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2005 ICFAI University M B A Business Law Question paper

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2005 ICFAI University M B A Business Law Question paper
Question Paper
Business Law (MB261): April 2005
Section A : Basic Concepts (30 Marks)
• This section consists of questions with serial number 1 - 30.
• Answer all questions.
• Each question carries one mark.
• Maximum time for answering Section A is 30 Minutes.

1. Who can become director of a company?
(a) A company (b) A firm (c) A corporation
(d) An individual (e) A Hindu Undivided Family.

2. Which of the following is/are inland bill(s)?
I. A bill drawn in Delhi on a merchant of Mumbai payable in London
II. A bill drawn in Mumbai on a merchant of Tokyo but made payable or accepted payable in Delhi.
III. A bill drawn in Chennai on a merchant of Kanpur and accepted payable in Paris
IV. A bill drawn in Mumbai on a merchant of Tokyo but made payable or accepted payable in Delhi
and endorsed in New York.

(a) Both (I) and (III) above (b) Both (I) and (II) above
(c) Both (II) and (III) above (d) Both (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.

3. Which of the following matters do not require prior approval of the Central Government?
(a) Payment of interest out of capital
(b) Removal of auditor
(c) Appointment of cost auditor
(d) Increase in numbers of directors beyond twelve
(e) Issue and effect of share warrants to bearer.

4. Under which of the following matters, joint holders of shares are treated as single member?
I. For making an application to NCLT for oppression and mismanagement
II. For counting number of members of a private company
III. For the purpose of quorum
IV. For making an application for right issue

(a) Only (I) above (b) Both (I) and (II) above
(c) Both (II) and (III) above (d) Both (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.

5. Under which of the following situations, accounts can be reopened after their adoption in the annual
general meeting?
(a)
Where personal expense is included in the company’s accounts
(b) Where revision arises out of a technical requirements of taxation laws
(c) Where the subsidiary company’s balance sheet is not attached in the holding company’s balance
sheet
(d) Where true and fair view is not revealed in the annual accounts but adopted in the AGM
(e) Where revision arises out of false figures entered in the accounts for the sake of declaration of
dividend.

6. A guarantee given for an existing debt or obligation is called a
(a) Retrospective guarantee (b) Prospective guarantee
(c) Specific guarantee (d) Simple guarantee (e) Fidelity guarantee.

7. Under the Companies Act, 1956, which of the following acts is held as oppressive?
(a) The majority shareholders alone appointed all directors
(b) The management is inefficient
(c) Failure to comply with the formalities of giving notice for general meetings
(d) Refusal to declare more than moderate rate of dividend, where the profits of the company justify a
higher rate
(e) A person, who had no authority at all, usurps the office of a director and managing director.

8. Under which of the following occasions does the allotment of shares become void?
(a) When any of the stock exchanges mentioned in the prospectus refuses to grant permission
(b) When the minimum subscription is not received
(c) When the money received on application is less than 5% of the nominal value of each share
(d) When the statement in lieu of prospectus is not filed with the Registrar of Companies
(e) When the application money is not deposited with a scheduled bank.

9. Provisional contract means
(a) A contract entered into by a private company for purchase of raw material
(b) A contract entered into by the promoters of the company before its incorporation
(c) A contract entered into by a private company after its incorporation
(d) A contract entered into by a public company after obtaining certificate of incorporation but before
obtaining certificate of commencement of business
(e) A contract entered into by a private company with its directors.

10. Doctrine of restitution can be invoked in the case of
(a) Quasi-contracts (b) Void agreements
(c) Valid contracts (d) Collateral contracts (e) Contingent contracts.

11. In case of a breach of warranty in a contract of sale, the buyer can
(a) Repudiate the contract (b) Claim damages only
(c) Reject the goods (d) Refuse to pay the price (e) Not reject the goods.

12. Which of the following is required to alter the objects clause of the memorandum of association?
(a) Passing of ordinary resolution
(b) Passing of special resolution
(c) Passing of ordinary resolution and confirmation of the National Company Law Tribunal
(d) Passing of special resolution and confirmation of the National Company Law Tribunal
(e) Passing of ordinary resolution and confirmation of the Central Government.

13. Which of the following persons is qualified to enter into a contract?
(a) An alien enemy (b) A foreign diplomat
(c) A company (d) An adjudged insolvent (e) A convict.

14. Under the Arbitration and Conciliation Act 1996, in case of international commercial disputes,
application has to be made to
(a) The Chief Justice of High Court
(b) A judge of High Court
(c) Central Government
(d) A judge of Supreme Court
(e) The Chief Justice of India.

