cs professional programme group 3

8/3/2019 CS Professional Programme Group 3

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PROFESSIONALBOGRAMME XAMINATIONJ U N E2 0 1

STRATEGICMANAGEMENT, LLIANCESAND'INTERNATIONAL RADETimeal lowed:3hours \Maximummarks 10 0

PART A(Answer ANY TWO Questions om thispan )Question1

(a) Distinguishbetween he following(i) 'Market risk'and

'businessrisk''(ii) 'Delphitechniques'and 'crossimpactanalysts"(iii)'Concentricdiversification'nd'conglomerateiversifcation'(iv) 'Managementinformation ystem'and 'decisionsuppotrsystem(v) 'lnter-firmcomparisons' nd 'intra-firmcomparisons'' (3 marks each)

(b) As a Company Secretary,how wouldyou pergelv?.the 'risk elements'that ashareholderwill have in a company rom financial riskpoint of view ? (5 marks)Answer1(aXi)Difference etweenMarketRiskand BusinessRisk

Market isk s he riskwhere hevalueof an nvestment il l ncrease/decreaseue ochangesn market actors nd sgenerally ncontrollable,[ '4arketis kcannot eavoidedno rnitterhow manydilferent toiks mightbe present n heporttolioThis s he day{o-da y luctuationsn a stock'sprice lt appliesmainly o stocksand optionsBusiness is kon he othernand efers o thesiluation f uncertaintyssociated ith.r"Jng "u"n frowsof a business. usiness iskca nbe nternal

nd externalExlernal: -rsness isk s he result i operatingonditions hich re mposed pon heorganization:, :rrcumstanceseyondtscontrolTh emajorbusinessiskswf\ich iv e ise o variation- :ash llowsand business alueare price isk,credit is kand purerist(Answer (aXi i )Difterence etweenDelphiTechniques nd Cross mpactAnalysis

3C:.3{lhesetechn|queSare{orecastingtechniques.HowevertheditterenCesbetweenther:a 'eas unoer:ln De,p: Techniques,he divergent xpertopinions re consolidatedo arriveal acomprom,sestimatef utureThis nvolvesheuseolexpert pinionhrough nonymous'.t"Lar,u" controlledeedback monga groupof experts.Normallyhe panel s polledlV qu".rionnuir"" n a searchoropinions n reasonably ell-definedssuesEachpanel


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PP-SMAIT-June 011 2member esponds itha forecast nd easonsor t.These esponsesre henstatisticallycompiled nd ed backanonymouslyo all he members f the panel.This echniquesemployedairlywioely npublic ndprivate ectorplanning. hekey o Delphi echniquelies n hecoordinatorndexperts.

Cross mpactAnalysisTechniques designed o assess he interactions mongtuture nvironmentalsocio, conomic, olitical,egaletc)conditions.he analyst eginstheseexercrsesy assuminghata setof future nvironmentalircumstancesil lcometrue.Throughheuseof matrix nalysis,he analysthe nattemptso assess he mpactol thesecircumstancesn hepossibil i tynd imingof others uchas price, ompetitionetc. if nothingelse, he analyst s able to expose orecastingnconsistenciesnd toclarifyunderlying ssumptionsn he orecastshemselves.Answer1(aXiii)Difference etweenConcentricdiversif cationand Conglomerate iversification

Concentric iversilicatio nccurswhenatirmadds elated roducts r markets. hegoalof suchdiversifications o achieve ynergy r strategicit .Strategicit noperationscould esultn synergy y hecombinationfoperating nits o mprove verall lficiency.Conglomerateiversificationn th e otherhandoccurswhena firm diversifiesntoareas hatare unrelatedo tscurrent ineof business. neof the reasonsor hjs ypeofdiversifications the imited pportunitiesn a firm's urrent ineol business. indjng nattractjverrvestmentpportunityequires he firm o consider lternativesn othersofbusiness. his approach s alsoadopted y irmsas a meansof increasinghe growthrate. n India,Tata's TC and Mahindra nd Mahindra re examples l ccnglomeratediversifedcompanies.

Answer1(aXiv)DifferencebetweenMISand DSS

M S (Management Info mationSystem) DSS(DecisionSuppotlSystem)1 Informationor m of a MIS is periodicandbased ndemands.2 Informationormatsar e pre-specifiedand ixed.3 Information s providedby extractionandmanipula l ionfoperat ionalata.4. lt provides nlormation bout th eper-formance f heorganization.

Informationormof DSS s nteractive.DSS informalionormatsar eadhoc,f exible ndadaptable.Informations produced y analyticalmodelingof operational ndexternaldata.It provides nformation nd decisionsupport echniqueoconfront roblems

Answer (aXv)Differenceetweennter-firm omparisonsnd ntra-firm omparisons

Inter-frmcomparisonssa technjquef comparingheperformances,ff ciencies,


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3 PP-Sl\4AlT-June011costsand protits f various oncernsn an industryor assesslngts own penormanceandaScerta in ingthereasons{oranydi f ferenceinperformances/ef f ic ienclesetc,

lntra-frmcomparisonsmeans omparison t two or moredepartmenls r divisionsbelongingo the same firm with the obiective f makingmeaningful nalysis or thepurpo;eol increasinghe effectiveness{ he departmentsr divisionsnvolvedThus,both nterjirmand ntrajirmcomparisonsredifferentn he sense ha twhlleformercompareshe pedormance t th e tirmwith other irms, he latter ompares heperformancef tsown division r departments he comparisonma ycover he nancialposition roperatingesults r both.

Answer1(b)Lapses n rlsk controloften ead o substantialinancialossesby a company.Abreak-downn riskcontrol venlually osts heshareholder oney, irectly r ndirectly'eitherby being orced o injectmorecapitalor by seeing he equity oosevaluewhenlosses esulting om iskcontrolailures ecome ublic nowledge hiscouldeven ea dto closure l the company f a desperateake overdoesnot happen'It s huswithin very hareholder'sight oquestionhecompany's oard ndSeniorManagement n how he irmmanages ndconlrols isk,sincegood iskmanagementmuststan rom hevery op Constitutionf RiskManagement ommittee nd ts eponsnave o be reviewed eriodicallynd management'sesponseo mitigatehe riskhas obe broughto theattention f heAuditCommittee hich n urnappriseshe Boardof helevelof risk ha t he company s exposedThere ollowsa l lstot questionswhichshareholdershouldask theirboardandseniormanagement.heanswers ontain iskmanagementndcontrol uidelines hichshareholdersoulduseas a Iemplateo evaluate hether heircompany as a l irmgripon riskcontrol.To sumup , heonus s on he opManagemento nstill onfidencen shareholdersn eventually iiclosing he risks ha iwerebroughto theirattention uring he yearandactionsnitiatedy hem n mitigatinghesame Likean Ombudsmanorbanking ystem': rvillnot be too late o see t Risi Ombudsmanor everycompanywh o will ve t the'eoortsof riskmanagement ommittee nd steps aken o prevent he identif ledisks:-'cugh a separate ommunicationo theshareholderslongwith heAnnua lBeport'

Ouest ion: rs passengeroperationwhich hetps eopleat largeconnectwith lndianRailwayse] 'Andyet ,passengerseNiceshavegenera| lybeenviewedbylRmanagement2'jery a; socialserviceobligation Passengerbusinesshave inflictedan annual:s! cl over < 20,000crore Earningsot < 23,488 crore from passengertraffic n2C09-10 ccountedfornly27 %of li 's grossevenues;reight arnings f< 58'502c cre :ont ributed657".Passengerbusnesswo dwideaccounted or 577"and freight43%of the$313blllionglobal il market(in 2005) Not hatrailwaypassengerbusiness s inherenlly oss-"making.On tB, t is the ordinary second-class egment that is the maiar culpritwhite the second ctassmait/eipress fare was 23.1 paise per km. in 2000-01: it


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PP-Sl\4AlT-June011 4remainedstubbornly stuck at 23.2 paiseper km. even in 2O0A-0g.The ordinarysecond-class are, argely esponsible or oss-making,has emaineduntenably owat 11.9paiseper km. and suburban ravel still ower,at 12.9paise per km. The fareon State road transporlservices n 2008-09averaged48.37paise per km.About 10 millionpassengers n lndia travelby air in a month, R transporls wice asmany n a day. Even so, R accounts for a meager 12o/o f lndia's totalpassengertrallic,roads carryingover 8770. Cost-effective uil traveldemand, far outstrippingsupply, will tut'thergrow substantiay in view of the country'sdecliningag culturesectordrivingmigration romruralareas oran integrated ational abourmarket.Theurban population is projected to rise from current 286 million to S7Smi ion by 2090,keeping hepopulationon themove.Also, thespecter of climatechange favours Rto reposition ail travel npreference o car and airlines.There s projectionof 7,189mi ion inter-citypassengersby 2025-26against 2,835million assengersn2007-08. f GDPgrows8% or more,annualdemand ortranspotlgenerally rises 10-12%, mplyingthe numberotoriginatingnon-suburban ailpassengersexceeding 12,000mi ion by 2025.On the basisof abovecase study,you are required o answer he tollowingquestionsas the CEO of lndianRailways(i) Describe heenvironmentalactors esponsibleorperlormanceof railwaysas acommercialentity. (5 marks)(ii) Describecomponentsof a strategicplanfor railways o meetpassengerdemandh gh ighting cons deration or each component.(iii) Writea note on commercial evivalof lR usingGap Analysis.

Answer 2(i)

(70 marks)(5marks)

India asseena signifcant hitt n ransport olumes way om ailwayso roadan darr ransportn he recent imes. As a resull, nce he backbone f domestic ransport,railways aveduring hepast20 yearsseen heirmarket haredecline harply. ndeedin he 1 80s, hisphenomenon enerated ome hinking s o whether he railways eresti l l elevant. n he 1990s, owever, oncern or theenvironmentalostsof transportngeneral nd of road ransportnparlicular,esultedn a growing cceptancehat ailha san mportantole o play n he national nd nternationalovement fgoodsandpeople.Th eenvironmentalactorsesponsibleorperformancef railwaysonsist feconomic,

technological ,o l l t ica l ,oc ia l , egaland global urroundings.he lactorswhichareresponsiblere as oilows:1 Chronicinancialeficits.e .ConstraintsnchargesmposedhroughGovernmentregulation;Persistent xcess apacity;Provision f guaranteed ervice evelsat fixedpricesor with excess'competitionin comparison ithothermodesottransport);Provision f services t belowmarginal ost; Failure o understandor dentity osts; neffectivenessn collectingevenues; owproductivity; ndulyhigtr perat ingosts:Overmanning.2. Growing perating ubsidies.e.,Lackof corporatization';Inadequateistinctionbetween olesol governmenl nd of the railwayoperator; nadequate ubsidypolicies.


