) Revised returns can be filed with in 90 days from the date of original return filed by the assessee
(7) E- payment of service tax is compulsory for every assessee
(8) Provisional assessment is not applicable at any given case under service tax provisions.
Answer:
(1) Yes. Specify the heading under which the service being provided is falling is necessary for the purpose of
classification.
(2) Yes. Service provided from India with respect to immovable property situated abroad is called export of
services.
(3) No. There should be reversal of Cenvat credit on input service towards Interior decorator services used to
produce partly dutiable goods as well as non dutiable goods.
(4) Yes. There can be no reversal of Cenvat credit on input services for an output service provider if the final
services are deemed exports.
(5) No. Due date of payment of service tax for e-payer is the 6th of following month except the dues for March
month.
(6) No. Service tax will be paid by an individual on quarterly basis
(7) No. Due date of submission of half yearly return ST-3 is 25th October and 25th April.
(8) Yes. Revised returns can be filed within 90 days from the date of original return filed by the assessee
(9) No. E- payment of service tax is not compulsory for every assessee
(10) No. Provisional assessment is applicable under service tax provisions.
32. Multiple Choice Questions

Applied Direct Taxation

Objective Questions and Answers
1. Multiple Choice Questions
(A) The following is capital receipt:
(a) Dividend from investment;
(b) Bonus shares;
(c) Sale of technological know- how;
(d) Compensation received for compulsory evacuation of place of business.
Ans. (d) Compensation received for compulsory evacuation of place of business
.
(B) Following is not a capital receipt:
(a) Dividend on investment;
(b) Bonus shares;
(c) Sale of know-how;
(d) Compensation received for vacating business place.
Ans. (a) Dividend on investment

(C) An individual is said to be resident in India in a previous year (in which the February month has 29 days) if he
is in India in that year for a period or periods amounting in all to 182 days or more, [(a) 182, (b) 183, (c) 60, (d)
150]
Ans. 182 days
(D) The assessee is charged to income-tax in the assessment year following the previous year:
(a) A non-resident business firm which shipped goods on 1.5.210 at Visakhapatnam Port in Andhra Pradesh
(b) An employee left India to USA on 1.8.2010 with no intention of returning
(c) ABC firm which discontinued its business on 1.9.2010
(d)An employee-assessee of a University who worked during 1.4.09 to 30.03.2010
Ans. (d) An employee-assessee of a University who worked during 1.4.09 to 30.03.2010.

(E) Income received in India in previous year is taxable in the hands of:
(a) Resident;
(b) Not-resident;
(c) Non ordinarily resident;
(d) All above.
Ans. (d) All above.

(F) Expenditure incurred by an employer on medical treatment and stay abroad of the employee shall not be
taxed in the case of ___________.
(a) an employee whose gross total income before including the said expenditure does not exceed Rs. 2 lakhs.
(b) an employee whose income under the head "Salaries" exclusive of all monetary perquisites does not exceed Rs.
2 lakhs,
(c) an employee whose income under the head "Salaries" exclusive of all non-monetary perquisites does not
exceed Rs. 2 lakhs,
(d) all employees irrespective of their amount of gross total income/the amount of income under the head
"Salaries".
Ans. (a) an employee whose gross total income before including the said expenditure does not exceed Rs. 2 lakhs.

2. Expand - Expand abbreviations — CCIT, CBDT.

Ans. CCIT - Chief Commissioner of Income Tax CBDT - Central Board of Direct Tax

3. Fill in the Blanks

(A)The basic exemption limit in case of a non-resident individual being a senior citizen of Rs. 1.60,000.
Income-tax rates are not prescribed by the Income-tax Act, but by the Finance Act of each year.
(B) The term business would include profession and accordingly the term business used in Section 9(1)(i) would
also include a professional connection.
(C)Compensation received from an insurer on account of damage to the crops is an agricultural income .
(D) Receipts from TV serial shooting in farm house is non agricultural income.

4. True and False/Correct and Incorrect

A. 'Gross Total Income' means aggregate of income computed under various heads and after allowing deduction
under Chapter Vl-A.
Ans. False. 'Gross Total Income' means aggregate of income computed under various heads before
allowing deduction under Chapter Vl-A. Income after allowing deduction under Chapter Vl-A is known as
Total Income.
B. If a person is resident and ordinarily resident of India, his income earned outside India is taxable in the
country in which he earned that income.
Ans. False. His income shall be taxable in India, subject to relief available u/s 90, 90A and 91.
C. Where a person does basic operations in lands and later sells the saplings grown by him in a nursery owned by
him, the same will be agricultural income. If the basic operations are not done by the assessee and the saplings
are sold in his nursery, the same will still be regarded as agricultural income.
Ans. True. Any income derived from saplings or seedlings grown in a nursery shall be deemed to be
agricultural income.
D. Vivitha, a Cost Accountant, is employed in Hema Plastics Ltd. The company pays the annual Cost accountant
membership fee. The fee so paid by the company is not to be treated as a perquisite in the hands of Vivitha.
Ans. False. As payment of annual Cost accountant membership fee is obligation of Vivitha. Since, obligation of
the employee is paid by the employer, hence such payment shall be considered as taxable perquisite u/s 17(2)(iv).
E. X is employed in Complex Ltd. as a Chartered Accountant. The an nual membership fee of X paid by Complex
Ltd. is not a perquisite and hence not chargeable to tax.
Ans. False. Payment of annual membership is an obligation of X which is borne by the employer, hence the same
shall be treated as perquisite u/s17(2).
F. Rental income from residential property owned by a company carrying on business of property rentals is taxable under
the head "Income from House Property".
Ans. True. Rental income from residential property of an assessee is taxable under the head 'Income from
House Property', irrespective of the fact that assessee is engaged in the business of letting of the property.

5. Multiple Choice Questions

6.
(A) If an employer transfers second hand motor car to the employee, the perquisite is valued at -
(a) Actual cost less depreciation @ 30% for every completed year under straight line method
(a) Actual cost less depreciation @ 20% for every completed year under WDV method
(b) Actual cost less depreciation @ 30% for every completed year under WDV method
(d)Actual cost less depreciation @ 20% for every completed year under SLM method.
Ans. (b) Actual cost less depreciation @ 20% for every completed year under WDV method
.
(B)The following is exempt income :—
(a) Travel concession to employee
(b) Remuneration received for valuation of answer scripts
(c) Encashment of leave salary whilst in service
(d) Perquisites in India
Ans. (a) Travel concession to employee.

(C) The following is not taxable as income under the head "Salaries":-
(a) Commission received by a full-time director;
(b) Remuneration received by a partner;
(c) Allowances received by an employee;
(d) Free accommodation given to an employee.
Ans. (b) Remuneration received by a partner.
6. Fill in the Blanks
A. Expenditure on free meals to employee in excess of Rs. 50 per meal will be treated as perquisite of
employee.
B. Gift to employee upto Rs. 5,000 per annum will not be treated as perquisite taxable in the hands of
employee.& entertainment allowances up Rs 5000/- is exempted.
C. Death-cum-retirement gratuity received by an employee of Central Government is wholly exempt (wholly
exempt/exempt up to Rs. 3,50,000/exempt up to 10,00,000)
D. If loan granted by employer to employee does not exceeds Rs. 20,000 (10,000, 20,000, 50,000, 1,00,000), it
is not treated as perquisite to employee for purpose of income tax.
E. Where an employer gifts a second hand motor car to an employee, the perquisite value is actual cost less
depreciation at 20 % for every completed year under reducing balance method of computing depreciation.
F. Any commission due or received by a partner of a firm from the firm shall not be regarded as salary
income under section 15;
G. Advance salary is taxable, while advance against salary is not taxable.

7. Distinguish between foregoing of salary and surrender of salary.

Ans. Once salary has been earned by an employee, its subsequent waiver does not make it exempt from tax liability.
Such waiver shall be treated as application of the income. Hence, salary foregone is taxable. However, where an
employee opts to surrender his salary to the Central Government u/s 2 of Voluntary Surrender of Salaries (Exemption
from Taxation) Act, 1961, the salary so surrendered shall not be taxable.
8. Multiple Choice Questions
If an assessee earns rent from a sub-tenant in respect to tenanted property let out as a residence, the said rent is:
(a) Exempt under Section 10.
(b) Taxable under the head income from house property.
(c) Taxable as business income, as the letting out is a commercial activity.
(d) Taxable as income from other sources, unless the assessee is in the busi ness of subletting properties on a
regular basis.
Ans. (d) Taxable as income from other sources, unless the assessee is in the business of subletting properties
on a regular basis.