15. Which of the following matters require confirmation from the National Company Law Tribunal?
(a) Reduction of share capital (b) Issue of shares at discount
(c) Buy-back of securities (d) Issue of share warrants
(e) Conversion of shares into stock.

16. The power to declare any association or body, whether incorporated or not, as a company for the
income tax purposes has been vested in the
(a) Central Board of Direct Taxes (b) Income tax officer
(c) Commissioner of Income tax (d) Income tax appellate tribunal
(e) Central government.


17. Which of the following is false in respect of the definition of ‘income’?
(a) Income can be received in cash or in kind
(b) Both the temporary and the permanent income are taxable
(c) Income whether received in lump sum or installments is taxable
(d) Income tainted with illegality also is taxable
(e) Income is taxed only on the basis of the actual receipt.

18. Kiran owns a car (1,500 c.c), which he uses for both official as well as for private purposes. He has
incurred the running and maintenance expenses of Rs.47,350 during the previous year 2004-05 and also
paid the salary of a driver at the rate of Rs.1,850 per month. His employer reimbursed the entire
expenditure. The perquisite taxable in the hands of Kiran for the assessment year 2005-06 is
(a) Rs.47,950 (b) Rs.21,600 (c) Rs.69,550 (d) Rs.16,800 (e) Rs.52,750.

19. The payment by the employer, of the school fees of the employees’ children, directly to the school is
(a) Taxable in the hands of both specified and non-specified employees
(b) Exempt upto Rs.50 per child per month
(c) Exempt upto Rs.100 per child per month
(d) Taxable only in the hands of the specified employees
(e) A tax-free perquisite.

20. Which of the following is treated as an asset for the purposes of the Wealth Tax?
(a) Motor cars used by the assessee in the business of running them on hire
(b) Residential property let out for 320 days during the previous year
(c) Land occupied by any building which has been constructed with the approval of the appropriate
authority
(d) Yachts, boats and aircrafts
(e) Land on which the construction of the building is not permitted under any law for the time being in
force.

21. Which of the following statements is false in respect of the term ‘manufacture’ under the Central Excise
Act?
(a) The term ‘manufacture’ includes the processes incidental and ancillary for the completion of the
main product
(b) Manufacture need not result in the new substance having the distinct name, character or use
(c) Manufacture implies a change but every change is not a manufacture
(d) If the process of assembling results in the new product that is movable and marketable, the same is
treated as manufacture
(e) Even if an article is mentioned in the tariff, no duty is leviable if there is no manufacture.

22. Which of the following is treated as a ‘sale’?
(a) Sale of the illegal goods
(b) Free replacement of the spare parts during the warranty period
(c) Hypothecation of goods
(d) Mortgage of goods
(e) Barter or the exchange of goods.

23. M/s.Samir Ltd. is engaged in construction and sale of buildings. It has the following assets as on March
31, 2005:
Description of asset
Rs.
Building in which the office of the company is located 5,00,000
Two flats constructed, which are ready for sale
8,00,000
House occupied by General Manager whose annual salary is Rs.4 lakhs 3,00,000
House occupied by CEO whose annual salary is Rs.6 lakhs 5,00,000
House occupied by CFO whose annual salary is Rs.5.5 lakhs 4,00,000
Guest house located 40 kms away from Mumbai
2,00,000
The net wealth of M/s.Samir Ltd. for the assessment year 2005-06 is
(a) Rs.7,00,000 (b) Rs.11,00,000 (c) Rs.12,00,000
(d) Rs.5,00,000 (e) Rs.24,00,000.

24. Section 2(28) of the Indian Customs Act, defines the term Indian Customs Waters. Which of the
following statements is true in the light of the above definition?
(a) The Indian Customs Waters extend Upto 10 nautical miles beyond the territorial waters
(b) The Indian Customs Waters extend Upto 14 nautical miles beyond the territorial waters
(c) The Indian Customs Waters extend Upto 12 nautical miles beyond the territorial waters
(d) The Indian Customs Waters extend Upto 16 nautical miles beyond the territorial waters
(e) The Indian Customs Waters extend Upto 9 nautical miles beyond the territorial waters.

25. Which of the following incomes is not exempt under section 10 of the Income Tax Act?
(a) Receipts from the HUF by a member of a Hindu Undivided Family
(b) Share of profit of a partner from a partnership firm
(c) Bonus received under a life insurance policy
(d) Sum received under Keyman Insurance Policy
(e) Educational Scholarship.

26. As stage of production and /or sales continue, each subsequent purchaser has to pay tax again and again
on the material which has already suffered tax. This is called ‘cascading effect’. To overcome this
difficulty, India has adopted the concept of
(a) Duty Drawback
(b) CENVAT Credit
(c) Provisional assessment
(d) Payment of duty under protest
(e) Sales tax.

