CA Intermediate May 2024 Suggested Answers Group I (All Papers)

FOR CA INTERMEDIATE EXAM PREPARATION

CA Intermediate 2024
Suggested Answers ·
Group I (All Papers)
EXAM YEAR TYPE SUBJECT

CA Intermediate 2024 Suggested Answers Group I (All Papers)
DATE

May 2024

Notes · Sample Papers · Previous Year Papers · Mock Tests

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SUGGESTED ANSWERS TO QUESTIONS SET AT THE

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INTERMEDIATE EXAMINATION
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MAY, 2024

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a THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
(Set up by an Act of Parliament)

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The Suggested Answers published in this volume do not constitute the basis for
evaluation of the students’ answers in the examination. The answers are prepared
by the Faculty of the Board of Studies with a view to assist the students in their
education. While due care is taken in preparation of the answers, if any errors or
omissions are noticed, the same may be brought to the attention of the Joint
Director, Board of Studies. The Council of the Institute is not in anyway
responsible for the correctness or otherwise of the answers published herein.

©THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted, in any form, or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without prior permission,
in writing, from the publisher.

Edition : August, 2024

Website : www.icai.org

Committee/ : Board of Studies
Department

E-mail : [email protected]

Price :

ISBN No. :

Published by : The Publication & CDS Directorate on behalf
of The Institute of Chartered Accountants of
India, ICAI Bhawan, Post Box No. 7100, Indraprastha
Marg, New Delhi- 110 002, India

Typeset and designed at Board of Studies.

Printed by :

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Contents
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Page Nos.

Paper 1.
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Advanced Accounting ......................................................... 1 – 34

Paper 2. Corporate and Other Laws ................................................ 35 – 58

Paper 3. Taxation .................................................................................. 59 – 90

Examiners’ comments on the performance of the examinees ...............91 – 97

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PAPER – 1 : ADVANCED ACCOUNTING
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o m Question No. 1 is compulsory. c. o
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Answer any four questions from the remaining five questions.

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Wherever necessary, suitable assumptions may be made and indicated in

a answer by the candidates.
Working Notes should form part of the answer.
Question 1
(a) On 1st April, 2023, Green Limited started the construction of an Office
Building (qualified asset). The land under the building is regarded as a
separate asset and is not a part of qualifying asset.

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For the purpose of construction of building, the company raised a specific

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loan of ` 14 lakhs from a Bank at an interest rate of 12% per annum. An

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interest income of ` 15,000 was earned on this loan while it was held in
anticipation of payments.
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The company's other outstanding loans on 1 stApril, 2023 were as follows:

Amount of Loan Rate of Interest per annum
` 20,00,000 15%
` 30,00,000 8%

The construction of building started on 1 stApril, 2023 and was completed on
31st January, 2024 when it was ready for its intended use. Up to the date of

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completion of the building, the following payments were made to the

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contractor:
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s em 1st Apirl,2023 4,00,000
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1st August,2023 10,00,000

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25,00,000
31 January,2024 5,00,000

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

The life of building is estimated to be 20 years and depreciation is calculated
on straight line method.
You are required to:
(i) Calculate the amount of borrowing cost to be capitalized.
(ii) Pass initial journal entry to recognise the cost of building.
(iii) Depreciation on building for the year ending 31 st March, 2024.
(iv) Carrying value of building as on 31 st March, 2024.
(b) Well Wear Limited is a Textile Manufacturing Company and engaged in the
production of Polyester (P) and Nylon (N). While manufacturing the main
products, a by-product Fiber (F) is also produced. Details of the cost of
production are as under:
Purchase of Raw Material for manufacturing process of

30,000 units ` 3,50,000
Wages paid ` 1,60,000
Fixed overheads ` 1,20,000
Variable overheads ` 60,000
Output:
Polyester (P) 12,500 Units
Nylon (N) 10,000 Units
Fiber (F) 3,200 Units
Closing Inventory:
Polyester (P) 1,600 Units
Nylon(N) 400 Units

Average market price of Polyester and Nylon is ` 100 and ` 60 per unit
respectively, by-product Fiber is sold@ ` 40 per unit. There is a profit of
` 8,000 on sale of by-product after incurring separate processing expenses of
` 10,000 and packing charges of ` 9,000. ` 5,000 was realized from sale of
scrap.
On the basis of the above information, you are required to compute the value
of closing inventory of Polyester and Nylon. (7 + 7 = 14 Marks)

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SUGGESTED ANSWER
ADVANCED ACCOUNTING

Answer
(a) (i) Computation of borrowing cost to be capitalized for specific
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borrowings and general borrowings based on weighted average

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accumulated expenses

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Date of Amount Financed Calculation `

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incurrence of spent through

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1 April 2023 4,00,000 Specific 4,00,000 x 40,000
borrowing 12% x 10/12
1st August 10,00,000 Specific 10,00,000 x 1,00,000
2023 borrowing 12% x 10/12
1st December 25,00,000 General 25,00,000 x
2023 borrowing 10.8% x 2/12 45,000

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31st January 5,00,000 General 5,00,000 x Nil

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2024 borrowing 10.8% x 0/12

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1,85,000
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lacost to be capitalized
Less: interest income on borrowing (15,000)

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Total amount borrowing 1,70,000

(ii) Journal Entry

Date Particulars ` `
31.1.2024 Building account Dr. 45,70,000
To Bank account 44,00,000
To Interest payable 1,70,000

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(borrowing cost)

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(Being expenditure incurred
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and borrowing cost thereon

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will be paid at the year end. Hence, entry for interest payable has
been passed on 31.1.2024.

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

Alternatively, following journal entry may be passed if interest is paid
on the date of capitalization:

Date Particulars ` `
31.1.2024 Building account Dr. 45,70,000
To Bank account 45,70,000
(Being expenditure incurred
on construction of building
and borrowing cost thereon
capitalized)

(iii) Depreciation on building for the year ending 31.3.2024
Cost of building 45,70,000
Life of building = 20 years
Depreciation = (45,70,000/20) x 2/12 = 38,083.33
(iv) Carrying Value of Building on 31st March 2024:
Carrying Value = Cost of Building - Accumulated Depreciation
= 45,70,000- 38,083.33
= 45,31,917
Working Notes:
1. Calculation of capitalization rate on borrowings other than
specific borrowings

Amount of loan (`) Rate of Amount of
interest interest (`)
20,00,000 15% = 3,00,000
30,00,000 8% = 2,40,000
50,00,000 5,40,000
Weighted average rate of = 10.8%*
5,40,000
interest ( × 100)
50,00,000

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SUGGESTED ANSWER
ADVANCED ACCOUNTING

2. Total expenses to be capitalized for building

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Cost of building ` (4,00,000 + 10,00,000 + 25,00,000 44,00,000

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mAdd:. Amount of interest to be capitalized e
+ 5,00,000)

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1,70,000
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(b) As per AS 2 ‘Valuation of Inventories’, most by-products as well as scrap or

net realizable value and this value is deducted from the cost of the main
product.
Determination of value of closing inventory of Polyester and Nylon

Polyester Nylon
Closing inventory in units 1,600 units 400 units
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Cost per unit ` 31.14 ` 18.68

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Value of closing inventory ` 49,824 ` 7,472

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Working Notes
1. Calculation of net a
realizable value of by-product, Fiber
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Selling price of by-product Fiber (3,200 units x ` 40 1,28,000
per unit)
Less: Separate processing
charges of by-product Fiber (10,000)

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Packing charges (9,000)

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Net realizable value of by-product 1,09,000
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Fiber

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2. Calculation of cost of conversion for allocation between joint

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products Polyester and Nylon a
a ` `
Raw material 3,50,000

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

Wages 1,60,000
Fixed overhead 1,20,000
Variable overhead 60,000
6,90,000
Less: NRV of by-product Fiber (W.N. 1) (1,09,000)
Sale value of scrap (5,000) (1,14,000)
Joint cost to be allocated between 5,76,000
Polyester and Nylon

Determination of “basis for allocation” and allocation of joint cost
to Polyester and Nylon
Polyester Nylon
Output in units (a) 12,500 units 10,000 units
Sales price per unit (b) ` 100 ` 60
Sales value (a x b) ` 12,50,000 ` 6,00,000
Total value (12,50,000 + 6,00,000)
= 18,50,000
Joint cost of ` 5,76,000 allocated in the ` 3,89,189 ` 1,86,811
ratio of 12,50,000 : 6,00,000
Cost per unit [c/a] ` 31.14 ` 18.68

Question 2
Following is the summarized Balance Sheets of Z Limited as on 31 st March, 2024:

Particulars (`)
EQUITY AND LIABILITIES:
Share Capital
Equity shares of ` 100 each 60,00,000
8% Preference shares of ` 100 each 21,00,000
10% Debentures of ` 100 each 18,00,000
Trade Payables 16,80,000
Total 1,15,80,000
ASSETS:
Goodwill 81,000

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SUGGESTED ANSWER
ADVANCED ACCOUNTING

Property, Plant and Equipment 72,00,000
Trade Receivables 13,75,000

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Inventories 9,80,000

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Cash at Bank 1,33,000

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Own Debentures (Nominal value of ` 6 lakhs) 5,76,000

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Profit and Loss A/c 12,35,000
1,15,80,000 g
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aLimited:
On 1 st
April, 2024, court approved the following reconstruction scheme for Z

(i) Each equity share shall be sub-divided into 10 equity shares of ` 10 each fully
paid up. After sub-division, equity share capital will be reduced by 40%.
(ii) Preference share dividends are in arrear for last 4 years. Preference
shareholders agreed to waive 75% of their dividend claim and accept
payment for the balance.
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(iii) Own debentures of ` 2,40,000 (nominal value) were sold at 98 cum interest

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eagreed
and remaining own debentures were cancelled.

