CA Intermediate September 2026 Suggested Answers Paper 3 Taxation

FOR CA INTERMEDIATE EXAM PREPARATION

CA Intermediate 2026
Suggested Answers ·
Paper 3 Taxation
EXAM YEAR TYPE SUBJECT

CA Intermediate 2026 Suggested Answers Paper 3 Taxation
DATE

September 2026

Notes · Sample Papers · Previous Year Papers · Mock Tests

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PAPER – 3 : TAXATION
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Case Scenario -I

la a resident individual, had purchased 1,000 equity shares of XYZ Ltd.a g
ong15 June, 2023 for ` 1,20,000 (including brokerage). On 1 March, 2026, the
Mr. Rudra,
acompany announced a right issue offering 1 new share for every 2 shares held at
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` 100 per share, when the market price of the share was ` 150. Mr. Rudra decided
not to subscribe to the right and instead renounced his entire entitlement in
favour of Mr. Suresh for a lump sum consideration of ` 40,000 on 10th March,
2026.
Mr. Rudra also held 10,000 equity shares in PQR Ltd. (Demerged Company),

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acquired on 1st April, 2022 for a total cost of ` 25,00,000. On 15th September,

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2025, the company underwent a demerger approved by NCLT, transferring one

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of its undertakings to ABC Ltd. (Resulting Company). As per the scheme,

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Mr. Rudra received 4,000 equity shares in ABC Ltd. The net book value of assets

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transferred to the ABC Ltd. was ` 80 crore, while the net worth of PQR Ltd.
immediately before demerger was ` 200 crore. No consideration was paid for the
new shares. Mr. Rudra sold 2,000 shares of ABC Ltd. on 20th February, 2026 for
` 18,00,000 (excluding brokerage ` 15,000).
(CII for 2023-24: 348; 2025-26:376)
Based on the facts of the case scenario given above, choose the most appropriate
answer to the following questions number 1 to 3:

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1. What would be the amount of capital gain/loss in the hand of Mr. Rudra and

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the start date of holding period for the renounced right?
(A) Long-term Capital Gain of ` 40,000 and the holding period m
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of renounced

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right will start from 15 June, 2023.
th

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(B) Short-term Capital Gain of ` 40,000 and the holding
a right will start from 1st March, 2026.
(C) Long-term Capital Loss of ` 24,828 and the holding period of renounced
right will start from 15th June, 2023.

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

(D) Short-term Capital Loss of ` 10,000 and the holding period of renounced
right will start from 1st March, 2026. (2 Marks)
2. What is the cost of acquisition per share of the shares received in ABC Ltd.?
(A) ` 250
(B) ` 100
(C) ` 500
(D) ` NIL (2 Marks)
3. What would be the Capital gain on sale of 2,000 shares of ABC Ltd. on
20th February, 2026?
(A) Short-term Capital Gain of ` 17,85,000
(B) Long-term Capital Gain of ` 7,85,000
(C) Short-term Capital Gain of ` 15,85,000
(D) Long-term Capital Gain of ` 12,85,000 (2 Marks)
Case Scenario - II
Mrs. Manon, a resident individual, purchased a residential house property on
22.07.1999 for ` 10,00,000. The fair market value of the house as on 01.04.2001
was ` 12,00,000. She had incurred ` 5,08,000 on its improvement on 01.01.2016.
The house was compulsory acquired by the Government on 01.08.2024 and
compensation fixed is ` 60,00,000, half of which was paid by the Government on
30.10.2025 and the balance paid on 30.06.2026.
Mrs. Manon had filed an appeal for increasing the compensation and the court
gave the final decision on 31.03.2026 directing the Government to pay additional
compensation of ` 6,00,000. The Government has paid the additional
compensation amount on 01.09.2026.
Miss Maina, her minor daughter, aged 16 years won a debate competition during
the annual competition held at her school and received a cash award of ` 25,000
and she also earned interest of ` 8,500 on the balance maintained in her savings
bank account.
Mr. Manon, a postgraduate resident individual, is engaged in a proprietary
garment business and earned a net profit of ` 22,10,000 for the Previous Year

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TAXATION

2025-26. In addition, he is employed as a sales manager with M/s CHA Private
Limited and draws a monthly salary of ` 1,80,000. Mrs. Manon holds 30% equity
shares in the said company. The school fees of Miss Maina were remitted from
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Mrs. Manon's bank account.
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Mrs. Manon filed her return of income for the AY 2026-27 on 1st September, 2026
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consisting of income from business, income from capital gain and interest from

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saving bank account. Subsequently, she realized that she had forgotten to claim
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a genuine business expenditure amounting to ` 2,50,000, so she wants to file a
revised return to claim such expenditure.
(Cost Inflation Index: FY 2001-02: 100; 2015-16: 254; 2024-25: 363; 2025-26: 376.)
From the information given above, answer the multiple-choice questions number
4 to 6 on the assumption that both Mr. and Mrs. Manon opted to pay tax under
default tax regime provided under section 115BAC(1A) for Assessment Year
2026-27.

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4. What will be the amount of income taxable in the hands of Mrs. Manon under

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the head 'Capital Gains' for AY 2026-27?
(A) Long-term Capital Gain of ` e48,92,000
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lofa ` 42,92,000
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(B) Long-term Capital Gain
(C) Long-term Capital Gain of ` 15,18,000
(D) Long-term Capital Gain of ` 9,18,000 (2 Marks)
5. In whose hands income of minor daughter will be clubbed for AY 2026-27?
(A) ` 33,500 shall be taxable in the hands of Mrs. Manon and nothing will
be taxable in the hands of Mr. Manon.

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(B) ` 7,000 shall be taxable in the hands of Mr. Manon and nothing will be

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taxable in the hands of Mrs. Manon.

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(C) ` 8,500 shall be taxable in the hands of Mrs. Manon and nothing

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las taxable in the hands of Mr. Manon.
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a and nothing will be
ag (D) ` 8,500 shall be taxable in the hands of Mr. Manon
taxable in the hands of Mrs. Manon. (2 Marks)

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

6. As per the relevant provisions for filing of revised return what would be the
most appropriate correct option out of the following?
(A) Only a return furnished u/s 139(1) can be revised upto the end of
relevant assessment year.
(B) The return furnished u/s 139(1) or a return furnished u/s 139(4) can both
be revised upto the end of the relevant assessment year or before the
completion of assessment, whichever is earlier.
(C) The return furnished u/s 139(1) or a return furnished u/s 139(4) can both
be revised at any time before 3 months prior to the end of the relevant
assessment year or before the completion of assessment, whichever is
earlier.
(D) The return furnished u/s 139(1) or a return furnished u/s 139(4) can both
be revised at any time upto 3 months from the end of the relevant
assessment year or before the completion of assessment, whichever is
earlier. (2 Marks)
7. Ms. Ananya is a freelance interior designer and opts for the presumptive
taxation scheme under the Income-tax Act for the Financial Year 2025-26.
Her gross professional receipts during the year amount to ` 42 lakhs. She
does not maintain regular books of account.
Apart from her individual practice, Ms. Ananya is also a partner in Creative
Spaces LLP, a firm engaged in providing architectural and interior design
consultancy services. The gross receipts of Creative Spaces LLP for the
Financial Year 2025-26 amount to ` 58 lakhs.
Considering the provisions relating to payment of advance tax applicable for
the Assessment Year 2026-27, which of the following statements is correct?
(A) Both Ms. Ananya and Creative Spaces LLP are required to discharge their
entire advance tax liability in a single instalment on or before 15th
March, 2026.
(B) Ms. Ananya is not required to pay advance tax because she follows the
presumptive taxation scheme; however, Creative Spaces LLP must pay its
entire advance tax by 15th March, 2026.