9. Fill in the Blanks

A. Interest on capital borrowed for acquisition or construction of property is deductible subject to limit of
Rs. 1,50,000 per year, if capital is borrowed on or after 1-04-1999. This is allowable if acquisition or
construction is completed within 3 years from end of financial year in which loan was taken .
B. For a self-occupied house property occupied on 1.7.2010, for which housing loan was availed, if the interest up
to 31.3.2010 is Rs. 90,000 and thereafter the interest payable is Rs. 3,000 per month, the deduction available under
section 24 in respect of interest for the year ended 31.3.2011 is Rs. 54,000.
C. An assessee, after sale of house property, receiving arrears of rent is (is\is not) chargeable to tax; the same
computed in the stipulated manner, is chargeable to tax as income from house property (inco
me from other source/income from house property).
D. The basis of chargeability under the head 'income from house property' is Annual Value.
E. Arrear rent is taxable after deducting 30% as per Section 25B of the Income-tax Act, 1961.

10. Multiple Choice Questions:

(A)X Ltd. has failed to remit the tax deducted at source from annual rent of Rs. 6,60,000 paid to Mr. A for its
office building. Said rent is —
(a)fully allowable as a business expenditure; (b)not allowable in view of Section 40(a)(i);(c)allowable to the extent
of 50%; (d)none of the above.
Ans. (b) not allowable in view of Section 40(a)(i).
(B) A partnership firm's profit as per the profit and loss account is Rs. 10,00,000. Its total income determined
according to the provisions of the Income- tax Act, 1961 is Rs. 9,00,000. A partner who has 20% share in the firm
can claim exemption of amount of Rs.__________under Section 10(2A).
(a)2,00,000,(b)1,80,000, (c) 20,000 (d) None of the above
Ans. (a) 2,00,000

(C) Expenditure incurred in carrying out illegal business is—

(a) Not allowed as deduction in any case.
(b) Allowable as deduction, if gross total income is less than Rs. 5 lakhs.
(c) Allowable as deduction in all cases.
(d) Allowable as deduction, if income from illegal business is offered to tax.
Ans. (d) Allowable as deduction, if income from illegal business is offered to tax.

(D) if any expenditure is incurred by an Indian company wholly and ex clusively for purpose of amalgamation or
demerger, the said expenditure is —
(a) not allowable as a deduction as a deduction in computing "Profits and gains from business or profession"
(b) Fully deductible as revenue expenditure in the year in which it is incurred.
(c) allowable as a deduction, spread over eight successive previous years beginning if the previous year in which the
amalgamation or demerger taken place.
(d) allowable as a deduction, spread over five successive years beginning with the previous year in which the
amalgamation or demerger taken place.
Ans. (d) allowable as a deduction, spread over five successive years beginning with the previous year in
which the amalgamation or demerger taken place.

11. Multiple Choice Questions:

(A)If any expenditure is incurred by an Indian company wholly and exclu sively for the purpose of amalgamation or
demerger, the said expenditure is —
(a) Not allowable as a deduction in computing profits and gains of business or profession.
(a) Fully deductible as revenue expenditure in the year in which it is incurred.
(b) Not deductible but is eligible to be treated as an intangible asset in respect of which depreciation can be
claimed.
(c) Allowed as a deduction spread over five successive previous year beginning with the previous year in which
the amalgamation or demerger takes place.
Ans. (d) Allowed as a deduction spread over five successive previous year beginning with the previous year in
which the amalgamation or demerger takes place.
(B) Deduction for bad debts is allowed to an assessee carrying on business —
(a) In the year in which the debt is written off as bad.
(b) In the year in which the debt first arose.
(c) In the year in which provisions was made in respect of the bad debt.
(d) In the year in which the debt becomes irrecoverable by operation of law.
Ans. (a) In the year in which the debt is written off as bad.

(C) Under Section 41(4) of the Income-tax Act, 1961, where a bad debt allowed as a deduction under Section 36(1)(vii) in
an earlier year is subsequently recovered —
(a) It is taxable to the extent of 50% of recovery, in the year of receipt, as business income.
(b) It is taxable as business income in the year of recovery.
(c) It is added back to the income of the year when it was written off and taxed as business income.
(d)It is taxable as income from other sources in the year of receipt.
Ans. (b) It is taxable as business income in the year of recovery.

(D) Payment of interest to partners of partnership firm assessed as firm is allowable as deduction under Section
40(b) of the Income Tax Act, 1961.
(a) If the rate of interest does not exceed 8% p.a.
(b) If the interest is paid on the minimum balance of capital account between 10th and the end of every month.
(c) If it is calculated on quarterly balance.
(d) If it is authorized by and in accordance with the partnership deed, pertains to a period after the deed and does not
exceed 12 percent simple interest per annum.
Ans. (d) If it is authorized by and in accordance with the partnership deed, pertains to a period after the deed and does not
exceed 12 percent simple interest per annum.

(E) The following is not 'plant' u/s 43(3) of the Income-Tax Act, 1961 —
(a) Books
(b) Know-how
(c) Road in the factory building
(d) Electrical fittings
Ans. (c) Road in the factory building.

(F) Mr. L Singh used it in his business. This is the only asset in the block. 20% of the usage is for personal
purposes. The WDV of the block as on 31.3.2011 is —
(a) Rs. 2,70,000;
(b) Rs. 2,55,000;
(c) Rs. 2,10,000;
(d) None of the above.
Ans. (d) None of the above.

12. Fill in the Blanks

A. In case of an existing industrial undertaking, to be eligible for addi tional depreciation, increase in installed
capacity as compared to the installed capacity as on 31.3.2002 is 10per cent.
[Note: As criteria of increment in installed capacity for allowing additional depreciation is now omitted]
B. The due date for filling return of net wealth by an individual who is a non-working partner in a firm whose
accounts are audited under Section 44AB of the Income-tax Act. 1961 is 31st July.
C. A person owns 4 heavy goods vehicles. His estimated annual income U/S. 44AE is 2,40,000. (16,800,
1,51,000, 1,92v000, 2,40,000).
D. According to Section 44AB, every person, carrying on business shall, if his total sales, turnover or gross
receipts, as the case may be, in business exceed or exceeds Rs. 60 lakh in any previous year, inter alia, get
his accounts of such previous year audited by a Chartered Accountant.
E. Additional depreciation of 20% of the actual cost of any new machinery or plant which has been acquired or
installed 31.03.2005 is available to an assessee engaged in the business of manufacture or production of an article of
things.
F. According to Section 40A(3), where the assessee incurs any expenditure in respect of which payment is made
in a sum exceeding Rs. 20,000 otherwise than by a crossed cheque or crossed bank draft. 100 percent of such ex-
penditure shall not be allowed as a deduction.
G. The additional or accelerated depreciation, for an eligible assessee, for machinery installed and used after
31.03.2005 is 20% of actual cost of the machinery.
H. Where an Indian company incurs any expenditure in connection with amalgamation or demerger, the same is
allowable as deduction, spread over 5 successive previous years beginning with the in which amalgamation or
demerger taken place .
I. 44BBB(i) of the Income-tax Act, 1961, the presumptive income is taken as 10% of the eligible receipts in the
hands of eligible assessee.
J. The deduction for amortization of preliminary expenses under section 35D is allowable at 20% of the
qualifying expenditure in each of the 5 successive years beginning with the year in which business commences.
K. Capital Expenses is a non-recurring expenditure whereas revenue expenses is normally a recurring one.
L. Sec 28 defines various income which are chargeable to tax under the head "Profits and gains of business or
profession".
M. Expenditure incurred towards demerger is deductible in 5 equal annual installments under Section 35DD of
the Income-tax Act, 1961.

13. True and False/Correct And Incorrect

A. Business expenses are allowed to be deducted from" business income even if they are in the nature of personal
expenditure of the assessee, as long as they are reasonable.
Ans. False. No personal expenses shall be allowed u/s 37(1).
B.Where business is carried on, on behalf of the assessee's minor child (whose income is clubbed in assessee's
hands), by the assessee, which is besides assessee's own business , the gross receipts of both should be reck oned
for judging the applicability of section 44AB of the Income-tax Act, 1961.
Ans. False. For the purpose of Sec.44AB, gross receipt or turnover from busi ness of assessee-individual shall be
considered.
C. No disallowance under Section 40A(3) of the Income-tax Act, 1961 arises where an assessee makes a cash
payment exceedings Rs. 20,000 towards purchase of a capital asset.
Ans. True. Sec.40A(3) deals with expenditure covered u/s 30 to 37. Hence, any cash payment made for capital
expenditure, subject to depreciation, is not covered by Sec.40A(3).
D. Depreciation is allowed when it is claimed.
Ans. False. According to explanation 5 to Sec.32, depreciation is allowed even if it is not claimed by the
assessee.
E. In the case of a dealer in shares, Income by way of dividend is tax able under the heads "Profits and gains of
business or profession".
Ans. False. Dividend on shares is specifically covered under the head 'Income from Other Sources'.
F. An assessee owns 11 trucks. One truck is always kept as a spare vehicle and is never plied on the road. Since
only 10 vehicles are plied on the road at any given point of time, the provisions of section 44AE of the Income
Tax Act, 1961, can be availed by the assessee.
Ans. False. The benefit u/s 44AE is available only if the assessee does not own more than 10 trucks. However, in
the instant case, assessee is owning more than 10 trucks, hence Sec.44AE is not applicable.
G. Municipal tax in respect of staff quarters is deductible only if it is paid, in computing business income.
Ans. True. As per Sec. 43B, while computing business income, deduction in respect of any tax, duty, cess, etc.
is allowable on payment basis.
H. Advertisement in any souvenir, brochure, pamphlet or the like published by a political party is not deductible under
Section 37(2B) of the Income-tax Act, 1961.
Ans. True. Expenditure incurred by an assessee on advertisement in any sou
venir, brochure, trade, pamphlet or like, published by a political party is disallowed u/s 37(2B).