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(iv) Debenture holders of ` 6,00,000 s
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value of ` 9,00,000 in full settlement.
(v) Remaining Property, Plant and Equipment were valued at ` 60,00,000.
(vi) Trade Payables, Trade Receivables and Inventories were valued at
` 15,00,000, ` 13,00,000 and ` 9,44,000 respectively. Goodwill and Profit and
Loss Account (Debit balance) are to be written off.
(vii) Company paid ` 60,000 as penalty to avoid capital commitments of ` 12
lakhs.

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(viii) Interest on 10% Debentures is paid every year on 31st March.
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(1) Pass necessary journal entries in the books of Z Limited tosimplement
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the

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(3) Prepare Bank Account (14 Marks)

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

Answer
1. Journal entries
In the Books of Z Ltd. as on 1st April 2024
Particulars Dr. Cr.
01.04.2024 Amount Amount
(`) (`)
1. Equity share capital A/c (` 100) Dr. 60,00,000
To Equity share capital A/c (` 10) 60,00,000
(Being sub-division of one share of
` 100 each into 10 shares of ` 10 each)
2. Equity share capital A/c (` 10) Dr. 24,00,000
To Capital reduction A/c 24,00,000
(Being reduction of Equity capital by 40%)
3. Capital reduction A/c Dr. 1,68,000
To Bank A/c 1,68,000
(Being payment in cash of 25% of arrear
of preference dividend) [21,00,000x8%] x
4 years
4. Bank A/c Dr. 2,35,200
To Own debentures A/c 2,30,400
(5,76,000/6,00,000) x 2,40,000
To Capital reduction A/c 4,800
(Being profit on sale of own debentures of
` 2,40,000 transferred to capital reduction
A/c)
5. 10% Debentures A/c Dr. 3,60,000
(6,00,000 -2,40,000)
To Own debentures A/c 3,45,600
To Capital reduction A/c 14,400
(Being profit on cancellation of own
debentures transferred to capital
reduction A/c)

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SUGGESTED ANSWER
ADVANCED ACCOUNTING

6. 10% Debentures A/c Dr. 6,00,000
Capital reduction A/c Dr. 3,00,000

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To Machinery or PPE A/c 9,00,000
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(Being machinery taken up by debenture

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holders for ` 6,00,000)
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A/c (balancing figure) Dr. 3,00,000

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PPE A/c 3,00,000
(72,00,000 - 9,00,000 - 60,00,000)
PPE revalued)
8. Trade payables A/c Dr. 1,80,000
(16,80,000 -15,00,000)
To Trade receivables A/c 75,000
(13,75,000-13,00,000)
To Inventory A/c 36,000
(9,80,000-9,44,000)
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To Capital Reduction A/c
. c 69,000

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Capital reduction A/c as
(Being assets and liabilities revalued)
9.
To Goodwill A/cg
l Dr. 13,16,000

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To Profit and Loss A/c
81,000
12,35,000
(Being the above assets written off)
10. Capital reduction A/c Dr. 60,000
To Bank A/c 60,000
(Being penalty paid for avoidance of
capital commitments)

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11. Capital reduction A/c Dr. 3,44,200

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To Capital reserve A/c 3,44,200

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(Being the credit balance in Capital

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Reduction A/c transferred to Capital
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Reserve)

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

2. Capital Reduction Account

(`) (`)
To Bank 1,68,000 By Equity Share Capital 24,00,000
To Property, Plant & 3,00,000 By Trade Payable 1,80,000
Equipment
To Property, Plant & 3,00,000 By Bank A/c (Profit on 4,800
Equipment Sale)
To Trade Receivables 75,000 By 10% debentures A/c 14,400
(Profit on cancellation)
To Inventory 36,000
To Goodwill 81,000
To Profit and Loss A/c 12,35,000
To Cash/Bank A/c 60,000
To Capital Reserve 3,44,200
25,99,200 25,99,200

3. Bank Account
` `
To To balance b/d 1,33,000 By Capital Reduction 1,68,000
To Own Debenture 2,35,200 By Capital Reduction A/c 60,000
(2,30,400 +4,800) By balance c/d 1,40,200
3,68,200 3,68,200

Question 3
(a) Constructions Limited is engaged in the business of constructing Flyovers and
Railway over bridges. It obtained a contract from Railway Authorities to
construct a railway over bridge for ` 400 crores. The construction of the
railway over bridge is expected to be completed in 4 years.
At the outset of the contract, it was estimated that the total costs to be
incurred will be ` 370 crores but by the end of year 1, this estimate stands
revised to ` 375 crores.

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SUGGESTED ANSWER
ADVANCED ACCOUNTING

During year 3, the Construction Limited has requested for a variation in the
contract which is approved by Railway Authorities and accordingly the total

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contract value will increase by ` 10 crores and costs will increase by ` 7

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crores.

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The Constructions Limited decided to measure the stage of completion on the

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basis of the proportion of contract costs incurred to the total estimated
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lYear 1
contract costs. Contract costs incurred at the end of each year is:
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a ` 98.8 crores
Year 2 ` 202.4 crores
Year 3 ` 310 crores (including unused material of 3 crores)
Year 4 ` 382 crores
You are required to:
(1) Calculate stage of completion of contract for each year

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(b) The following information is provided. for Aarambh Limited:
(2) Profit to be recognised for each year.

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Particulars 31 March 2023 31 March 2024
a ( `) ( `)
Profit and Loss a/c 5,400 (Dr.) 37,800
Provision for Taxation 2,21,400 1,35,000
General Reserve 54,000 81,000
12% Debentures 1,18,000 2,91,600
Trade Payables 1,29,600 1,18,800
8% Current Investments 54,000 1,08,000

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Property, plant and equipment (Gross) 3,99,600 3,99,600
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Accumulated Depreciation 1,29,600

s e 2,61,360
em 27,000la
Trade Receivables (Gross) 81,000

las Provision for Doubtful Debts
a g 54,000

ag Inventories
Cash and Cash Equivalents
1,35,000
54,00
81,000
30,240

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

Additional information:
(i) Income tax provided during the year ` 1,62,000.
(ii) New debentures have been issued at the end of current financial year.
(iii) New investments have been acquired at the end of the current financial
year.
You are required to calculate net Cash Flow from Operating Activities.
(7 Marks + 7 Marks = 14 Marks)
Answer
(a) (a) Stage of completion = Costs incurred to date / Total estimated
costs
Year 1: 98.8 crore / 375 crore = 26.35%
Year 2: 202.4 crore / 375 crore = 53.97%
Year 3: (310 crore – 3 crore) / (375+7) crore = 80.37%
Year 4: 382 crore / 382 crore = 100%
(b) Profit to be recognized each year has been calculated as follows:
Year 1 Year 2 Year 3 Year 4
Contract 105.40 110.48 crore 113.64 crore 80.48 crore
Revenue (1) crore
(400 crore (400 crore x (410 crore x (410 crore x
x 26.35%) 53.97% - 80.37% 100% -
105.40 crore) - 105.40 crore 105.40 crore -
-110.48 crore) 110.48 crore -
113.64 crore)
Contract 98.8 crore 103.60 crore 104.60 crore 75 crore
Cost (2)
202.40 - (307 crore - (382 crore -
98.80 crore) 98.8 crore- 98.8 crore-
103.60 crore) 103.6 crore –
104.6 crore)
Contract 6.60 crore 6.88 crore 9.04 crore 5.48 crore
Profit
(1) – (2)

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SUGGESTED ANSWER
ADVANCED ACCOUNTING

(b) Cash Flow from Operating Activities

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Difference between Profit and Loss Account ` (37,800 + 5,400)
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43,200
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Add: Transfer to General Reserve (81,000-54,000) 27,000
Add:m
s e Before tax
Adjustment for Provision for taxation 1,62,000
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l Add: Adjustment for Depreciation (` 1,62,000 – ` 1,29,600)
Profit 2,32,200
a
a 32,400
Add: Adjustment for provision for doubtful debt (` 54,000 – 27,000
` 27,000)
Add: Debenture Interest Paid ` (1,18,800 × 12%) 14,256
Less: Income from Investments (54,000 × 8%) (4,320)
Operating Profit before Working Capital changes 3,01,536

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Decrease in Inventories ` (1,35,000-81,000) 54,000

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Increase in Trade receivables ` (2,61,360-81,000) (1,80,360)

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Decrease in Trade payables ` (1,29,600-1,18,800) (10,800)

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Cash generated from operations 1,64,376
Income tax paid (2,48,400)
Net Cash generated from Operating Activities (84,024)

Working Note:
Provision for taxation account
` `

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To Cash (Paid) 2,48,400 By Balance b/d 2,21,400

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(Balancing figure)
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To Balance c/d 1,35,000 By Profit and Loss A/c 1,62,000

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3,83,400

ag Question 4
Intelligent Limited and Diligent Limited are carrying their business independently
for last two years. Following financial information in respect of both the
companies as at 31 st March, 2024 has been given to you:

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

Particulars Intelligent Limited Diligent Limited
(` ) (`)
Equity Shares Capital of ` 100 each 12,00,000 10,00,000
8% Preference shares of ` 100 each 3,00,000 2,00,000
Trade Payables 12,00,000 4,00,000
Retirement Gratuity Fund (Long Term) 3,00,000 2,00,000
Profit and Loss Account
Opening balance 4,50,000 2,50,000
Profit for the current year 2,50,000 1,50,000
Land and Buildings 10,00,000 8,00,000
Plant and Machinery 10,00,000 6,00,000
Inventories 7,00,000 4,00,000
Trade Receivables 6,00,000 3,00,000
Cash and Bank 4,00,000 1,00,000

On 1st April, 2024, both the companies agreed to amalgamate and form a new
company 'Genius Limited, with an authorized capital of ` 40,00,000 divided into
30,000 equity shares of ` 100 each and 10,000 8% preference shares of ` 100
each.
The amalgamation has to be carried out on the basis of following agreement:
(1) Assets of both the companies were to be revalued as follows:

Particulars Intelligent Limited (`) Diligent Limited (`)
Land and Buildings 11,00,000 8,50,000
Plant and Machinery 9,00,000 4,00,000
Inventories 6,00,000 3,00,000

(2) Trade payables of Intelligent Limited includes ` 1,00,000 due to Diligent Ltd.
and the Trade receivables of Diligent Limited shows ` 1,00,000 receivables
from Intelligent Limited.
(3) The purchase consideration is to be discharged in the following manner:
(i) Issue 22,000 Equity Shares of ` 100 each fully paid up in the proportion
of the sum of their profitability in the preceding two financial years.