27. Which of the following goods are not taxable under the Sales Tax Act?
(a) Advance licence
(b) Lottery tickets
(c) SIM card sold by the cellular companies
(d) Stocks and shares and debentures
(e) Sale of the copyright.

28. Which of the following statements is false with regard to ‘rebate’ under the Income Tax Act, 1961?
(a) Rebate under 88C is applicable in case of women assessees only
(b) Rebate under 88C is applicable in case of women below the age of 65 years
(c) In case of women assessees above 65 years, rebate under 88B is applicable
(d) The maximum amount of rebate under Sec 88C is Rs.15,000
(e) Rebate under section 88 is inapplicable in case of assessees whose gross total income exceeds
Rs.5,00,000.

29. Mr.Zee has only one house, which could not be occupied by him owing to his employment. The house
was neither let out nor any benefit has been received by him during the previous year 2004-05. What is
the annual value of the property for the assessment year 2005-06?
(a) The municipal rental value
(b) The fair rental value
(c) The standard rent
(d) Nil
(e) The fair rent or the municipal value whichever is higher, subject to a maximum of the standard
rent

30. The capital goods intended for use in the 100% export oriented undertaking can be kept in the
warehouse for a period of
(a) 6 months from the date on which the goods have been kept in the warehouse
(b) One year from the date on which the goods have been kept in the warehouse
(c) One and half years from the date on which the goods have been kept in the warehouse
(d) Two years from the date on which the goods have been kept in the warehouse
(e) Five years from the date on which the goods have been kept in the warehouse.

END OF SECTION A

Section B : Problems (50 Marks) MB261-0405

• This section consists of questions with serial number 1 – 8.
• Answer all questions.
• Marks are indicated against each question.
• Detailed workings should form part of your answer.
• Do not spend more than 110 - 120 minutes on Section B.

1. Chemkey Ltd. has paid up capital of Rs.1 crore of which:
LIC holds 9%; SBI holds 2%; UTI holds 2%; Central Government holds 5%; and Public Financial Institution
holds 1.75% of the subscribed capital.
The company issued notice on 15t h February 2005 by calling its annual general meeting on 25t h March 2005 inter
alia proposing the appointment of an auditor. On 25th February 2005 the company further issued and allotted 5,000
preference shares of Rs.100 each to SBI by private placement. Chemkey Ltd. advertised in newspapers on 7t h
March 2005 for closure of its register of members with effect from 15th March 2005 and as per its decision the
register of members shall remain closed until 25th March 2005. In the annual general meeting held on 25t h March
2005, the auditor was appointed by passing an ordinary resolution. The Registrar of Companies raised an objection
that ‘since SBI holds shares in the company on the day of the meeting, the appointment of auditor will be invalid
unless made by a special resolution’. The Board of directors of the company replied that the appointment of
auditor in this company is valid even though made by ordinary resolution.
Required:
Keeping in view the above situation, discuss the legal position of the auditor so appointed by Chemkey Ltd.
(7 marks)

2. Lucky Ltd. with a paid-up capital of Rs.10 crore and free reserves of Rs.16.8 crore as on March 31, 2005 provided
the following investments/loans/security/guarantee to the other bodies corporate as follows:
I. 50,000 equity shares of Rs.10 each at Rs.390 per share in PQR Co. Limited (as a right of receiving shares
under section 81 of the Companies Act)
II. A loan of Rs.1 crore to Albert Pharmacy Limited, which is a wholly owned subsidiary of the Lucky Limited.
III. Security provided for purchase of 50,000 Units of US-64 issued by the UTI at Rs.14.50 each to Kutty
Limited, which is a wholly owned subsidiary of Lucky Limited.
IV. Investment of Rs.32,50,000 in a firm in which all the directors of Lucky Limited are partners.
How much amount further, the Board of directors of the company (apart from the existing investments / loans /
security / guarantee) can invest in other bodies corporate?
(7 marks)

3. A selection committee of a university interviewed Mr. X, a candidate for the post of a lecturer. Selection
committee passed a resolution selecting Mr. X for the post. One of the committee members, acting in his
individual capacity, informed Mr. X, about the favorable response by the selection committee by way of a
resolution passed in its meeting. But Mr. X received no information from the university as regards his selection.
Subsequently, the resolution was cancelled and Mr. X was not appointed for the post.
Required:
In the above situation, critically examine, the course of action (if any) available to Mr. X, for not appointing him
for the post of Lecturer.
(5 marks)