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5 PP SMAIT-June0113. Archaicpricing ystemswherechargesar e not relatedo cost;Pricesare no trelatedo marginal osts;Costsnotproperlydentif iedrmeasured;nadequatefinancialndmanagemenlccountingystems;nadequaternon-exlstentnclngobjectives r statements t pricingoollcy'4. Lackof anequitablearestructurendexcessiveares; ackot userorcornmunyrepresentationn service nd pricedecisionmaking'5. Low operating lficiency; ow abourproductivity nd Poormanagemenl ndtechnical ff ciencY.6. Lo w servicequality;Severely ongested ervices e ' Lackoi competltlon;opeak-loadricing;nadequateost ecoverynpricing olicies;nabilityo reinvestoperating urpluses r raise unds or nvestment7. Def ic ienciesn hephysicalnfrastructure,oorassetmaintenancee ' Fai lureof pricing olicieso recover apital osts; Structuralnabilityo retain/reinvestsurplusunds;Begulationsreventingnvestment r borrowlng8. Inadequateunds o investn ransportnfrastructurend/or ervices'9. Widespreadtate wnershipndoperationf ransportnirastructurendservlces

10 . Low private ecto'oart;cioationn he ranspon eclor'Answer2(i i)StrategicPlannins

Strategic lanningelers o heprocess l deciding nobjectlves t th eorganization'on "nung"".in heseJbjectives,n the resources se d o attainheseobjectives ndon

the policiesha tare o govern he acquisition, nd disposition f these esources'Therefore ve n R willhave o plan or change n order o reach ts ultimate oalEffective lanning illhelp R o adaptchangeby identilying ppodunltlesnd avolonqpiour"t.lin" *iy it ca nset hedirectiono;theother unctions f management nd ori;;;"t. Planning mprovesdecision-making ll levelsoi management ngage nplan ng.Someof the mponant xamples f strategic lannlngncludes lanned rowth ale

" a"t"a, ,"rg"r, an d acquisitions, iversiflcttion y technologies,ypesol products,

,.., t."r."n"O

g"ographical reas, lanning ctivitiesn he areasol organizing tafling'' -a. rce.e lc .

Basedon this he tollowing re the components l strategic lan or rallwayswrtn: : -s cerat ion:' ldentiticationf demand-supplyap(as he urbanpopulations projectedo nseirom 28 6 mill ion o 575 millio; by 2030and also ha t he agriculture ector smovlng om trral reas)in i{ferentonesof IndianRailways o as o ascertainthe most lurdened reas;

(ii) Developrnentf strategic lans o copeup with he ncreased ernandncluding. , o r o i e c t e d i n c r e a s e o l T l S g m i l l i o n | n t e r . c i t y p a s s e n g e r S b y 2 0 2 3 . 2 6 a S a g a | n s t


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PP-SN4'AtT-June01 62835millionn2007_08.,The eeds oemergeutol hegroovyraditionaltyleol thinking hereinhe ocushasbeen o increasehenumber f rail ripsoradditiontpassengerogies:(iii) Exptoringhepossibiljtyf he o owing

(a ) Ensuringublic rjvatearticipation:(b) Privalizationfcertainoutes ith evenueharing;(iv) Constituencyurturingased n politicalonsidera n needso be stopped.Professionalshould e nvolved hile evelopingtrategiclans;(v) Introductionf ast rains t east n he rowdedoutesoserveheduar urposeof optimumtilizationf rail apacitynd ecourseosegmentedrivatization:(vi) Increasinghe airfarencomparisonoroad ndair ransportndbringingtatparwithothermodes. he ail are orsecond lassmail/expressncrjas"edo23.2paise erkm n20OB_O9sagainst3.1paise erkm n2000_01hereasthe are l road ransportn20Og_09u"rug"d g.37 rjseperkm.Answer (iii)

GapAnatysis.GAPanalysiss heprocess f dentifyinghegapbetweenheoptimizedllocationand ntegrationf the nputs nd hecurrentevelol allocation.hishelps"orp"nyrovidensightntoareas hathave oom or mprovement.hegapanalysis rocessinvolves etermining,ocumentingnd approvingne variance etween usinessrequirementsndcurrentapabirities.apanarysis-natura[yrowsrombenchmarkingandother ssessmentsnce hegenerarxpectationfperformancen he ndustrysunderstood,t spossibleocompareha texpectationiin frl tevet f performancetwhichhecompanyurrenflyunctions.hjs omparisonecomeshegapanalysis.. UnderGapAnalysis ttentions firsl ocused n hegapsbeMeenheactual ndantrc'patedaruesha t ertainariabresake nand hevirues hataremost esirabre.once hegapsareproperrydentified,ttentionnits ooevisrni ays ocrosehem.ln thecontext f the ndianRailways,hestrategy hould econcerned ith hepositionnd ore f he airwaysn erationo heir nui-ronr"nt"nooesigningfoptimatstrategyn hepresent ircumstances.Onan overall onsiderationf hesituation,he ndian ailwayseedso ocus nimprovingheperformancen erms t ncreasenrevenue ith egardosecond lassordrnary, ai landexpressaresrruhichsstill tuck t 23.2paise erKm ncompa'sonto23 1paise er m n2000-01These eed obeupgraded'inrderoenabtehe ndianBailwayso ecoverhe ost nd oatow.itoearnhe easonabrLrotits. ut urprrsingrythe oadransportare tands rmosttdoubrehe are tructuref airwayshicnwaJataround 832paise erkm n2009-og.nvironmentatyrsoairwaysreprererabreoai ror oadransport.t ndicatesheneedoenhanceheutirizationfexistingine apacities.Inaddition,ndian ailwayseedso exploreheextensionl railnetworkoareaswithearnrngsotentral.twillhelphe ailwayso ecoverhe osses,arn evenuesnd henpayattentiono hehithertoeglectedreas.


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PP*SMAIT-June 011Question3(a) suggest ways to overcome resistanceo change. which is the reasteffectivestyleof managingchangeand why ? (10 marks)

(b) what are the ten p' erements f risk n business? Describeat reast ne erementfor each'p'. (10 marks)Answer3(a)

change sa naturar henomenon. esearchindings n ndividuarndorganizationarbehaviourevealedha torganizationnd ndividualsesist hange.Flesistanceochange s rikeryobe minimisedf he management er p mproyeesoadjust ocontemplatedhangewjtha supportiveonduct ndbehaviour. he mperativeneed rs to make the emproyeeseer hat their nterest n the work situations beinoadequatelyonsidered nd ultyprotected y themanagement.t shouldbe mpressejupon heemployeeshat n he ong un heywjllgain romchange nd he managementwill,by all means,help hem o achieve hesegains. f thesupportive ljmate xGts,heemployees re ikely o be more eceptiveo change.Howevei, ha tapart, he ollowinoconsiderationshould urther e kept n view:

Ways o OvercomeBesistance o Change_ Thebasic roblemnmanaging hanges oovercome eopleesistanceuccessfully.Problems f overcomingesistanceo change an be managedn he ollowing ays:

(t) Education nd communicationlf misinlormati onnd ac kof nformarionreatebarrierso managinghange, ducation ndcommunicationjght eappropriate.

(i i) Pafticipation: Participationetps o give peopte n organizationalhangeafeelingol importance.t creates he feelingsamong he employeesha i th edecisions theirown.They realisehat hechangeprocess sa must.\iii) Obtaining ommitment:Commitment o takepart nchangedprogramme an beobtainedn privaterom each ndividual.However, ettinga person o commtthimself n private o a changedprogrammema y yield ewer results ha n f hevoluntari lyndpublicly iveshis commitmento an ideaof change.'r ) Leadership:A transformationaleadercan use personal easons or changewtthout rousingesistance.neffectiveeaderries ochange hepsychologicalneedsof his ollowers., Trainingand PsychologicalCounselling: Managementcan change the basic,,,auesof thepeople y raining ndpsychologicalounseling.eopleshould eedLJcatedo become amiliar it hchange, ls process, ndworking., Ccercion r Edict:Coercion r edict s he mpositionf change r the ssuing fr -ectrvesaboutchange. t is the explicit seol power.The easteffectiveway of managing hangeout of the abovementionedmaybe:Coercion r Edict:Coercions he east uccessful tyleof managing hange xceptn a stateoi crisisor confusion. oercronor edict s th e imposition r changeor the


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PP-SMAIT-JUne01 8issuingfdirectivesbout hange.tmeans ontrontingnd orcingesrs.ngmproyeestochange.t s heexplicit seofpower.Managers ay orce eopleogo-along ithachangeyusing xpricitnd mpricithreatsnvorvingransfer,oss fpromotion,-egativerecommendations,ismissaretc.tcanbeextremeryiskyf t reavesndmakes -eopreangry t he nitiators.Answer (b )

The en'P'elemenlsf isk nbusinessreS.No. 'P' elements Elements

1 0

PremisesProductPurchasing

PeopleProcedure

Protection

ProcessesPerformancePlanning

Pol icy

Location f theorganization,yp eof premisesavailableor use.Industry ector, eatures f product,if ecycleof theproduct,ashion rends.Access o supplies, torageand warehousefacilities, tock control,payment erms an dcost.Workers n the organizat ion,k i l ls , ra in ingneeds,motivation nd commitment.Production rocedures, ecordkeepingandreport ing ystems,use ol s tandardsandemergency rocedures.Personal rotection f workers,property ndvehicle ecurity,nsurance over, nformationsystemsand datasecurity.P r o d u c t i o n r o c e s s e s , a s t e a n d s c r a pdisposal, kills, echnology ewmaterials.Targetsets,monitoring,measurementools,validity f data.Access o relevant ata, management kills,externalfactorsnd evels fcontrol, hortandlong ermplanning nd nvestmentpt ions.Rangeof policieshat support trategic lansof the irm.

PART B(AnswerANy ONEquestion rom thispa11.)

Question4(a) Hero Honda oint venture ormed n 19g4 s a crassiccaseof strateqic lrianceinvolvingthe lndiancompany Hero Groupand Japaneseautomobile ajor HondaMotorcycle.Thealliancehasbeen erminatedwith heentire26/" stakeof HondaMotorcycle n the ventureboughtby the Hero Group.Sellingout of theventure


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sivesheapaneseompanyh:reedomo ota",l"i;ir!|Ilill!rt,i,largestmarket or two-wheelers.(i) Listout theadvantagesof thestrategicalliance orboth the organisations,ntwo-wheelermarket n lndia. (5marks)(ii) Whatare the key successfactors or managingan alliance? ln the ight ofthese key success factors, dentifythe reasons for the terminationof thissuccessfulointventure. (5 marks)(b) Assumingthat High Speed Auto Ltd. intends o acquiretechnicalknow_how oproduce a small car for the lndian market in collaborationwith a Germancarmanufacturer, pecify hebroad ssuestobe covered n theagreement or oreigntechnicalseNices in lndia. (10maris)

Answer4(aXi)Advantages f strategic lliance re as under:- Rapidlymove o decisively eizeopportunitiesefore heydisappear.- Respondmorequicklyochange.- Adaptwithgreater exibility.- Increase company'smarket hare.- Gainaccess o a newmarketor beatothers o thatmarket.- Quickly horeup nternal eaknesses.- Gaina newski l l r areaof competence.- Rapidlymeeta company's eed or key resources uch as morecustomers.additional apital,new/better roducts,new distribulion hannels,additionalfacilities,ncreased roductionapacity, rcompetent ersonnel tc .