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SUGGESTED ANSWER
ADVANCED ACCOUNTING

(ii) Preference shareholders of both companies are issued equivalent
number of 8% Preference Shares of ` 100 each of Genius Limited at a

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price of ` 125 per share.

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(iii) 12% debentures of ` 100 each in Genius Limited at par to provide an

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income equivalent to 10% return on the basis of net assets in their
s e
s e respective business as on 1 st April, 2024 after revaluation of assets.
g l a
l a a
a(a)g Compute the amount of Shares & Debentures to be issued to Intelligent
You are required to:

Limited and Diligent Limited.
(b) Prepare a Balance Sheet of Genius Limited showing the position immediately
after amalgamation. (14 Marks)
Answer
Computation of shares and debentures to be issued

o mIntelligent Ltd. Diligent Ltd.
(i) Equity shares 22,000 x 7/11 = 14,000 .c
em
14,00,000
(W.N.1)
la s
a g
22,000 x 4/11 =8,000
(W.N.1)
8,00,000

(ii)Preference 3,00,000 3,75,000
( × 125)
shares 100
2,00,000 2,50,000
( × 125)
100
(iii) Debentures Refer (W.N.3) 17,50,000 11,25,000
Total Purchase Consideration (i + ii + iii) 35,25,000 21,75,000
m
m
Balance Sheet of Genius Limited
.co
c. o as at 1st April, 2024 (after amalgamation)

Notes no.s
em `
s em g la
gla I. Equity and Liabilities
a
a (1) Shareholder’s fund
(a) Share Capital 1 27,00,000
(b) Reserves & Surplus 2 1,25,000

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

(2) Non-current Liabilities
(a) Long term borrowings 3 28,75,000
(b) Other non-current liabilities 4 5,00,000
(3) Current Liabilities
(a) Trade Payables 15,00,000
(12,00,000 + 4,00,000 – 1,00,000)
Total 77,00,000
II. Assets
(1) Non-current Assets
(a) Property, Plant & Equipment 5 32,50,000
(b) Intangible Assets 6 22,50,000
(2) Current Assets
(a) Inventories (6,00,000 + 3,00,000) 9,00,000
(b) Trade Receivables 8,00,000
(6,00,000 + 3,00,000 - 1,00,000)
(c) Cash & Cash Equivalents 5,00,000
Total 77,00,000

Notes to Accounts:

Sr. Particular `
No.
1. Share Capital
Authorized Share Capital
a) Equity Share Capital
30,000 Equity Shares of ` 100 each 30,00,000
b) Preference Share Capital
10% 10,000 Preference Shares ` 100 each 10,00,000
40,00,000
Issued, Subscribed & Paid-up Capital
a) Equity Share Capital

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SUGGESTED ANSWER
ADVANCED ACCOUNTING

22,000 Equity Shares of `100 each 22,00,000
(out of the above all shares are issued for
m
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consideration other than cash)

o m m
c
. 5,000 Preference Shares of `100 each e
b) Preference Share Capital

m10%
e (out of the above all shares are issued for
5,00,000
l a s
l a s ag
ag
consideration other than cash)
27,00,000
2. Reserves & Surplus
Securities Premium 1,25,000
3. Long term borrowings
12% Debentures of ` 100 each 28,75,000
4. Other Non-current Liabilities

o m
. c
Gratuity Fund 5,00,000
5. Property, Plant & Equipment
m
e + 8,50,000)
l a s
Land & Building (11,00,000 19,50,000
Plant & Machinery g
a (9, 00,000 + 4,00,000) 13,00,000
32,50,000
6. Intangible Assets
Goodwill 22,50,000

Working Notes:
1. Calculation of Ratio of Equity Shares

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Intelligent Ltd. Diligent Ltd
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c. o em

Opening balance P&L 4,50,000 2,50,000

em
Profit for the current year 2,50,000
la s
1,50,000

las Total 7,00,000
ag
4,00,000

ag

As the company has been in existence for two years, the opening balance of profit and
loss account has been assumed to be the profit of the previous year.

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

The total profits- ` 7,00,000+ ` 4,00,000 = ` 11,00,000.
No. of shares to be issued = 22,000 equity shares in the proportion of the
preceding 2 years’ profits. i.e. in 7:4.
2. Calculation of Net assets as on 31.3.2024

Particulars Intelligent Ltd. Diligent Ltd
Assets (after revaluation)
Land and Buildings 11,00,000 8,50,000
Plant & Machinery 9,00,000 4,00,000
Inventories 6,00,000 3,00,000
Trade Receivables 6,00,000 3,00,000
Cash & Cash Equivalents 4,00,000 1,00,000
Total (a) 36,00,000 19,50,000
Liabilities
Trade Payables 12,00,000 4,00,000
Gratuity Fund 3,00,000 2,00,000
Total (b) 15,00,000 6,00,000
Net Assets (a – b) 21,00,000 13,50,000

3. Calculation of 12% Debentures to be issued to Intelligent Ltd. and
Diligent Ltd.

Intelligent Ltd. Diligent Ltd
` `
Net assets (Refer working note) 21,00,000 13,50,000
10% return on Net assets 2,10,000 1,35,000
12% Debentures to be issued 17,500
100
[2,10,000× ] =17,50,000of ` 100 each
12
100 11,250
[1,35,000× ] =11,25,000 of ` 100 each
12

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SUGGESTED ANSWER
ADVANCED ACCOUNTING

4. Calculation of Goodwill / Capital Reserve

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S. Particulars Intelligent Diligent

c. o
No. Ltd. Ltd.
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(i) Purchase Consideration Paid 35,25,000 21,75,000

m s e
e Goodwill a
(ii) Less: Net Assets 21,00,000 13,50,000

s l
l a ag
(iii) 14,25,000 8,25,000 22,50,000

g
a4. Calculation of Goodwill / Capital Reserve
Alternatively:

S. Particulars Intelligent Diligent
No. Ltd. Ltd
(i) Purchase Consideration Paid 35,25,000 21,75,000
(ii) Less: Net Assets* 22,00,000 12,50,000

m
(iii) Goodwill 13,25,000 9,25,000 22,50,000
* Calculation of Net assets taken over
c. o
Particulars
s em Intelligent Ltd. Diligent Ltd
l a
ag
Assets (after revaluation)
Land and Buildings 11,00,000 8,50,000
Plant & Machinery 9,00,000 4,00,000
Inventories 6,00,000 3,00,000
Trade Receivables 6,00,000 2,00,000*
Cash & Cash Equivalents 4,00,000 1,00,000
Total (a) 36,00,000 18,50,000

m
Liabilities

m c o
.2,00,000
c. o
Trade Payables 11,00,000** 4,00,000

m
e 6,00,000
14,00,000 s
Gratuity Fund 3,00,000

s em Total (b)
g la 12,50,000
gla Net Assets (a – b)
a
22,00,000

a *` 3,00,000 - ` 1,00,000= ` 2,00,000
**` 12,00,000 - ` 1,00,000 = ` 11,00,000

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

Question 5
The Balance Sheets of Art Limited and Craft Limited as on 31 March 2024 are as
below:

Particulars Note Art Limited Craft Limited
No (`) (`)
I. Equity and Liabilities
a. Shareholder’s Fund
i. Share Capital 1 6,50,000 4,00,000
ii. Reserve & Surplus 2 3,12,000 2,48,000
b. Current Liabilities
i. Trade Payables 1,45,000 92,000
ii. Short term borrowings 3 70,000 -
11,77,000 7,40,000
II. Assets
a. Non-current Assets
i. Property, Plant & 4 4,21,000 3,60,000
Equipment
ii. Non-current investment 5 4,32,000 -
b. Current Assets
i. Inventories 1,66,000 2,05,000
ii. Trade Receivables 6 1,33,500 1,68,300
iii. Cash & Cash equivalent 24,500 6,700
11,77,000 7,40,000

Notes to Accounts:

Art Limited Craft Limited
( `) (`)
1. Share capital
6,500 shares of ` 100 each fully paid up 6,50,000
4,000 shares of ` 100 each fully paid-up - 4,00,000
Total 6,50,000 4,00,000
2. Reserves and Surplus

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ADVANCED ACCOUNTING

General Reserve 1,20,000 40,000
Profit and Loss account 1,92,000 2,08,000

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Total 3,12,000 2,48,000
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.co e m
3. Short term borrowings -

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e Plant & Equipment
Bank Overdraft 70,000
l a s
a s
l Land & Building
4. Property
ag
g
a Plant & Machinery
1,90,000
2,31,000
1,35,000
2,25,000
Total 4,21,000 3,60,000
5. Non-current investments -
Investment in Craft Limited (Cost) 4,32,000
6. Cash & Cash equivalents
Cash 24,500 6,700

o m
c
(i) Art Limited acquired 3,200 ordinary .shares of Craft Limited on 1 October,
Additional information:

2023. The Reserve & Surplus s emProfit & Loss Account of Craft Limited
st

g a and ` 58,700 respectively as on 1 April,
showed a credit balance of `l40,000
and

a
st

2023.
(ii) The Plant & Machinery of Craft Limited which stood at ` 2,50,000 as on
1st April, 2023 was considered worth ` 2,20,000 on the date of acquisition.
The depreciation on Plant & Machinery is calculated @ 10% p.a. on the basis
of useful life. The revaluation of Plant & Machinery is to be considered at the
time of consolidation.

m
(iii) Craft Limited deducts 1% from Trade Receivables as a general provision

m c o
. it had
against doubtful debts. This policy is not followed by Art Limited.