14.Multiple Choice Questions

A. Long-term capital gains arising on compulsory acquisition of agricultural land held by a domestic company
within specified urban limits is —
(a) not exempt under Section 10(37);
(b) exempt under Section 10(37) in full;
(c) 50% of the receipt is exempt under Section 10(37);
(d) 25% of the receipt is exempt under Section 10(37).
Ans. (a) not exempt under Section 10(37).

B. In case of an investor in shares, in respect of shares sold, securities transactions tax paid (at the time of purchase
of the said shares earlier), is —
(a) to be added to the cost of acquisition;
(b) to be deducted as an expenditure connected with transfer;
(c) not deductible at all while computing capital gains;
(d) none of the above.
Ans. (c) not deductible at all while computing capital gains.

C. In respect of listed shares held for 10 months sold on 12.8.2010, the rate of tax in respect of capital gains is —
(a) 10%;
(b) 20%;
(c) 15%;
(d) not determinable, as the capital gains will form part of the total income whose other components are not
known.
Ans. (c) 15%

D. Capital gains arising to an individual/HUF is exempt from tax under section 10(37) if the land was being used
for agriculture purposes by such HUF or individual or parent of his during a period of or more immediately
preceding the date of transfer.
(a) 2 years,(c) 12 months,
(b) 36 months,(d) 6 months
Ans. (a) 2 years

E. Long term capital gain arising to an assessee on the sale of a capital asset is exempt under Section 54EC of the
Income-tax Act, 1961 —
(a) To the extent of investment in specified bonds up to a limit of X 100 lakhs.
(b) To the extent of 50% of investment in certain bonds up to a limit of Rs. 50 lakhs.
(c) To the extent of investment of capital gain in specified bonds not exceeding Rs. 50 lakhs.
(d) Proportionate to the extent of investment of net sale proceeds in specified
bonds, not exceeding Rs. 50 lakhs.
Ans. (c) To the extent of investment of capital gain in specified bonds not exceeding Rs. 50 lakhs.

15. Fill in the Blanks

A. 2010 - The cost of acquisition of 100 bonus shares, where the original shares (100 nos.) were acquired for
Rs.30,000 is Nil.
16. True and False/Correct and Incorrect
A. Long-term capital gains arising from units of debt-oriented equity funds for which securities transactions tax
has been paid in a recognized stock exchange is exempt.
Ans. False. Long-term capital gains arising from units of equity-oriented equity funds for which securities
transactions tax has been paid in a recognized stock exchange is exempt u/s 10(38).
B. For computation of capital gains, full value of consideration arising from the transfer of a capital asset, being
land or building or both, shall be the value adopted by the "Stamp Valuation Authority" for payment of stamp
duty or the consideration accruing or received from the transfer, whichever is less.
Ans. False. As per Sec.50C, in case of transfer of immovable capital asset being land or building or both, sale
consideration shall be higher of the following:
1. Actual consideration received or accrued on such transfer; or
2. The value adopted or assessed or assessable by any authority of a State Government (i.e. Stamp Valuation
Authority) for the purpose of payment of stamp duty.
C. Surplus on sale of motor car on which depreciation has been allowed for all year by proprietor of a business
will be taxed as long term capital gain.
Ans. False. Surplus on sale of motor car on which depreciation has been allowed for all year by proprietor of a
business will be taxed as short term capital gain.
D. Short-term capital gains arising from sale of listed shares through a recognized stock exchange, for which
security transaction tax has been paid, will be charged to tax at a concessional rate of 10%.
Ans. False. Short-term capital gains arising from sale of listed shares through a recognized stock exchange, for
which security transaction tax has been paid, will be charged to tax at a concessional rate of 15%.

Multiple Choice Questions

17. (A)Gift received from one or more unrelated person(s) during the previous year shall form part of an individual's
income, if the aggregate of gifts exceeds —
(a) Rs. 50,000
(b) Rs. 1,00,000
(c) Rs. 1,35,000
(d) Rs. 1,65,000
Ans. (a) Rs. 50,000

B. Cash gift received under Section 56(2)(vii) from non relatives are not taxable upto —
(a) Rs. 1,00,000;
(b) 175,000;
(c) Rs. 50,000;
(d) Rs. 25,000
Ans. (c) Rs. 50,000.

C. Mr. X gifts Rs.60,000 to the HUF of which he is member; said amount will be treated as income of —
(a) Mr. X;
(b) The HUF;
(c) None, as it is exempt;
(d) None of the above.
Ans. (b) The HUF.

18. Fill in the Blanks

A. Interest on refund on Income-tax paid in excess is a Taxable receipt.
B. Amount received towards permission for putting up hoarding at the top of the building is taxable
under the head Income from Other Sources .
19. True and False/Correct and Incorrect
A. Mr. A has received gift of Rs. 1,50,000 on 12 th December, 2010 from his close friend who is assessed to
income-tax. The same is taxable at the hands of Mr. A.
Ans. True. Said gift is taxable u/s 56(2)(vii).
B. Gift received from assesssee's grandfather in excess of Rs. 50,000 will be taxed as income from other sources.
Ans. False. Gift from related person is not taxable.
C. Gift of a diamond necklace worth I 2,00,000 received from a friend by an individual assessee is not taxable
as income from other sources.
Ans. False. Such gift is taxable u/s 56(2)(vii).
D. Mr. Janak has received as gift, gold buillion bars worth Rs. 70,000 from his friend on his birthday on 15.3.2011.
The same is not to be treated as income from other sources.
Ans. False. Gift of bullions is covered under Sec.56(2)(vii), hence, it is taxable under the head 'Income from Other
Sources'.
E. Mr. Saravanan follows mercantile system of accounting. On 13.3.2011, he has received from the State
Government, in respect of lands acquired, interest on enhanced compensation of Rs.1,50,000 which includes a
sum of 120,000 relatable to this year. The amount assessable is Rs. 20,000.
Ans. False. As per amended provision of Sec. 145A(2), interest on enhanced compensation is assessable as
income from other source in the year of receipts. Hence, entire Rs.1,50,000 shall be assessable in the A.Y. 2011-12
subject to standard deduction available u/s 56(2)(viii).
G. Mr. A has three minor children deriving interest from bank deposits to of the tune of Rs.2,000, Rs.1,300 and
Rs.1,600 respectively. Exemption available under Section 10(32) of the Income-tax Act, 1961 is-
(a) Rs. 4,900;(c)Rs. 4,500;
(b) Rs. 4,300;(d)None of above
(c) Ans. (b) Rs. 4,300
H. Miss Femina, aged 17, is married to Mr. Masculine. Her mother alone is alive. Income by way of interest
on loans, of Miss Femina will be -
(a) Assessed to tax in the hands of Mr. Masculine;
(b) Assessed to tax in the hands of her mother;
(c) Taxable in own hands;
(d) None of the above.
Ans. (b) Assessed to tax in the hands of her mother.

20.Fill in the Blanks

A. Exemption u/s. 10(32) of IT Act 1961 in respect of income of minor child included in the hands of
assesses under Section 64(1A) is restricted to Rs. 1,500 per child.
B. Assets held by minor married daughter will not (will/will not) be clubbed in the hands of the
individual.
C. For the applicability of clubbing provisions of the Wealth Tax Act, 1957, the expression 'child' includes step
child and adopted child.

21. Fill in the Blanks

Accumulated losses of amalgamating company shall be allowed to be set off or carried forward by amalgamates
company, if the amalgamated company holds continuously for a minimum period of 5 years from date of
amalgamation at least three-fourths of the book value of assets of the amalgamating company.