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(C) Ms. Ananya is required to pay her entire advance tax liability on or before
15th March, 2026, whereas Creative Spaces LLP must pay advance tax in
the prescribed quarterly instalments.
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(D) Both Ms. Ananya and Creative Spaces LLP are required to pay advance
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tax liability according to the normal quarterly schedule applicable under
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the Income-tax Act. (2 Marks)
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8. Mr. Raju, a resident individual aged 61 years, is found to be the owner of five
gold bars of 50 gms each not recorded in the books of account. The value of
each gold bar is ` 3,50,000. He could only offer satisfactory explanation for
` 12 lakhs spent on acquiring these gold bars to Assessing Officer. What shall
be the tax payable by him on the value of such bullion considered to be
deemed income as per section 69?
(A) ` 3,43,200
(B) ` 10,92,000
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(C) ` 4,29,000
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(D) ` 13,65,000
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Case Scenario - III
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M/s AGTP Private Limited (AGTP) is engaged in providing various types of
supplies of goods and services within the State of Karnataka since July 2025. Its
aggregate turnover till 30.09.2025 was ` 19 lakh and on 01.10.2025, its Board of
Directors passed the resolution to apply for the voluntary registration under GST
keeping in view of the increasing turnover and to take advantage of the input tax
credit. AGTP applied for the registration on 20.10.2025 and the registration was
granted on 26.10.2025.

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After taking registration, AGTP started its business operations across the country.

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c. o AGTP furnishes the following details related to outward supply forsem
It started dispatching the goods across the India based on purchase orders it got.

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the month of

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November 2025:
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Sr. Particulars Amount
No. (`)
1. Received from M/s ABF Ltd. of Mumbai (unregistered under 1,50,000
GST), who had promised to AGTP on 5th August, 2025 to

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

complete the awarded contract within 3 months. But M/s ABF
Ltd. was not able to complete committed contract within
3 months' time, hence AGTP received compensation for non-
performance of contract on time as per the terms of the pre-
written agreement.
2. Received interest on fixed deposit with AVY Bank Ltd., a 1,00,000
Scheduled Bank which is not a Public-Sector Bank.

AGTP entered a contract for supply of goods taxable under forward charge and
where movement of goods was involved, with M/s Naman & Company, a
partnership firm registered under GST in Chennai. Other related details are as
follows:
(i) Full advance payment received on 1st December, 2025.
(ii) Goods made available to M/s Naman & Company on 17th December, 2025.
(iii) Goods removed from warehouse for supply on 15th December, 2025.
(iv) Invoice issued on 18th December, 2025.

(v) You may assume that payment entered in the books and credited in the bank
on the same day of receipt.
During the month of January 2026, Mr. Yash (registered under GST in Punjab)
had provided architectural services to AGTP related to its office building situated
in Dubai (UAE) and the payment to Mr. Yash was made through account payee
cheque in Mumbai.
Further, the AGTP also made the following outward supplies to the Government
in the month of February 2026:
(i) Supply of materials to Andhra Pradesh State GST Department for an invoice
value of ` 2,95,000 inclusive of GST @ 18% and delivered at Amravati in the
State of Andhra Pradesh.
(ii) Advertisement services to Haryana State Government, registered under GST
in Haryana, for an invoice value of ` 3,00,900 inclusive of GST @ 18%. The
advertisement was disseminated in the State of Karnataka only.

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Apart from the above, during the month of February 2026, AGTP supplied goods
to M/s VGD & Company registered under GST in Maharashtra. Part A of the
e-way bill was furnished by M/s VGD & Company being recipient on
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6th February, 2026 at 3:00 PM. The goods were delivered on 10th February, 2026
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at 7:00 PM. The details of the e-way bill were made available to AGTP on the
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common portal immediately upon generation, but AGTP did not communicate
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acceptance or rejection of the consignment.
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Note: All the amount given above are excluding of GST except mentioned

Based on the information given above, choose the most appropriate answer for
the following questions number 9 to 14:
9. The effective date of registration is:
(A) 01.10.2025

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(B) 26.10.2025
(C) 20.10.2025
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la supplies for the month of November 2025?
(D) 25.10.2025 (2 Marks)

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10. What is the taxable value of outward
(A) ` 1,00,000
(B) ` 1,50,000
(C) ` Nil
(D) ` 2,50,000 (2 Marks)
11. What is the place of supply for the transaction with Mr. Yash?

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(A) Punjab
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(D) Mumbai (2 Marks)
12. With reference to transaction with M/s Naman & Company, what is the time
of supply for the purpose of payment of tax as per GST Law?
(A) 1st December, 2025

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

(B) 17th December, 2025
(C) 15th December, 2025
(D) 18th December, 2025 (2 Marks)
13. In respect of Government related supplies in the month of February 2026, the
company shall be subjected to a total GST TDS (ignoring bifurcation & CGST
& SGST/IGST) of ` :
(A) Nil
(B) 5,000

(C) 10,100
(D) 5,100 (2 Marks)
14. What is the last date and time for communication of acceptance or rejection
of e-way bill by the AGTP?
(A) 11th February, 2026 at 7:00 PM
(B) 10th February, 2026 at 7:00 PM

(C) 7th February, 2026 at 3:00 PM
(D) 9th February, 2026 at 3:00 PM (2 Marks)
15. Mr. Shankar was a registered taxpayer under GST and was required to file
returns under section 39(1) of the CGST Act, 2017. His GST registration was
cancelled on 8th October, 2025 and the cancellation order was issued on
15th October, 2025. By which date should Mr. Shankar file the Final Return
in Form GSTR-10?
(A) 8th November, 2025
(B) 8th January, 2026

(C) 15th January, 2026
(D) 15th November, 2025 (2 Marks)
16. M/s Vinit Textile Ltd., a registered person dealing in supply of taxable goods
all over India and having an aggregate turnover of ` 5.95 crore in the

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preceding financial year 2024-25, is required to issue tax invoice with
mandatory HSN Code of:

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(A) 4 digits for goods supplied to registered persons only (B2B).
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(B) 4 digits for goods supplied to registered as well as unregistered persons
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(B2B and B2C).
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(C) 6 digits for goods supplied to registered as well as unregistered persons
(B2B and B2C).
(D) 6 digits for goods supplied to registered persons (B2B) and 4 digits for
goods supplied to unregistered persons (B2C). (1 Mark)
Answer Key

MCQ No. Correct Option
1. (B)
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2. (A)
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3. (D)
4. (B)
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(C) or (D)g
5.
6. (C)
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7. (C)
8. (C)
9. (B)
10. (C)
11. (B)
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12. (C)
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13. (A)

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14. (D)

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15. (C)
16. (C)

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

Part II – Descriptive Questions
SECTION A: INCOME TAX LAW
Question No.1 is compulsory.
Candidates are also required to answer any two questions from the remaining
three questions.
Working notes should form part of the respective answers.
All questions relate to Assessment Year 2026-27, unless otherwise stated.

Question 1
Mr. Siddharth aged 50 years, a resident Indian has furnished the following
particulars for the year ended 31.03.2026:
(i) He occupies ground floor of his residential building and has let out first floor
for residential use at an annual rent of ` 3,95,000. He has paid municipal
taxes of ` 25,000 for the current financial year. Both these floors are of equal
size.
(ii) As per interest certificate from HDFC Bank, he paid ` 1,50,000 as interest and
` 80,000 towards principal repayment of housing loan borrowed for the
above residential building. The home loan was taken in the year 2019.
(iii) He owns an industrial undertaking established in a SEZ which had
commenced operation during the financial year 2019-20. Total turnover of
the said undertaking was ` 500 lakhs, which includes ` 150 lakhs from export
turnover. Out of such ` 150 lakhs, only 120 lakhs have been received in India
in convertible foreign exchange on or before 30.09.2026. This industrial
undertaking fulfills all the conditions of section 10AA of the Income-tax Act,
1961. Profit from this undertaking is ` 44 lakhs.
(iv) He employed 20 new employees for the said industrial undertaking during
the previous year 2025-26. Out of 20 employees, 14 were employed on
1st May, 2025 for monthly emoluments of 20,000 and remaining were
employed on 1st September, 2025 on monthly emoluments of ` 12,000. All
these employees participate in recognized provident fund and they are paid
their emoluments directly to their bank accounts.
(v) He earned ` 30,000 and ` 40,000 as interest on saving bank deposits and
fixed deposits, respectively.