c. o (iv) On m
e 15% on cost
st
31 March 2024, Craft Limited's inventory includes goods which

em l a s
purchased from Art Limited for 1,03,500 which made a profit of

las g
You are required to prepare a consolidated Balance Sheet a
price.

ag as on 31 March 2024.
(14 Marks)
st

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

Answer
Consolidated Balance Sheet of Art and Craft Ltd
As on 31st March, 2024

Particulars Note no. `
I. Equity & Liabilities
(1) Shareholders’ fund
(a) Share Capital 1 6,50,000
(b) Reserves & Surplus 2 3,73,460
(2) Minority Interest 3 1,26,740
(3) Current Liabilities
(a) Short term borrowings 4 70,000
(b) Trade Payables (1,45,000 + 92,000) 2,37,000
Total 14,57,200
II. Assets
(1) Non-current Assets
(a) Property, Plant & Equipment 5 7,65,000
(2) Current Assets
(a) Inventories 6 3,57,500
(b) Trade Receivables 7 3,03,500
(c) Cash & Cash Equivalents 8 31,200
Total 14,57,200

Notes to Accounts

Sr. No. Particulars `

1. Share Capital
Issued, Subscribed & Paid-up Capital
a) Equity Share Capital
6,500 Equity Shares of ` 100 each 6,50,000

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SUGGESTED ANSWER
ADVANCED ACCOUNTING

2. Reserves & Surplus

m
Profit & Loss A/c (WN 5) 2,40,100

m c. o
c. oCapital Reserve (W.N. 3)
General Reserve (WN 5) 1,20,000

e m
m s
13,360

s e l a
a ag
3,73,460
l3. Minority interest in Craft Ltd. (W.N.4)
ag 4.
1,26,740
Short-term borrowings
Bank Overdraft 70,000
5. Property, Plant & Equipment
Land & Building
Art Ltd. 1,90,000

om
Craft Ltd. 1,35,000 3,25,000

. c
em
Plant & Machinery
Art Ltd.
l a s 2,31,000

ag
Craft Ltd. (2,25,000-17,500+1,500) 2,09,000 4,40,000
7,65,000
6. Inventories
Art Ltd. 1,66,000
Craft Ltd. 2,05,000
Less: unrealized profit (13,500) 3,57,500

o m
m .c
7. Trade Receivables

c. o Art Ltd.
m
1,70,000 se 3,03,500
1,33,500

s em Craft Ltd.
g la
gla 8. Cash & Cash Equivalents
a
a Art Ltd. 24,500
Craft Ltd. 6,700 31,200

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

Working Notes:
1. Shareholding Pattern

Total 4,000 shares
3,200 shares 800 shares
Art Ltd (80%) 20% Minority Interest

2. Analysis of Profit

General reserve Profit and loss account
Opening balance 40,000 58,700
Closing balance 40,000 2,08,000
Changes during the year 1,49,300

Analysis of Profit

Particulars Pre acquisition Post acquisition
profit (6 months) profit (6 months)
(`) (`)
Opening Balances 98,700
(40,000 + 58,700)
Profit for 6 months 74,650 74,650
(1,49,300 x 6/12)
Provision reversed 850 850
(1,700) (W.N. 8)
Revaluation Loss (W.N. 6) (17,500) -
Savings in depreciation (W.N. 6) - 1,500
Total 1,56,700 77,000
Holding (80%) 1,25,360 61,600
Minority Interest (20%) 31,340 15,400

3. Cost of Control

Particulars ` `
Cost of Investment (Given) 4,32,000

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ADVANCED ACCOUNTING

Less: Share in Net Assets:
a) Share Capital (3,200 shares × `100) 3,20,000
m
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b) Capital Profit (W.N. 2) 1,25,360 (4,45,360)

c. o
Capital Reserve 13,360
s e m
s em Interest l a
ag
4. Minority

g laParticulars
a Share Capital (800 shares × 100)
`
80,000
Capital Profit (W.N. 2) 31,340
Revenue Profit (W.N. 2) 15,400
Total 1,26,740

5. Consolidated Profit and General Reserve of Art Ltd

om
Particulars Profit and loss General

. c account ` reserve `

s em
Balance as per Balance Sheet 1,92,000 1,20,000
Revenue Profit
g l a 61,600 -

Total
a
Unrealized Profit (Downstream) (13,500)
2,40,100 1,20,000

6. Calculation of Revaluation Profit /Loss

Particulars `
Balance as on 01.04.2023 (given) 2,50,000
Depreciation for 6 months (2,50,000 × 10% × 6/12) (12,500)

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WDV as on date of acquisition 2,37,500

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Revalued amount 2,20,000

em Revaluation Loss
l a se 17,500
las 7. Savings in Depreciation
a g
ag = Depreciation Provided for 6 months – Depreciation Should be
= 12,500 – (2,20,000 × 10% × 6/12)
= 1,500

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

8. Calculation of provision reversed
Trade Receivable (Given) =1,68,300 it is after provision i.e 99%
So, 100% will be 1,70,000 therefor provision will be 1,700
As per para 20 and 21 of AS 21, Consolidated financial statements:
Consolidated financial statements should be prepared using uniform
accounting policies for like transactions and other events in similar
circumstances. If it is not practicable to use uniform accounting policies in
preparing the consolidated financial statements, that fact should be
disclosed together with the proportions of the items in the consolidated
financial statements to which the different accounting policies have been
applied.
Question 6
(a) Colour Limited leased a Machine to Red Limited on 1 April, 2021 on the
following:

Cost of the machine ` 18,00,000
Lease term 3 Years
Fair market value of the machine ` 18,00,000
Unguaranteed residual value as on 31.3.2024 ` 2,00,000
Internal rate of return 12%

Other information:
The expected useful life of the machine is 5 years. The machine will revert to
Colour Limited on termination of the lease. The lease payment is to be made
at the end of each year in 3 equal parts.
The present value of ` 1 due at the end of 3 rd year at 12% rate of interest is
` 0.7118. The present value of annuity of at ` 1 due at the end of 3 rd year at
12% IRR is ` 2.4018.
You are required to analyze whether lease constitutes finance lease. Also
calculate unearned finance income, if any.

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SUGGESTED ANSWER
ADVANCED ACCOUNTING

OR
(a) On 1 April 2023, ABC Limited has given the following information:
m
m c. o
co
`

. em
s
50,000 equity shares of ` 100 each ( ` 80 paid up by all 40,00,000
m
e 8% Preference shares of ` 10 each l a
s
shareholders)

a
l 10,000, 12% Debentures of ` 100 each
2,00,000
a g
g
20,00,000

a (Each debenture is convertible into 3 equity shares of ` 100 10,00,000

each)

On 1" July 2023, the remaining ` 20 was called up and paid by all the
shareholders except one shareholder holding 10,000 equity shares. During
the year 2023-24 the company had a profit after tax of ` 3,44,000.
Tax rate is 30%.

o m
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You are required to compute Basic and Diluted EPS. (4 Marks)

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s
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(b) Following information are available in respect of Z Limited as on 31 March,
2024
l a
1. Equity shares of ` 100geach
a ` 500 lakhs
2. General Reserve ` 100 lakhs
3. Loss for the year ending 31 st March, 2024 ` 5 lakhs
Due to absence of profits during the year 2023-24, the management
recommends to declare dividend of 10% on equity share capital out of
general reserve.

o m
The rates of equity dividend for the last 5 years immediately preceding the

m
year 2023-24 are as follows:
.c
c. o 10% s
m
e 7%
em
2022-23 2021-22 2020-21 2019-20 2018-19

s g la whether the
12% 14% 10%

gla a
As an accountant of the company, you are required to suggest
a recommendation of the management is justified? If, you do not agree, then
suggest the rate of dividend. (4 Marks)

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(c) Smart Limited is an Indian Company and has its Branch at New York. The
following balances in respect of Smart Limited's USA Branch office are
provided:
(i) Debit Balances (in USD)
Expenditure (excluding Depreciation) : 1,03,095
Cash & bank balances : 2,175
Debtors : 7,365
Fixed Assets (Gross) : 34,200
(Rate of Depreciation on Fixed Assets: 20%)
Inventory-Stock 'P' : 5,520
Inventory- Stock 'Q' : 1,035
(ii) Credit Balances (in USD)
Incomes : 1,32,000
Creditors : 15,570
HO Control a/c : 5,820
The following additional information is provided:
(1) The average exchange rate during the above financial year was 1 USD
= ` 56.
(2) The fixed assets were purchased when the exchange rate was 1 USD
` 55.
(3) The closing exchange rate on reporting date is 1 USD = ` 58.
(4) Stock item 'P' is valued at cost of USD 5,520, purchased when the
exchange rate was ` 56.50. The present net realizable value of this item
is ` 2,85,000.
(5) Stock item 'Q' is carried at net realizable value of USD 1,035, but its cost
in USD is 1,065, It was purchased when exchange rate was 1 USD
= ` 53.
(6) Branch Control Account as per HO books was ` 2,66,265.