Answer4(a)(i i)The keysuccess actors or managing lliance re under;- Mutual rusl: L4utualrustat seniormanagementevelcarryventureshroughturbulentimes.- Ability o compromise:When there are two strongcompanjes, he ability ocompromises not easy to achieve. f you expect o receivesome valuabletechnology,roductionr marketingno whow roma partner,oumustbe willingto give omething.- Favourableusiness ondition: aunchingnalliance hen avourableusinessconditions xistmakesa venture if econsiderablyasier or tspartners.- Alliance utonomy: heautonomymandates h ghdegree f responsibil ityndgoodJUdgementy heventuresmanagement.Feasonsor termination f successlulointventure re as under:- D flerent ultures,ma yquickly inci he variationsn theirbehavioral ormsarecreating reeding roundormisunderstanding,oo r ollowthrough,ndeventualdrstrust .


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PP-SMAIT-June 011 1 0- Joint entures realsopotentiarorconfricts.heymay esurtndisputes etweenor amongpartners ue o varjed nterests.- Slowdown ndecisionmakingby partners.- Changesn th e business nvironmentn two countries nd cnanges n partnerstrength.- Lifecycleof ointventures.

Answer4(b)Th e broad ssues o be covered n the agreementor foreign echnjcal ervicesnIndia reas under:- Technical erviceso the Indian ompany.- Deputationf eohnical ersonnel.* Training f personnel f he IndianCompany.- Secrecyconditionsuch as strictconfidencean d secrecyan d sh a not bedisclosed y he IndianCompany.- Considerationechnical ervicesee o theForeign. ompany.- PriorGovernmentpproval.- Duration f the agreement.- Terminationf the agreement.- ForceMajeure onditions,uchas actsof God,Governmentaw sand egulations,strikes, ockouts, aror any othercausesbeyond ts conrrot.- Arbitrationrause,ncaseof anydispute r differencerising etweenheparties.- l \4 iscel laneouscondi t ions.- La wapplicableo the agreement.

Question5Describe n brief the folowing in connectionwithdirect nvestmentoutside ndiabyan Indiancompany nan oveiseasoint venture JV)/whoy ownedsubsidiary WOS)underautomati) routeof FEMA:(i) Differentnethods of fundingof investment.(ii) Theconditionsto be furfiled for investmentby an rndianentityengaged n financialsector.

(iii) Theconditions or capitalisation f expoftsand other dues(iv) compliancesof rebodingof nitiar nvestment,subsequent nvestmentand iringof annual eturns.(v) Conditionsor allowing nvestmentsnJVMOS through he medMmof a specialpurposevehicle SPV). G marks each)


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11 PP-SMAtT-June011Answer5(i)

Methods f Funding f investmentsre as under- Drawl f foreign xchangeroman Authorised ealerBank n India:- Capitalizationt exports;- Swapof shares:- l..,til izationl proceedsot ExternalCommercialBorrowings ECBs)/ForeignCurrency onvertible onds FCCBs);- In exchange f ADRs/GDRsssued n accordance ith hescheme or ssueofForeignCurrencyConvertible ondsandOrdinaryShares throughDepositoryReceiptMechanism) cheme, 993,an d heguidelinesssuedthereunder romtirne o timeby he CentralGovernmenl;- Balances eld n EEFCaccount f the Indian arty;and- Utilisationfproceeds f oreign urrencyunds aisedhrough DR/GDRssues.

Answer5(i i)Conditionsor Investmentsn Financial ervicesSectorAn Indianpartyseeking o make nvestmentn an entityengaged n the financialsectorshould ulfill he ollowing dditional onditions:Providedhat ndian arty:* is registered ith he appropriateegulatoryuthorityn India orconductinghef nancral ectoractivities;- ha searned etprofit uring heprecedinghree inancial ears rom he inancialservicesactivities;- has obtained pproval or investmentn fjnancial ectoractivities broad romregulatoryuthoritiesoncernedn India ndabroad; nd- has ulfi l ledhe prudential orms elatingo capital dequacy s prescribed yth eregulatoryuthority oncernedn India.

Answer ( i i i )Conditionsor capitalisationt exports nd otherduesare:- Indianpartiesar e permittedo capitalizehe paymentsdue from the foreignentity owards xports, ees, oyalties r any otherdues rom he oreign ntityio r supplyof technical nowhow,consultancy, anagerial nd otherserviceswi th in he cei l ings ppl icable. api ta l isat ionf expor tproceeds emainingunrealizedeyond heprescnbed eriod f realization ill equire riorapprovaloi the ReserveBank.- ndiansoftware xporters-areermittedo receive25 pe r centof the valueoftheirexports o an overseas oftware tart-up ompany n the torm ol shareswithout nteringnt o ojntVenture greements, it hprior pproval f he ReserveBank.


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PP-S[,4AlT-June01 12Answer (iv)

The ndian artys requiredo report f nvestment,n ormoDr o theAuthorisedDealer ankorsubmittingo heReserve ankwithin period f30days rom hedateot he ransaction.ODl, omprisingf ourparts:Part - includeshe ol lowing:Section - Details f he ndian artySection - Details f Investmentn NewprojectSection - Details f InvestmentnExistingrojectSection - FundingorJV WOSSection - Declarationy he ndian arty(tobe etainedyADCategory |bank)section - certificatey hestatutory uditorsf he ndian arty tobe etainedyADCategory*bank)Part l - Beportingf RemittancesPart ll - Annual erformanceeportApR)Part v - Report ncrosure/Disinvestmenworuntaryiquidation^/vindingpofJVWOSIncaseswherehe nvestmentsbeingmadeoinfly y more hanone ndian arty,formoDl is equiredobesignedoinfly yall he nvestingntitiesnd ubmittedo hedesignatedranch f heADCategory | bank.Thesameprocedurehould e ollowed herehe nvestmentis madeoutof heproceedsf ADB GDR ssues f an ndian artv.

Answer5(v)conditionsor nvestmentsnJV,^/vosbroad y ndian artieshroughhemediumofa Special urpose ehicleSpV) re :- InvestmentermittednderheAutomaticoute.- Indlan arty s not ncludedn the Reserve ank,sCautionis tor is underinvestigationy heEnforcementirectorater ncludedn he istof defaultersto the banking ystem irculatedy the Reserve ank/anv therCredj tlnformationompanysapprovedy heReserve ank.* Indianarties hose ames ppearn heDefaurters'ist equirerror pprovalrtheReserve ank or he nvestment.

PARTC(AnswerANy TWOquestionsrom hispan.)Question

(a) State he similarities nd differences etween anti_dumpingduty,and'counteNailingduty'. (S marks)


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1 3(b) HighlighthedifferencesetweenGATT nd WTO.(c) Elucidateheconcept f 'mostfavoured ation' MFN).(d) Describehesigniticancef 'rulesof origin' nderWTO ystem orensuringairinternationaltnde.

Answer6(a)(5 marks)

Dumping nd subsidies together i thanti -dumpingAD)measures ndcountervailingutiesCVD) areotteninked. xpertspeak f AD-CVD"nonebreath.lvlanyountriesandlehe wo ssues nder singleaw,apply imilar rocesso dealwith hern ndgivea single uthorityesponsibilityor nvestigations.ccasionally,hetwoWTO ommitteesesponsibleor hesessuesmeetointly.There rea number tsimilarities.he eactiono dumpingndsubsidiessoftenspecial flsettingmportax (countervailinguty n the caseof a subsidy). ikeanti-dumping uly,countervailinguly s charged nproductsromspeci{icountriesndthereforet breaksheGATTprinciplesf binding tarifl nd reatingrading artnersequallyMFN). heagreementsrovide nescape lause, ut heybothalso ay ha tbeforemposingduty,he mportingountry ust onduct detailednvestigationha tshows roperlyhatdomesticndustrys hurt.

Bu t here realso undamentalifferences,nd hese re etlectedn heagreemenls.Dumpings an action y a company.Withsubsidies,t is the governmentr agovernmentgencyhatacts,either y paying ut subsidiesirectly r by requiringcompanieso subsidizeertainustomers,But heWTO sanorganizationfcountriesnd heir overnments.heWTOdoesnotdealwithcompaniesndcannot egulateompanies'ctions uchas dumping.Thereforehe Anti-Dumpinggreementnlyconcernshe actions overnmentsaytakeagainst umping. ithsubsidies,overnmentscton both ides:heysubsidizeand hey ctagainstach thers'ubsidies.hereforehe ubsidiesgreementisciplinesooth hesubsidiesnd he eactions.

Answer (b )Thediflerencesetween ATT ndWTOare:- GATTwasadhocandprovisional.heGeneral greementasnever atifed nmembers' arliaments,nd t containedo provisionsor he creation f anorganization.heWTOand tsagreementsrepermanent.s an nternationalorganization,heWTOhasa soundegal asis ecause embersave atifiedtheWTOagreements,nd heagreementshemselvesescribeow heWTOis o function.- GATT ad contractingartiesTheWTOhas members".- GATT ealtwith radengoods.WTOcovers oods, ervicesnd ntellectualproperiyswell.- The WTOdispute ettlementystems faster,moreautomatichan he oldGATT ystem.ts rulings annot eblocked.

PP*SMAIT-June 011(5marks)(5matks)


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PP-SMAtT-June20 11 1tAnswer 6(c)

Mosffavoured-nation(MFNcountry,urnhe ro* ;;"1fTXt":J?,::1J;1"J:ffi,1treatmentor ne arricurar;X:1i:.yi]::;lnyl3;j?jt"'0",,."ut.irir,"tr,"";#;:l'Jl[:1ly;J".ffii.?prtnr,thasJd;";; "'.:b'J,'f{l!jfi!ff i:i?ff[$ili8",i." S.ilEhey lr emainmoslfavoured"r.40st-tuuorr"iu't"ioilaF,u'j.iu,r. ,ono,"rwaysmeanquarrreatment.n he1gth enrury-."n"n" nrrJ"i oi"urrfoi[i"ru,\lrN reatiesere:'i?d** {d:fl::Ti,{il1;}"11"J.",:',""1a';flffiJi..;T[:[1ounkiesre n heWTO,heMFN luOsno ongei",ririu"lii" ,af.fpr,nciptensuresnat ach ountryreatsts ellow-membersqJalty.Answer 6(d)"Rutes f origin" re hecrit(t;;;ll::ii,l[J,#i1;Hr]IY:ji"##t"ii;"i#::1:;,.,(charsedocounre,."*oon ro",il3l;l*1'X'J;:t'""pins actions,ountervairinsuty

"r" rtl:;""i?i':[arealsousedocompileradetatistics,nd or maden,,rabershat

Thisirst-evergreementnlhe ubjectequiresTOmembersoensurehatheirutes forigin re ransparenl:harhey onoth*" ,".i,"ung.";,"tortingordisruptive'ects n nternationatrade:hat,rheyieadmi"ia,"r"Ol"" a""r.lslent,nitorm,mpartral,lli'ffi'lX?:1ffi:il"*XHl Ptareasedn"p"J'" i""o"'din therords,euestion 7

er oflgtn ather hanwhatdoesnot.(a) Under he Madridand Hague Systetls.deatingwith the nternationalegistrationf marksand industrialdesgns,match the ollowino(i) StrasbourgAgreement

