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Posted By: ashish Member Level: Diamond Posted Date: 26 Dec 2007
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2006 ICFAI University M.B.A Business Law (MB261) : July 2006 Question paper
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Question Paper
Business Law (MB261) : July 2006
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. Mr.Karan is an employee in the Finance Department of InfoTech Limited. On January 15, 2006, he
attended a seminar on “Tax amendments”. Seminar fees of Rs.2,500 were paid by InfoTech Limited. The
taxable value of the perquisite in the hands of the Mr.Karan for the assessment year 2006-07 is
(a) Rs.500 (b) Rs.1,000 (c) Rs.1,500 (d) Rs.2,500 (e) Nil.
2. If the income of a minor child is included in the total income of his parent u/s.64 (1A) the amount of
income exempted u/s 10(32) of the Income Tax Act is
(a) Rs.5,000 (b) Rs.3,000 (c) Rs.2,500 (d) Rs.2,000 (e) Rs.1,500.
3. Mr.Balu is employed in a non-seasonal factory at a salary of Rs.2,400 P.M. Besides, he also gets dearness
allowance @ Rs.600 P.M. and bonus @ Rs.200 P.M. He retires on December 31, 2005 and gets Rs.75, 000
as gratuity under the payment of Gratuity Act after serving 31 years and 4 months in that factory. The
amount of gratuity which is exempt under the Income Tax Act for the assessment year 2006-07 is
(a) Rs.53,654 (b) Rs.21,346 (c) Rs.75,000
(d) Rs.3,50,000 (e) Rs.35,654.
4. Which of the following is/are not treated as manufacture with reference to the Central Excise Act, 1944
(a) Making Masala Powder (b) Recording of cassette
(c) Stitching of cloth (d) Yarn to thread
(e) Charging of dry batteries.
5. According to the Central Sales Tax Act, 1956 Form ‘D’ relates to
(a) Sales covered in the course of export
(b) For stock transfers from one state to another
(c) Indemnity furnished by dealer in mattes of security deposits
(d) Supply to government concerns by the dealers
(e) Interstate sales.
6. The essential condition(s) to be fulfilled for the purpose of the valuation of the goods under the Customs
Act 1962 is/are
I. The sale or the offer for sale should be in the course of th e international trade and there should be no
mutuality of interest between the seller and th e bu yer.
II. The price should be the sole consideration for the sale or the offer for sale.
III. The terms of the price should be for delivery at the time and place of importation or exportation.
(a) Only (I) above (b) Only (II) above
(c) Only (III) above (d) Both (II) and (III) above
(e) All (I), (II) and (III) above.
7. The aggregate deduction under section 80 C, 80CCC and 80CCD for the assessment year 2006-07 cannot
exceed
(a) Rs.1,00,000 (b) Rs.2,00,000 (c) Rs.3 ,00,000
(d) Rs.4,00,000 (e) Rs.5,00,000.
8. According to the Income Tax Act which of the following is not a revenue receipt/revenue expense
(a) XY & Co. received Rs.1,00,000 as compensation from PQ & Co. for premature termination of
contract of agency
(b) DE Company Limited instead of receiving royalty year by year, received it in advance lump sum
(c) An amount of Rs.1,00,000 was spent by a company for sending its production manager abroad to
study new methods of production
(d) Payment of Rs.75,000 as compensation for cancellation of a contract for the purchase of a machinery
with a view to avoid an unnecessary expenditure
(e) An employee director of a company was paid Rs.1,00,000 as lump sum consideration for not
resigning from the directorship.
9. The education cess that is leviable on the amount wealth tax is
(a) 1% (b) 2% (c) 3% (d) 5% (e) Nil.
10.If an employer provides free education allowance to meet the education cost of the child of the employee,
the maximum amount of deduction available to the employee is
(a) Rs.400 per month per child maximum of two children
(b) Rs.300 per month per child maximum of two children
(c) Rs.350 per month per child maximum of two children
(d) Rs.100 per month per child maximum of two children
(e) Nil.