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ADVANCED ACCOUNTING

You are required to show how it will be reflected in the books of Head Office
in the form of Trial Balance, if the USA Branch Office is classified as an

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Integral Foreign Operation. (6 Marks)

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Answer

m . s e
e a
(a) Computation of Annual Lease Payment

a s gl
l Cost of Equipment a
Particulars Amount
g
a Unguaranteed Residual Value 18,00,000
2,00,000
Present Value of unguaranteed residual value 1,42,360
(` 200,000 x 0.7118)
Present Value of Lease Payments
(` 18,00,000 – ` 1,42,360) 16,57,640

m
Present Value of Annuity for three years is 2.4018
Annual Lease Payment (16,57,640 / 2.4018)
. co 6,90,165.71

Classification of Lease:
s em
Parameter 1:
g l a
a
The present value of lease payment i.e. ` 16,57,649 which equals 92.09% of
the fair market value i.e., ` 18,00,000.
The present value of minimum lease payments is substantially covers the
fair value of the leased asset
Parameter 2:
The lease term (i.e. 3 years) covers the major part of the life of the asset (i.e.

m
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5 years).

m .
c. o m
Therefore, it constitutes a finance lease.

em
Computation of unearned Finance Income:
la se
las Particulars
a g Amount

ag Total Lease Payments (` 6,90,165 x 3) ` 20,70,495
Add: Unguaranteed residual value ` 2,00,000
` 22,70,495

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

Less: Present value of lease payments and residual value
i.e. Net investment (1,42,360+16,57,640) ` 18,00,000
Unearned Finance Income ` 4,70,495

OR
(a) Basic Earnings per share (EPS) =
Net profit attributable to equity shareholders
Weighted average number of equity shares outstanding during the year
1,84,000
= = ` 4 per share
46,000 Shares (as per working note)

Diluted earnings per share

Net profit for the current year ` 3,44,000
No. of equity shares outstanding 50,000
Basic earnings per share `4
No. of 12% convertible debentures of ` 100 10,000
each
Each debenture is convertible into 3 equity
shares
Interest expense for the current year ` 1,20,000
Tax relating to interest expense (30%) ` 36,000
Adjusted net profit for the current year ` (1,84,000 + 1,20,000 -
36,000) = ` 2,68,000
No. of equity shares resulting from 30,000
conversion of debentures
No. of equity shares used to compute diluted 46,000 + 30,000 = 76,000
earnings per share
Diluted earnings per share 2,68,000 / 76,000 = ` 3.53

Working Note:
1. Net profit attributable to equity share holders = Net profit less
preference dividends
Total earnings – preference shares dividend

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ADVANCED ACCOUNTING

` 3,44,000 – ` (8% x 20,00,000)
` 3,44,000 - ` 1,60,000
m
m
= ` 1,84,000
c. o
2.
c. o
Calculation of weighted average number of equity shares
s e m
s eAsasmaperfraction of equity share to the extent that they were entitled to gl
AS 20 ‘Earnings Per Share’, partly paid equity shares are treated a
g la participate in dividend relative to a fully paid equity share during thea
a reporting period. Assuming that the partly paid shares are entitled to
participate in the dividend to the extent of amount paid, weighted
average number of shares will be calculated as follows:

Date No. of equity Amount paid Weighted average
shares per share no. of equity shares
` ` `

c om
01.04.2023 50,000 80 50,000x 80/100x 3/12

.
em
= 10,000
01.07.2023
la s
40,000 100 40,000 x 9/12

g
a 10,000
= 30,000
01.07.2023 80 10,000x 80/100x 9/12
= 6,000
Total weighted average equity shares 46,000

(b) In case of declaration of dividend out of free reserves, there are 3
conditions:
(1) Dividend Rate < Average Rate of last 3 years

o m
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10% < 12% [(12+14+10)/3]

c. o Condition is Satisfied
s em
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l5,00,000)
(2) Dividend Distributed < 10% of PUSC + Reserve and Surplus

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50,00,000 < 59,50,000 [(5,00,00,000 + 1,00,00,000 – × 10%]
a Condition is Satisfied
(3) Reserves after dividend > 15% of PUSC 45,00,000 not > 75,00,000
(5,00,00,000 × 15%)

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Condition is Not Satisfied
(4) The closing balance of reserves after payment of dividend and set off
of loss = ` 75,00,000
Therefore, can be utilized = 20,00,000 (1,00,00,000 – 5,00,000 – 75,00,000)
Thus, rate of dividend = (20,00,000/5,00,00,000) = 4%
Alternatively
To judge the recommendation of management, the satisfaction of all three
conditions is to be checked:
(1) Condition I
The proposed dividend of 10% is less than the average rate of dividend
being 12%
(i.e.) (12+14+10) /5 =12 %.
Hence, this condition is satisfied.
(2) Condition II
Amount to be withdrawn.

10% dividend on Equity share capital 50,00,000
+ Loss of Current year 5,00,000
Amount to be drawn from General Reserve 55,00,000

Maximum amount that can be withdrawn should not exceed 10% of
paid-up share capital + free reserves.
= 10% of [` 500 lakhs + ` 100 lakhs] = ` 60,00,000
As the amount to be withdrawn is within the maximum limit, hence,
this condition is also satisfied.
(3) Condition III
Balance of reserves after withdrawal (100-55) ` 45,00,000
15% of paid-up capital ` 75,00,000
As the balance of reserves should not be less than 15% of its paid-up
share capital, but here the balance of reserves after withdrawal is less

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ADVANCED ACCOUNTING

than 15% of paid-up share capital, hence this condition is not satisfied,
hence, 10% dividend cannot be declared.

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Maximum withdrawal of Reserve if condition II is satisfied.
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Opening balance of Reserves in the beginning = ` 1,00,00,000

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e- Closing balance of reserves being 15% of
of the year
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a s
l paid-up capital
=` 75,00,000
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a Reserves available = ` 25,00,000
Maximum permissible Divisible Profits
Permissible withdrawal as above = ` 25,00,000
Less: Current Year's Loss =` 5,00,000
Maximum permissible Divisible profit = ` 20,00,000

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Actual permissible rate of Dividend =

m . = 4%
e of management is not justified and a
(` 20,00,000 / ` 5,00,00,000) x 100

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l of 4% can be declared.
Therefore, the recommendation
dividend only up to agrate
a
(c) Converted branch trail balance (in the books of head office)

Particular Dr. $ Cr. $ Rate ` Dr. ` Cr.
per $
Expenditure 1,03,095 56 57,73,320
Cash & bank 2,175 58 1,26,150

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balance

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Debtors 7,365
55 15,04,800 .
58
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4,27,170

c. o Fixed assets 27,360
s em
s em Depreciation 20% 6,840 55
g la
3,76,200

gla Inventory P 5,520 Direct
a 56,445
2,85,000

a Inventory Q 1,065 53
Income 1,32,000 56 73,92,000
Creditors 15,570 58 9,03,060

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HO control A/c 5,820 2,66,265
Exchange difference 12,240
85,61,325 85,61,325

Working Note:

Inventory P $ 5,520 Inventory Q $ 1,065
Purchased Cost rate 56.50 NRV $ 1,035
NRV ` 2,85,000 Closing rate 58
Cost ` 3,11,880 Purchased Cost 53
rate
Value at cost or NRV ` 2,85,000 Value at cost or $ 1,035 @ ` 58 or
whichever is less NRV whichever $1,065 @ ` 53
is less = 56,445 or 60,030

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PAPER – 2: CORPORATE AND OTHER LAWS
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o m Question No. 1 is compulsory. c. o
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. any four questions from the remaining five questions. e m
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se
Attempt

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a(a) MNO limited has the following equity share capital –
Question 1

Class-1: Equity Share Capital – 3,00,000 equity shares of ` 30,00,000
` 10 each.
(1 voting right for every 1 share)
Class-2: Equity share Capital – 50,000 equity shares of ` 10 ` 5,00,000
each.
(1 voting right for every 5 shares)
o m
c
. fulfilled all the conditions related to
the issue of equity share capital. em
At the time of issue, the company had

The company wants to vary lthea svoting rights of class 2 equity share capital–
g
1 voting right for every 5ashares to 1 voting right for every 10 shares.
The Company’s Memorandum and Articles of Association have given the
company the power to make the variation. The holders of 40,000 equity
shares have their consent in writing for this variation.
Out of dissenting shareholders, the holders of 4,500 equity shares want to
apply to the Tribunal against the company’s action.

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Examine, with reference to the relevant provisions of the Companies Act,

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2013-

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(i) Whether a company can change the rights of its shareholders?
(ii) Whether the dissenting shareholders can apply to the a
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Tribunal?

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a
(5 Marks)
(b) BBQ Ltd., with its registered office in Hyderabad, has two branch offices,
one located in Delhi and the other in London. The accounting transactions
of the branches are recorded and all books of account are maintained in

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the branches. The branch accountant of the Delhi branch sent monthly and
the branch accountant of London sent quarterly summarized trial balan ce,
profits and loss account and balance sheet to the Hyderabad office. One of
the assistants of the audit team, Mr. Naveen, raised the issue that the
branches of the company maintain its books and records at branches, so it
defaults on not maintaining the proper books of account at the registered
office. Mr. Naveen further objected to the fact that the London branch sent
their summarised returns on a quarterly basis instead of a monthly basis.
You are requested to analyse and decide the validity of both the objections
of Mr. Naveen relating to the place of maintaining the books of account
and sending summarised returns thereof to the registered office by the
branch offices of the company referring to the provisions of the Companies
Act, 2013. (5 Marks)
(c) Mr. L was employed as a fashion designer in Elegant Textile Ltd., a public
limited company in Gurugram, India during the financial year 2023-24. He
had efficiently provided his services for 183 days during the above said
period. On 01.04.2024, Mr. H. the Human Resource Manager of Jeff Fashion
Ltd., Paris (a foreign country) offered him a better employment opportunity
in such company.
On 02.04.2024, Mr. L. left India for taking up employment as a production
controller at Jeff Fashion Ltd. in Paris. On 30.04.2024 he flew back to India
for a 10 day family function in Manali, India.
In light of the provisions of the Foreign Exchange Management Act, 1999,
elucidate: The residential status of Mr. L-
(i) On his return for attending the family function on 30.04.2024.
(ii) In case, instead of vacation, he joins an employment in an Indian
company after arriving on 30.04.2024. (4 Marks)
Answer
(a) Section 48 of the Companies Act, 2013, allows the variation of
shareholders’ rights, if three conditions have been met.
First - There should be a provision in the memorandum or articles of the
company entitling it to vary such class rights, in absence of same; the
terms of issue of the shares of that class not prohibiting such a variation.

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Second - The holders of at-least 75% of the issued shares of that class
must have given their consent in writing or pass a special resolution

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sanctioning the variation at a separate class meeting.