4. Raju purchased a T.V. from Ankit Electronics for Rs.25,000 and requested the shopkeeper to keep the T.V. in the
very shop, and said that since he is leaving for Chennai for one week, he would take delivery of the T.V. The
shopkeeper accepted the request and immediately packed the T.V. in front of Raju and kept aside. Two days later,
the shop caught fire and all the goods including the T.V. of Raju were burnt in the fire. After coming from
Chennai, Raju demanded the shopkeeper for another T.V. or return the money paid by him. But the shopkeeper
denied the demand of Raju.
Required:
In this scenario critically examine the case whether the demand of Raju is tenable.
(6 marks)

5. Mrs.Mala, an employee of ABC Ltd., furnishes the following information for the previous year 2004-05.
Rs.
Basic Salary From 1.4.2004 – 30.9.2004 (per month) 5,500
From 1.10.2004 onwards (per month)
6,500
Advance salary of 3 months received
19,500
Dearness allowance (50% forms part of retirement benefits) 8,500
Bonus
6,500
Employers contribution to provident fund account of the employee 7,500
Children educational allowance (for 2 children) 4,350
The company provides her with a rent-free unfurnished house at Hyderabad. The fair rent of the house is
Rs.39,700 p.a. However, Municipal Valuation is Rs.35,000 p.a.
Required:
Determine the taxable value of the perquisite rent free accommodation, for the assessment year 2005-06.
(6 marks)

6. Mrs.Roma Agarwal, a director-employee of a public limited company submits the following information relevant
for the assessment year 2005-06:
Particulars
Amount (Rs.)
Basic salary
60,000
Dearness allowance (45% forms part of salary for retirement) 25% of basic
Commission on the turnover of Rs.5,00,000 achieved by her @ 5%
Bonus
10,000
Education allowance for 3 children
3,600
Medical expenses reimbursed by the employer 5,000
Payment of electricity bills by the employer
1,000
Reimbursement of gas bills
1,000
Free refreshment during the office hours
2,000
The employer provides a furnished bungalow to Mrs.Roma Agarwal in Calcutta at a concessional rent of Rs.11,200. The
fair rent of the house is Rs.40,800 and the cost of furniture provided (owned by the employer) was 20,000. An air-
conditioner at a monthly rent of Rs.250 was provided for 5 months to Mrs.Roma Agarwal. The cost of maintenance of
the garden adjacent to the bungalow (including the salary of gardener) is Rs.2,000, the salary of 2 watchmen is Rs.1,000
p.m., and the salary of the cook is Rs.1,000 p.m, all of which are paid by the employer.
A Fiat car (H.P. less than 16) owned by the employer was provided to Mrs.Roma Agarwal along with a driver for
both official and personal purposes. The employer does not maintain any logbook.
Mrs.Roma Agarwal receives an interest of Rs.26,000 from investment in Bonds.
The following contributions were made by Mrs.Roma Agarwal during the previous year 2004-05:
• Insurance premium for a policy on the life of her husband: Rs.9,000
• Insurance premium for a policy on the life of her father: Rs.3,000
• Deposit in 10-year account under the Post Office Savings Bank: Rs.2,000.
You are required to compute the taxable salary of Mrs. Roma Agarwal for the assessment year 2005-06.
(8 marks)

7. Mr.Kamalnath, an advocate, who maintains books of account on cash basis furnishes the following particulars of
his income for the previous year ended March 31, 2005.
Receipts and payments a/c for year ended March 31, 2005
Rs.
Rs.
Balance b/d 12,500 Purchase of computer 8,000
Fees from clients: Car expenses 6,900
2000-01 20,000 Office expenses 18,600
2001-02 35,000 Interest on loan 1,200
2002-03 12,500 Income tax penalty 2,500
Presents from clients 6,000 Salary to staff 18,400
Loan from client 7,500 Contribution to public provident fund 1,500

Balance c/d 36,400
93,500
93,500

1. 40% of car expenses are attributable towards use of car for personal purposes. Depreciation is to be
calculated @ 20%.
2. Written down value of the car on April 1, 2004 is Rs.12,500.
3. Fees due but outstanding – Rs.1,600.
4. Income of Mr.Kamalnath from other sources – Rs.15,000.
5. The Write down value of the typewriter was Rs.20,000 as on April 1, 2004.
Rate of depreciation is 25%.
Required:
Determine the taxable income of Mr.Kamalnath for the assessment year 2005-06.
(7 marks)

8. Ms. Anuradha, whose valuation date is March 31, 2005 submits the following particulars of her assets and
liabilities for the assessment year 2005-06:
Particulars Amount (Rs.)
Jewelry in India
60,00,000
Utensils of gold (situated outside India)
30,00,000
Capital borrowed for acquiring jewelry in India 2,00,000
Capital borrowed for purchasing utensils of gold outside India 1,00,000
You are required to determine the net wealth of Ms. Anuradha for the assessment year 2005-06 if she is a
a. Resident and ordinarily resident Indian.
b. Resident but not ordinarily resident Indian.
(2 + 2 = 4 marks)
END OF SECTION B

Section C : Applied Theory (20 Marks)
• This section consists of questions with serial number 9 - 10.
• Answer all questions.
• Marks are indicated against each question.
• Do not spend more than 25 -30 minutes on section C.