11.Dr.Anand , an Indian citizen and a professor in IIM, Lucknow, left India on September 15, 2005 for USA
to take up Professor’s job in MIT, USA .The residential status of Dr.Anand for the assessment year 2006-
07 is
(a) Resident (b) Not-ordinary resident
(c) Non-resident (d) Indian Citizen
(e) Foreign Citizen.
12.Tata Limited purchased goods on credit from Alpha Limited on January 6, 2006 for Rs.40,000 which is
paid as follows
1. Rs.10,000 in cash on February 5, 2006
2. Rs.30,000 by a bearer cheque on February 28, 2006.
The amount of disallowance is
(a) Rs.15,000 (b) Rs.6,000 (c) Rs.30,000 (d) Rs.20,000 (e) Rs.3,000.
13.Mr. Xavier is a non resident, and had the following income during the previous year ended March 31,
2006
Particulars
Rs.
Salary Received in India for three months
9,000
Income from house property
13,470
Interest on Saving Bank Deposit in State Bank of India 1,000
Amount brought into India out of the past untaxed profit earned in Germany 20,000
The taxable income of Mr. Xavier for the assessment year 2006-07 is
(a) Rs.23,470 (b) Rs.25,460 (c) Rs.25,470
(d) Rs.23,740 (e) Rs.32,470.
14.Mr.Zaheer informs you that h is taxable income for the assessment year 2006-07 is Rs.11,00,000. The tax
liability of Mr.Zaheer for the assessment year 2006-0 7 is
(a) Rs.3,14,160 (b) Rs.3,00,160 (c) Rs.3,04,160
(d) Rs.3,41,160 (e) Rs.3,14,610.
15.The remuneration due to ‘Judges of Supreme Court of India’ would assessable under the head
(a) Income from other sources (b) Salaries
(c) Capital gains (d) Income from business
(e) Income from profession.
16.Which of the following is treated as an asset under the Wealth Tax Act-1956?
(a) A house held as stock in trade
(b) A house allotted to a director who is not a whole time director and draws a salary of Rs.1,50,000 p. a.
(c) A commercial complex
(d) A house used for own business (or) profession
(e) A house used for the residential purpose.
17.Which of the following statements is/are not true regarding the appointment of the Managing director
I. He, being a director must be an Individual.
II. He is appointed by the board of directors usually to perform such functions and carry out such duties
as may be assigned to him by the Board of directors to whom h e is responsible or sub ject.
III. The board cannot revoke the authority of the managing director.
IV. There cannot be two or more than two managing directors in a company.
(a) Only (I) above (b) Only (II) above
(c) Both (I) and (II) above (d) Both (II) and (III) above
(e) Both (III) and (IV) above.
18.Every company having a share capital must file an Annual Return with the registrar. The annual return
must be filed with the registrar within
(a) 60 days of the annual general meeting
(b) 10days of the annual general meeting
(c) 30 days of the annual general meeting
(d) 45 days of the annual general meeting
(e) 20 days of the annual general meeting.
19.Minimum subscription, as per revised Schedule II, of the Companies Act, 1956 is
(a) 90% of the issued capital (b) 85% of the issued capital
(c) 50% of the issued capital (d) 40% of the issued capital
(e) 30% of the issued capital.
20.The additional directors of the company will be appointed by the
(a) Members of the company in annual general meeting
(b) Shareholders of the company
(c) Company in extra-ordinary general meeting
(d) Managing Director of the company
(e) Board of Directors of the company.
21.An agreement made under coercion according to the sec.15 of the Contract Act, 1872 is
(a) Valid (b) Void (c) Voidable
(d) Illegal (e) Unenforceable.
22.Who enjoys the right of subrogation in a contract of indemnity?
(a) Creditor (b) Principal debtor
(c) Indemnifier (d) Indemnified (e) Garnishee.