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(vi) He also sold his vacant land on 01.12.2025 for ` 16 lakhs. The stamp duty
value of land at the time of transfer was ` 17 lakhs. This land was acquired
by him on 15.10.1998 for ` 2.80 lakhs. The FMV of the land as on 1st April,
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2001 was ` 4.8 lakhs and stamp duty value on the said date was ` 4 lakhs.
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He had incurred registration expenses of ` 12,000 at the time of purchase.
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(vii) The cost of inflation index for the financial year 2025-26 and 2001-02 are

la paid insurance premium of ` 40,000 towards life insurance policy of hisa
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a son, who is not dependent on him.
(viii)He

You are requested to compute total income and tax liability of Mr. Siddharth for
the Assessment Year 2026-27 under default tax regime. (15 Marks)
Answer
Computation of total income and tax liability of Mr. Siddharth for
A.Y. 2026-27 under default tax regime under section 115BAC
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Particulars ` `
I Income from house property m
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Ground Floor [Self-occupied]
Gross annual value Nil
Less: Municipal tax paid [Not allowable in case of -
self-occupied property]
Net annual value Nil
Less: Interest on loan [Not allowable under -
default tax regime]

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Nil

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First Floor [Let-out]
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12,500
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a Net annual value
Less: Deduction under section 24
3,82,500

- 30% of NAV 1,14,750

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

- Interest on housing loan [relating to let 75,000
out portion is allowable in full even under
default tax regime]
1,92,750
Income from house property 1,92,750
II Profits and gains from business or profession
Profit from industrial undertaking set up in a SEZ 44,00,000
III Capital Gains
Full value of consideration of Vacant land [Since 16,00,000
stamp duty value does not exceed 110% of the
actual sales consideration of ` 16 lakhs, the
actual sales consideration would be deemed as
the full value of consideration]
Less: Cost of acquisition [Since land was acquired 4,00,000
before 1.4.2001, higher of
- the cost of acquisition of ` 2,92,000
(` 2,80,000 plus ` 12,000, registration
expenses) or
- fair market value of ` 4,80,000 on
1.4.2001
but restricted to stamp duty value of
` 4,00,000 as on 1.4.2001 would be
considered as cost of acquisition of vacant
land]
Long-term capital gains [since held for more 12,00,000
than 24 months]
IV Income from Other Sources
- Interest on saving bank deposits 30,000
- Interest on fixed deposits 40,000
70,000
Gross Total Income 58,62,750
Less: Deduction under section 10AA [Not Nil
allowable under the default tax regime]

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Less: Deduction under Chapter VI-A
- Deduction under section 80JJAA 1 in 9,24,000
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respect of new employees allowable as

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deduction even under the default tax regime

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[30% of ` 30,80,000 i.e., emoluments of 14

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employees employed on 1st May 2025 [14 x
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[6 employees employed on 1st September
2025 are not considered as additional
employees since such employees are
employed for less than 240 days during the
P.Y. 2025-26].
- No deduction under Chapter VI-A is allowed -
under the default tax regime except under
section 80JJAA.

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m Siddharth under section 115BAC
Total Income 49,38,750

s eMr.
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Computation of tax liability of

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Particulars ` `
Tax on total income of ` 49,38,750
Tax on LTCG on sale of vacant land 19,200
As the asset is a long-term capital asset, being land
acquired before 23.07.2024 and transferred on or
after 23.07.2024 by a resident individual, the tax
shall be computed @20% with indexation benefit or
@12.5% without indexation benefit, whichever is
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more beneficial to the assessee.
1,50,000 m
Tax @12.5% on LTCG of ` 12,00,000 without
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gla Tax @20% on LTCG of ` 96,000 with indexation
a 19,200

a LTCG with indexation ` 96,000 [` 16,00,000 –
` 15,04,000 (` 4,00,000 x 376/100)]

1
Assuming that the provisions of section 44AB applies on Mr. Siddharth.

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

Tax on ` 37,38,750, being total income other
than LTCG
` 4,00,001 – ` 8,00,000 [` 4 lakhs @5%] 20,000
` 8,00,001 – ` 12,00,000 [` 4 lakhs @10%] 40,000
` 12,00,001 – ` 16,00,000 [` 4 lakhs @15%] 60,000
` 16,00,001 – ` 20,00,000 [` 4 lakhs @20%] 80,000
` 20,00,001 – ` 24,00,000 [` 4 lakhs @25%] 1,00,000
` 24,00,001 – ` 37,38,750 [` 13,38,750 @30%] 4,01,625
7,01,625
7,20,825
Add: Health and Education Cess@4% 28,833
Tax liability 7,49,658
Tax liability (Rounded off) 7,49,660
Note - An individual paying tax u/s 115BAC is not liable to alternate
minimum tax u/s 115JC.

Question 2
(a) Mr. Tikam aged 35 years, furnishes the following information regarding his
income for the assessment year 2026-27.
(i) Fees for Technical Services of ` 50,000 for services rendered in Malaysia
to a non-resident for business in Malaysia, credited to his bank account
in Malaysia and immediately remitted to his bank account in India.
(ii) Profits from a business in England controlled from Mumbai ` 3,00,000
(out of which ` 25,000 is received in India).
(iii) Amount brought to India out of past untaxed profits earned in Singapore
` 1,00,000.
(iv) Capital gain on sale of land in India but received in Malaysia ` 2,00,000.
(v) Income from agriculture land in Nepal of ` 18,000, received there and
then brought to India.
(vi) He paid ` 50,000 towards principal payment of loan taken for
construction of his self-occupied house in India.

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(vii) Interest on saving bank deposit maintained in India in State Bank of
India of ` 12,000.

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Compute the total income of Mr. Tikam assuming he is :
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(1) Resident and Ordinarily Resident (Ignore the provisions of section

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115BAC).
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(2) Resident but Not Ordinarily Resident (Ignore the provisions of section
a g
a(b)g Examine the applicable provisions relating to deduction or collection of tax
115BAC). (6 Marks)

at source in the following independent cases for the assessment year
2026-27. Also, specify the rate and quantum of tax deductible or collectible,
wherever relevant:
(i) Mr. Dinesh, a resident individual, has invested ` 49 lakhs on April 1, 2025
in a Nationalized Bank in Power Finance Corporation Limited (PFCL)

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section 54EC Capital Gain Bonds at the rate of interest of 5.25% per

c. o
annum. Interest is payable annually and the bonds have a 5-year tenure

emworking as an accounts manager in a
with a lock-in period.
s
a into a contract with Mr. Rinkoo, another
lenters
(ii) Mr. Vijay, a resident individual
multinational company, g
a the repair of his residential house property.
resident individual, for
Under this contract, Mr. Vijay made the following payments to Mr. Rinkoo:
` 16 lakh on 1st July, 2025
` 22 lakh on 10th August, 2025
` 15 lakh on 15th March, 2026. (4 Marks)

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Answer

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(a) Computation of total income of Mr. Tikam for the A.Y. 2026-27
(if he is Resident and Ordinarily Resident - ROR)e
em la s
las Particulars
a g
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`

a (i) FTS for services rendered in Malaysia
Global income is taxable in case of a ROR.
50,000

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

(ii) Profit from business in England controlled from 3,00,000
Mumbai
Global income is taxable in case of a ROR.
(iii) Past untaxed profits earned in Singapore and Nil
brought to India in current year is not taxable, since
it does not represent income of the P.Y. 2025-26.
(iv) Capital gain on sale of land in India but received in 2,00,000
Malaysia
Deemed to accrue or arise in India, since the property is
situated in India.
(v) Income from agricultural land in Nepal, received 18,000
there
Global income is taxable in case of a ROR
(vi) Interest on saving bank deposit in SBI
Taxable since it is deemed to accrue or arises in India. 12,000
Gross Total Income 5,80,000
Less: Deduction under Chapter VI-A
Deduction under section 80C - For repayment of 50,000
housing loan
Deduction under section 80TTA - Interest on savings
bank account subject to a maximum of ` 10,000 10,000
Total Income 5,20,000

Computation of total income of Mr. Tikam for the A.Y. 2026-27
(if he is Resident but Not Ordinarily Resident - RNOR)

Particulars `
(i) FTS for services rendered in Malaysia to a non- Nil
resident
In case of RNOR, FTS would not be taxable in India since
neither services are utilised for business in India nor FTS
received in India.