(ii) NiceAgreement(iii) ViennaAgreement

(iv) Locarno'Agreement

(b) State,with reasonsnbrief,

(a) C.once.rns ith establishingan tnternationalcass t cat on for industriat des gns.(b) Esta.blishingn internationalctassification lthe figurativeelementsof marks.(c) Conc.erninghe internationalclassification fSood?1!d services for the purposesot theregtstrat@n f marks.(d) Concerning theclassification. international paient

(1nark each)whetherhe o owingstatementsrc trueor false(i) Anti4umping cases nitiated y WTO have ncreasedignificanttysincemid(ii) Tradecreation describes he situationwhere the emovalof tariffbarriers


15/37

rc pp_SMAIT-JuneZO1betweenmembers of the tradingbloc now enable various products to bepurchasedat lower prices, here:by timutatingn-tri rJg;;;li;;;:.(c) Attempt the folowing . (1 mark each)(i) whichtwoof the orowingare themost ikeryetfects f the mpos,ionofa tariffon an mpoiedgood_(a) Thedomesticpriceof the mpoftedgoodwi fall(b) Overseas roduction f thegoodmaybe stimulated(c) Overseasunemploymentwillcomedown(d) Thedomestic riceof the mpofted oodwi rise(e) Gainof tax evenue y theGovernment.(ii) Whichwoof he ollowingrgumentsre used y critics f ree rade(a) Free tradedoei no t take nto considerationheproductivityd ffe rences etween ount ies(b) Free rademay ead o unemployment(c) Free tradeoften gnores he effectsof monoporyetements nconsumer elfare(d) Free radecanonlyworkwithin radingblocs(e) Free rade educesnternationalpecialisation.(iii) Which woof the fo.owingare the most ntegratedorrpsof regionaltrading rrangement(a) CustomsUruon

(b) EconomicUnion(c) Free radearea(d) Multilateralradingarea(e) Commonmarkets. (1mark each)(d) Explain he conceptof 'boxes'under WTO erminologyor agricultureagreementndbriefly escribe achof hem. @ marks)(e) Whatare heprinciples f multilateraltradingystem nderwTO ?

(5marks)AnswerT(aXi)strasbourggreement(d )concerninghe nternationaralentcrassificationAnswer (a)(ii)

^ Nice greement(c ) Concerninghe Internatjonallassifcation f GoodsandServicesor hepurposesof heRegistrationf MarksAnswer (aXiii)_, vienna greement(b )Establishingn nternationallassifcationf heFigurativeElementsf Marks


16/37

PP-Sl \4AtT-June0 1 t6Answer7(aXiv).-^:.:.:o,no Agreement (a ) Establishing n lnternationat lassificationor IndustrialUrlS i l i rSAnswer7(b)(i)True

WT O Annual Reportsshow, lh e use of antj-dumpingmeasuresha s increaseddramaticallyn recent ears, onsiderablyreaterha n hen"umbersfsuchmeasuresnrorce n he1990's nd Antidumprngases nitiated ywr o have ncreased jgnificansincemid1990sAnswer7(bXii)True

Thestatic rfectof Regionar conomicntegrations ha t t mayresurt neither radecreation r radediversionTraciereation escribeshesituation here he removarariffbarriers etweenmenibers fthe.tradinglocknowenableu"iio* proOr"fao bepurchasedat rower rjce, hereby stimulatingntra egionalradeAnswer7(cXi)

(d) Th edomestic riceof the mported oodswi rise(e) Gainof tax revenue y heGovernment

Answer7(c)(i i)(b ) Free rademay ea d o unemployment(c) Free radeoften gnoresheeffectof monopory rements nconsumerwerfareAnswer7(c)(i i i)(b ) Economic nion(e) CommonMarkel

Answer 7(d)il WTO erminology,,boxes"whicharegiven hecoloursof traffic ights n generalrdentifyubsidies:reen permitted),mber srow own j.e.be reduced),eo (fori idoen).The amberbox,iroragriculture,ll subsidies nd otherdomestic upportmeasures onslderedodrsiortproduction nd trade (withsomeexceptions)all nto he amberbox. The totalvalueof thesenteasuresmustbe reduced.

The greenbox'-, ln order o quarifyor the "greenbox",a subsidymustnot distort rade,or at mostcausemrntmalistortion.heyhave obegovernment-fundednotbycharging onsumersnrgner rjces) ndmustnot nvolve ricesupport. he y en d o be programmeshatare


17/37

l:] gL:":9 atparricurarroducts,nd ncrudeirectncome PP-sMAlr-June201are ol elatedo aredecoupted,,r;-r ;;;;;:,::':;1:eme supportsor armershata owedthu it; ffi 5!"lilT,#ff r,l,"H?:::: ; ;.; ";; ;;;,",iThe bluebox'The lue ox sanexempmusrDe educed, "p t *i t in l'.?I lhegeneralulehat ll ubsidiesinkedoproductionor.ectty;nteo o-a"'r;#';'^"-",::d minimal"deminimis")evets.r"ou"r"p"-v"iunl.produoion,byi;p;;;;;;;;,1.?1T1' n"o"'.' bu tunder chiy.fr""T[:*,."s,,i""".,01,9J"X,,"jiru".:ffiWnflffi]i#l?'i#Ji

Answer7(e)Theprinciplesof multjlateralradingystem reas under:- WithoutdiscriminationHl.l;jli,";#ix*hii:ij:;*:;.""JlHi::;ry:il,,,,fJi:,li;narionarstneyl.l;il|'.;5ff:i,?i:,X,'"onf,indo'"isn.or"r.,"'"iil!"Ji

- Freer:with arriersoming ownhroughegotration;- predictable:for",nnor,:111? investorsndgovernmenrsshould econfjdentffi'[:t;H:T[,,?,"]flnl11", "nuu,ir"iLi"'uniihereasureslhourdcorrnitmenr"a|."i;";;Jj ltohr;#8,more tarirr atesandmarr


18/37

Pl - Sl'.1All . iune2ir1 t o(b) '"Tttc subsidiesartdcoLtntervailhgmeasures (SCM) agg3ment creates tnreenarron\, lefinedcategoricsf non-actionableubsidies." xplain- (smarks)ic) B:i.)fiy descrlbe he role af appelt'^body in reviewol the panel repoft whenaDarl; b ta(1edtspute ilesappeal against hepanel report (5 marKs)ld) Doll{}Mir}isterialConterence,20Ol has ailedto fulfill ts commitment o correctan(l revent rcsltictionanctlistorlionn worldagriculturalmarket Do you agree?Lriscuss. (5 marks)

Answer8(a)(i) The El(po4!.llce of goods mportednt o ndias hepricepaidorpayableor hegoodsDy he' r rs l 'ndeoenoe' l tuyer '(ii) Gener4l Agreeloenl on Tfadg in Sefvrees GALSJ is the tirsl ever set o{' ' turtifolo-tallugJlyenJorceableulescoveringnternationalrade n services'(iii) -l-heThirclWT OMinisterial onference' 999wa sheld n Seatl le'Washinglen

USA between 0t hNovember, 99 9and3rdDecember' 99 9(iv) Taritf ncrcaseshe prrce t mported oods(v ) Th eMaastrichlTrqalyntroducedhe erm EuropeanUnion'n November' 993'

Answer8(b)The SCMAgreemenl reates hreenarrowly

efined ategories f subsidies' hichare nor-ac i ionib le,.e. ,whichcannotbe chal lenged ul t i la teral ly 'r is subject ofountervaitlrrqction. hese ubsidjes resumablyre protected ither ecausehe yareconsicleredr)(irefnclynlikelyo causea'lverseeffects r becauseheyarc consideredtobe of par l icu laralue ndnot o bediscouraged he hree ategor lesre:

- Bi sic rese::rch nd pre-competitiveevelopment ubsidlesThesesubsidiesc;inrliit xceedi designated roporlion f project ostsandcan onlybe used orcr i ia lnexpel ld i tu issn 166io be non-act ionableesearch nddevelopment:;L.tbsidiesn the clvllalrcraft cctordo no t benelit romnon-actionabletatus. Ass!stairceo clisaldvairlaq eil1,'gi0ns egional id sare non-actionablerovided11-:aihey are no t imitedo specific nterprises r industries ithin he region'1j-rathey' ro glvenpursuanto a general chemeof regional evelopment'ndtnat ne'regio-ns disadvantagedy comparison.w ithhe Memberas a whole ntermsof o6jective riteria uchas GN Ppercapitaan dUnemploymenl.

- Assistanceo acjapt xistlngacilitieso ne wenvironmentalequirements uchassistancemustbo on a oie-timebasis'be imitedo 20 percento{ adaptationcosts,an d be availabteo all {irms'whichcan adopt he new equipment ndprocesses.! iubs ic ty rograrnmes, hich are not i f ied o the Commit tee efore hey areimplenrenlecl,reprotecteonless ndunti l heCommittee rarbitrationod ydeterminesthat heydo notqualityor non-actionabletatus subsidyprogrammes hichhavenotbeennot i f ier l i ]e lore ln]pIemenlat ionmaybeinvest igatedbyapaneIoraninvest igat ingauinorlfyUu t f founil o meel he criteria or non-actionability'hallbe treatedas non-actionable.


19/37

PP !ji l lAi | .jr1nc 0.iAnswer8(c)Ei ther ide anappeal Danel ,sul ing. omet imesoth ides o so.Appeals ave:X[::il:l:l#[t;;jf ffi:l"T r"gd;t"'o'"t;ii"',lii,".inno,n",arnnexisrinsThreemembers fa Derm1,-n:nlev:n-memtrer ppellate ooysc rupby he Dtsputeettlement odyand broadlv epresentinghe rangJiiili*C.cmrre'.silip, heareachppeal.The appealcan uphold,modifyol' |."uni.n the p-aner,:-.eg.1l nd,fgs ancJonctusions. ormallyappealsshouldnlt l"at n-.or" nrn '; O ,r,.;.,.,vril) ri . :ii)soiulcaxrmum f 90 days.

The DisputeSe t ementB9.dI1" . to acceptor reject he appeats epoiiwilhin30ays and rejections only possible y consensus.Appeals re imitedo ssueloeveopeoufne;;;;i:ff;;;JHi"";ilTilJ:ilil:Ji:T:i;:i"flil,ll3,i#':l"[:ach f hessuesf aw overedy h"pun"r"poi ,io-ilJLgJ;'.',u,jr,,r,"rrorisde'eloperiy hepaner hich ere ppeateiu,'r'"g,n"p;"i"[';;;:il"n rneArrpeiiareociyay phold, odifyr eversehe egatllndingsno J""rr.L""or neDanet.Answerg(d)Recogniz lngheworkundertakenn the negot ia l ionsnl t ia teonear ty 000unclerrlicle20 of the Agreement n Agncuiture_ ncrrdingnu largl' nr.:mr;erf negotiatingroposalsubmitted n behalf fa totalol i 21 membei.,L.l,niri.u,ec.'rex he ong_terrl.Jectrveeferredo in the Agreemento estabrish fair an d m.rket oric,nledradingyslenr hrough programme f fundamenial"tor, *naorrtfJrsrnr.itrengiheneclulesnd specifc commitments n supportand protectionn uri"r l. , correctand pi.eventestrictionsnddistortionsn worldagricultural arkels.r\'4inistersommittedhernservesocomprehensiveegotiationsrmed t:suilstaniialmprovementsn marketaccess; eduction.sf, withu uiu-r'io' f.,ua,ngut ,all formsofxport ubsidies; ndsubstantjaleductionsn racle-Jirtoiiino"m".r,c ,uppo,r.