9. a. Explain the ‘advantages of law’ by applying the theory of Jurisprudence.
b. Explain the doctrine of ‘supervening impossibility of a contract’ by applying the provisions of The Indian
Contract Act.
c. Explain the ‘different modes of crossing of a cheque’ by applying the provisions of the Negotiable
Instrument Act, 1881.
(3 + 4 + 3 = 10 marks)

10. Explain the differences between Revenue and Capital receipts.
(10 marks)

 

Question Paper
Business Law (MB261) : January 2005
Section A : Basic Concepts (30 Marks)

• This section consists of questions with serial number 1 - 30.
• Answer all questions.
• Each question carries one mark.
• Maximum time for answering Section A is 30 Minutes.

1. How much amount shall be transferred to capital redemption reserve account, when a company
purchases its own shares out of free reserves?
(a) A sum equal to the nominal value of the shares so purchased
(b) A sum equal to the market value of the shares so purchased
(c) A sum equal to the book value of the shares so purchased
(d) A sum equal to the intrinsic value of the shares so purchased
(e) A sum equal to the market value of shares or book value of shares which ever is higher.

2. The Companies (Acceptance of Deposits) Rules, 1975 are applicable to
(a) Non –Banking Finance Companies
(b) Non-Banking Non–Finance Companies
(c) Finance Companies
(d) Banking Companies
(e) Co-operative societies.

3. As per section 591 of the Companies Act, a foreign company means?
(a) A company incorporated out side India and having place of business in India
(b) A company incorporated in India and having place of business out side India
(c) A company incorporated out side India and having place of business out side India
(d) A company incorporated in India and having place of business in India
(e) A company incorporated in India but not commenced its business.

4. Which of the following directors can be appointed by passing circular resolution?
I. Appointment of director in casual vacancy
II. Appointment of director as additional director
III. Appointment of director as alternate director
(a) Only (I) above (b) Only (II) above
(c) Both (I) and (III) above (d) Both (II) and (III) above
(e) (I), (II) and (III) above.

5. What is the minimum age limit prescribed under the Companies Act, for a person to be appointed as
managing director of a company
(a) Attaining the age of eighteen years (b) Attaining the age of twenty five years
(c) Completing the age of eighteen years (d) Completing the age of twenty five years
(e) Attaining the age of twenty one years.

6. Which of the following is the scope of the company?
(a) Memorandum of Association of the company
(b) Articles of Association of the Company
(c) Paid up capital of the company
(d) Common seal of the company
(e) Assets of the company.

7. The Doctrine of Election lays down the principle that
(a) Representatives of the people should be elected
(b) A person has the liberty to do whatever he wants
(c) A man taking a benefit under an instrument must also bear the burden
(d) Between alternative legal remedies a person may choose that which is most beneficial to him.
(e) A property cannot be transferred where a suit or proceeding is pending in any court.


8. Which of the following is false?
(a) Compromise can be a consideration for a contract
(b) Forbearance can be a consideration for a contract
(c) Abstinence can be a consideration for a contract
(d) Consideration for a contract may be illusory
(e) Consideration should be real.

9. Debentures cannot be issued at discount if they are
(a) Non-cumulative (b) Redeemable (c) Convertible
(d) Unsecured (e) Cumulative.
< Answer >
10. A guarantee given for an existing debt or obligation is called a
(a) Retrospective guarantee (b) Prospective guarantee
(c) Specific guarantee (d) Simple guarantee
(e) Fidelity guarantee.

11. Under which of the following circumstances a company is not permitted to engage in buy-back of its
securities?
(a) When default is made in filing its annual return
(b) When Managing director is not appointed as required
(c) When annual general meeting is not conducted for a calendar year
(d) When the directors claims excess remuneration than what they are eligible
(e) When higher rate of dividend is declared at an annual general meeting.

12. Which of the following is not the right of an auditor of a company
(a) To have access to books of accounts
(b) To call for information and explanations
(c) To receive notices and other communications relating to general meetings
(d) To receive remuneration for auditing the accounts
(e) To check whether the transactions of the company, which are represented merely by book entries,
are not prejudicial to the interest of the company.

13. An agent, who in consideration for an extra-commission, guarantees his principal that the persons with
whom he enters into a contract on behalf of the principal, shall perform their obligations, is called:
(a) Special agent (b) General agent (c) Universal agent
(d) Commission agent (e) Del-credere agent.