23.Which of the following is not the characteristics of a bills of exchange
(a) It must be in writing
(b) It must contain an unconditional order to pay
(c) It must be signed by the drawer
(d) The sum payable must be uncertain
(e) The parties must be certain.
24.Every depository and participant is required to be reg istered with
(a) SEBI (b) ROC
(c) Recognized Stock Exchange (d) Central Government
(e) Department of company affairs.
25.An Arb itrator may be ch allenged if
I. There are reasons giving rise to doubts as to his independence.
II. He d oes not possess the qualifications, wh ich are agreed to by the parties.
III. The p arty had the knowledge of facts affecting impartiality and continues with it.
(a) Only (I) above (b) Only (II) above
(c) Only (III) Above (d) Both (I) and (II) above
(e) Both (I) and (III) above.
26.Auditors who are appointed should communicate their acceptance or refusal in which form
(a) No.18 (b) No.8 (c) No.13 (d) No.23B (e) No.2.
27.Which of the following would resu lt in termination of agency by operation of law
(a) On expiry of time
(b) By an agreement between the parties
(c) On completion of business of the agency
(d) Agent renouncing the business of agency
(e) Principal revoking his authority.
28.Which of the following is true as regards an ‘agreement to sell’ in respect of goods
(a) It is an executed contract which creates a jus in rem
(b) It is an executory contract which creates a jus in personam
(c) It is an executed contract which creates a jus in personam
(d) It is an executory contract which creates a jus in rem
(e) It is an executory contract.
29.Which is not one of the essential elements of state?
(a) Law (b) Population (c) Government
(d) Territory (e) Sovereignty.
30.Bailment can be terminated
I. On the expiry of the bailment period.
II. When the purpose of bailment is achieved.
III. When the subject matter gets destroyed.
IV. Inconsistent use of the goods.
(a) Only (I) above (b) Only (II) above
(c) Only (III) above (d) Both (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.
END OF SECTION A
Section B : Problems (50 Marks)
• This section consists of questions with serial number 1 – 7.
• 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. The following details are furnished by Sundaram an Indian Citizen for the year ending March 31, 2006
Particulars
Rs. Salary (Net of tax and Sundaram’s contribution to Prov ident Fund) 48,000
Sundaram’s contribution to Provident Fund
4,950
Employer’s contribution to Provident Fund
4,950
Interest credited to Provident Fund@ 3.75% p.a.
14,000
Leave Travel Allowance received
3,600
House rent allowance (Rent paid on house in Hyderabad, Rs.4,500) 4,500
Dividends from ACC Limited, an Indian company (Gross) 2,500
Dividend collection charges
200
Tax deduction at source on salary
1,500
Contribution to Public Provident Fund
4,000
Contribution to National Laboratory approved u/s.35
5,000
Amount received on maturity of a key man Insurance policy 6,000
Sundaram acquired 2,000 shares of Rs.5,00,000 during 1998-89. Company allotted him equal value of bonus
shares during 1996-97. Second bonus issue was made during March 2005 when he received 1 bonus share for
every 2 shares held by him. The entire shares held in the company have been sold by him during November 2005
@ Rs.1,100 per share.
Inflation indexation for the financial year 1988-89 and 2005-06 may be taken as 161 and 497 respectively.
You are required to calcu late the total income of Sundaram for the assessment year 2006-07.
(12 marks)
2. Sushma furnishes the information about her period of stay in India during 1995-96 to 2005-06 which is as follows:
1995-96 365 days
1996-97 366 days
1997-98 365 days
1998-99 110 days
1999-00 75 days
2000-01 67 days
2001-02 178 days
2002-03 65 days
2003-04 62 days
2004-05 70 days
2005-06 100 days
You are required to determine the statu s of th e assessee for the assessment year 2006-07.
(5 marks)
3. a. Mr.Xavier owns a house property (municipal valuation: Rs.1,45,000, fair rent: Rs.1,36,000, standard rent:
Rs.1,24,000). It is let out throughout the previous year (rent being Rs.8,000 per month up to November 15,
2005 and Rs.14,000 per month thereafter). The property is transferred by Xavier to James on January 31,
2006.