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(ii) Profit from business in England controlled from 3,00,000
Bombay

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In case of RNOR, whole profits of ` 3,00,000 from

o m
business in England is taxable since business is
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(iii) m
.c controlled from India.
s e
s e Past untaxed profits earned in Singapore and Nil
g l a
la it does not represent income of the P.Y. 2025-26. a
brought to India in current year is not taxable, since
g
a (iv) Capital gain on sale of land in India but received in 2,00,000
Malaysia
Deemed to accrue or arises in India, since the property is
situated in India.
(v) Income from agricultural land in Nepal, received Nil
there and then brought to India

m
In case of RNOR, it would not be taxable in India, since

c. o
neither it is deemed to accrue or arise in India nor

m in SBI
received in India.
(vi) Interest on saving bank edeposit
s
la to accrue or arises in India.
Gross Total Incomea g
Taxable since it is deemed 12,000
5,12,000
Less: Deduction under Chapter VI-A
Deduction under section 80C - For repayment of 50,000
housing loan
Deduction under section 80TTA - Interest on savings
bank account subject to a maximum of ` 10,000 10,000

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Total Income 4,52,000

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(b) (i) Tax is required to be deducted at source @10% on interest on securities
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se
where the amount exceeds ` 10,000. However, no tax is required to be

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deducted at source on interest payable on “Power Finance Corporation

las Limited 54EC Capital Gains Bond” 2.
a g
ag (ii) TDS provisions under section 194C are not attracted since Mr. Vijay is
a salaried individual.

2
Vide Notification No. 27 & 28/2018, dated 18-06-2018

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

However, tax is required to be deducted at source @2% under section
194M, since the aggregate payment of ` 53 lakhs exceed the threshold
of ` 50 lakhs.
Accordingly, tax is required to be deducted at source on 15th March
2026, on which the aggregate payment exceed ` 50 lakhs.
Thus, tax deducted at source would be ` 1,06,000.
Question 3
(a) Mr. Arvind Mehta, aged 53 years, is a resident individual employed as General
Manager (Operations) with a Public Sector Undertaking. During the Previous
Year 2025-26, he was entitled to a monthly basic salary of ` 1,20,000 and
dearness allowance equal to 20% of basic salary. The following payments,
benefits and perquisites were provided to him during the year:
(1) In response to a severe earthquake that affected several districts of
Uttarakhand, Mr. Mehta requested his employer to directly remit his
salary plus DA for the month of August 2025 to the Prime Minister's
National Relief Fund (PMNRF).
(2) During the year, he encashed a portion of his earned leave and received
` 86,400 from his employer, representing 18 days' salary (basic pay plus
dearness allowance).
(3) The employer contributed ` 2,59,200 to his Recognised Provident Fund,
being 15% of his annual basic salary and dearness allowance.
(4) The PSU incurred expenditure of ` 6,20,000 on the medical treatment of
Mr. Mehta's dependent son in Germany. The amount included ` 1,40,000
towards travel expenses of the patient and one accompanying family
member, and the travel was undertaken in accordance with the
applicable foreign exchange regulations.
(5) House Rent Allowance (HRA) - ` 48,000 per month.
⇒ Mr. Sharma resided in a rented house in Bengaluru till
31st December, 2025, and paid rent of ` 52,000 per month.
⇒ From 1st January, 2026, he shifted to his self-owned house and
continued to receive HRA.

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(6) The employer transferred ownership of a desktop computer to
Mr. Sharma on 31st March, 2026. The computer was purchased on
1st April, 2022 for ` 1,20,000.
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(7) He has taken interest free loan of ` 15,000 from employer for treatment

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of tuberculosis (prescribed diseases).
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e2026-27 (Assuming he has opted for default tax regime). Give reasons gl a
a s
Compute the taxable salary income

lfor the tax treatment of each item.
of Mr. Arvind Mehta for the Assessment
a
g
Year
a (6 Marks)
(b) Who will authorize to verify the return of income tax in the case of following
persons as per provisions of Income-tax Act, 1961 for Assessment Year 2026-27:
(i) Mr. Sohail, a resident individual, is mentally incapacitated from
attending to his affairs.
(ii) M/s BAL & Associates, a partnership firm, whose managing partner is
absent from India.
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(iii) M/s PAL Private Limited, a company registered under Companies Act

em
2013, has made an application for initiation of corporate insolvency

a s
resolution process which has been admitted by Adjudicating Authority
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a g
under the Insolvency and Bankruptcy Code, 2016.
(iv) M/s XYZ Private Limited, a company registered under Companies Act
2013, whose management has been taken over by the Central
Government. (4 Marks)
Answer
(a) Computation of Taxable Salary Income of Mr. Arvind Mehta for
A.Y. 2026-27 as per the default tax regime

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Income from Salaries

em
Basic Salary [` 1,20,000 x 12]
la se 14,40,000
las Dearness allowance [20% of ` 14,40,000]
a g 2,88,000

ag Salary donated to PM National Relief Fund
for August month still be taxable in the
-

hands of Mr. Arvind Mehta since it is foregoing
of salary/ application of income

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

Leave encashment received during service is 86,400
taxable
Employer's contribution to RPF in excess of
12% of salary
15% of ` 17,28,000 i.e., basic salary plus DA 3 2,59,200
Less: 12% of ` 17,28,000 i.e., basic salary plus 2,07,360
DA
51,840
Perquisite value of medical treatment
Medical expenditure (other than travel Nil
expenses) to the extent permitted by RBI is
exempt
Travel expenses of the patient and one 1,40,000
accompanying member would be taxable, since
gross total income before including the said
expenditure of Mr. Arvind Mehta exceeds
` 8,00,000
1,40,000
House Rent Allowance (` 48,000 x 12) [Fully 5,76,000
Taxable under the default tax regime]
Perquisite Value on sale of desktop
computer
Original cost of computer 1,20,000
Less: Depreciation for F.Y. 2022-23 @ 50% 60,000
60,000
Less: Depreciation for F.Y. 2023-24 @50% 30,000
30,000
Less: Depreciation for F.Y. 2024-25 @50% 15,000
15,000
Less: Depreciation for F.Y. 2025-26 @50% 7,500

3
Alternatively, it is possible to assume that DA does not form part of salary for retirement
benefits.
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TAXATION

Value as on 31.3.2026 - being the date of sale 7,500 7,500
to Mr. Arvind Mehta 4

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Note – The desktop computer was acquired on
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01.04.2022. Accordingly, 31.03.2026 represents

. em
s
the completion of four years of usage. However,

e m l a
s
since the desktop computer is transferred on

l a ag
31.03.2026 itself, it is possible not to provide

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depreciation for F.Y. 2025-26 while computing
the perquisite value. In such a case, the
perquisite value would be ` 15,000.
Interest free loan of ` 15,000 would not be Nil
considered as perquisite, since the same is
given for treatment of tuberculosis
(prescribed diseases) or since the amount
does not exceed ` 20,000”.

o m
c
Gross Salary 25,89,740
. salary
or ` 75,000, whichever is less] em
Less: Standard deduction u/s 16 [Actual 75,000

l a s
ag
Taxable salary 25,14,740

(b) (i) Mr. Sohail, a resident individual mentally incapacitated from
attending to his affairs: Mr. Sohail’s return shall be verified by his
guardian or any other person competent to act on his behalf.
(ii) M/s BAL & Associates, a partnership firm: Since the managing
partner is absent from India, the return of partnership firm shall be
verified by any partner, other than a minor.