^^ ^Y'll:l" ?si"ed ha t pecial nddifferentiarreatmer'rtordcvrropr(j.Lii i.ies ha ,ben ntegralar tol al lelements f henegotiationsndshall eemir().i cJrr ir eschedulesfoncessionsndcommitmentsndasappropriutun nur.J", Lij'0u",u,,n". ,or)enecotiated,o as to be operationa,ytfectivendo enabieoeueLprn',1.ir"nlr,". o eri.ctiveryakeccount f hei r eveiopmenteeds,nc ludingoo. l ecuni iu, ,J rro,oevetoprnent .Taking oteol thenon-tradeovr.remoJ.s,r,rinl;i;,;;;;ffiJin:,il:li:::il'#::,,;iiTy#:lTfl:fJli:lhenegotiationssprovidedor ntheAgreementna"r-",riiritr"heres a consjderableisperson^a onqstioysr.rar,, i4 f l tctr cpro.tc l rogriculturaroricyAt oneextreme reGovernr"rentsni"r'. i'-n,tnerr tleftiono thel:1.^:i,-?f.",igric efliciencyithinhetr gricutturaisc,i;,"rr,"i ,i,.,,'",n",.",e(;overnmentswnrcnegardheir gricurturarectors -sulfilling" i rrJh"i"u;i'r"n"rarDjflctrve,/ithoutegardoeffjcjency.ivenhese ujte iffercnt"ositioir.,," pr*l"o (.jtlijculto jndanyrddleroundn hecurrenteootiationn newro wni.i o. " in,i"*o ,,"nerArlrcre0ofheAgreementnAgric'rrturend there s also nconsistencynddivergentnterestscrosshemembersf heWTO.


20/37

ADVANCED AX LAWSAND PRACTTCETimeallowed:ghoursMaximummarks 100NOTE Altreferenceso sectionsmentionedn paft-Aof theeuestrcn aperrelate ohe ncome_taxct, t96l and elevantAssessmelniel)ot t -tZ, untess tatedotherwise.

PARTA(AnswerANy TWOquestionsrom this art)Question

{a) !!e the mostappropriate nswer rom thegiven optionsn respect f theollowing(i) Which cheduleo theC.onstitutionf tndia ndicatesifurcation fpowersIomake aws,betweenUnion overnmentnd Statigor"rr^"nt" _(a) FirstSchedule(b) SeventhSchedute(c) EighthSchedute(d) Twetfth chedute(ii) whichafticte f theconstit.utionf rndia rovides hat otax sha, e reviedor co ectedexceptby authorityof law_(a) Articte265(b) Articte26e

(c) Articte269(d) Afticre274.(iii) companiesnwhich ubric resubstantialy nterested rearsoeferredo(a) lndiancompanies(b) lnvestmentompanies(c) Widety_heldcompanies(d) Ctosety-hetdompanies.(iv) rn respectof whicharea axptanning annotbe aftemptedt the imeofsetting-up fnew business ntity_(a) Formoforganisation(b) Locationatspects(c) Nature f business(d) Corporateestructuring.(v) Whicheturnof ncome annot e revised y theassessee(a) Returnof loss(b) Defectiveeturn


21/37

(c) Belated return(d) Revised eturn.

(i/ Hindu deity(ii) Holderof an impartibteestate

(iii) partnershipfim(iv) Associationsf persons(v) Trusteesof a private trusl.Answer (axi)

(b ) SeventhScheduleAnswer (axii)(a ) Articte 65Answer 1(aXiii)

(c) WidelyheldcompaniesAnswer(axiv)(d) CorporateestructL!ring

Answer (aXv)(c) Belatedeturn

'' I""il!;l#::lllwinssentencesafterrittins'inthebtankspaces:;r::';;::::" i::::::::lfi,i!;3!!",iii;1",,I*,n 2015ou,de overedy@ : rW::;,!" : : :::,fl'! fl !"-'-"i "'e. conslsrsn orn om w ch scap a gan ,a a ; ; ; ;:i:

": ".f#i :: I"!:!':

"i:,f:;rt ',' n om rom

(iii) Surchargeat the rateofor"ro,"iii i p;;2,;."* a ";*f, if:,::"Xr:,:::f ; ::1,;fT(iv) Unabsorbedossesandunabso,rbedepreciationannot eallowedobearriedorward ndsetolt n hehana,in" "i,"ti".",,J)XJ!",3ii', "ci d esect,.i "'-'1I""?7i!il!;f,Ti!l'v) !::::1ht t,o ite.appe1bothe CommissionerAppeats)gainstheordersrassessingffce r s __ rc the epanment.''' u;:#::

[A"":!:;"-,;,2i,!,;:;:;:,arseabtenrespe*,,","",1:,:::,,::i:l

PP-ATLP-June2011

(1 mark each)


22/37

PP-ATLP-June20 j1 22Answer (b ),, I|;ffilf ioi[;;:t:l'lji:1il:31stMarch,2o1sourde overedyhe' ' lt::#:;[t lffTJ;:::J?11 incomeonsistsainrvr ncomehichsgarns'nd incomerrom thei::i:l:?T !"Yt" propettv;'inc-omefrom apitalr sourcesscallednvestmentomp"nu . --(iii) Surcharget he ate , a.Uj1";,1^1l!,1!abtencaseotatncomera forejgnompanyxceeds1croreor he s."..rn"ntv""iedij _ie'' ,:ffiHHl :Tnil1#Ji::"j:19 epreciationannote rowedobe arriedcasesprescribedn0", """tnot ol the amalgamatedcomoany,except n the(v) heigh'oi,eppea,s,"i;;#*::H::il#::j::;" """,.,ssessingffjcersno tavailableo n" o"purtrlli*'", "r .Answer (c )(j ) Hindudeity yes,,,i*,S:l t: chargeabteoweatlhax . Trustestabtjshedor hebeneftofHindu-deitiesrede"r"O toO" nir*iO"arssesseenderhe}"J;i: fffi" "tarseabreow""r,n-tur.ieli."iiia"ason"td.,(1ee')82' ll'J:ilr'l# $3f#?';:::.t"-rle-s,.orderrmparribrestatereharseabreto endivjduarw;",?Tfti:";,:xl'ff#ii"#ilTfr:'tioi".tut""J"i"i("':x'liil*f":ffi',|i;!?li"'lhiprirmsarenotcharseabretowearthrax.weart

arenor hargeabt"" #fl;?:t; HUF nd"otp"niet onlv Al r"tn"i p"rr"".(iv) Association of Fersons : No,.Associatjonof persons AOp) js no t liable oflifli#;ff."1i,j1u"",!"1::,o',n'";;"; J;' ;t;',minater nownhenpropertyf heAop. re liableo wealthax n respect t tneirsnare n he(v ) Trustees f a private rust yes,Trusteesf heprivakroweatthax.Atrusi ,not axabre"n'tvno"ir,J.i:lT:?J"_.Hfl::?;llXi:;!J,"i,"Jlj;;l t"l" *lp".t, ;;1;;l;;.ie-elr privaterustnotGordhandasorindr"^"rreose)areassessables ndividualst.iii" oieuestion |ramiryCharity rust .CtT 19731a fi aiii;; ",(a) Sbr GasLtd.commencer z{x}:,,i":"{, ;i":,j,,!i?;;:; iil:{x :ir "';xitinancialnstrumen,Z tui"p,,u,expenditure f ? I 4g0 tafn (inctuaing.ciitof,i!ii;:li;:;:::;,:::::ly:,;,'",1;""r"n

"!x:;r;:!":"1,f!l!":;:iy"


23/37

23 pp-ATLp_June2011Futlher, uringhe inancialear2010-l it ncurredapitat xpendituref (6,600rakh inctudins ostof ta.nd.r,too tarij eicturi"if'i", ,n" abovebusiness.compute heamount f.deduction"a"i"iii"iiiio'io, me assessmentea,2011-12, ssuminghat hecompanyhas utfileJ ti tni conaitions pecifednection SAD. H marks)(b) PQR,a partnershipirm,has3 partners amety ankai, eureshiand Robert.he irm haspaidsatary,of 1.i taknp", ^nrrik ti'"')th of itspartnersuringhepreviouseat2010_:1^1r:d_t!e:"r" ii "rtniii"iiv theparlnershipeed.henet profitof the irmas shown n theprofitand loiis ccount omputednnemanner aiddown n chapter v-o orine tncome_ii, Act,1961s ?6 rakhfterprovidinsorsatary,tohepaftn9* ciipriiii"trmount of deduction femunerationaid opaftners ssumingnateuresii is) non-workingaftner.(c) Discuss ith thehetp f a.d^eci!:!_ca::aw, fany,whetherhe ",:t:::ilneassesseen thb olowingseparate asess orrect or ncorrect(i) An assessee aspaid he- ntireamountof taxdue or the earby wayofelf_assessmentax,but filed he eturn f niiie i"tatedly.The assesseectaims hat nterest ndersection 3qe s not eiiite on nim.(ii) An assesseeendered enainsevices rom abroadwithout arlingwithechnology. heassessee oesnothaveanypermanentestablishmentn::;i lLiS::" that e s not iabr,op"y Li ii,icome rromenderins

Answer2(a) P markseach)Computationof the amount of deductionallowableunder section35ADforthe Assessment ear2011_. t2

Capi ta l xpendi turencurred ur ing lnancja lear2010_11(excludinghecoslof and)I 6 .600 akh_ a I ,1 0 takhCapital expendjture ncurreoprror o commencemento,9urin?r:. nd Capitatizedn 1 4.200 t*"rrJrg .;.t Jif inancialnstrument)a 1,490 ak h { Z takhTotaldeduction nder ection 5AD or he Assessment ear2 . ) 1 1 - 1 2

Answer2(b)Computalion of book prolit of th e firm

Net prolitas per profit& LossAccountAdd: Salary a id o a partnersa 1.5 akh 3)Book profit

? (in lakhs)

5,500

1 4886,988

6.0 akh4.5 akh

10.5 akh


24/37

PP-ATLP_June011Computation f Amountpartners:

24of deduction under section 40(b) for remuneration o

On irst 3 takh f bookprofit@90%Onbalance 7.5 akhof bookprofit@60%(i) Maximumimit f remuneration(ii) ActualemunerationoworKrngartnersPankaj ndRoberti 1.5 akh 2) = a 3,00,000Allowabte eductionItowerof rhe i)& (ii)]Answer (c)(i)

a2,7 ,000..4,50,0007,20,000

3,00,000Correct, nterest nder ection 34 4 s not eviable n heassessee.The honorableSupremeourtnDt .prannovRoy nd notner.6:lrird;;ft raxman3 SC) adeldhatwhereeassessee'hadaidhe axes "i"r"',n?li" o"teof iringhe eturnbu t could not file he return or reasonsbeyondni" "ontrofOri ttted t belatedly, eharge of interest .r/s 2S4A is not vatid as in such ."r. in"r" is no loss to theevenue.Further,nterest ndersection S+n,Oeing omfensatory nnature, hallbeeviedonrywhere he tax has notbeendeposited iio, to tn " Jr " date of firingot theeturn. Accordingly, here he entireamountof selfassessmenrax was paidbeforethedue ateor itingeturn f ncome,nterestnoer lciion_alanil oul;;; j"r*;in filingof returnol income hallnotbe tevied.