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Proviso to sub-section 1, provides if variation by one class of shareholders

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affects the rights of any other class of shareholders, the consent of three-
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fourths of such other class of shareholders shall also be obtained and the

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provisions of this section shall apply to such variation.
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ag Third – Where the holders of not less than10 per cent of the issued shares
of a class did not consent to such variation or vote in favour of the special
resolution for the variation, they may apply to the Tribunal to have the
variation cancelled and where any such application is made the variation
shall not have effect unless and until it is confirmed by the Tribunal.
(i) In the given question, 40,000 equity shareholders of Class 2 have
given their consent in writing for the variation.

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Since, 80% (40,000/ 50,000) of the shareholders have given the

.
consent, the company can change the rights of Class 2 shareholders

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provided such change in the rights of Class 2 shareholders is not

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affecting the rights of any other class of shareholders i.e. Class 1
shareholders in this case.
a g
(ii) Total number of dissenting shareholders= 50,000- 40,000= 10,000.
Minimum number of shareholders who may apply to the Tribunal and
then variation shall not take effect unless and until it is confirmed by
the Tribunal= 10% of 50,000=5,000.
In the given question, since less than 5,000 (here 4,500) shareholders
are intending to apply to Tribunal, hence, they cannot apply.

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(b) 1. Provisions of section 128 of the Companies Act, 2013, requires every

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company to prepare and keep the books of account and other

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relevant books and papers and financial statements at its registered

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It also provides that all or any of the books of account may be kept at

a such other place in India as the Board of directors may decide. Where
such a decision is taken by the Board, the company shall within seven
days thereof file with the registrar a notice in writing as per rule 2A of

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the Companies (Accounts) Rules, 2014 in form AOC-5 giving full
address of that other place.
Thus, in the given case, the books of accounts of BBQ Ltd. should be
prepared and maintained at registered office in Hyderabad. However,
the same can be maintained at the respective branches if the Board
of directors have decided so and intimated the registrar a notice in
writing within 7 days thereof giving full address of that other place
(i.e. other than the registered office).
Hence, objection of Mr. Naveen is valid as intimation to registrar is
not specified in the question.
2. Where a company has a branch office in or outside India, it shall be
deemed to have complied with the requisite provisions of section
128(1) if-
a. Proper books of account relating to the transactions effected at
the branch office are kept at that office, and
b. Proper summarised returns are sent on periodical basis by branch
office to the company at its registered office or other place.
As per Rule 4(1) of the Companies (Accounts) Rules, 2014, the
summarized returns of the books of account of the company kept
and maintained outside India shall be sent to the registered office at
quarterly intervals, which shall be kept and maintained at the
registered office of the company and kept open to directors for
inspection.
Since, London office was sending summarized returns to the
registered office in Hyderabad on quarterly basis, which is as per the
requirement of law, hence, the objection of Mr. Naveen is invalid.
(c) According to section 2(v) of the Foreign Exchange Management Act, 1999,
“Person resident in India” means a person residing in India for more than
182 days during the course of the preceding financial year but does not
include a person who has gone out of India or who stays outside India, for
or on taking up employment besides with the other specified purposes,
outside India.
(i) In the given question, Mr. L will be treated as a person resident
outside from 2.4.2024 till the time he works in Jeff Fashion Ltd. in

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Paris, as he has gone out of India for or on taking up employment
outside India.

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His return to India for 10 days to attend a family function, will not
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alter his residential status.

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(ii) Mr. L will be treated as a person resident in India from the day he

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joins employment in India (after arriving on 30.4.2024).

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a(a) Referring to the provisions of the Companies Act, 2013, answer the
Question

following queries:
(i) What is the type of resolution to be passed and maximum number of
persons to whom an offer by private placement in a financial year be
made?
(ii) Explain the consequences of non-allotment of shares within the

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stipulated timeline.

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(iii) In case the shares were allotted within the requisite allowed time, when

s
can the company start utilizing the funds received by it from such
private placement?
(b) (i) In the circumstance g
l a (5 Marks)

a where Mr. M and Mr. P, joint shareholders of
Primal Private Limited holding 500 equity shares, have conflicting
views on one special business (related to proposed changes in the
Articles of Association) at the extra-ordinary general meeting, Mr. M is
endorsing the resolution, and Mr. P is dissenting. Determine the
procedure for casting the vote in the event of such a situation, as per
the guidelines outlined in the Companies Act, 2013. (3 Marks)

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(ii) Okara Limited, a company. having a net worth of `110 crore and a

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turnover of `450 crore, wants to accept deposits from the public.

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Referring to the provisions of the Companies Act, 2013, decide, whether

em a (2 Marks)
the above company can accept the deposits from the public.

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g (c) (i) The Board of Directors of Cool Private Limited,athrough a resolution
a passed in the board meeting, granted authorization to Mr. Sharad, the
CEO of the company to appoint two employees for the procurement
department. Subsequently, Mr. Sharad selected Mr. Suresh and

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Mr. Hemant for the positions. However, after one month, Mr. Sharad,
noticing unsatisfactory performance and lack of honesty in their duties,
issued dismissal orders for both employees, citing proper reasons. Mr.
Suresh contested his dismissal in the court, arguing that the Board had
only empowered Mr. Sharad for appointments and not for dismissals
and hence the dismissal order is invalid.
Assess the validity of Mr. Suresh's argument under the provisions of the
General Clauses Act, 1897. (2 Marks)
(ii) Mr. M issued a cheque of ` 3,00,00 dated 31.12.2023 at 10 a.m. to Mr.
N as a consideration towards the medical services provided by the
later. Mr. N presented the above cheque on 31.03.2024 during the
banking business hours. The cheque was dishonoured taking the plea
that it was not presented within the requisite time of 3 months as
provided under section 138 of the Negotiable Instruments Act 1881.
Referring to the provisions of the General Clauses Act, 1897 decide,
whether the plea for dishonouring the cheque was valid. (2 Marks)
Answer
(a) (i) Rule 14 (1) of the Companies (Prospectus and Allotment of Securities)
Rules, 2014, requires prior approval of the shareholders of the
company, by a special resolution for each of the private placement
offers or invitations.
Provided further that this sub-rule shall not apply in case of offer or
invitation for non-convertible debentures, where the proposed
amount to be raised through such offer or invitation does not exceed
the limit as specified in clause (c) of sub-section (1) of section 180 in
such cases relevant Board resolution under clause (c) of sub-section
(3) of section 179 would be adequate.
Provided also that in case of offer or invitation for non-convertible
debentures, where the proposed amount to be raised through such
offer or invitation exceeds the limit as specified in clause (c) of sub-
section (1) of section 180, it shall be sufficient if the company passes
a previous special resolution only once in a year for all the offers or
invitations for such debentures during the year.
Thus, based on above, the resolution will be passed.

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As per section 42(2) of the Companies Act, 2013, a private placement
shall be made only to a select group of persons who have been

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identified by the Board, whose number shall not exceed 50 or such

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higher number as may be prescribed, in a financial year.

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Rule 14 (2) of the Companies (Prospectus and Allotment of Securities)

s e la
Rules, 2014 has prescribed ‘an offer or invitation to subscribe

l a securities under private placement shall not be made to persons
a g
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more than two hundred (200) in the aggregate in a financial year’.
Provided that any offer or invitation made to Qualified Institutional
Buyers and Employees of the company being offered under a scheme
of ESOP under section 62(1)(b) shall not be considered while
calculating the limit of two hundred persons.
As per rule 14(7), NBFCs which are registered with the RBI and
Housing Finance Companies which are registered with the National

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Housing Bank; if they are complying with any regulations made by

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the RBI or National Housing Bank in respect of offer or invitation to

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be issued on private placement basis, then need not to comply with
the rule 14(2) above.

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a g
Thus, based on above, the maximum number of persons to whom an
offer by private placement in a financial year will be determined.
(ii) As per section 42(6) of the Companies Act, 2013 provides that a
company making an offer or invitation under private placement shall
allot its securities within sixty days from the date of receipt of the
application money.
If company fails to make allotment within 60 days, then repayment of

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the application money to the subscribers shall be made within fifteen

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days from the expiry of sixty days and if the company fails to repay

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the application money within the aforesaid period, it shall be liable to

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repay that money with interest at the rate of twelve per cent per

s
annum from the expiry of the sixtieth day.
g l a
gla a private placement
a
(iii) Company shall not utilise monies raised through
unless allotment is made and the return of allotment is filed with the
Registrar in accordance with section 42(8). The return of allotment

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shall be filed with the Registrar within 15 days from the date of the
allotment under section 42.
Hence, it can utilize the money thus received once the return has
been filled with the Registrar.
(b) (i) As per the Companies Act, 2013, in case of joint shareholders, they
must concur in voting unless the articles provide to the contrary.
As per Regulation 52 of Table F, the voting in case of joint
shareholders is done in the order of seniority, which is determined on
the basis of the order in which their names appear in the register of
members. The joint-holders have a right to instruct the company as
to the order in which their names shall appear in the register of
members.
Accordingly, in case of Mr. M and Mr. P, it is to be seen as to whose
name appears first in the register of members; and then to decide
whether the vote is cast in favour of resolution or against it.
(ii) According to section 76 (1) of the Companies Act, 2013, an “eligible
company” means a public company, having a net worth of not less
than one hundred crore rupees or a turnover of not less than five
hundred crore rupees and which has obtained the prior consent of
the company in general meeting by means of a special resolution and
also filed the said resolution with the Registrar of Companies before
making any invitation to the public for acceptance of deposits.
Okara Limited is having net worth of ` 110 crore. Hence, it falls in the
category of ‘eligible company’ and thus can accept the deposits from
public.
(c) (i) According to section 16 of the General Clauses Act, 1897, the
authority having for the time being power to make the appointment
shall also have power to suspend or dismiss any person appointed
whether by itself or any other authority in exercise of that power.
In the given question, Mr. Sharad was granted authorization to
appoint the said employees. This implies (in terms of the General
Clauses Act, 1897) that he also had the power to dismiss or suspend
these employees. Hence, Mr. Suresh’s argument is not valid.