22. True and False/Correct and Incorrect

1. Benefit of carry forward and set off of accumulated losses and unabsorbed depreciation is not available in case
of amalgamation of a company owning hotel, with another company.
Ans. False. Benefit of carry forward and set off of accumulated losses and unabsorbed depreciation is available in
case of amalgamation of a company owning hotel, with another company u/s 72A.
2. Business loss can be set off against salary income.
Ans. False;. As per Sec.71 (2A), business loss cannot be set off against salary income.
3. Section 73 does not permit carry forward of losses from speculation business for more than four assessment
years immediately succeeding the assessment year for which the loss was first computed.
Ans. True. As per Sec.73, losses from speculation business cannot be carried forward for more than four
assessment years immediately succeeding the assessment year for which the loss was first computed.

23.Multiple Choice Questions

A. Government's contribution to the new pension scheme referred to in Section 80CCD is -
(a) an exempt income;
(b) income chargeable to tax as "Salaries" in full;
(c) 50% thereof is income chargeable to tax as "Salaries";
(d) Income chargeable to tax as "Income from other sources" in full.
Ans. (b) income chargeable to tax as "Salaries" in full.

B. In case of a hospital built in specified area after 31.3.2008 fulfilling the required conditions laid down in
Section 80IB-(11C), the profits and gains derived from running the hospital are
(a) deductible in full;
(b) deductible to the extent of 50%;
(c) deductible to the extent of 75%;
(d) taxable in full.
Ans. (a) deductible in full.

24. Fill in the Blanks

A. For a person suffering from server physical disability, deduction available under Section 80U is Rs.
1,00,000.
B. The tax rebate available under Section 80E to a Hindu Undivided Family resident in India is Rs. Nil.
C. The maximum amount of permissible deduction under Section 80C, subject to overall ceiling of Rs. 1,00,000,
for repayment of principal part of eligible housing loan in Rs. any amount subject to max of Rs.100000 and
that of interest is Rs. Nil.
D. From out of his agricultural income, X has paid interest of Rs.10,000 on education loan taken from
nationalized bank last year. Deduction available u/s 80E of the Income Tax Act, 1961 is Rs. NIL
E. Medical insurance premium paid otherwise than in cash is eligible for deduction under Section 80D of the
Income-tax Act, 1961.

25.True and False/Correct And Incorrect

A. Every assessee carrying on a business or profession is entitled to deduction under section 80JJAA equal to
30% of additional wages paid to new regular workmen employed by the assessee.
Ans. False. Deduction u/s 80JJAA is available to Indian company only.
B. In the case of an individual resident in India, who is an author, maximum deduction available from gross total
income in respect of eligible royalty income is Rs. 5,00,000,
Ans. False. In the case of an individual resident in India, who is an author, maximum deduction available
from gross total income in respect of eligible royalty income is Rs. 3,00,000.
C. Market value of donation given in kind is also eligible for deduction under Section 80G of the Income-tax
Act, 1961.
Ans. False. Donation in kind is not eligible for deduction u/s 80G.

26. Multiple Choice Questions

A. The registration of a charitable trust can be cancelled under Section 12AA of the Income-tax Act, 1961 by —'
(a) Assessing Office;
(b) Commissioner of Income-tax;
(c) Chief Commissioner of Income-tax;
(d) Central Board of Direct Taxes.
Ans. (b) Commissioner of Income-tax.
27. Fill in the Blanks
Where a charitable trust is created on 01-04-2010, the application for registration u/s 12A of the Income-tax
Act, 1961 should be submitted within one year from 1-4-2010 (date of creation of trust).
[Note Now, a trust is required to apply for registration in Form 10A with the Commissioner of Income tax. It is to
be noted that exemption will be available from the assessment year relevant to the financial year in which such
application is made.]

28.True and False /Correct And Incorrect

A. Under Section 12A of the Income-tax Act, 1961, application for registration of charitable trust can be made
within one year form the date of creation of the trust.
Ans. False. A trust is required to apply for registration in Form 10A with the Commissioner of Income tax. It is to
be noted that exemption will be available from the assessment year relevant to the financial year in which such
application is made.
B. In case of an artificial judicial person, no surcharge is payable where the total income exceeds Rs.10,00,000.
Ans. True. Surcharge is applicable only in case of corporate assessee.
C. Political parties governed by Section 13A of the Income-tax Act, 1961 have to file their returns of income
within the time limit prescribed under Section 139(1) even if there is no income chargeable to tax under the Act.
Ans. False. As per Sec.139(4B), the chief executive officer (whether such chief executive officer is known as
Secretary or by any other designation) of any political party is required to furnish a return in respect of income of
such political party, if the amount of gross total income before allowing exemption u/s 13A exceeds the maximum
amount not chargeable to tax.

29.Multiple Choice Questions

A. The income of any university or other educational institution existing solely for educational purposes and not
for the purposes of profit is exempt under clause (iiiad) of Section 10(23C) if the aggregate annual receipts'of such
university or educational institution do not exceed Rs.
(a) Rs.100crores,(c) Rs. 10crores,
(b) Rs.1 crore,(d) Rs. 10 lakhs
Ans. (b) Rs. 1 crore

B. Any income chargeable under the based "Salaries" is exempt from tax under Section 10(6)(viii), if it is
received by any non resident individual as remuneration for services rendered in connection with his
employment in a foreign ship where his total stay in India does not exceed a period days in that previous year.
(a) 90
(b) 182
(c) 60
(d) 120
Ans. (a) 90 days

C. The following is not a venture capital undertaking for the purposes of Sec.10(23F), if engaged in
business of-
(a) Generation of power
(b) Telecommunications
(c) Providing infrastructural facility
(d) Dairy farming whose shares are not listed in a recognized stock exchange
Ans. (d) Dairy farming whose shares are not listed in a recognized stock exchange.

30. Fill in the Blanks

A. To claim the benefit under Section 10A, SEZ undertaking having a turnover of rupees two crores, should file the
return of income on or before 31st Oct 2011.
B. Exemption under Section 10B of the Income-tax Act, 1961 is available till assessment year A.Y. 2012-13.

31. True and False /Correct and Incorrect

A. Amount received under Keyman insurance policy is not exempt un der Section 10(10D) of the Income-tax Act,
1961.
Ans. True. Amount received under Keyman insurance policy is specifically excluded from exemption u/s
10(10D).
B. Amount received under Reverse Mortgage Scheme is taxable as income under the head 'income form other
sources'.
Ans. False. Amount received under Reverse Mortgage Scheme is exempted u/s 10(43).
C. In case of assesses other than companies, the following is advance tax rate to be payable on or before of 15 lh
September:
(a) 15 per cent(c) 45 per cent
(b) 30 per cent(d) 60 per cent
Ans. (b) 30 per cent.

32. Fill in the Blanks

While effecting the tax deduction at source, education cess and special higher education cess totalling 3% need
not (should/need not) be also deducted from the amount due or payable to the deductee.

33.True and False/Correct and Incorrect

A. As per Section 194-C of the Income-tax Act, 1961, all Association of Persons and Body of Individuals are
liable to deduct tax at source from specified payments made to resident contractors.
Ans. False. An association of persons or a body of individuals, whose books of account are required to audited u/s
44AB (due to turnover or gross receipt criteria) during the financial year immediately preceding the financial year
is liable to deduct tax at source.
B. The rate of TDS applicable for payment made on 28.2.2011 to non-individual sub-contractor, as per
section 194C, is 2%.
Ans. True. As per Sec. 194C, where payee is a other than individual and HUF, tax shall be deducted @ 2%.
C. Only in the TDS certificate furnished by the deductor, quoting the PAN of deductor is compulsory and not in
the other correspondences between the deductor and the deductee.
Ans. False. As per Sec. 206AA, PAN of deductor is required to be quoted on TDS Statement and other
correspondence.

34. Multiple Choice Questions

A. In case of companies deriving loss for any assessment year, filling of return of income within the due date laid
down in Section 139(1) is compulsory
(a) only where the Department issues notice to the assessee-company;
(b) for domestic companies only;
(c) for foreign companies only;
(d) for all companies.
Ans. (d) for all companies.

B. Where assessment has not been completed, belated income-tax return for assessment year 2011-12 can be
filed upto
(a) 31-03-2013
(b) 31-12-2012
(c) 31-03-2012
(d) 31-12-2013
Ans. (a) 31-03-2013

C. The due date for filing return of net wealth of an individual, who is a partner in a firm, whose turnover for the year
ended 31-03-2011 exceeds Rs. 60 lacs, is
(a) 30th June, 2011
(b) 31st July, 2011
(c) 31st October, 2011
(d) None of the above
Ans. (d) None of the above.

D. Where the karta is not available, the return of wealth of a HUF can be signed by:
(a) Any adult member of the family;
(b) Any adult coparcener of the family:
(c) The male member who is next in seniority to the karta;
(d) None of the above.
Ans. (a) Any adult member of the family.

E. Following Form Number is to be used for filing the return of income by an individual having business income:
(a) Form No. 1;
(b) Form No. 2;
(c) Form No. 4;
(d) Form No. 4A.
Ans. (c) Form No. 4.