Answer2(cXii)Correcl, th e assessee s not liable o pa y tax. The AAF in case of InvensysSystemsnc. 2009)17 tt or9 _lu.lll"lonry'wnereneiesparting ithecnnorogy,thepaymentourd e egardeds echnicarervice.ncase-ofnyother ervicesrendered romabroadwithoutDartjng it h echnotogy,n"r" i" no trabil i tyor th e non-residentopayaxunresshe erviceir" "no"r"JByn"liii.rn"nr ".t"brishmentfheassesseen India.

Question(a) singhaiAirrines td.sotdticketso traveragentsn rndiaandattowed hemoretain he amountcollected y them n eicessof ni,tlare of ticketunderapassenger alesagency greement.Examinewhetherhe above ransaction

amountsocommission nd iable odeduction f taxat source.Cite relevantcase aw (s marks)(b) Dhavalwas n the business f manufacturingustomiseditchen quipments.H" yu: 1l?o hemanaging irector nd,hetid earty65%ot thepaid_up harecapital f AaravLtd.A substantialartof the businesst Dhaval,was btainedthroughAaravLtd. For thispurp,sss, aravLtd. uiii""" on the advancereceivedrom tscustomersoDhavatoexecute ii 1oi trtorxentrusredc him.The assessing fficerheld,thatheadvancemoney receivedy Dhavats innatureof the oangivenbyAaravLtd. o him,andaccordinjly c aeemed ividendwithinhemeaning f theprovisions f section(24(;)).ihe assessingfficer,


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,l;::Jn,ffii:,!,e adaitionyl)eatinsdvanceot Pp-Arlp-June201Examine whethet thc ^", ^.' ^, :^:""'o"ce

moneyas the deemeddividendrelevant caseaw.the action of the assessingofficerB bnable in taw. Cite''iitr{,lt::w;:!i:[i';;:til:.i:i;"!E:::t:;:::::,asreementithMr[,"Lli?,'',11i?te r con ec!onasreement.,*",[iyz:J';-;xi::."_:tii:ffl?x!;ii?[Zii;:f;,";!;,i::::2ZZ:r::i;j;i:ii:",;:;:!"i;:;",":"i:::i:"::t:i: ;:,::,':,:{,::!;::;,n ," #"3:;:;ili:i;"?:,#"i;::I:;Whether he contentionakenby the ncome-taxdeDao""*".?lii'"" supportourns*"inn"ui'io,i,Jl{frT::::i:f*tl: ::#;

",'li:,e"?;::1;,lf :1":?jffilT'1,?l_"^fl!,yl.cour.sudsemen,nhease,I h eHo n r eH i g h o u r lu \ < v v r l z t r I a x a t r o n4 1 D e l)

*,l,r,iltiil:il[til#,r#"T#""#i[l]i:i:i{[illi',lff:ifii"T:llitilil:i,ilrft':iff::i,tu3il::ilff,fixl':fli11+!!&:ifl;:"?"',"#f1?"Jil,9:*::L"l"tll1;n51[Sfliil?:::?Iffi,1'"T;i,"iTh e pteasubmittedbv th r'pp,f"l,;'",ili';::?#:: ;iffij[l !:ff::.fiH""j"'f,"#i.l?11#fl:fil"",J,:""::il1.',:i?,:ili:::IlTrfas beenejectednheorowjnssround.heiil;:'Ix';,;;fiI*fli:"".,,:::lT',i:'lllflf::?'*;lnn:;'i:klff ,""'"Til'Jli;:blii*H1l*i"'*,,i,l,":l't"J;::i',"#11'anasentrudncrusronharaymenru,",;'lTL"3':tnu"'" ',i"li,'i'i*Ji:igff.T:,i::ffi1iJco.missionwli#iffi#ru""]{J;:lJff ',l"J,TJiTentarycommission.*u"JHence, he retained mounl

Answer3(b): s iable or axdeducted t source'

,_,-Thecasestudy sbasedon t\- r v. HalKumar3s trR462'Lijlln#lt t "on'ble erhi ish ourtn he ase f"". PJ,..:liiljJ.the evenue,heDerhi ishourt pherdhe ecrsion, he rjbunalThewordadvance'has obe eadnconjunct,onith hewordroan.usuary ttributes


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PP-ATLP-June011 26of oanare hat t involves,h"??rltly"ac lof ending,oupted rth cceptancey hether ideof hemoney s oan;tgenera[yarriesii"r".i "no n"r" rsanobrigationfepayment. n heother andn ts.widesi eaningne erm aouuncemayor maynotncludeending. heword advance,ifno t oundn iu "o,nprnio,o. ,nconjunctionithl.h"y:id'toan' mayor maynot ncludeheoorigriion i5iui."n,. ,, t does, hen twould ea oan.

Theword advance'which_appearsn the. ompany f theword loan,couldonlymean uchadvance hich arrjes ith tan obligaiionf repayment. rade dvancewhich re n henature f money.ransact"o" gi " "if""t tl?ior."r.'", transactionwoutd ot a wirhinheambit f heprovisionsf Section (Zil1e) , rheAct.,..ThetradeadvancegiventoDhavalyAarav td. ouldno tbe reated sdeemeddivided ndersection (22Xe) f theAct.

Answer (c ). ^Ttte ase tudysbased n he udgementyHon,ble elhiHighCourtn hecaseot CITv. BhaniCelutar td., 19 TR I S1O"t

_ .. On appealiledby heFlevenue,heDelhiHighCourt phetdhedecision f theTribunalndheld sunder:-.^ll-"-":.j":" renderedua nterconnection/portccess idno nvotve nyhumanrntenacend, herefore,heservicesould otbe regardeds technicalservices,ascontemplatednder ection94Jof heAct. ne inteiconnect/portccessacirity as:ll-1lT1,ly l? use hesateway nd henetwork f \4TNL/otnerompanies. TNL rotner ompaniesjdno tprovidenyassistanceraidorhelpo heassesseenmanagingoperating,etting p heirnfrastrucrurendnetwork.

Nodoubt,he acility f nterconnecUonndportaccess rovided y ,4TNL/othercompaniesas'rechnica' inhesensehat t nvorvedopnist icateoechnorogy.heexpressrontechnicarservice' asno t obeconstruedn heabstractndgenerarensebut n henarrowerense scircumscribedy heexpressionsmanagingservice,ndconsultancyservjce,asppearingnExplanationtoSectron1t 1vii)f heAct.Theexpressiontechnicarservice'wourdave eferenceoonty ecnn,"arervrceenderedbya human. twould ot ncludeanyservrce rovidedymachtnesr robots.Therefore,he nterconnectharges/porlccess hargesould otbe egardedsfees or echnicalervicesence ot iableor axdeduct6dl .orr"".PART B(AnswerQuestionNo.4 which s compulsoryand any two of the rest rom thispari.)Question4

(a) y!:e the most appropriateanswer from the given options n respectot thefollowing :(i) UnderRule 1Sof theCentralExciseRutes,2002, ompoundedevy schemets presen y applicable o _(a) Pan masala


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PP-ATLP-June 01(b) cutkha(c) Chewing obacco(d) Aluminiumcircles.(ii) Undersection27A of the CustomsAct,1962, interest n retunds spayable,if refunddue is not disbursedwithin_(a) 3 Months trom the date of apptication(b) 6 Months from the date of application(c) 3 Months rom the date of order grantingrefund(d) 6 Months rom dateof ordergrantingrefund.(iii) Effectiverate of customsduty on general baggages _(a) 1s0%

(b) 100%(c) 35%(d) 10%.

(iv) With the sanctionof theproper officer andon the payment of prescribedtees, the ownerof any goods after warehousing_(a) Cannot nspect hegoods(b) Can show thegoods forsale(c) Cannotsale,exportor disposeoff the goods(d) Cannotseparatedamagedor deterioratedgoods rom the rest.(v) The books of account or other documents, seizedby the Central ExciseOfficershallbe returnedwithin_. (a) 6 Months of seizureof documents(b) 90 Days of issueof show cause notice(c) 30 Days of issueof show cause notice(d) 60 Days of issue of show cause notice. (l mark each)(b) Re-write he followingsentences fter illing-in heblank spaceswth appropriateword(s)/figure(s) :

(i) Applicationto set ement commissioncan be madeonly when a case spending before on the date of application.(ii) ln thecaseofgoodsmpoded y post, ny abelordeclarationccompanyingthe goodsshowinghe contents, esciiption, uantityia)atue sha betreated s_.(iii) Shipping i forexpotlofgoodsunder laim ordutydrawbackshoulde n^^l^t 'rSection 17of heCustomsAct,1962 rovidesgeneralenalty oa personwhocon.travenesnyprovisions f theector aLetsn[oitiieition anarnopenattyhasbeenprescribed,hepenaltywoutdbeuptoUnder ectionSSBofthe CentralExciseAct,1g44, ny person ggrievedbyanydecision r orderpassed y heConmissioneripfi"util iiy "pp""t

(iv)

(v )


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PP-ATLp-June 20.1tOCESTATWithiNorder contested.

Answer4(aXi)(d ) Aluminumircles.