14. In case of breach of a warranty in a contract of sale, the buyer can
(a) Repudiate the contract (b) Claim damages only
(c) Reject the goods (d) Refuse to pay the price
(e) Not reject the goods.
15. Which of the following instruments can be made payable to ‘bearer on demand’
I. A promissory note. II. A bill of exchange.
III. A cheque. IV. A hundi.
(a) Only (II) above (b) Only (III) above
(c) Both (II) and (III) above (d) Both (I) and (II) above
(e) Both (III) and (IV) above.

16. Which of the following preconditions is false in respect of the deductions that a newly established
undertaking in the Free Trade Zone can claim under Section 10A of the Income Tax Act, 1961?
(a) The undertaking should not be formed by the splitting or the reconstruction of the existing
business
(b) It should not be formed by the transfer of the old machinery
(c) It has to begin the manufacture or production in the Free Trade Zone
(d) There should be repatriation of the sale proceeds to India in convertible foreign exchange
(e) No certificate from the Auditor is necessary for the purpose of claiming the deduction.

17. The income from the sale of the coffee grown, cured, roasted and grounded by the seller in India
without mixing any flavouring ingredients is treated as agricultural income to the extent of
(a) 40 percent (b) 60 percent (c) 100 percent
(d) 50 percent (e) Nil.

18. Which of the following statements is/are true in respect of the income earned by a local authority?
I. The income from the supply of a commodity (not being water and electricity) within the
jurisdiction is exempt from tax.
II. The income from the supply of electricity outside the jurisdiction is exempt from tax.
III. The income from the supply of the water is fully taxable.
IV. The capital gains earned by a local authority are fully taxable.
(a) Only (I) above (b) (I), (II) and (III) above (c) (III) and (IV) above
(d) (I) and (II) above (e) (I), (II), (III) and (IV) above.

19. Mr. Dhananjay who works as an officer in a private company uses his own car of 1200c.c for both
official and the private purposes. His employer incurs an amount of Rs.6,000 per month on the car. He
recovered an amount of Rs.18,000 p.a. from Mr. Dhananjay towards the car expenses. What is the
taxable value of the perquisite in respect of the car in the hands of Mr. Dhananjay for the assessment
year 2004-05?
(a) Rs.54,000 (b) Rs.14,400 (c) Rs.60,000 (d) Rs.39,600 (e) Rs.45,600.

20. Which of the following is not treated as profits in lieu of salary as per the provisions of the Income Tax
Act, 1961?
(a) Retrenchment compensation received by an employee
(b) Lumpsum payments received prior to the employment
(c) Lumpsum payments received after the cessation of the employment
(d) Compensation received from the employer in connection with the modifications of the terms of the
employment
(e) Payment from the unrecognized provident fund over and above the contributions made by the
assessee and the interest thereon.

21. For which of the following purposes can the Central Government prohibit the import or export of goods
of specified description u/s 11 of the Customs Act, 1962?
I. Maintenance of security of India.
II. The protection of deceptive practices.
III. The conservation of exhaustible natural resources.
IV. The prevention of smuggling.
(a) Both (I) and (III) above (b) Both (II) and (IV) above
(c) Both (I) and (II) above (d) (I), (II) and (III) above
(e) (I), (II), (III) and (IV) above.

22. Which of the following is/are the sale in course of export on which no tax is payable under the Central
Sales Tax?
I. Sale or purchase that occasions the export.
II. Sale is effected by a transfer of the documents of title to goods after the goods have crossed the
customs frontiers of India.
III. Exports through the agents.
(a) Only (I) above (b) Only (II) above (c) Only (III) above
(d) Both (I) and (III) above (e) (I), (II) and (III) above.

23. Under the Central Excise Act ‘sale’ at the time of removal includes
(a) Hire purchase and the lease (b) Job work (c) Stock transfer
(d) Branch transfer (e) Free samples.

24. Under which of the following situations, are the rules under Part B of Schedule III not applicable for
valuation of a building?
I. The Assessing Officer, with the approval of Deputy Commissioner, is of the opinion that it is not
practicable to apply the rules of Part B of Schedule III to a particular case
II. The unbuilt area exceeds the specified area by more than 20% of the aggregate area
III. The property is built on a leasehold land and the lease expires within a period of 15 years and the
lease deed does not give an option to the lessee for renewal of the lease.
(a) Only (I) above (b) Only (II) above (c) Both (I) and (II) above
(d) Both (I) and (III) above (e) (I), (II) and (III) above.