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(c) (ii) As per the section 9 of the General Clauses Act, 1897, in case any
legislation or Regulation, it shall be sufficient, for the purpose of

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excluding the first in a series of days or any other period of time, to

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use the word “from”, and, for the purpose of including the last in a

c o m
The .first day in series is 31.12.2023 and last day is 31.03.2024. Hence, e
series of days or any other period of time, to use the word “to”.

m the above provisions, 31.12.2023 is to be excluded and las
eapplying
l a s 31.03.2024 is to be included in calculation as per the General Clausesa
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ag Act, 1897.
Since, the cheque has been presented within 3 months i.e. on
31.03.2024, it is eligible for honor and payment.
Hence, the plea of dishonouring the cheque is not valid.
Question 3

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(a) "A Bonus share is a distribution of capitalized undivided profit having an

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identity and value capable of being bought and sold." in reference to the
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above line elaborate the pre-requisites for issue of bonus shares as enlisted

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in the Companies Act, 2013. (5 Marks)

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a
(b) Q L Ltd. is a public limited company incorporated in Surat, Gujarat with
1200 members. On 10.12.2023 a general meeting was convened in which
14 members were present in person. Mr. Mohan was acting as an
authorized representative of two body corporates who are members of Q L
Ltd. Shyam one of the important members was absent. The Chairman Mr.
Rahi adjourned the meeting, taking plea of absence of Mr. Shyam, to same
day and place next week. The members present at the meeting venue
waiting to attend, opposed the decision submitting that the majority of

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them present now shall be unavailable next week. Referring to the

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provisions of Companies Act, 2013 elaborate:
c o
(i) Whether the requisite quorum to hold meeting as required .in case of
c. o s em
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public limited companies is present in this case?

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(ii) Whether Mr. Rahi could adjourn the meeting in the current

ag (5 Marks)

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(c) What are the differences between interpretation and construction in the
legal context, and how do these two concepts relate to each other as per
Interpretation of Statute? (4 Marks)
Answer
(a) Pre-requisites for issue of bonus shares
As per section 63(2) of the Companies Act, 2013, no company shall
capitalise its profits or reserves for the purpose of issuing fully paid-up
bonus shares, unless:
a. it is authorised by its Articles,
b. it has on the recommendation of the Board, been authorised in the
general meeting of the company.
c. it has not defaulted in payment of interest or principal in respect of
fixed deposits or debt securities issued by it.
d. it has not defaulted in respect of the payment of statutory dues of
the employees, such as, contribution to provident fund, gratuity and
bonus.
e. the partly paid-up shares, if any outstanding on the date of allotment,
are made fully paid-up.
f. it complies with such conditions as prescribed by Rule 14 of the
Companies (Share capital and debenture) Rules, 2014, that a company
which has once announced the decision of its Board recommending a
bonus issue, shall not subsequently withdraw the same.
(b) According to section 103 of the Companies Act, 2013, in case of a public
company, unless the articles of the company provide for a larger number,
if the number of members is more than 1000 but upto 5000, then the
quorum shall be 15 members personally present.
As per Secretarial Standard– 2, one person can be an authorised
representative of more than one body corporate. In such a case, he is
treated as more than one Member present in person for the purpose of
Quorum.
Here, the term ‘members personally present’ refers to the members
entitled to vote in respect of the items of business on the agenda of the
meeting.
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(i) Q Ltd. is a public company, having 1200 members hence, the quorum
shall be 15 members personally present.

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Mr. Mohan shall be treated as 2 members as he is the authorized
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representative of two body corporates.

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Hence, total 15 members were present at the meeting held on

a s 10.12.2023.

l Thus, the requisite quorum was present. a g
ag Assumption: It is assumed that these 14 persons are inclusive of
Mr. Mohan.
(ii) In the given scenario, even if Mr. Shyam was absent, Mr. Rahi could
not adjourn the meeting, as the requisite quorum was present.
(c) Difference and Relationship between Interpretation and Construction
The two terms- ‘Interpretation’ and ‘Construction’, are used
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interchangeably to denote a process adopted by the courts to ascertain

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the meaning of the legislature from the words with which it is expressed,

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these two terms have different connotations.

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Interpretation is the art of ascertaining the meaning of words and the true
a
sense in which the author intended that they should be understood.
Thus, where the Court adheres to the plain meaning of the language used
by the legislature, it would be ‘interpretation’ of the words, but where the
meaning is not plain, the court has to decide whether the wording was
meant to cover the situation before the court. Here, the court would be
resorting to ‘construction’. Conclusions drawn by means of construction
are within the spirit though not necessarily within the letter of the law.

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In practice construction includes interpretation and the terms are

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c. o Question 4
frequently used synonymously.
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aBoard ofmode
(a) Long Boots Ltd. a listed company is engaged in the manufacturing of shoes

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and related accessories. The Business is set on a recovery by the
induction of the new Production Manager, Mr. A. The Directors of
the company has recommended the declaration of a dividend of ` 50 lakh
after a gap of eight years during which profits were inadequate to distribute
the same.
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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

The dividend thus proposed is to be met partially out of the current year
profit of ` 16 lakh. Accumulated profits during the past eight years were
` 170 lakh which is 25% of the total share capital of the company. Referring
to the provisions of the Companies Act, 2013 decide, whether the conditions
with regard to declaration of dividend in case of inadequate profit are met?
You are requested to support your answer with requisite calculations.
(5 Marks)
(b) A dispute among the partners of Limited Liability Partnership (the LLP)
jeopardized the stability of the business. Out of two partners, one due to a
quarrel, left the LLP. The other partner alone continued the business of the
LLP. You are being an expert in law is requested to explain the provisions
governing the LLP being operated by a single partner and its winding up by
the Tribunal as per the provisions of the Limited Liability Partnership Act,
2008. (5 Marks)
(c) Explain the term “Generalia specialibus non derogant”, in connection with
Interpretation of Statues. (4 Marks)
Answer
(a) According to second proviso to section 123, where in any year there are
no adequate profits for declaring dividend, the company may declare
dividend out of the accumulated profits earned by it in previous years and
transferred by it to the free reserves only in accordance with the
procedure laid down in Rule 3 of the Companies (Declaration and
Payment of Dividend) Rules, 2014.
Free Reserves means such reserves which, as per the latest audited
balance sheet of a company, are available for distribution as dividend.
Under Rule 3 such declaration shall be subject to the following conditions:
CONDITION I
The rate of dividend declared shall not exceed the average of the rates at
which dividend was declared by the company in the immediately
preceding three years.
However, this condition shall not apply if the company has not declared
any dividend in each of the three preceding financial year.

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CONDITION II
The total amount to be drawn from such accumulated profits shall not
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exceed 10% of its paid-up share capital and free reserves as appearing in
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the latest audited financial statement.

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CONDITION III

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The amount so drawn shall first be utilised to set off the losses incurred in
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the financial year in which dividend is declared and only thereafter, any
dividend in respect of equity shares shall be declared.
CONDITION IV
The balance of reserves after such withdrawal shall not fall below 15% of
its paid- up share capital as appearing in the latest audited financial
statement.
In the given question, since Long Boots Ltd. current year profits of

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` 16 lakh are insufficient to meet the dividend requirement of ` 50 lakh,

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hence the company has to fulfil the conditions as prescribed under Rule 3

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(mentioned above).

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Particulars Amount

Amount of dividend declared (A)
a (in `)
50 lakh
Current year profits (B) 16 lakh
Amount to be withdrawn accumulated profits [(A)- (B)] 34 lakh
Accumulated profits during the past 8 years 170 lakh
Total share capital of the company [170/25%] 680 lakh

Fulfilment of Conditions mentioned in Rule 3

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Conditions Calculation
c
. Met
Met/

c. o This condition is not applicable the company s
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em not declared any dividend in each of thela
I has

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three

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preceding financial year.
Paid-up share capital and free 680+ 170 Met
reserves
= 850 lakh (C)

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

10% of (C) 85 lakh
Amount to be withdrawn
accumulated profits i.e. 34 lakhs
is less than (C)
III The company has since made Met
profit in the financial year in
which dividend is declared.
IV Free Reserves (D) 170 lakh Met
Amount drawn for payment of 34 lakh
dividend (E)
Balance of reserves after such 136 lakh
withdrawal (F) =(D)- (E)
15% of its paid up share capital 102 lakh
(G)
(F) more than (G)
In the given question, since all the conditions are met, hence Long Boots
Ltd. has validly declared dividend.
(b) According to section 6 of the Limited Liability Partnership Act, 2008,
(i) Every LLP shall have at least two partners.
(ii) If at any time the number of partners of a LLP is reduced below two
and the LLP carries on business for more than six months while the
number is so reduced, the person, who is the only partner of the LLP
during the time that it so carries on business after those six months
and has the knowledge of the fact that it is carrying on business with
him alone, shall be liable personally for the obligations of the LLP
incurred during that period.
In the given situation, the alone partner should consider the above
provisions of the Limited Liability Partnership Act, 2008, governing the
LLP being operated by a single partner.
As per section 64 of the Limited Liability Partnership Act, 2008, the
circumstances in which LLP may be wound up by Tribunal are:
(a) if the LLP decides that LLP be wound up by the Tribunal;

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(b) if, for a period of more than 6 months, the number of partners of
the LLP is reduced below two;

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(c) if the LLP has acted against the interests of the sovereignty and
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integrity of India, the security of the state or public order;

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(d) if the LLP has made a default in filling with the Registrar the

l a s Statement of Account and Solvency or annual return for any 5
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consecutive financial years; or
(e) if the Tribunal is of the opinion that it is just and equitable that the
LLP be wound up.
(c) It is a basic rule of interpretation that if it is possible to avoid a conflict
between two provisions on a proper construction thereof, then it is the
duty of the court to so construe them that they are in harmony with each
other. But where it is not possible to give effect to both the provisions
harmoniously, collision may be avoided by holding that one section which

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is in conflict with another merely provides for an exception or a specific

.
rule different from the general rule contained in the other. A specific rule

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will override a general rule. This principle is usually expressed by the

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maxim, “generalia specialibus non derogant”.