35. Fill in the Blanks:

A. Belated return of income for the assessment year 2011-12 can be filed on or before 31st March. 2013. where
no assessment has been made.
B. The due date for filling wealth-tax return by a closely held company, whose turnover is below Rs. 40 lakhs, is
30th September.
C. Electronic furnishing of income-tax return in approved computer readable media can be furnished under
sub-section (1B) of section 139 of the Income-tax Act, 1961.
D. 2009 - Time limit for filling revised return when assessment has not been completed is one year from the
end of the relevant assessment year.
E. Sec. 139(1) pplies to all persons whether they are resident or non-resident.

36.True and False/Correct And Incorrect

Partnership firm deriving loss need not file return of income.
Ans. False. A firm is required to furnish return of income mandatorily.

37. Multiple Choice Questions

A. Surcharge of 2.5% is payable in the case of companies, by
(a) domestic companies only;
(b) companies other than domestic companies;
(c) all companies;
(d) None of the above.
Ans. (d) None of the above.
[Note; Surcharge of 2.5% is payable by non-domestic company if total in come exceeds Rs.1 crore.]
B. Expand - MAT.
Ans. Minimum Alternate Tax

38.Fill in the Blanks

A. For the assessment year 2011-12, tax on distributed profits (dividend distribution tax) is payable at 15% plus
surcharge of 7.5% (+ Education Cess & SHEC 3%).
B. The rate of Minimum Alternate Tax has been increased from 15% to 18% of book profits with effect from
assessment year 2011 -12.
C. Long term capital gain which are exempt u/s. 10(38) credited to profit a n d l o s s a c c o u n t a r e s u b j e c t t o
( subject to/not subject to) Minimum Alternate Tax, from assessment year 2011-12.
D. A foreign company means a Company which is not a domestic company.
E. The rate of tax in case of Minimum Alternate Tax has been increased to 18% % with effect from Assessment
year 2011 -12.

39. True and False/Correct and Incorrect

A. For the purposes of computing minimum alternate tax (MAT) under Section 115JB(2) of the Income-tax Act,
1961 the book profit need not to be increased, by inter alia, the amount of deferred tax debited to the profit and loss
account.
Ans. False. For the purposes of computing minimum alternate tax (MAT) under Section 115JB(2) of the Income-tax
Act, 1961 the book profit required to be increased, by inter alia, the amount of deferred tax debited to the profit and loss
account.
B. The period for setting off the MAT credit under Section 115JB is seven years.

Income Tax Objective type Questions

Objective Questions in Income Tax
MULTIPLE CHOICE QUESTIONS (Finance Act 2008)
3. Family pension received by a widow of a member of the armed forces where the death of the
member has occurred in the course of the operational duties, is
a) Exempt up to Rs.3,00,000 b) Exempt up to Rs. 3,50,000
c) Totally exempt under section 10(19) d) Totally chargeable to tax
Ans c

5. Gift of Rs 5,00,000 received on 10 July, 2008 through account payee cheque from a non-relative
regularly assessed to income-tax, is
a) A capital receipt not chargeable to tax b) Chargeable as other sources
c) Chargeable to tax as business income
d) Exempt up to Rs.50,000 and balance chargeable to tax as income from other source
Ans b

7. For an employee in receipt of hostel expenditure allowance for his three children, the maximum
annual allowance exempt under section 10(14) is
a) Rs.10, 800 b) Rs.7,200 c) Rs.9,600 d) Rs.3,600
Ans b

8. For an industrial undertaking fulfilling the conditions, additional depreciation in respect of a

machinery costing Rs.10 lakh acquired and installed on October 3, 2005 is
a) Rs.75,000 b) Rs.1,50,000 c) Rs.1,00,000 d) None of the above
Ans c

9. Assessee is always a person but a person may or may not be an assessee.

a) True b) False
Ans a

10. A person may not have assessable income but may still be assessee.
a) True b) False
Ans a

11. In some cases assessment year and previous year can be same financial year.
a) True b) False
Ans a

12. A.O.P should consist of :individual and persons other than individual.

13. Body of individual should consist of :

a) Individual only b) Persons other than individual only c) Both the above
Ans a

14. A new business was set up on15-11-2008 and it commenced its business from 1-12-2008.The
first previous year in this case shall be:
a) 15-11-2008 to 31-3-2009 b) 1-12-2008 to 31-3-2009 c) 2008-2009
Ans a
15. A person leaves India permanently on 15-11-2008.The assessment year for income earned till
15-11-2008 in this case shall be:
a) 2007-08 b) 2008-09 c) 2009-10
Ans b

18. The maximum amount on which income-tax is not chargeable in case of firm is:
a) Rs.1,00,000 b) Rs. 90,000 c) Nil
Ans c

19. The maximum amount on which income-tax is not chargeable in case a co-operative society is:
a) Rs.50,000 b) Rs.30,000 c) Nil
Ans c

20. A local authority is taxable at flat rate of income-tax.

a) True b) False
Ans a

21. A co-operative society is taxable at flat rate of 30% on TI.

a) True b) False
Ans b

22. Education cess is leviable @:

a) 3% b) 5% c) 2.5%
Ans a

23. Education cess is leviable in case of:

a) An individual and HUF b) A company assessee only c) All assesses
Ans c

25. The TI of the assessee has been computed as Rs.2,53,494.90. For rounding off ,the TI will be
taken as:
a) Rs.2,53,500 b) Rs.2,53,490 c) Rs.2,53,495
Ans a

26. Income tax is rounded off to:

a) Nearest ten rupees b) Nearest one rupee c) No rounding off of tax is done
Ans a

27. A’s TI for the A.Yr.2009-10 is Rs.2,50,000.His tax liability shall be

a) 10,000 b) 10,300 c) 11,330
Ans b

28. Residential status to be determined for :

a) Previous year b) Assessment year c) Accounting year
Ans a

29. Incomes which accrue or arise outside India but are received directly into India are taxable in case of
a) Resident only b) Both ordinarily resident and NOR c) Non-resident d) All the assesses
Ans d

30. Income deemed to accrue or arise in India is taxable in case of :

a) Resident only b) Both ordinarily resident and NOR c) Non-resident d) All the assesses
Ans d

31. Income which accrue outside India from a business controlled from India is taxable in case of:
a) Resident only b) Not ordinarily resident only
c) Both ordinarily resident and NOR d) Non-resident
Ans c

32. Income which accrue or arise outside India and also received outside India taxable in case of:
a) resident only b) not ordinarily resident
c) both ordinarily resident and NOR d) none of the above
Ans a

33. TI of a person is determined on the basis of his:

a) residential status in India b) citizenship in India c) none d) both of the above
Ans a
34. Once a person is a resident in a P.Yr. he shall be deemed to be resident for subsequent P. Yr.
a) True b) False
Ans b

35. Once a person is resident for a source of income in a particular P. Y r. he shall be deemed to be
resident for all other sources of income in the same P. Yr :
a) True b) False: yes for all sources of income.
Ans b

36. R Ltd., is an Indian company whose entire control and management of its affairs is situated
outside India. R Ltd., shall be :
a) Resident in India b) Non-resident in India c) Not ordinarily resident in India
Ans a

37. R Ltd., is registered in U.K. The control and management of its affairs is situated in India .R Ltd
shall be :
a) Resident in India b) Non-resident c) Not ordinarily resident in India
Ans b

38. R, a foreign national visited India during previous year 2008-09 for 180 days. Earlier to this he
never visited India. R in this case shall be:
a) Resident in India b) Non-resident c) Not ordinarily resident in India
Ans b

39. An Indian company is always resident in India

a) True b) False
Ans a

40. Dividend paid by an Indian company is:

a) Taxable in India in the hands of the recipient b) Exempt in the hands of recipient
c) Taxable in the hands of the company and exempt in the hands of the recipient
Ans c

41. Agricultural income is exempt provided the:

a) Land is situated in India b) Land is situated in any rural area India
c) Land is situated whether in India or outside India.
Ans a

42. If the assessee is engaged in the business of growing and manufacturing tea in India ,the
agricultural income in that case shall be:
a) 40% of the income from such business b) 60% of the income from such business
c) Market value of the agricultural produce minus expenses on cultivation of such produce
Ans b

43. Agricultural income is :

a) Fully exempt b) Partially exempt c) Fully taxable
Ans a

44. The partial integration of agricultural income, is done to compute tax on:
a) Agricultural income b) non agricultural income
c) Both agricultural and non agricultural income
Ans b

45. There will be no partial integration of agricultural income with non agricultural income, if the
non agricultural income does not exceed:
a) Rs.1,50,000 b) Rs. 1,00,000 c) Rs.1,10,000
Ans a

46. There will be no partial integration, if the agricultural income does not exceed:
a) Rs.40,000 b) Rs.50,000 c) Rs.5,000
Ans c