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(iii) Company undergoing corporate insolvency resolution process:

m Where an application for corporate insolvency resolution process has
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c. o been admitted, the return of the company shall be verified by the
se
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insolvency professional appointed by the Adjudicating Authority.

las a g
ag 4
The name of Mr. Sharma has been inadvertently given in the question due to a typographical
error. If the name of Mr. Sharma is considered to have been intentionally stated, no perquisite
value would arise in the hands of Mr. Arvind Mehta in respect of the transfer of the desktop
computer.

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

(iv) Company whose management is taken over by Central
Government: The return of the company shall be verified by the
principal officer of the company.
Question 4
(a) Mrs. Rupil, a resident individual and widow of Mr. Rupil, furnishes the
following details of her income and losses for the Previous Year 2025-26:

Particulars Amount (`)
Part-time coaching income earned from private tuitions 45,000
Income-tax refund received relating to Assessment Year 66,356
2024-25 including interest of ` 3,500
Income from the activity of owning and maintaining camel 1,45,000
races
Brought forward loss from the activity of owning and
maintaining race horses (relating to AY 2023-24) 65,000
Loss from speculative business 35,000
Presumptive Income from retail trade of garments business 3,75,000
u/s 44AD
Brought forward business loss of AY 2022-23 25,000
Brought forward business loss of AY 2023-24. This does not 30,000
include brought forward business loss of AY 2022-23
Salary from M/s FOX & Co., a partnership firm, in which she 3,60,000
holds 25% profit share. ` 85,000 of salary is not allowed in
the hands of firm while calculating income of the firm.

Mr. Kapish the major son of Mrs. Rupil, is employed as an accounts manager
with M/s FOX & Co. since July 2024 and receives a salary of ` 36,000 per
month. He does not possess any technical or professional qualifications.
In October 2020, Mrs. Rupil's father gifted 5,000 unlisted equity shares of an
Indian company to Master Dalip, the minor son of Mrs. Rupil. These shares
were originally acquired by him on 2nd April, 2019 for ` 75,000. Subsequently,
Master Dalip sold the said shares on 1st January, 2026 for ` 1,95,000.
Compute the total income of Mrs. Rupil and her two children for the
assessment year 2026-27 under proper heads of income along with the

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TAXATION

amount of losses to be carried forward on the assumption that Mrs. Rupil has
opted for optional tax regime, while Mr. Kapish and Dalip have chosen the
default tax regime. Mrs. Rupil filed her return of income for AY 2022-23
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within the due date of filing return of income for that year but filed return of
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income for AY 2023-24 after the expiry of due date for filing return of income
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e m
for that year.
l a
l a s
(CII for FY 2019-20: 289; 2020-21:301; 2025-26:376) (6 Marks) g
a
(b)g Mr. Dhiraj, Proprietor of M/s Kunj Developers, a prominent real estate firm,
a has completed a ultra-luxury residential complex titled "The Horizon" and
received the Completion Certificate on November 10, 2023. Unit 101
remained vacant throughout the year financial year 2025-26 as the sales
team waited for a better market price, while Unit 102 was let out to a
corporate client as a guest house for a monthly rent of ` 1,00,000 to cover
maintenance costs. Meanwhile, to streamline operations, the firm used Unit
103 as its own regional administrative office instead of renting a separate
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space. Finally, on January 15, 2026, the firm successfully liquidated Unit 104

.
(originally constructed at a cost of ` 1.4 crores) by selling it to an NRI for a

s em
total consideration of ` 2 crores. Mr. Dhiraj has also paid medical insurance

l a
premium of ` 15,000 for dependent sister. You are required to determine the
g
a
Total Income under the appropriate heads of income (assuming he has opted
out of Default tax regime) for the AY 2026-27. (4 Marks)
OR
(b) Ms. Kavita Sharma (aged 55 years), who is engaged in a trading business,
has a total income of ` 12,50,000 for the Previous Year 2025-26. Her total
tax liability (including health and education cess) under optional tax regime
is ` 1,95,000. Tax deducted at source during the year amounts to ` 75,000.

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She discharged her advance tax liability by making the following payments:

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Installment Due Date Advance Tax Paid

em
First 15th June,2025
la s
` 10,000

las Second 15th September, 2025
g
a` 28,000
` 22,000

ag Third 15th December, 2025
Fourth 15th March,2026 ` 30,000

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

You are required to calculate the interest payable under section 234C for
deferment of advance tax instalments for the Assessment Year 2026-27.
Show all necessary calculations and workings. (4 Marks)
Answer
(a) Computation of Total Income of Mrs. Rupil for the A.Y. 2026-27
as per the Optional tax regime under the Income-tax Act, 1961

Particulars ` `
Profit and gains of business or profession
Presumptive income from retail trade u/s 44AD 3,75,000
Salary from M/s FOX & Co. a partnership firm 2,75,000
[` 2,75,000 (` 3,60,000 – ` 85,000) taxable to
the extent allowable as deduction to the
partnership firm]
6,50,000
Less: Set-off of brought forward loss of A.Y. 25,000
2022-23 is allowed since return of income filed
within the due date of filing return of income
Less: Set-off of brought forward loss from -
business of A.Y. 2023-24 is not allowed, since
return of income is filed after the expiry of due
date for filing return of income
6,25,000
Capital Gains
Sales consideration of unlisted equity shares 1,95,000
Less: Cost of acquisition [cost to the previous 75,000
owner would be considered]
Long-term capital gains [Capital gain on sale 1,20,000
of unlisted equity shares gifted by Mrs. Rupil’s
father to his minor son would be clubbed in
her hands]
Less: Exemption under section 10(32) 1,500
1,18,500

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Income from Other Sources
Part-time coaching income 5 45,000
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Interest on income-tax refund [Income-tax 3,500

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refund is not taxable]
. s e
em a
Income from activity of owning and 1,45,000 1,93,500

s g l
la Gross Total Income/Total Income
maintaining camel races
9,37,000 a
ag Losses to be carried forward
Loss from speculative business of A.Y. 2026-27 35,000
Loss from speculative business can be set-off from income
from speculative business only. Thus, the same would be
carried forward.

Loss from activity of owning and maintaining race Nil
horses of A.Y. 2023-24
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Loss from activity of owning and maintaining racehorses

em
can be set-off against income from owning and

l a s
maintaining of race horses only. However, since the return

a g
for the A.Y. 2023-24 was filed belatedly, such loss cannot
be carried forward.

Computation of Total Income of her major son, Mr. Kapish and
minor son Master Dalip for A.Y. 2026-27 as per the default
tax regime

Particulars Mr. Kapish Master Dalip
Income from Salaries

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Basic Salary [` 36,000 x 12] 4,32,000
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Less: Standard Deduction [Lower of

em
actual salary or ` 75,000]
3,57,000la
75,000
s
las Net Salary
ag
ag
5
Alternatively, it is possible to tax part-time coaching income under the head “PGBP”.

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

[Income of major child not clubbed in
the hands of parents even if he does not
possess any technical or professional
qualification]
Capital Gains [LTCG from sale of unlisted Nil
equity shares by Master Dalip clubbed in
the hands of Mrs. Rupil]
Gross Total Income/ Total Income 3,57,000 Nil
(b) First Alternative
Computation of Total Income of Mr. Dhiraj for the A.Y. 2026-27
as per the normal provisions of the Income-tax Act, 1961

Particulars ` `
Income from House Property
Unit 101
Annual Value [Since Unit 101 is held as stock in Nil
trade, the annual value would be treated as NIL for
a period of two years i.e., 2024-25 & 2025-26 from
the end of the financial year i.e., 31st March 2024 in
which certificate of completion of construction of
the property is obtained from the competent
authority, if such property is not let-out] 6
Unit 102
Net Annual Value [Being actual 12,00,000
rent (` 1,00,000 x 12)]
Less: 30% of NAV 3,60,000
8,40,000
Income from house property 8,40,000
Profit and gains of business or profession
Unit 103 -
Since, the unit is used for business purposes,
depreciation in respect of such unit can be
claimed under the head “PGBP”.