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However, this rule can be
merely apparent conflict
adopted only when there is a real and not
provisions, where the words of a
statute, on a reasonable construction thereof, admit of one meaning only
then such natural meaning will prevail. The court shall not attempt an
interpretation based on equity and harmonious construction.
Question 5
(a) Stallworth Ltd., a listed company having a paid up share capital of

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` 11 crore with a turnover of ` 100 crore had appointed an Audit

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Committee which recommended M/s ANC & Associates, a firm of Chartered

c. o Accountants having such qualifications and experience as is required for
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appointment as the auditor of the company. The next Annual General

las Meeting (the AGM) was due on 30.09.2023. The Board disagreed with the
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ag said recommendation of the committee and refer back to it for
reconsideration. The Audit Committee was adamant on appointing the
above firm of the chartered accountants.
Discuss in the light of the Companies Act, 2013:

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

(i) The course of action for Board of Directors to resolve the above
deadlock. What would be your answer, if above situation was that of
filling the casual vacancy of auditors?
(ii) The steps to be taken by the Board of Directors for appointment of
auditors in case there was no requirement of Audit Committee in the
company? (5 Marks)
(b) (i) Explain the protection available for the "whistleblowers" in the context
of the Limited Liability Partnership Act, 2008. (3 Marks)
(ii) Describe the consequences of making a false statement in any return,
statement or other document under section 37 of the Limited Liability
Partnership Act, 2008. (2 Marks)
(c) State the provisions of the General Clauses Act, 1897 relating to ‘gender
and number’. (4 Marks)
Answer
(a) According to section 177 of the Companies Act, 2013 read with the
Companies (Meetings of Board and its Powers) Rules, 2014, in every listed
public company- an Audit Committee shall be constituted by Board of
directors.
Rule 6 of Companies (Meetings of Board and its Powers) Rules, 2014,
provides that in case of a company that is required to constitute an Audit
Committee under section 177, the committee, and, in cases where such a
committee is not required to be constituted, the Board, shall take into
consideration the qualifications and experience of the individual or the
firm proposed to be considered for appointment as auditor and whether
such qualifications and experience are commensurate with the size and
requirements of the company.
The audit committee shall recommend the name of an individual or a firm
as auditor to the Board for consideration; the Board shall consider and
recommend an individual or a firm as auditor to the members in the
Annual General Meeting (AGM) for appointment.
If the Board disagrees with the recommendation of the Audit Committee-
It shall refer back the recommendation to the committee for
reconsideration citing reasons for such disagreement.

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(i) In the given question, the Board shall record reasons for its
disagreement with the committee and send its own recommendation

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for consideration of the members in the AGM.

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Section 139(8) provides that the Board may fill any casual vacancy in

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the office of an auditor within 30 days.
s e
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139(11) prescribes that where a company is required to
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constitute an Audit Committee under section 177, all appointments,
including the filling of a casual vacancy of an auditor under this
section shall be made after taking into account the recommendations
of such committee.
Hence, the position will remain same even in case of casual vacancy.
(ii) In case there was no requirement of appointment of an audit
committee then the BOD shall recommend to the members in the
AGM, the name of an individual or a firm which can be appointed as

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auditor after considering qualifications and experience of such
individual or firm and other matter as laid therein.

s emLimited Liability Partnership Act, 2008,
(b) (i) According to section 31 of the

g l a may reduce or waive any penalty leviable
a or employee of a LLP, if it is satisfied that:
(1) The Court or Tribunal
against any partner
• such partner or employee of an LLP has provided useful
information during investigation of such LLP; or
• when any information given by any partner or employee
(whether or not during investigation) leads to LLP or any
partner or employee of such LLP being convicted under this
Act or any other Act.

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(2) No partner or employee of any LLP may be discharged, demoted,

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suspended, threatened, harassed or in any other manner

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discriminated against the terms and conditions of his LLP or

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employment merely because of his providing information or

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causing information to be provided pursuant to sub-section (1).

a (ii) According to section 37 of the Limited Liability Partnership Act, 2008,

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

If in any return, statement or other document required by or for the
purposes of any of the provisions of this Act, any person makes a
statement:
(a) which is false in any material particular, knowing it to be false; or
(b) which omits any material fact knowing it to be material,
he shall, save as otherwise expressly provided in this Act, be
punishable with imprisonment for a term which may extend to 2
years, and shall also be liable to fine which may extend to 5 lakh
rupees but which shall not be less than 1 lakh rupees.
(c) Gender and number
According to section 13 of the General Clauses Act, 1897, in all
legislations and regulations, unless there is anything repugnant in the
subject or context:
(1) Words importing the masculine gender shall be taken to include
females, and
(2) Words in singular shall include the plural and vice versa.
In accordance with the rule that the words importing the masculine
gender are to be taken to include females, the word men may be properly
held to include women, and the pronoun ‘he’ and its derivatives may be
construed to refer to any person whether male or female. So, the words
‘his father and mother’ as they occur in section 125(1)(d) of the CrPC,
1973 have been construed to include ‘her father and mother’ and a
daughter has been held to be liable to maintain her father unable to
maintain himself.
Where a word connoting a common gender is available but the word
used conveys a specific gender, there is a presumption that the provisions
of General Clauses Act, 1897 do not apply.
Question 6
(a) LKJ Ltd. is a company having paid up share capital of ` 12.50 crore with
total number of members being 3500. The board of directors have called a
general meeting (the meeting) to be conducted on 06.05.2023 at 2.00 pm.
On the date of the meeting the required quorum was not present within
half an hour and hence was adjourned to the next week on 13.05.2023 on

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same day at same venue. In reference to the above scenario in light of the
relevant provisions of the Companies Act, 2013 elucidate upon the

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following queries of the company.

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(i) What will be the fate of the meeting in case two members, in person,
were present at the adjourned meeting held on 13.05.2023?
(ii) eInmcase, on 06.05.2023 a total of 16 members were present but the s e
s chairman owing to the unruly behaviour of some members during the g
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a meeting only 3 members, in person, are present. What will be the fate
meeting had adjourned the same to 13.05.2023 and at the adjourned

of such adjourned meeting?
(iii) In case, where such meeting was called by the requisitionists under
section 100 of the Act and at such meeting the quorum was not
present, what will be the fate of such meeting?
OR

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(a) The Income Tax Authority (the statutory body) has gathered some
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information and is of the view that there has been a manipulation of

s
accounts of FGH Ltd. reflecting an incorrect financial position of the

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company. The statutory body intends to get the accounts reopened to

a
reflect correct financial position of the company. In light of the Companies
Act, 2013 elucidate.
(i) the statutory provisions governing the issue of re-opening of accounts
by the Income Tax Authority.
(ii) the voluntary revision of financial statements or board's report by th e
directors.
(iii) For how many preceding financial years the board of directors may
revise the financial statements?
o m
(5 Marks)

m (b) (i) Who c
. reportor
c. o m
will sign the audit report in case of a proprietorship concern

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a
the firm of the auditors and how the qualification/s in the audit

s e g l2013?
will be dealt with by the auditor at the annual general meeting of the

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company as per the provisions of the Companies Act,
(3 Marks)

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

(ii) Explain the provisions relating to expert's consent included in the
prospectus to be issued in India by the companies incorporated outside
India as per the provisions of the Companies Act, 2013. (2 Marks)
(c) Explain the rules relating to the remittances made by persons other than
individuals requiring approval of RBI as provided in Schedule III to the
Foreign Exchange Management (Current Account Transactions) Rules, 2000
issued under the Foreign Exchange Management Act, 1999 in respect of the
following:
(i) Commission to the agents abroad for sale of residential flats or
commercial plots in India.
(ii) Remittances for consultancy services procured from outside India.
(iii) Remittances by way of reimbursement of pre-incorporation expenses.
(4 Marks)

Answer
(a) (i) According to section 103 of the Companies Act, 2013, in case of a
public company, unless the articles of the company provide for a
larger number, if the number of members is more than 1000 but upto
5000, then the quorum shall be 15 members personally present.
If the quorum is not present within half-an-hour from the time
appointed for holding a meeting of the company:
(a) the meeting shall stand adjourned to the same day in the next
week at the same time and place, or to such other date and such
other time and place as the Board may determine; or
(b) the meeting, if called by requisitionists under section 100, shall
stand cancelled:
Provided that in case of an adjourned meeting or of a change of day,
time or place of meeting under clause (a), the company shall give not
less than three days’ notice to the members either individually or by
publishing an advertisement in the newspapers (one in English and
one in vernacular language) which is in circulation at the place where
the registered office of the company is situated.

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Quorum not present at the adjourned meeting also: Where
quorum is not present in the adjourned meeting also within half an

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hour, then the members present shall form the quorum.

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In the given question, the quorum for the given company having

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3500 members shall be 15 members personally present.
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quorum is not present in the adjourned meeting (i.e.
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13.05.2023) also within half an hour, then the two members present
shall form the quorum.
(ii) The meeting held on 6.05.2023 had 16 members present. Hence, the
quorum was present. However, the meeting was adjourned due to
unruly behaviour of some members and not for want of quorum. In
the said meeting (13.05.2023), only 3 members in person were
present. In such a case, these 3 members shall not constitute the
quorum and hence, shall stand further adjourned.

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(iii) If the quorum is not present within half-an-hour from the time

.
appointed for holding a meeting of the company, the meeting, if

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s OR
called by requisitionists under section 100, shall stand cancelled.

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Answer a
(a) (i) According to section 130 of the Companies Act, 2013, a company
shall not:
a. re-open its books of account and
b. recast its financial statements,

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unless an application in this regard is made by:

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a. the Central Government,
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c. o b. the Income-tax authorities,
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c. the Securities and Exchange Board of India (SEBI),

g a or
a
d. any other statutory regulatory body or authority
e. any person concerned.

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