47. A local authority has earned income from the supply of commodities outside its own
jurisdictional area. It is :
a) Exempt b) Taxable
Ans b

48. R, a chartered accountant is employed with R Ltd., as an internal auditor and requests the
employer to call the remuneration as internal audit fee. R shall be chargeable to tax for such fee
under the head.
a) Income from salaries b) Profit and gains from Business and Profession
c) Income from other sources.
Ans a

49. R, who is entitled to a salary of Rs.10,000 p.m. took an advance of Rs.20,000 against the salary
in the month of March 2009.The gross salary of R for assessment year 2009-10 shall be:
a) Rs.1,40,000 b) Rs.1,20,000 c) None of these two: NO
Ans a

50. A is entitled to children education allowance @ Rs. 80 p.m. per child for 3 children amounting
Rs. 240 p.m. It will be exempt to the extent of :
a) Rs.200 p.m. b) Rs.160 p.m. c) Rs. 240 p.m.
Ans a

RE: Income Tax Objective type Questions

51. R gifted his house property to his wife in 2000. R has let out the house property @ Rs.5,000 p.m.
The income from such house property will be taxable in the hands of :
a) Mrs. R
b) R. However , income will be computed first as Mrs. R’s income and thereafter clubbed in the
income of R
c) R as he will be treated as deemed owner & liable to tax
Ans c

52. R transferred his house property to his wife under an agreement to live apart. Income from such
house property shall be taxable in the hands of :
a) R as deemed owner
b) R. However, it will be first computed as Mrs. R income & Thereafter clubbed in the hands of R
c) Mrs. R
Ans c

53. R gifted his house property to his married minor daughter. The income from such house property
shall be taxable in the hands of :
a) R as deemed owner.
b) R. However, it will be first computed as minor daughters income & clubbed in the income of R.
c) Income of married minor daughter.
Ans c

54. A has two house properties. Both are self-occupied. The annual value of
a) Both house shall be nil b) One house shall be nil c) No house shall be nil
Ans b
55. An assessee has borrowed money for purchase of a house & Interest is payable outside India.
Such interest shall:
a) Be allowed as deduction b) Not to be allowed on deduction
c) Be allowed as deduction if the tax is deducted at source
Ans c

56. Salary, bonus, commission or remuneration due to or received by a working partner from the
firm is taxable under the head.
a) Income from salaries b) Other sources c) PGBP
Ans c

57. Perquisite received by the assessee during the course of carrying on his business or profession is
taxable under the head.
a) Salary b) Other sources c) PGBP
Ans c

58. Interest on capital or loan received by a partner from a firm is:

a) Exempt U/S 10(2A) b) Taxable U/H business and profession
c) Taxable U/H income from other sources
Ans b

59. Under the head Business or Profession, the method of accounting which an assessee can follow
shall be :
a) Mercantile system only b) Cash system only c) Mercantile or cash system only d)
Hybrid system
Ans c

60. An asset which was acquired for Rs. 5, 00, 000 was earlier used for scientific research. After the
research was completed, the machinery was brought into the business of the assessee. The
actual cost of the asset for the purpose of inclusion in the block of asset shall be :
a) Rs.5,00,000 b) Nil
c) Market value of the asset on the date it was brought into business
Ans b

61. A car is imported after 1- 4- 2005 by R Ltd. from London to be used by its employee. R Ltd. shall
be allowed depreciation on such car at:
a) 15% b) 40% c) Nil
Ans c

62. Unabsorbed depreciation which could not be set off in the same assessment year, can be carried forward
for:
a) 8 Years b) Indefinitely c) 4Years
Ans b

63. Certain revenue and capital expenditure on scientific research are allowed as deduction in the
previous year of commencement of business even if these are incurred:
a) Five years immediately before the commencement of business
b) 3 years immediately before the commencement of the business
c) Any time prior to the commencement of the business.
Ans b

64. If any amount is donate for research, such research should be in nature of:
a) Scientific research only b) Social or statistical research only
c) Scientific or social or statistical research
Ans c

65. Preliminary expenses incurred are allowed deduction in:

a) 10 equal annual installments b) 5 equal annual installments c) full
Ans b

66. In case the assessee follows mercantile system of accounting, bonus or commission to the
employee are allowed as deduction on:
a) Due basis b) Payment basis c) Due basis but subject to section 43B
Ans c

67. Interest on money borrowed for the purpose of acquiring a capital asset pertaining to the period
after the asset is put to use is to be:
a) Capitalized b) Treated as revenue expenditure
Ans b

68. Expenditure incurred on purchase of animals to be used by the assessee for the purpose of
carrying on his business& profession is subject to
a) Depreciation
b) Deduction in the previous year in which animal dies or become permanently useless
c) Nil deduction
Ans b

69. Expenditure incurred on family planning amongst the employees is allowed to

a) Any assessee b) A company assessee c) An assessee which is a company or cooperative society
Ans b

70. Interest on capital of or loan from partner of a firm is allowed as deduction to the firm to the extent of:
a) 18% p.a. b) 12% p.a. even if it is not mentioned in partnership deed
c) 12% p.a. or at the rate mentioned in partnership deed whichever is less.
Ans c

71. Deduction under section 40(b) shall be allowed on account of salary /remuneration paid to :
a) Any partner b) Major partner only c) Working partner only
Ans c

72. Remuneration paid to working partner shall be allowed as deduction to a firm:

a) In full b) Subject to limits specified in section 40(b) c) None of these two
Ans b

73. A firm business income is nil /negative. It shall still be allowed as deduction on account of
remuneration to working partner to the maximum extent of:
a) Actual remuneration paid as specified in partnership deed b) Rs.50,000 c) Nil
Ans b

74. For person carrying on profession, tax audit is compulsory, if the gross receipts of the previous
year exceeds:
a) Rs.50 lakhs b) Rs.40 lakhs c) Rs.10 lakhs
Ans c

75. Tax audit is compulsory in case a person is carrying on business whose gross
turnover/sales/receipts, as the case may be, exceeds:
a) Rs. 10 lakhs b) Rs. 40 lakhs c) 1 crore
Ans b

76. In case an assessee is engaged in the business of civil construction, presumptive income scheme
is applicable if the gross receipts paid or payable to him in the previous year does not exceed:
a) Rs.10 lakhs b) Rs. 40 lakhs c) Rs. 50 lakhs
Ans b

77. In the aforesaid case ,the income shall be presumed to be :

a) 5% of gross receipts b) 8% of gross receipts c) 10% of gross receipts
Ans b

78. In case an assessee is engaged in the business of plying hiring or leasing goods carriage,
presumption income scheme under section 44AE is applicable if the assessee is the owner of
maximum of :
a) 8 goods carriages b) 10 goods carriages c) 12 goods carriages
Ans b

79. In case an assessee is engaged in the business of retail trade, presumptive income scheme is
applicable if the total turnover of such retail trade of goods does not exceed:
a) Rs.10 lakhs b) Rs.30 lakhs c) Rs.40 lakhs d) Rs.50 lakhs
Ans c

80. In the above case the income to be presumed under section 44AF shall be :
a) 8% of total turnover b) 5% of total turnover c) 10% of total turnover
Ans b

81. If the assessee opts for section 44AD or 44AF or 44AE,then the assessee shall:
a) Not be entitled to any deduction under sections 30 to 37
b) Be entitled to deduction under sections 30 to 37
c) Not be entitled to deduction under sections 30 to 37except for interest on capital or loan from
partner and remuneration to a working partner subject to conditions laid down under section 40(b)
Ans c

82. The period of holding of shares acquired in exchange of convertible debentures shall be reckoned
from:
a) The date of holding of debentures
b) The date of when the debentures were converted into shares
c) None of these two
Ans b

85. Conversion of capital asset into stock in trade will result into capital gain of the previous year:
a) In which such conversion took place
b) In which such converted asset is sold or otherwise transferred c) None of these two
Ans b

86. Where a partner transfers any capital asset into the business of firm ,the sale consideration of
such asset to the partner shall be :
a) Market value of such asset on the date of such transfer
b) Price at which it was recorded in the books of the firm
c) Cost of such asset to the partner
Ans b

87. Where the entire block of the depreciable asset is transferred after 36 months, there will be:
a) Short-term capital gain b) Long-term capital gain
c) Short-term capital gain or loss d) Long-term capital gain or loss
Ans c

88. In the case of compulsory acquisition, the indexation of cost of acquisition or improvement shall
be done till the :
a) Previous year of compulsory acquisition b) In which the full compensation received
c) In which part or full consideration is received
Ans a

89. If good will of a profession which is self generated is transferred, there will:
a) Be capital gain b) Not be any capital gain c) Be a short-term capital gain
Ans b