Answer4(a)(ii)(a) 3 monthsrom hedateof application.Answer (a)(iii)(c) 35%

Answer4(aXiv)(b ) Can how hegoodsorsateAnswer4(axv)(c ) 30daysof ssue l show ause otice.Answer4(b)

from the date of communicationof the

(5 marks)

28

(c) DiscussnbrietwhetherEA (1markeach)(i) rnputsone noror"""'lJJ."'"ditwill u admissibten ottowing ases:

(ii) Cement sed or instaation fmachinery.(iii) Accessoriesclearedalongwfthhefinalproduct.(iv) paintsused n factory o protectplant.(v) Tubes ndpipesused n,o,!X":or.o"irr;,,,,,",, , , !"iJii I ),o",o u,",,, :":: ': :

'ofiB'[tffi#;Iil,ffi il.;;T,:ilL. :3i,lJI#"""u"s enn"fl{ff:*'i;;lts::txiiistii;,?Hit?,ii;::fl:liTiTiffJi::,',,,3l3J;tn",lliforxport,soodsnderlaimordury ravr'backhourde n(iv) Section17ot heCustomsffix"il:#:t,i.;f#i["jlffiffilyff fiTr#t;(v) UnderectionSB l theCranvoqcls,oniil;; ;""J."ltd Excise ct'1944, nvoer:.,o.no;,,J0,,,n,n,n,"".""i1il,#,r:TTfl?XT#d#I


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Answer4(c) PP-ATLp-June2011(r) Ves,6g1rlyOtsavaj lablenenttreuanti tyf nput ,nprocessoss_Multi(ii)No, s pr,"rptun^rio!,

rs tav nbce it;;;;;'t"fflJJil.lt'no't o"'machinery, "o, ,,n,oltJl3:lljllT;JJ:[*cementsedornstarationt'"'' J'in];,iii,"ilil?iflll.:1,'l: "ttvAr credit ures,004,ccessoriesre(iv) yes,goods sed spaeorlrl hese recleared longwith he ina'o*"i ' '"s?J#id#'[r;;:*:rli:{ti:i'j,ffi,[:,:::"ffiJi:i[:",TlTods .CCE2007)18ELT7j6cesrnrj l --. ' ' , , '(v) yes,as perdefinition1.91f1:l,n""o: jn Ruje (a)of heCENVAT reditules,ubes ndpipes re apiralooostusJJin-Iil,"""tory.Answer(d)

_ Withef fect rom1_04-2010Hule2 of hecenlrat xcise";;llT":l,l:]"1has eenmademandatory.rovisoto9".:.:_,?t'"*,.",.,"",i'""1;i:T":[:""[ii,!xl:i,?#.ff:l: :iTi:"".""'il:,i3i3i3i'""JXl;3"'h;;;;;;;,ii;lli""ln!'*,n,,or uarter,y

Question5(a) Priya and Co. manufactLwere teared,o ,,","fi33,Y0! y:its of ProductP, utof which800 nits!:n[:si-*itm;iii;#i":"::;:T::'::.i#w,l!:"

- Cost lproductionof 1 000 units sper CAS-4 ( 7,90,000.- Profitmargin sperannualepott f the ompany lZy"oncost.- Seltingpriceper unit (excludingexcisedutyand otheraxes)= ?g0O.Y?'t!! ::,'"";{::i{::,ir batanceaol unts weresotd oanunretatedbuyer

(b) Bholaramrpo,tud "",t":,'eday ?Give easonsoryour answer.1snai*s1t;i,r;;-#::i_,*,i,,!,fi,ili,!,iif?J;,?!!"2:i:;:i:i:,{"!,;:r:i*ii{":,*'ill:}i'":Ifr::;jij{::;:":r::,::;:i !{:iy i::: i :i f i ',:":::::, ,:",w,thesoods, ;;n;;;;Z:;i;dns dutv ndother harses,nora,ammol,Ja

?;#;:i":x:;:::::;l,z!{!?':'" o' unotaramhiteemovinshe oodsp"y"or"viiii"t;;;;i;i;i;x;,;:ailli:;i:;::,zi:Jeciaraaaitiona,rsitii


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PP-ATLP-JUne 011 3028.11.2009 01.03.2010 15.04.2010Rate of exchangeper US $ (46 {45 {44

Rate of basic customs duty 15% 10% S%(5 marks)(c) What s the remedyavailable o an assesseeaggrievedby followingdecisions/orders n each separate case :

(i) Adjudicationorderpassed by AdditionatCommissionerof Central Excise.(ii) Adjudicationorderpassed by the Commissionerof Central Excise.(iii) Orderpassed by the Commissioner Appeals) elating o rebateof duty ofexcise on goods exporled outside lndia.(iv) Orderpassedby the Tribunal elating o valuationof goods.(v) Orderpassed by the Tribunal elating openalty. (1 mark each)

Answer5(a)Incasegoods resuppl iedoa' re lated erson' for apt ive onsumpt ion,aluat ionis doneon the basisof cost of production lus10%(provisoo ruleg o[ CentralExciseValuation lules).Rateof prof t marginor sellingprice s notconsidered.

/,90,000Cost eruni t sperCAS-4= 1OO0Add 10%notionalrofit sperBule 79

Assessable alueperunil 869Assessablealue f 800units asperprovisoo Rule )= 4 869x800uni ts f 6.95.200

lf the balance 00 unitsweresold o unrelated uyers@ { 925per unil henassessablealue hall eRs.1,85,000200 925)as Priya ndCo.directly ellinghegoodso unrelaledarty ot hroughhesister nit.Answer (b )

Relevantate f ExchangeNoteApplicableate l duty Note )AssessablealueUS$1,00,000 f 46Customs uty@10%Add : EC@Z"k SHEC@1%f Customs utyTotal ustoms utypayable

= ( + o= 10%= 4 46,00,000= 4 4,60,000= a 13,800= 4 4,73,800

Nof.r7 The elevantate fexchange illbe herate n orce n hedateonwhichintobond'billof entry s presented. ubsequenthange s not relevant.Henceexchangeate elevants1 US$ = f 46on28.11.2009.


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PP ATLP-June 011

any, whethercontentionof the department s tenable n law. (5 marks)

J INote2:ln KesoramRayonv. CC (1996)g6 ELT464, t was held ha tgoodswhicharenot emoved om hewarehouse ithin hepermissibreerooaredeemed obeimproperlyemoved n he astdateonwhichgoods hould av ebeen emoved.Hence, he appl icableateof duty s .10%,i .e. ,on 01.03.2010,he astdatewhen he periodwas over.Answer5(c)

(i) He mayappeal o CommissionerAppeals)(ii) Appealca n be made to Customs,Excise& ServiceTa x AppellateTribunal(CESTAT) gainst heorderpassedby Commissioner f CentralExcise.(iii) In his matterappear ha[ not ri ewithGESTAT.Revision ppricationas o bef ledwithCentralGovernment.

(iv) Appeal hall iewithSupremeCourt. (v) Appeal an be f ledwithHighCourt.

Question6(a) The assessee,a manufacturerof small uicer, used to avail of the benefit ofSS|-exemption. hesaidgoodsweresoldundertheirownbrandnamed'Fatafat'.However, n caseof sale to Smarl TeleShopping STS),who were urlher sellinqthe product through tele-shoppingnetwork, the supervisorsof STS used to

examinethe goods and affix a sticker thereoncontaining he name of STS.The depaftmentdeniedSSI-exemptionn respectof goods bearing the name/symbolof STScontending hat the same amountsto affixationof brand nameso as to dis-entitle he exemption. Discuss n the light of decided case aw, t

(b) ls thepoft trust iable topay duty on goodspilfered white n their possession?Explain n brief under the Customs Act, 1962. (S marks)(c) What s ad hoc exemption nder heCustomsAct,1962evenafterduty spaid?(d) What s ACES? Discuss riefty.

? Can it be granted(3 marks)(2 marks)

Answer (a )lfa manufacturerlearsoods nder isown rand ame, sl-exemptionsavailabre.But f hemanufacturerlears oods earinghebrand ame fanyother erson, SI_exemptionsnotavailable.The actsof hegiven asearesimilaro hecaseof lJnisonElectronicsvt . Ltd.[2009] 35ELT 06 SC), hereintwashetd hat,hesticker ontainingame/symbolot hebuyerwere ixedafter uality hecking,heretore,hesamewasa Drano ameusedor hepurposef ndicatingconnectionn hecourse f rade etweenhegoodsand hebuyer.Accordingly,heassessee asnotentitredossr-exemprtonn esDectofgoods old o hisparticularuyer. o theassesseesnotentitledoavaii hebenefitot Ss|-exemptionnrespect fgoods otd o STS.


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PP ATLP-June2011 32Answer6(b)

secllon 45(3) of the customs Act, 1962casts iabiti ty n the custodians o pa vcustomsduty in case o, any pilferage akingplacewhile he goodsare under heircustody. However, Section 45(3)applies o 'personreferred o in section45(1).Sect ion 5(1)prov idesor approval f custodiansy the Commissionerf customs.Accordingly,he major Portsnotif iedunder he l,,4ajoror t TrustsAct, 1963who ar eauthorized o functionas custodianunder heir respectiveActs, do not requireanyapprovalbeforeactingas custodians.Therelore. rovisions f Section45(.1) o notapply o them.ln Boardot l rusteesv. Unionof lndia 2009)241|ELT513(Bom.), t was hetd hat

underSection45(1)of the CustomsAct, the recoveryof duty an espectof pilferedgoodscouldonlybe made rom he approved ersonand he port rust s not iable opaydutyon goods i l fered hi le n hei r ossession.The Courl nterpretedha t the intention l the law mjghthave been o check hepilferageakenplace roma privatewarehouse r a customswarehouseunbya privatepa(y. The negligence f suchprivate arties houldno tcause oss o the exchequer.

Answer 6(c)Section 5(2)ot the CustomsAc t permitshe Centra!Governmento issuead hocexemptionrorncustomsduty by issueof a specialorder n public nterest nd underexceptional lrcumstances. he ordershouldspecify he exceptional ircumstanceslorgrant i r .adhocexempt ion.It hrs beenclarif iedha tsuchexemption an begranted ve nafterduty s paicj. nsuch . ise, utyhas obe refunded-MFDR)Cicularno.1Zlg7-Cusated 2.05.1997.

Answer6(d)rriCES tands or Automation f CentralExcisean dServiceTax, lt s a centralized,web based oltware pplication hichautomates arious rocesses f CentralExcise&S{rrvico ax assessesan d Departmenl nd givescompleteend to end solution.An yassessee an regis ter i thdepartment s ingACESappl icat ion,an f i le ax return,c larnsand nt i rnat ions,rack tsstatus ndgetonl inemessage.

Quest ion(a) Whatare the conditionsgoverning etund of import duty under section26A ofthe CustomsAct, 1962 ? Explain briefly. (5 marks)b) Distinguishbetween he following

(i) Expoftunderbond by 'merchantexpoftel and 'manufacturerexporler'undelRule 19of the Central Excise Rules, 2002.(ii) 'Brand rate'and 'specialbrund rate' or dutydrawback. (4 markseach)

(c) Can an application or advance rulingbe madeby the following(i) Governmentdepaftment.(ii) A resident mportinggoods underproject mporlscheme. (l mark each)

-


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PP-ATLP-June 011Answer (a)Sect ion 64 of Customs ct ,as inserted y the Finance No.2) ct ,2009w.e. f .9 8 2009makesprovisionor ref noor mport uty paio t!o"o"o."r" tornd defeclive rotas per specilications.Otherconditions re as under:(i ) Th e importedgoodsare found o be defective r no t in conformitywith th especificationsnd he yshouldno thavebeen eworkeJ r repaired r usedafterrmport.