6
By virtue of Section 23(5)
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TAXATION

Unit 104
Sales Consideration of Unit 104 2,00,00,000
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c. o
Less: Cost of Construction 1,40,00,000 60,00,000

o m m
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Gross Total Income 68,40,000
s e
e m
Less: Deduction under section 80D – No Nil
l a
a s
l premium paid for his sister as she does not fall
deduction is allowable for medical insurance
ag
g
a within the meaning of “Family” for the
purpose of deduction under section 80D.
Total Income 68,40,000

(b) Second Alternative
Computation of Interest Payable under section 234C of
Ms. Kavita Sharma

o m
. c
Particulars `

Less: Tax deducted at source se
m
Tax liability for the financial year 2025-26. 1,95,000

Advance tax payable gl
a 75,000

Due Date
a
Amount payable Advance Shortfall
1,20,000
Interest
of Tax Paid
installment (`) (`) (`) (`)
On or ` 18,000, being not 10,000 8,000 240
before 15th less than 15% of (18,000 – (8,000 x 1%
June, 2025 advance tax 10,000 x 3 months)

o m
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On or ` 44,000 (` 54,000 – 22,000 22,000
.c 660

c. o before 15th ` 10,000) Not less (44,000 –
22,000) s em(22,000 x

em a
September, than 45% of
l
1% x 3

las 2025 advance tax
ag
months)

g
liability less
a amount paid in
earlier installment

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

On or ` 58,000 (` 90,000 – 28,000 30,000 900 (30,000
before 15th ` 32,000), being (58,000 - x 1% x 3
December, not less than 75% 28,000) months)
2025 of advance tax
liability less
amount paid in
earlier
installment(s)
On or ` 60,000 30,000 30,000 300 (30,000
before 15 th
(` 1,20,000 – (60,000 - x 1% x 1
March, 2026 ` 60,000), being 30,000) month)
whole of the
advance tax
liability less
amount paid in
earlier
installment(s)
Interest Payable 2,100

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Part II – Descriptive Questions

SECTION B: GOODS AND SERVICES TAX
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1.
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For Part-II, Section B comprises of questions from 5-8. In Section B, answer
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question no. 5 which is compulsory and any two questions from question nos.
s em
6-8.
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2.
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Working notes should form part of the answer.
a g
a3.g All questions in Section B should be answered on the basis of position of GST
law as amended by the Finance Act, 2025 and the significant notifications/
circulars which have become effective up to 28th February, 2026.
Question 5
(a) QTR Ltd. of Pune, a registered person under GST in the State of Maharashtra,
is engaged in making various supplies of goods and services. QTR Ltd. has
provided the following details regarding the transactions undertaken in the

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month of February 2026:

.
em
Sr. Outward / Inward Transactions Amount
No.

l a s (` )
(i)
a g
Supply of goods to Kapil Enterprises, a registered
person in Mumbai, Maharashtra.
20,00,000

Further, this amount of ` 20,00,000 includes lump sum
amount of ` 20,000 towards freight (transportation)
charges as contract agrees to deliver the goods at Kapil
Enterprises' premises.
QTR Ltd. paid for freight to a Goods Transport Agency 25,000
(GTA) for the delivery of the goods mentioned above to
Kapil Enterprises. GTA is registered person under GST
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m located in the State of Gujarat and opted to pay tax
c. o
c. o under forward charge.
s emAs given
s em la
(ii) QTR Ltd. is also dealing in selling of WiFi headphones
g
la a
and portable speakers of the same OEM. Although in the

ag portable speakers of the same OEM are not
mandatorily required for functioning of the
inner
column
headphones. However, if both the products are
purchased together in a single combo list price then a

29

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SUGGESTED ANSWERS
INTERMEDIATE EXAMINATION: SEPTEMBER 2026

pre-decided discount of 2% on single combo list price
will be given through invoice itself.
During the month, following details are available:
(a) QTR Ltd. supplied 60 WiFi headphones with
portable speakers to BCH Ltd. at the single combo
list price of ` 5,45,000.
(Single combo list price is not bifurcated
separately in the invoice, the individual list price
of portable speakers is ` 45,000 included in the
above price but not reflected in the invoice.)
(b) QTR Ltd. supplied 50 WiFi headphones only to
ACH Ltd. of Jaipur, Rajasthan at the list price of
` 5,00,000.
(iii) Amount received for training to car drivers at Delhi in 2,50,000
connection with the road safety week celebration of
the Delhi Government. (In this training, 79.95% of the
total expenditure is borne by the Delhi Government.)
(iv) Provided warehousing services for storage of whole 3,50,000
pulse grains such as whole gram, kidney beans
(Rajma).
(v) Availed and paid for services of an Arbitral Tribunal to 7,00,000
settle a dispute relating to the Companies Act, 2013
(vi) Purchased raw material from BHK Ltd., registered 6,50,000
under GST in the State of Uttar Pradesh (U.P.)
BHK Ltd. is mandatorily required to issue e-invoice.
However, it did not issue e-invoice with Invoice
Reference Number (IRN) but this invoice was reflected
in GSTR-2B.

Additional information:
(i) All the figures are exclusive of GST wherever applicable.
(ii) All the conditions necessary for availing the input tax credit have been
fulfilled and that details of GST paid on inward supplies are available
in GSTR 2B.

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(iii) There is an opening balance of SGST of ` 4,00,000 in e-credit ledger
at the beginning of the month.

m
c. o
(iv) Assume that all the inward supplies have been used only for providing
m
co
taxable outward supplies.

. em
m
(v) Aggregate turnover of QTR Ltd. for the previous financial year was
e l a s
l a s ` 210 lakh.
(vi) Wherever details for determination of place of supply are not given ina
g
ag the question, it shall be taken as intra-State transaction.
(vii) Assume the applicable rates of GST as below:

Sr. Details CGST SGST IGST
No.
1 Portable speakers 14% 14% 28%
2 WiFi headphone 9% 9% 18%
m
c. o
3 Goods Transport Agency (GTA), only if 2.50% 2.50% 5%

m supplies 9% 9% 18%
taxable under RCM
All other outward andeinward
4
s
la liability of QTR Ltd. to be paid in cash if any,
Compute the net minimumgGST
for the month of Februarya 2026 after utilizing input tax credit available.
Note: Calculate tax for each step separately and legal explanations for each
step should form part of your answer but detailed provisions of law are not
required. (10 Marks)
(b) Mr. Satendra Yadav, engaged in providing various services, is registered as a
regular taxpayer under GST. He furnished the following information relating

m
to various output supply transactions for the month of February 2026:

m .co
c. o m
Sr. Particulars Amount

se
No. in INR

s em (i) Received event management fees to organise a musical
gla
5,00,000

gla concert where ticket price for admission in musical concert a
a was ` 300 per person.
(ii) Provided services by way of artificial insemination of live 1,00,000
horses.

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(iii) Provided services of collecting news as an independent 1,20,000
journalist to a News Agency.
(iv) Received fees for appointment as Team Manager of We 1,00,000
Sports Academy, a registered recognised sports body, to
participate in Footwall Championship organised by We
Sports Academy.
(v) Provided services of non-air-conditioned contract carriage 1,50,000
used for conducting tours of M/s Shivani Enterprises

You are required to compute the amount of taxable supply of Mr. Satendra
Yadav for the month of February 2026 along with explanation for each step.
All amounts given are exclusive of taxes wherever applicable. (5 Marks)
Answer

(a) Computation of net minimum GST liability of QTR Ltd. to be paid in
cash for the month of February 2026

Particulars Value CGST SGST IGST (`)
(`) (`)
Computation of outward tax liability
(i) Supply of goods to 20,00,000 1,80,000 1,80,000 -
Kapil Enterprises [20,00,000 [20,00,000
[Since supplier has x 9%] x 9%]
agreed to deliver
goods at customer's
premises and
arranges
transportation itself,
contract of supply
becomes a
composite supply;
principal supply
being the supply of
goods. Accordingly,
GST is levied on the
entire value of
` 20,00,000 (inclusive

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of freight). Further, it
is an intra-State
supply.]
m
m c. o
co
(ii)(a) Supply of WiFi 5,34,100 74,774 74,774 -

.
headphones with [5,45,000 [5,34,100 [5,34,100
em
e m portable speakers to − 10,900 x 14%] x 14%]
l a s
l a s BCH Ltd. (5,45,000
ag
ag
[Since supplies are x 2%)]
not naturally
bundled and a single
price is being
charged, it is a mixed
supply.
It is treated as supply
of that particular

m
supply which attracts
highest tax rate (i.e.,
. co
em
portable speakers).
Further, 2% discount
l a s
is deductible from the
combo price since it is a g
pre-agreed and linked
to invoice. It is also an
intra-State supply 1.]
(ii)(b) Supply of WiFi 5,00,000 - - 90,000
headphones to ACH [5,00,000
Ltd. x 18%]

m
[Being individual

m .co
supply of WiFi

c. o m
headphones, it will

em
be charged at the
la se
las rate of headphones.
a g
g
Further, it is an inter-

a State supply.]