25. Which of the following will not be considered while computing the maximum ceiling of Rs.20,000 in
respect of the repayment of the housing loan for the purpose of section 88?
(a) Stamp duty and the registration
(b) Legal expenditure incurred for the registration of the house property in the assessee’s name
(c) Cost of the repairs before the issuance of the completion certificate
(d) Cost of the repairs before the occupation of the house
(e) Repayment of the loan taken from a friend for the house construction.

26. Which of the following losses are not deductible from the business income?
I. Losses relating to any business or profession discontinued before the commencement of the
previous year
II. Loss of the advances made for setting up of a new business and which could not be started
III. Losses incurred on the sale of the shares held as investments
IV. Loss arising from the non-recovery of the tax paid by an agent on behalf of the non-resident.
(a) Both (III) and (IV) above (b) (I), (II) and (III) above
(c) (I), (III) and (IV) above (d) (II), (III) and (IV) above
(e) (I), (II), (III) and (IV) above.

27. Which of the following statements are true in respect of the wealth tax return to be filed by an
assessee?
I. The due date for the income tax and the wealth tax return is the same.
II. Wealth tax officer can issue a notice to the assessee on his failure to file the wealth tax return,
before the end of the relevant assessment year.
III. A revised wealth tax return can be filed within one year from the end of the assessment year or
before the completion of the assessment, whichever is earlier.
IV. A return, which shows the net wealth below the exemption limit is deemed to have never been
furnished.
(a) Both (I) and (II) above (b) Both (II) and (III) above
(c) (I), (II) and (III) above (d) (II), (III) and (IV) above
(e) (I), (II), (III) and (IV) above.

28. The excise duty is not chargeable from the manufacturer
(a) On the goods which are used within the factory
(b) On the goods which are captively consumed in the factory for the further manufacture
(c) On the goods which are given as free samples
(d) On the goods which are given as free replacement
(e) On the textile goods manufactured on a job work basis, at small units.

29. The abatement of the duty on the damaged goods is allowed u/s 22 of customs Act in which of the
following cases?
I. If the goods are damaged before or during the unloading in India.
II. If the goods are damaged by accident after unloading but before the examination by the Customs
Officer, for the assessment.
III. If the goods are damaged by accident in the warehouse before the clearance.
(a) Only (I) above (b) Only (II) above (c) Only (III) above
(d) Both (II) and (III) above (e) (I), (II) and (III) above.

30. The stock transfer will be treated as occasioned as a result of the sale, if not supported by
(a) Form ‘C’ (b) Form ‘H’ (c) Form ‘G’ (d) Form’F’ (e) Form ‘D’.

END OF SECTION A


Section B : Problems (50 Marks)
• This section consists of questions with serial number 1 – 8.
• Answer all questions.
• Marks are indicated against each question.
• Detailed workings should form part of your answer.
• Do not spend more than 110 - 120 minutes on Section B.

1. Kartik is a director in 20 companies as on 1st October 2004. The composition of his directorships is as detailed
below:
I. Alternative director in a public limited company;
II. Director in 15 public limited companies;
III. Director in 2 private companies which are neither subsidiaries nor holding of other public companies; and
IV. Director in a company registered as an association not carrying on business for profit.
V. Director in an unlimited company.
Wise Ltd., a public limited company, wants to induct Kartik as a director in its Board. Decide whether Kartik can
be appointed as director in Wise Ltd. in terms of Sections 275 and 278 of the Companies Act, 1956?
(5 marks)

2. Sri Krishna Limited with paid-up capital of Rs.3 crore and free reserves of Rs. 5 crore as on March 31, 2004 has
investments of Rs. 8 crore in various firms. The company made the following further investments:
I. 50,000 Equity shares of Rs. 10 each at Rs. 390 per share in PQR Co. Ltd.,
II. Investment of Rs. 1 crore in 11% debentures of Albert Pharma Ltd.
III. 50,000 Units of US-64 issued by the UTI at Rs. 14.50 each
IV. 25,000 Equity shares of Rs. 10 each @ Rs. 130 each in securities.
Discuss whether, the company has violated the provisions of Sec 372A of the Companies
Act, if not so, how much amounts further the company apart from the existing investments can invest in other
body corporates?
(5 marks)

3. The Board of directors of Slow-Down Limited set up an audit committee comprising of four members, but did not
fix the quorum. At a meeting of the audit committee only two members present to transact certain business. In the
above situation, discuss, whether the two members of the Audit Committee can form quorum for the meeting?
(5 marks)

4. A, accepted a bill and delivered it to B for the purpose of getting it discounted from him. B, having failed to
discount it, returned the bill to A, who tore the bill into two pieces intending to cancel it, and threw the pieces
into the street. B picked up the pieces and pasted them together in such a manner that the bill seemed to have
been folded for safe custody rather than cancelled. B then indorsed the bill in favor of C, a holder in due course.
In the above context, discuss whether, C gets valid title to the bill?
(5 marks)