(ir) Th e goodsshourd e dentifiedo thesatisfaction f the AC/DCof customsasthe goodswhichwere mported.(i i i) The '.nporterhad notclajmed rawback nderanyotherprovrston i thisAct.(iv) Goods houldeitherbe re"exportedrabandoned r destroyedn he presenceot theproper flicerwithin Odays rom he dateon whLn gooO. "r"' irnpo11"j(theperiod an be extended pto hreemonths).(v) Appricationor refund hourd e madewithin ix months rom hererevant at ein prescribedorman dmanner.Answer7(bXi)Exportunderbond by merchantexponerand manufacturerexporrerProceduresorexport nder ondunderRule 9of heCentra l xc ise ules, OO2ar eprescflbedn Notification o.4212001cE(NT)dated26.6.2001.

l,4erchantxporters requiredo executea bond n FormB_1.MerchantExporterregistered ith recognizeci xportpromotioncouncitanJ siar ExportHousesdo nothave o furnishany security/surety hileexecutingOonJ,unf""" in"V n""" "#" aadverse otice fdepartment. lterexecution fOo"O,nur"n"ri rxponernas o obtainCT-1certifcates om exciseolf ce.Hewilr endcr-1 certificateo hemanu{acturerromwhomgoodsare obeprocuredfo rexportwithout ayment f duty.Th emerchant xport"i*iri 1,n,r,n , ,nunningBondAccount' or export.

, . ,The.manufacturerxporter eedsnol o execute bond. He can urntsh Letter fundertak ingLUT) n Formur-1 . TheLUToncegiven . ""Lroi " t 12carendar onths.The LUTwillnot be discharoed nlessproofof ex-poir, .rJri i ,fo o,,duty s paidupondeficiency ith nterest.Answer7(bXii)'Brandrate 'and ,specia lbrand ate ' forduty drawback

Arr ndustry rawback atesare ixecr y he Directoratef Drawrrack. is possibreto fix all ndustry atesonly or somestandard roducts. t cannlt Oe ixed or specialtypeof products. nsuchcases,brand ate s ixedunO"r rl"i. in".anufacturer hasto submitan application it h all details o the Commissioner, entratExcise. Suchapplication us tbe maclewithin60 daysof export.Al l ndustry atesare ixedon averagebasis. ncase he manuracrurerr exporterfinds hat he (a ) duty-drawbacks per att ndustry at e s t;ss ihan 809," f the duties


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PP-ATLp--June011 g4paidbyhim b) ate snot ess han 1%ol F_OBalue fproduct xceplwnen mount fllwback per hipmentsmorehanBs.s00 c)expor.t;ru i" no t ". . tnun hevarue lmported aterialsed n hem.nsucn ases,'he"" "ppf' ". t*"i"n ol special randate o heCommissionerf Central xcise nOCust#!., ft-e"n "pp,yunderBule7or ixation fSpecial randRate,within 0days io;;r;"ri. "'Answer (cXi)

.- f9, 9ou"rlTentDepartmentannot ppryoradvanceuring,s t snot ncludedinhedefinitionf publicSectorComoanv.Answer (cXii)-^^,L"^"j "_:lg:lt

mporringoods nder rojectmportscheme noer eading801 anppryoradvanceuting Norrficatjont o. Z+leOOg_Cusifrfil J"t"o zOA.zOOgPARTCQuesl ion

Attempt ny fiveof the ollowing(i) Whats ,taxheaven' What re he parametersoconsider nemer urisdictionis taxheaven rnot,as au!inedby ih. Organisatiii iiEconomicCo-operationandDevetopmentOECD) ( marks)(ii) Mahesh, gecr 4years, s resdentandordinariryesident rndia.His ncomeis ? 16,80,000roma busine-ssn naia anJ dls,On iro, a businessn afo.reignountrywithwhom ndiahasagre"m"nt io, irlijaice otaouoteaxation(ADT). Accordingo theADT agreeir"nt, irroiiii'iii"bte in the ountrynwhicht searned ndnot nother ountry.Howeve;, theothercountry,suchincome anbe ncluded or omputaton t taxrate.Accordingothe tax awsof.the oreign ounlry,Mahesh as aid(32,000astax n thatcountry.During heprevious ear,Maheshhaspaid ( 2g,000ast,uitionee.forhisdaughterntndiaand rg6,ooira, triio, feefor hissonoutsidetndia orfu timeeducation.Maheshhasatsi """ii"i ii irt"nst of (4a,000onGovernmentecurities..Find ut he ax iaOitity:UJe*sh or theassessmentvear2011-12Does t makeanvdifference,ruanesi ii i no, ,t;2;:^;;"',,

(iii) Whatare theentryoptions.av:it:bt?lr foreisncompanieslanningo set_upbusnessoperationsn lndia? Exptain riefti. H marks)(iv) Exptainhebinding atureofadvance ulings nderthe ncom" ,", 1"0,,,r1!!frr;(v) Whats the roleof ,TransferpricingOffber,? ls it possibleor the AssessingOfficero pass heassessmen.trderpenainingo iheassessmenlear 201_12without onsiderinq rm's engthpriceaairiii"a {inu Transfer ricingOfficer? H narks)(vi) DistinguishetweencrossBorderTransactions'andrntematDnarrransactions,.(4marks)

-


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\tcAnswerB(i) PP-ATLp-June20i 1

4,11,400

.- A taxheaven sa placevrhffiUil",ffi""i:n:';'ffi"flr l"";:i [il?#::';Jiff{ii :fg,r "lH;T::.tfioutrned the orow'nsur"r"[;,;]o"nsioerwnetnerurisdiction.(i) lmposesnoor onlynomrnalaxes:(ii) Whetherheresa ackopenndonsi;t;;;#ij',1ffiiililt;J:T;:XfliJijsuresharheresan

il' lffl,',y?J:llonneededvax*r';;,,*,"i3,li"lli!::Xffiit"l1i;,f:(iii) Whetherhereare awsfJiffii*,iltil?Hf,'Ij,ffilH""n[xilfi[in""#""",:y:t',yfl? jH"J:,,X?.""Jff^"^'^:.eq emn hath a ti ir. investmen,""0,"".*n33i:n*:**n1J;:;1J:,iH?i"??ii,i,l"iAnswer (ii)Computati,..," 3""J"11i#illl,"J#:'T"'Businessncomen IndiaInterestnGovernmentSecuntiesGross otal ncomeLess Deductionnder ection oC seenote)Total ncomeAdd Foteignncomeobe ncludedor ate urposeTotalTaxon ? 22,45,OOOUpro 1,60,000From , 1,60,001oa 5,00,000 1O%

From 5,00,00.1o f 8,00,000@20o{,Unbatance 14.45,000@30%Add: EducatjonCess 2%of ax)Add:Secondaryandhigher ducalon ess .10 f axTaxpayableAverageateo, u, 9{9'?1 -Z2.4S,OOO100= 24.20q.Indian ax iabitity 117,00,ooo 24.20o/o)

\16,80,00048,00017,28,00028,00017,00,000

5,45,00022,45.00o? - . -

Nil34,00060,000

4,33,500 5,275oo10,5505,2755,43,325


36/37

PP*ATLP-JUne 011 36Itwill not makeany differencef [,4aheshs a non-resident. he Non Resident ancertainlyak e he benefit f theprovisions f DTAAentered nt obetween ndiaand hecountry ,nwhich e res ides.Nole Deduction nder ectiong0c isno tavairabreor uitioneepaidoutsidendia.

Answer 8(iii)A Foreignompany lanningo set-upbusiness perationsn Indiahas he ollowingent ry pt ions:(i) As an incorporated ntityby getting ncorporated nder he ComoaniesAct.1956 r hrough ointVentures,swhol ly wned ubsid iar ies l

(ii) As an otficeof a foreignentity ikea riaison ff celrepresentativefl ice/projectotflce/branchflice.Entry outes anbe hroughechnicaroflaborationr hroughinanciaroflaboration.such nvestmentsremadeeither nder utomaticoute r approvaroute. nvestmentunderautomaticoute nvorves os facto apvovarof RBr or he nvestmentmadean dth e nvestmentnder pprovaroute equires riorapprovar f FrpB ForeignnvestmentPromotion oard).

Answer8(iv)Accordtngo Sect ion 45S of the IncomeTax Act , j96.1, the advance ul inopronouncedy heauthor i tynderSect ion 45R hal l ebjnding nly:(i ) On the applicant ho hadsought t;(ii) In respect f th e ransactionn relationowhich he ruling adbeensought; nd(i i i) On the commissioner,nd he lncome-Tax uthorities ubordinateo him, nrespect f the applicant nd he said ransaction.The advance uling eferredo abovesha|| e binding s aforesaid nresshere sachange n awor actson the basisof which he advance ulinghas beenpronounced.The effectof the ruiing s, understandably,tated o be conlined o the apolicantwhohas sought t as wellas hecommissioner nd he rncome-Tax uthority ubordinateohimhavingurisdictionver hecaseand hat ooonly n relationo ransactionor whichadvance ulingwas sought. t may, however,be stated hat the Authoritygenerally

lollows he ruling n othercaseson materially imilar actsand, mostcertainryn otheicases raising he samequestion f law, f any, which t has decided.The rulehere sdifferentrom hepositionn othercountries hereeither he axpayer r the revenue rbothar eat l iberty o accept he ruling r not.Answer 8(v)Roleof "TransferPricing Officer"

lf Assessing tl icer considerst necessary r expediento reler hecomputation fArm'sLengthPriceof an Internationalransaction o the Transferpricinoolficer thenhe may do so with he previous pproval l the Commissioner.


37/37

37On the datespecilied n th e abovenoticeor as soonas thereafter sPP-ATLp-June2011maybe :inc luding nyas the ransfer

@ :1t:jj:1,1"n suchevidence,asneassessee ayproduce,rntormationr documents np i n orrcem yd;;;;;;""X1"J*H:TH?"::i : ",o" "(b) after aking ntoaccount ll relevantmaterialwhichhe has garhered.The ransler ricjng ff cer.shall yorder nwriting eterminehe arm,s ength riceilj"j:i::J:jf" "ternationarransactionnd end"c"pv"ii-ri" ro"r',"he oando"" **.'.iJ,liii:ij?'ii]f i::::sins

otr'|certoasshe ssessmentorderertaininsI:l:tl p,icing'oiri;ns;l'i:Jffi?;31iii iT'; l'j:j.rrceeterminedvhJof icerocompulcheotarncomenhe asisfarm'""ng,r''toigoJrJHfiixr:Answer (vi),;::,n?:r:".:,f#,1:::;i_" 1.":3"ti"nnannternationarr oreisnountry,raoutsrdehe home ountry , ,na 'l *n'"n at east neof hecounterpartiess ocatedco b det,u. io l ,#rffJff i";:",1#.jJilT:::Hl"*"1:ili,,:illij13i33il5i'i:

"l5J?Jr::::ffitq"" ""s,""'"nlid;,;;,;. trademark,icenseemprovmentsreements,ostT;s;;?ill?ffllt:torshlp asreements,xparriate' Internationaltransacl ion,enrerpnsesndag s3s16s61r.ll.a transactionmustbe betweenwo associatedmust e n henaturufprr"hu.",'"nenterprise us t ea non-residenth" ,t"".""r]o";*rns:1fttiil:[:l.?nfuJ,",,,,"":x"i#ffil'J","!,:1"#,;;rT:

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