90. Exemption under section 54 is available to :

a) All assesses b) Individuals only c) Individual + HUF.
Ans c

91. The exemption under section 54 ,shall be available:

a) To the extent of capital gain invested in the HP
b) Proportionate to the net consideration price invested
c) To the extent of amount actually invested
Ans a

92. The exemption u/s 54B, is allowed to :

a) Any assessee b) Individual only c) Individual or HUF
Ans b

93. For claiming exemption under section 54B the assessee should acquire:
a) Urban agricultural land b) Rural agricultural land c) Any agricultural land
Ans c

94. New assets acquired for claiming exemption u/s 54, 54B or 54D,if transferred within 3 years,
will result in:
a) Short-term capital gain b) long-term capital gain
c) ST or LTCG depending upon original transfer
Ans a

95. Loss from a speculation business of a particular A. Yr. can be set off in the same A. Yr. from:
a) Profit and gains from any business
b) Profit and gains from any business other than speculation business
c) Income of speculation business
Ans c

96. Loss under the head capital gain in a particular assessment year can:
a) Be set off from other head of income in the same assessment year.
b) Be carried forward c) Neither be set off nor carried forward
Ans b

97. The loss is allowed to be carried forward only when as assessee has furnished:
a) Return of loss b) Return of loss before the due date mentioned u/s 139(1)
c) Or not furnished the return of loss
Ans b

98. Loss under the head income from house property can be carried forward:
a) Only if the return is furnished before the due date mentioned u/s 139(1)
b) Even if the return is not furnished c) Even if the return is furnished after the due date
Ans c

99. Deduction u/s 80C in respect of LIP, Contribution to provident fund, etc. is allowed to :
a) Any assessee b) An individual
c) An individual of HUF d) An individual or HUF who is resident in India
Ans c

100. Deduction under section 80C is allowed from:

a) Gross total income b) Total income c) Tax on total income
Ans a

101. An assessee has paid life insurance premium of Rs.25,000 during the previous year for a policy
of Rs.1,00,000.He shall:
a) Not be allowed deduction u/s 80C
b) Be allowed Deduction u/s 80C to the extent of 20% of the capital sum assured i.e.Rs.20,000
c) Be allowed Deduction for the entire premium as per the provisions of section 80C
Ans b

102. For claiming Deduction u/s 80C, the payment or deposit should be made:
a) Out of any income b) Out of any income chargeable to income tax
c) During the current year out of any source
Ans b

103. Deduction under section 80C shall be allowed for :

a) Any education fee
b) Tution fee exclusive of any payment towards any development fee or donation or payment of
similar nature c) Tution fee and annual charges
Ans b

104. Deduction under section 80CCC is allowed to the extent of :

a) Rs. 2,00,000 b) Rs. 1,00,000 c) Rs. 4,00,000
Ans b

105. Deduction under section 80D in respect of medical insurance premium is allowed to:
a) Any assessee b) An individual or HUF
c) Individual or HUF who is resident in India d) Individual only
Ans b

106. Deduction u/s 80D is allowed if the premium is paid to :

a) Life insurance Corporation
b) General insurance Corporation or any other insurer approved by IRDA
c) Life insurance or General insurance corporation
Ans b

107. The payment for Insurance premium under section 80D should be paid:
a) In cash b) By any mode other than cash c) Cash/by cheque
Ans b

108. The quantum of deduction allowed under section 80D shall be limited to:
a) Rs.20,000 b) Rs.10,000 c) Rs. 15,000
Ans c

109. Deduction U/s 80G on account of donation is allowed to:

a) A business assessee only b) Any assessee c) Individual or HUF only
Ans b

110. The maximum deduction u/s 80GG shall be limited to:

a) Rs. 1,000 p.m. b) Rs. 2,000 p.m. c) Rs. 3,000 p.m.
Ans b

111. Deduction u/s 80GGA in respect of certain donation for scientific research or rural development
is allowed to:
a) any assessee b) non corporate business assessee
c) an assessee whose income does not include PGBP income.
Ans c

112. Deduction under section 80DD shall be allowed:

a) To the extent of actual expenditure/deposit or Rs.40,000 whichever is less
b) For a sum of Rs.50,000 irrespective of actual expenditure or deposit
c) For a sum of Rs.40,000 irrespective of any expenditure incurred or actual deposited
Ans b

113. The deduction u/s 80E is allowed for repayment of interest to the extent of :
a) Rs.25,000 b) Rs.40,000 c) Any amount repaid
Ans c

114. The quantum of deduction allowed u/s 80U is :

a) Rs. 40,000 b) Rs. 50,000 c) Rs. 60,000
Ans b

115. As per Sec.139(1), a company shall have to file return of income:

a) When its total income exceeds Rs.50,000
b) When its total income exceeds the maximum amount which is not chargeable to income tax
c) In all cases irrespective of any income or loss earned by it.
Ans c

116. The last date of filing the return of income u/s 139(1) for A. Yr. 2009-10 in case of a company
assessee is
a) 30th November of the assessment year b) 30th September of the assessment year
c) 31st July of the assessment year d) 31st October of the assessment year
Ans b

117. The last date of filing the return of income u/s 139(1) for assessment year 2009-10 in case of a
non corporate business assessee whose accounts are not liable to be audited shall be:
a) 31st July of the assessment year b) 30th June of assessment year
c) 31st October of the assessment year d) 30th September of the assessment year
Ans a

118. For the P.Y. 2008-09 the business income of the assessee before providing C.Yr. depreciation of
Rs. 3,50,000 is Rs. 1,50,000. His due date of return was 30-09-2009 but he submitted the
return on 16-12-2009, the assessee in this case:
a) Be allowed to carry forward unabsorbed depreciation of Rs. 2,00,000
b) Not allowed to carry forward unabsorbed depreciation of Rs.2,00,000
Ans b

119. K finds some mistake in the return of income submitted by him on 05-06-2008 for assessment
year 2009-10, he wishes to revised such return. No assessment has been done in this case. K
can revise such return till:
a) 31-03-2009 b) 31-03-2010 c) 31-03-2011
Ans b

FILL THE BLANKS

1. For a self-occupied house property occupied on July 1, 2007 for which housing loan was
availed, if the interest up to March 31,2007 is Rs.90,000 and thereafter the interest payable is
Rs.3,000 per month, the deduction available under section 24 in respect of interest for the year
ended March 31, 2008 is Rs. …………………………….
Ans Rs.54,000

2. For a person suffering from severe physical disability, deduction available under section 80U is
Rs………………………..
Ans Rs.75,000

3. Accumulated losses of amalgamating company shall be allowed to be set off or carried forward by
amalgamated company, if the amalgamated company holds continuously for a minimum period
of …………………….. years from date of amalgamation at least three-fourth of …………….of the
amalgamating company.
Ans 5, book value of fixed assets

4. An author of a work of literacy, artistic or scientific nature is entitled to deduction to certain

amount from his income. State the amount and section number under which he is entitled to
deduction ………………………….
Ans 3 lakhs or 100 percent of such income
which ever is lower, sec.80 QQB

5. Interest on capital borrowed for acquisition or construction of property is deductible subject to

limit of Rs. ………………… per year, if capital is borrowed on or after ………………. This is
allowable if acquisition or construction is completed within …………. Years from ………………
Ans 1,50,000, 1-4-1999, 3 years, the end of the
financial year in which the capital was
borrowed.

6. For the assessment year 2009-10, tax on distributed profits ( divided distribution tax) is payable
at…………………% plus surcharge of ………………… if domestic company distributes dividend on
or after…………………..
Ans 15, 10% + (education cess) 3%, April 1st 2005.

7. The due date for filing of return under section 139(1) by a company having a turnover of less
than Rs.40 lakhs is …………..
Ans 30th Sep. of the relevant assessment year

8. Deduction under section 80GGC in respect of contribution to approved political parties given by
a local authority partly funded by the Government is ……..
Ans Not allowed

9. Where a person transfers capital asset to a firm in which he becomes partner the full value of
consideration in the context of capital gain computation, will be ………….
Ans The value of assets recorded in the books
of the firm

10. For availing exemption under section 10A, return of income should be filed by a corporate
assessee on or before …………..
Ans 31-10-07

11. In case of an eligible assessee, imported second hand machinery never put to use by any person
in India before, additional or accelerated depreciation is allowable at the rate of ………. on the
actual cost of machinery.
Ans Nil

12. Fringe benefit tax …………. an allowable item of business expenditure

Ans is not

13. Where an individual has repaid in the second year, Rs.20,000 towards principal and Rs.60,000
towards eligible education loan from an approved bank, the deduction available under Section
80E is Rs……………
Ans 60,000

14. As per section 2(47) …………., or ……….. of a zero coupon bond will be treated as “transfer” for the purpose
of capital gains tax
Ans Maturity, redemption

15. An Assessee, after sale of house property, receiving arrears of rent, ……… (is/isnot) chargeable to tax; the
same computed in the stipulated manner, shall be chargeable to tax as ……… (income from other sources / income
from house property / question does not arise since there is no chargeability to tax)
Ans is, income from house property

16. A motor car is the only Asset in a block. Cost Rs.2,00,000. Rate of depreciation is 15%. 20% is
disallowed for estimated personal use. WDV of the block is Rs…………
Ans 1,76,000

17. Mr. A gifts cash Rs.1,00,000 to his brother’s wife Mrs.B, Mr.B gifts cash Rs.1,00,000 to Mrs A.
from cash gifted to her, Mrs.B invests in a fixed deposit, income there from is Rs.10,000. A
foresaid Rs.10,000 will be included in the total income of ………..
Ans Mr.B
18. The time limit for filing revised return where assessment has not been completed is …………….
Ans One year from the end of the relevant assessment year or before the best judgement assessment order passed
which ever is earlier.