1
It is specifically mentioned in the question that wherever details for determining the place
of supply are not given in the question, it shall be treated as intra-State transaction.

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(iii) Training to car drivers Nil - - -
[Since services are
being provided to
Delhi Government
under a training
programme for
which more than
75% of total
expenditure is borne
by Delhi
Government, said
services are exempt.]
(iv) Warehousing Nil - - -
services
[Services of
warehousing of
whole pulse grains
being agricultural
produce are exempt.]
Total output tax 2,54,774 2,54,774 90,000
liability
Less: Total eligible
ITC [Refer Working
Note]
IGST credit is set off (4,500)
against IGST liability.
CGST and SGST (63,000) (2,54,774)
credit is set off
against CGST and
SGST liability
respectively.
Remaining SGST (85,500)
credit is set-off
against IGST liability.

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SGST credit cannot
be set-off against
CGST liability.
m
m c. o
co
Net GST 1,91,774 Nil Nil

. em
s
Add: GST payable 7,00,000 63,000 63,000

em under reverse charge
l a
l a s on Arbitral Tribunal
ag
ag
services availed
[Services provided by
an arbitral tribunal to
a business entity are
taxable under
reverse charge
(RCM)]
Tax payable under
reverse charge, being
m
not an output tax,
. co
em
cannot be set off
against ITC. It has to
l a s
be paid in cash.]
Minimum net GST a g 2,54,774 63,000 Nil
payable in cash
Working Note:
Computation of total ITC available for set off

Particulars Value CGST SGST IGST
(`) (`) (`) (`)

m
co
(i) Opening balance 4,00,000
m .
c. o m
(ii) Arbitral Tribunal 7,00,000 63,000 63,000

em se
services availed 2 [7,00,000 [7,00,000

s
[ITC on services x 9%]
g la
x 9%]

gla used in course or
a
a
2
It is specifically mentioned in the question that wherever details for determining the place
of supply are not given in the question, it shall be treated as intra-State transaction.

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furtherance of
business.]
(iii) Raw material 6,50,000 - - -
purchased from BHK
Ltd.
[Since BHK Ltd.
mandatorily
required to issue
invoice did not issue
e-invoice with IRN, it
cannot be treated as
valid document for
claiming ITC. Thus,
ITC cannot be
claimed.]
(iv) GTA services availed 25,000 4,500
[IGST @ 18% is [25,000 X
payable under 18%]
forward charge on
services of GTA
since location of
supplier is Gujarat
and place of supply
(being location of
recipient) is
Maharashtra. ITC
on services used in
course or
furtherance of
business is
allowed.]
Total input tax 63,000 4,63,000 4,500
credit 3

3
Full credit is admissible for set-off since it has been provided in question that all inward
supplies are used only for outward taxable supply.

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(b) Computation of amount of taxable supply of Mr. Satendra Yadav:

Particulars Taxable
m
c. o
value (`)
(i)
om
c.[Taxable.
Event management services 5,00,000
em
m
e Where the consideration for right to admission to a l a s
l a s ag
ag
concert does not exceed ` 500 per person, services
by way of right to admission to said concert are
exempt. However, said exemption is not applicable
to event management services provided to organize
said concert.]
(ii) Artificial insemination of live horses 1,00,000
[Taxable, artificial insemination of livestock is exempt
except when performed on horses.]

om
(iii) Services of collecting news --

. c
[Exempt since services of collecting news by an

s em
independent journalist are exempt.]
(iv)
g l a
Fees for appointment as Team Manager of We Sports
Academy
a
[Not Taxable since services provided by a team
--

manager to a recognised sports body (RSB) for
participation in a sporting event organised by said
body are exempt.]
(v) Services of non-air-conditioned contract carriage
[Taxable. Services by non-air-conditioned contract 1,50,000

m
carriage for transportation of passengers are exempt.

m c. o
However, said exemption is not applicable to

c. o m
conducted tours.]

em Total amount of taxable supply
l a se 7,50,000
las Question 6
a g
ag (a) M/s Sam International Co. Ltd., located at Japan, entered into an agreement
with its associate enterprise M/s Dare International Private Limited, located
in India and registered under GST in Delhi, to provide professional services
for USD 60,000 with a condition of 50% payment immediately on the receipt
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of invoice and the balance 50% payment within 30 days of receipt of the
invoice.
In case of delay of payment, interest at the rate of 3% per month or part of
month will be charged. M/s Sam International Co. Ltd. issued invoice of
USD 60,000 on 10th December, 2025. M/s Dare International Private Limited
received and recorded invoice in its books of accounts on 12th December,
2025 and transferred 50% payment of USD 30,000 to the account of
M/s Sam International Co. Ltd. on 12th December, 2025.
The balance amount of USD 30,000 and interest of USD 1,800 for delay in
payment were paid on 20th February, 2026.
You are required to determine the time of supply for above transactions
which are liable for payment of GST under RCM in the hands of
M/s Dare International Private Limited. Necessary explanations should form
part of your answer. (5 Marks)
(b) M/s Mahesh Enterprises registered under GST at Bengaluru, Karnataka had
purchased goods for ` 2,00,000 with IGST extra for ` 36,000 on it from
M/s Deep Traders registered at Pune, Maharashtra on 1st March 2025.
M/s Deep Traders did not file any GST return since March 2025. The proper
officer cancelled the GST registration of M/s Deep Traders on 25th October, 2025
with effect from 1st March, 2025 due to non-filing of GST returns.
M/s Deep Traders applied for revocation of cancellation of registration on
25th November, 2025. The proper officer approved application on
7th December, 2025 and activated its GST registration. M/s Deep Traders
paid GST and filed its all pending GST returns on 2nd January, 2026. Whether
M/s Mahesh Enterprises is eligible to claim GST input tax credit on goods
purchased from M/s Deep Traders on 1st March, 2025? (5 Marks)
Answer
(a) Time of supply of import of service from associated enterprise is
Earlier of:
(i) Date of entry in the books of account of the recipient
or

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(ii) Date of payment.
A. Time of supply of 50% payment immediately on the receipt of invoice:
m
c. o
Earlier of:
mDate of entry in the books of account of the recipient (12
c. o December
(i)
em
th

e m 2025)
l a s
l a s or
a g
ag (ii) Date of payment (12 December 2025) .e. time of supply will be
th

12th December 2025.
B. Time of supply of the remaining (balance) 50% payment:
Earlier of:
(i) Date of entry in the books of account of the recipient
(12th December 2025)
or
m
c. o
(ii) Date of payment (20th February 2026) i.e. time of supply will be

em
12th December 2025

s
la is the date on which the supplier receives
C. Time of supply of interest:
Time of supply ofg
a interest
such Interest / addition in value, i.e. time of supply will be
20th February 2026.
(b) One of the conditions for availing ITC is that supplier must upload the
invoice details in his GSTR-1/IFF and such details are reflected in the
recipient's Form GSTR-2B.
Since Deep Traders did not file returns since March 2025, its GSTR-1 for

m
March was not filed 4. Hence, in the given case, above condition is not

m c. o
fulfilled and thus, ITC cannot be availed by M/s Mahesh Enterprises in the

c. o month of March, 2025.

s em of the
em la is earlier.
Further, ITC for a financial year can be claimed up to 30 November th

las a g
succeeding FY or the date of filing annual return, whichever

ag
4
Since Deep Traders has not filed any return since March 2025, it would not have filed GSTR-
3B for February 2025 which was due in March 2025. This debars Deep Traders from
furnishing details of outward supplies in GSTR-1 for the month of March 2025.