5. ABC Ltd. company has twelve directors, who are scattered all over the country. Every time when ever there is a Board meeting, all twelve directors attend thereby, the cost of sitting fees is high and the directors are given
trouble all the way to attend to all the board meetings. They sought the advise of the company secretary on this
matter, how they can meet and decide the matters which will not amount to violation of the Companies Act. The
company secretary advised the Board of directors to form committees so that, they need not waste money, time
and energy of all directors. Taking the above matter into account, decide what are the matters that can be
delegated to committee of directors?
(5 marks)

6. Brahma Ltd. offered the following fringe benefits to its senior executive, Mr.Seshadri whose basic pay exceeds
Rs.18,000 per month for the previous year 2003-04:
• Special discount on the sales of the company’s product for personal use.
• Option to purchase used furniture, cooler and refrigerator in furnished accommodation (used for 10 years)
at concessional value.
• Leave travel assistance to the same extent as is given to the Government servants.
• Free educational facility for his 3 children in the school owned and maintained by the company.
• Interest free loan for the purchase of a house.
• Free lunch facility within the office premises during the business hours.
• The company has provided also a domestic servant.
You are required to discuss the tax treatment of the above benefits / perquisites provided by the company to
Mr.Seshadri for the assessment year 2004-05.
(7 marks)

7. On May 28, 1999 Mr. Pranav purchased 1,000 equity shares of Rs.10 each of Glaco Ltd. at the rate of Rs.150 per share from a broker. He paid brokerage at the rate of 1% on the purchase. On January 24, 2002, he was allotted bonus shares by the company at the rate of one bonus share for every four shares held. Subsequently, in the month of April, 2003, he was given an option to acquire right shares at the rate of Rs.90 per share in the ratio of one share for every two shares originally purchased. He acquired 50% of the right shares on the same day and sold the balance 50% of the rights at Rs.20,000 to his friend. On March 26, 2004 he sold all his shares at the rate of Rs.225 per share. The transaction cost was 1% of the sale consideration.
You are required to compute the capital gains in the hands of Mr. Pranav for the assessment year 2004-05.
(Clearly indicate the short-term and long-term capital gains).
Cost inflation index
1998-1999 – 351 2001-2002 – 426
1999-2000 – 389 2002-2003 – 447
2000-2001 – 406 2003-2004 – 463
(8 marks)

8. Mr.Dhananjay owns 3 houses. The following particulars have been furnished by Mr.Dhananjay for the previous
year 2003-04:

House 1
House 2
House 3
Particulars
Let out
Self occupied
Self occupied
(Rs.)
(Rs.)
(Rs.)
Municipal value 3,50,000 2,60,000 80,000
Fair rent
3,60,000 2,25,000 79,000
Standard rent 3,65,000 2,15,000 81,000
Actual rent
3,72,000 –– ––
Unrealized rent 31,000 –– ––
Repair expenses 60,000 20,000 5,000
Municipal taxes 24,000 12,000 2,000
Insurance premium 4,000 3,000 400
Interest on borrowed fund utilized for
construction of respective house property
60,000
82,000
––
Vacancy period 1 month –– ––
Date of completion of construction March 3, 1992 Jan. 1, 2001 June 6, 1989
Date of loan May 5, 1990 July 7, 1999 ––
On the basis of above particulars, you are required to compute the income chargeable to tax from house
properties in the hands of Mr. Dhananjay for the assessment year 2004-05.
(10 marks)

END OF SECTION B

Section C : Applied Theory (20 Marks)
• This section consists of questions with serial number 9 - 12.
• Answer all questions.
• Marks are indicated against each question.
• Do not spend more than 25 -30 minutes on section C.

9. Discuss the ‘privileges’ of holder in due course by applying the provisions of Negotiable Instruments Act, 1881.
(5 marks)

10. ‘All agreements are not contracts but all contracts are agreements’ elucidate the statement by applying the
provisions of the Indian Contract Act, 1872.
(5 marks)

11. Write short notes on the following applying the provisions of Central Sales Tax Act, 1956:
a. Dealer [(u/s 2(b)]
b. Place of business [(u/s 2(dd)]
c. Goods [(u/s 2(d)]

(2 + 2 + 2 = 6 marks)

12. Briefly explain the procedure for registration u/s 6 of the Central Excise Act, 1944.
(4 marks)



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2005 ICFAI University M B A Business Law Question paper for exam preparation. Question paper for 2005 ICFAI University M B A Business Law Question paper, 2005 ICFAI University M B A Business Law Question paper