19. The quantum of deduction allowed u/s 80D for parents shall be limited to ………………
Ans Rs.30,000

TRUE OR FALSE (WITH REASONS)

1. Where an urban agricultural land owned by an individual, continuously used by him for
agricultural purposes for a period of two years prior to the date of transfer, is compulsorily, acquired under
law and the compensation is fixed by the state Government, resultant capital gain is exempt.
Ans F

2. Where an individual repays a sum of Rs.30,000 towards principal and Rs.14,000 as interest in
respect of loan taken from a bank for pursuing eligible higher studies ,the deduction allowable
under section 80E is Rs.40,000 and not Rs.30,000 ( principal component only)
Ans F

3. Business loss can be set off against salary income;

Ans F

4. A has received gift to Rs.1,50,000 on December 12, 2005 from his close friend who is assessed to
income-tax . The same is taxable at the hands of A.
Ans T

5. Long term capital gains arising from units of debt-oriented equity funds for which securities
transactions tax has been paid in a recognized stock exchange is exempt.
Ans T

6. Under Section 35DDA, amortization of expenditure incurred under eligible Voluntary Retirement
Scheme at the time of retirement alone, can be done
Ans F

7. Value of fringe benefit chargeable to tax under Chapter XII-H in the hands of the employer, is not
to be treated as a perquisite under Section 17(2), in the hands of the employee.
Ans T

8. Zero coupon bonds of Eligible Corporation, held for more than 12 months, will be long-term
capital assets.
Ans T

9. In the case of a dealer in shares, income by way of dividend is taxable under the head “profits
and gains of business or profession”.
Ans F

10. Mr. Y who is a physically handicapped minor (suffering from a disability of the nature specified
in Section 80U) earns bank interest of Rs.50,000 and Rs.60,000 from making bags manually by
himself. The total income of Mr.Y shall be computed in his hands separately.
Ans T

11. Only individuals and HUFs can be resident, but not ordinarily resident in India; firms can be
either a resident or non-resident.
Ans T

12. In respect of voluntary contributions in excess of Rs.20,000 received by a political party,

exemption under section 13A is available where proper details about the donations are
maintained; there is no need to maintain books of account.
Ans F

13. Depreciation is allowed only when it is claimed.

Ans F

14. For grant of deduction under section 80-IB, filing of audit report in prescribed form is must for a
corporate assessee; filing of return within the due date laid down in section 139(1) is not required.
Ans F

15. From 1.6.2006 onwards, the Assessing Officer has the power, inter alia, to allot PAN to any
person by whom no tax is payable.
Ans T

16. Where the Karta of a HUF is absent from India, the return of income can be signed by any male
member of the family.
Ans F

17. It is a condition precedent to write off in the books of account, the amount due from debtor to
claim deduction for bad debt.
Ans T

18. Tax on fringe benefits provided for employment is payable by all employers.
Ans F

19. Failure to deduct tax at source in accordance with the provisions of chapter XVII-B, inter alia,
from the amounts payable to a resident as rent or royalty, will result in disallowance while
computing the business income.
Ans T

20. Compensation on account of disaster received from local authority by an individual or his/her legal heir
is taxable.
Ans T

21. Rural branches of the cooperative banks are not allowed to claim provision for bad and doudtful debts.
Ans F

22. Income to a non- resident by way of interest, royalty and fee for technical services deemed to
accrue or arise in India is taxable in India irrespective of territorial nexus.
Ans T

23. Capital gain of Rs.75 lakh arising from transfer of long term capital assets will be exempt from
tax if such capital gain is invested in the bonds redeemable after three years, issued by
NHAI u/s 54EC of the Act.
Ans T

24. X, Ltd. follows mercantile system of accounting. After negotiations with the bank, interest of Rs.4
lakhs (including interest of Rs.1.2lakhs pertaining to year ended 31.03.2007) has been converted
into loan. Can the interest of Rs.1.2lakhs so capitalized be claimed as business expenditure.
Ans F

25. Can a Primary cooperative Agricultural and Rural Development Bank claim deduction under
Sec.80P in respect of income derived from the business of banking.
Ans T

26. The total income of a University without giving effect to exemption under Sec.10(23C) is
Rs.46lakhs. Its total income however is nil. Should the university file its return of income?
Ans T

27. Ms.Vasudha contends that sale of work of art held by her is not eligible to capital gains tax.
Ans F

28. Will a charitable trust forfeit the exemption granted to it, if it holds shares in a Public Sector
Company?
Ans F

29. Deduction u/s 80CCD is available only to individuals employed by C.G.

Ans F

30. Mrs. Hemalatha has made payments of Rs.5lakhs to a contractor ( for business purposes) during the last
Quarters of the year ended 31.03.2008. Her turnover for the year ended 31.03.2007 was
Rs.45lakhs. Is there any obligation to deduct tax at source?
Ans T

31. Can an individual who is not in India, sign the return of income from outside India.
Ans T
The duty is always calculated on C.I.F. In case the actual insurance/freight are not available, the Customs
Act provides for levy of a notional freight and insurance=insurance-1.125, freight=20, loading and unloading
charges=1.

The STP code stands for Service Tax Payer Code. It is used by the computer as a unique identifiers for the
assesses records. The department is presently allotting 15 digit STP codes to individual assesses,
irrespective of the number of services the assesse may be offering.

Excise duty is a tax on manufacture or production of goods. Excise duty on alcohol, alcoholic preparations, and
narcotic substances is collected by the State Government and is called "State Excise" duty. The Excise duty on rest
of goods is called "Central Excise" duty and is collected in terms of Section 3 of the Central Excise Act, 1944.
Sales Tax is different from the Excise duty as former is a tax on the act of sale while the latter is a tax on the act of
manufacture or production of goods.
Subject to specified conditions, generally the following categories of persons are required to get themselves
registered with the Central Excise department: (i) Every manufacturer of dutiable excisable goods; (ii) First and
second stage dealers or importers desiring to issue Cenvatable invoices; (iii) Persons holding bonded
warehouses for storing non-duty paid goods; (iv) persons who obtain excisable goods for availing end-use
based exemption.
Yes. Subject to specified conditions, the following categories of persons need not obtain Central Excise
registration. (i) Manufacturers of goods which are chargeable to nil rate of duty or are fully exempt; (ii) SSI
manufacturers having annual turnover of below Rs.90 lakhs. Once their turnover touches Rs.90 lakhs, they
should give the prescribed declaration to the Jurisdictional Superintendent of Central Excise; (iii) Job-
workers of ready-made garments if the principal manufacturer undertakes to discharge the duty liability;
(iv) Approved/licensed units in Export Processing Zones, Special Economic Zones and 100% Export
Oriented Units.
All goods listed in the Central Excise Tariff Act, 1985 attract Central Excise duty unless specified to the contrary
in the Act itself or under any notification issued under the Central Excise Act, 1944 by the appropriate statutory
authority.
The assessee is required to inform to the Superintendent/Inspector in the Range Office 24 hours in advance about
the proposed consignment of export. The Central Excise officer remains present while stuffing the goods in the
container. After completion of the stuffing, the container is sealed with the Central Excise seal in presence of the
said officer. Necessary documents such as ARE-1, invoice, packing list are also signed by the said officer. Self-
sealing facility is also available under which the assessee himself stuffs the container and take clearance thereof.
For more details, please contact the nearest Central Excise Range Office.
.
The major incentives and facilities available to SEZ developers include:-
 Exemption from customs/excise duties for development of SEZs for authorized operations approved by the
BOA.
 Income Tax exemption on income derived from the business of development of the SEZ in a block of 10
years in 15 years under Section 80-IAB of the Income Tax Act.
 Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act.
 Exemption from dividend distribution tax under Section 115O of the Income Tax Act.
 Exemption from Central Sales Tax (CST).
 Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act).
The remaining part of India, not covered by the SEZ Rules, is known as the Domestic tariff area.