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Even though Deep Traders subsequently filed its return within 30 days of
revocation of cancellation, time limit for availing ITC has lapsed.
Hence, M/s Mahesh Enterprises is not eligible to claim ITC on goods
purchased from M/s Deep Traders.
Question 7
(a) M/s Hanry Co., a registered supplier in Delhi had sold goods for ` 5,00,000
to M/s Chintu Sales Co. located and registered in Chennai. M/s Hanry Co.
hires Shree Transporter to transport goods from Delhi to Chennai. M/s Hanry
Co. handed over goods to transporter on 14th June, 2025 with e-way bill
having validity up to 19th June, 2025.
On 16th June, 2025, during the transit Shree Transporter handed over goods
to Fasto Transporter at Bhopal due to failure of engine of the vehicle. Fasto
Transporter loaded goods to another vehicle and delivered the goods to
consignee at Chennai.
In the above situation, how many e-way bills are required to be generated
and explain the process involved in the above situation for generation of
e-way bill in brief. (5 Marks)
(b) What is eligible criteria for small tax payers to apply for electronical
automatic registration and to withdraw from the option under rule 14A?
Whether more than one registration can be applied in a particular state
against the same PAN under rule 14A?
OR
(b) 'Notified registered persons are required to prepare e-invoice for the supplies
made. State the notified registered persons and the supplies that require the
preparation of e-invoices. Also, state the transactions or the scenarios by such
notified registered person that do not attract e-invoicing. (5 Marks)
Answer
(a) Only one e-way bill is required in the given case
M/s Hanry Co. (or the Supplier) will fill Part A of the e-way bill and assign
the e-way bill to Shree Transporter,
Shree Transporter (or the Transporter) will fill the details of the conveyance
in Part B and transport the goods.

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However, where goods are transferred to another conveyance during
transit (including due to vehicle breakdown), the details of conveyance
need to be updated in Part-B of the existing e-way bill. Such updating
m
m
should be done within the validity period of the e-way bill.
c. o
.co
Accordingly, on reaching Bhopal, Shree Transporter will hand over the
s em
em l a
s
goods along with the existing e-way bill to Fasto Transporter.

l a ag
ag
Fasto Transporter (or the second Transporter) will update the details of its
conveyance in Part B of the existing e-way bill and move the goods from
Bhopal to Chennai.
(b) A person is eligible to opt for registration under rule 14A provided:
(1) He has made an application for registration under rule 8.
(2) His total output tax liability on supply made to registered persons
(or B2B) does not exceed ` 2.5 lakh per month.

o m
(3) He must opt for and undergo successful Aadhaar authentication 5.
c
. to file application for withdrawal of
m
A registered person shall be allowed

s e
a
option only if:
l 3 months' return, where such application
ag 2026.
(1) he has furnished minimum
is filed before 1 April, st

(2) he has furnished minimum 1 tax period's return, where such
application is filed on or after 1 st April, 2026.
(3) he has furnished all the returns due for the period from the effective
date of registration till the date of application for withdrawal.
(4) no cancellation proceedings have been initiated against such
registered person.
o m
m c
. this
c. o m
No, a taxpayer can have only one registration per State/UT under

s e
em
option against the same PAN.

s g la
gla a
a
5
except cases notified under section 25(6D)

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(b) Alternative
All registered businesses with an aggregate turnover (based on PAN) in any
preceding financial year from 2017-18 onwards greater than ` 5 crore are
the ‘notified persons’ who are required to issue e-invoices.
Supplies that require the preparation of e-invoices
(i) Taxable supplies to a registered person (B2B supplies)
(ii) Exports
(iii) Invoice issued for the outward supply, tax on which payable under
RCM
Transactions/scenarios by such notified registered person that do not
attract e-invoicing
(i) Supplies made to an unregistered person (B2C supplies)
(ii) Supplies by Special Economic Zone (SEZ) units
(iii) Supplies by an insurer
(iv) Supplies by GTA supplying services in relation to transportation of
goods by road in a goods carriage
(v) Supplies by supplier of passenger transportation service
(vi) Supplies by person supplying services by way of admission to
exhibition of cinematograph films in multiplex screens
(vii) Supplies by a Government Department and a local authority (any
one)
(viii)Supplies by Banking company or financial institution including NBFC
(any one)
(ix) Exempt supplies made by notified persons.
Question 8
(a) With reference to recent clarification issued vide Circular number
251/08/2025 GST dated 12.09.2025, discuss when "A Post-Sale Discount"
offered by a manufacturer to its dealer / distributor would be treated as a
consideration paid by the manufacturer for the dealer's supply of the same

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goods to the end customer and also discuss when it will not be treated as a
consideration along with necessary explanation as per the above circular.

m
c. o
(5 Marks)
m
.co m
(b) (i) State the provisions of the CGST Act, 2017 regarding the period for which

m s e
a
books of account and other records must be retained by a registered

s e l
ag
person when such a person is a party to an appeal or any other

g l a proceedings before any Authority or Tribunal. (2 Marks)
a (ii) Write a note on the main constitutional pillars of GST. (3 Marks)
Answer
(a) When post-sale discount is treated as consideration: Where manufacturer
has a pre-existing agreement with the end customer to supply goods at a
discounted price and issues a financial/commercial credit note to dealer
thereby enabling dealer to supply goods at discounted rate to end consumer,
post-sale discount offered by a manufacturer to its dealer/distributor would
m
c. o
be treated as a consideration paid by the manufacturer for the dealer's supply

emtreated as consideration: Where sale
of the same goods to the end customer.
When post-sale discount is NOT
l s
adealer/distributor is on principal-to-principal
of goods by manufacturer to
g
basis (i.e., title in the agoods fully passes to the dealer) and dealer
independently sells to end customer with no pre-existing agreement
between manufacturer and end customer, post-sale discount offered by a
manufacturer to its dealer/distributor would not be treated as a
consideration paid by the manufacturer for the dealer's supply of the same
goods to the end customer.
(b) (i) Period for which books of account and other records must be retained
by a registered person when such a person is a party to an appeal or
m
m
any other proceedings before any Authority or Tribunal: 72 months
.co
c. o from due date of furnishing of annual return for the year pertaining to
se
m
em la
such accounts and records

las or
a g
ag 1 year after final disposal (or order) of such appeal or any other
proceedings,
whichever is later.

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(ii) Main constitutional pillars of GST
Concurrent powers are given to Parliament and State Legislatures to
make laws governing taxes on goods and services.
IGST (Integrated Goods and Services Tax) on inter-State transactions
of goods and services is to be levied and collected by the Central
Government and apportioned between the Union and the States in
the manner provided by Parliament by Law as per the
recommendation of the GST Council.
Parliament is empowered to formulate the principles for
determining the place of supply and when a supply takes place in
the course of inter-State trade or commerce.
Goods and Services Tax means any tax on supply of goods, or
services or both except taxes on the supply of the alcoholic liquor
for human consumption. Thus, GST can be levied on supply of all
goods and services except alcoholic liquor for human consumption.
President is empowered to constitute a joint forum of the Centre
and States namely, Goods and Services Tax Council (GST Council).
GST Council shall make recommendations to the Union and the
States on:
(a) taxes to be subsumed in GST,
(b) goods to be taxed and to be exempted,
(c) model GST laws,
(d) GST rates,
(e) registration threshold limits and
(f) special provisions for Special Category States.

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