You are required to calculate the Gross Annual Value of the property in th e hands of Xavier for the
assessment year 2006-07.
b. Mr.Raghava owns a property at Delhi (municipal value Rs.1,64,000, fair rent: Rs.2,16,000, standard rent
Rs.1,80,000). The house is let out up to January 31, 2006 (monthly rent being Rs.14,000). From February 1,
2006, the property is self-occupied for own residential purposes. Expenses incurred by Raghava are:
municipal tax: Rs.6,000 (actually paid) repairs: Rs.2,100, insurance Rs.1,1 00, interest on capital borrowed
(date of borrowing being June10, 1 991 ) for acquiring property: Rs1,23,000. Assuming that the income of
Raghava from other sources is Rs.1,86,000.
You are required to compute the net income from House property for the assessment year 2006-07
(3 + 5 = 8 marks)
4. Rosa Ltd. has paid up capital of Rs.1 crore and LIC of India holds 10% of the same. The company issued notice on 15th May, 2005 calling its annual general meeting on 26th June, 2005 inter-alia proposing the appointment of auditor. On 30th May 2005, the company issued and allotted 50,000 preference shares of Rs.100 each to LIC by private placement. Rosa Ltd. advertised closure of its register of members in newspapers on 7th June 2005 stating that the closure of registrar of members would be effective from 15th June 2005 and the register of members shall remain closed until 26th June 2005. In the annual general meeting held on 26th June 2005, the auditor was appointed by passing an ordinary resolution. One of the shareholders present, raised an objection as the LIC holds more than 25% of the share capital on the day of the meeting, th e appointment of auditor will be the LIC was holding only 10%, ordinary resolution is valid and the shares allotted on 30th May, 2005 to LIC were preference shares only and not to be counted for the purpose”. Is the contention of chairman valid? And discuss what is the right course of action available to the company?
(7 marks)
5. A company named ABC Ltd. maintained a guest house for use of its CMD and other senior executives. It entered into a contract with XYZ Ltd. for installation of central air-conditioning system. Complaint was lodged with
XYZ Ltd., that the air–conditioning system did not function properly. But no action was taken by XYZ Ltd. to
repair the air-conditioning system. Then, the complaint company appointed a consultant to submit a report on
the working of the air conditioning system. The consultant pointed out a number of defects such as defective
fabrication, improper construction of the cooling tower and so on. ABC Ltd. now wants to make a comp laint
before the consumer forum. Will it succeed?
(6 marks)
6. a. The Registrar of Companies issued a Certificate of incorporation actually on 8th January 1999. However by
mistake, the certificate was dated 5th January, 1999. An allotment of shares was made on 7th January, 1999.
Could the allotment be declared void on the ground that it was made before the company was incorporated?
b A company issued a prospectus. All the statements contained therein were literally true. It also stated that
the company had paid dividends for a number of years, but did not disclose the fact that the dividends were
not paid out of trading profits, but out of capital profits. An allottee of shares wants to avoid the contract on
the ground that the prospectus was false in material particulars. Decide.
(4 + 4 = 8 marks)
7. A bill is drawn by A and accepted by B without consideration. A, the drawer, transfers the bill to C for valuable
consideration. C presents the bill for payment on the due date to the acceptor. B contends that he is not liable to
pay C, as the bill is not supported by consideration. How would you decide? Give reasons.
(4 marks)
END OF SECTION B
Section C : Applied Theory (20 Marks)
• This section consists of questions with serial number 8 - 10.
• Answer all questions.
• Marks are indicated against each question.
• Do not spend mo re than 25 -30 minutes on section C.
8. Explain the main difference between Annual General Meeting and Extra Ordinary General Meeting.
(6 marks)
9. What is a taxable turnover under central sales tax act? How is it determined?
(4 marks)
10. Briefly define the following:
a. Private company.
b. Caveat Emptor.
c. Levy & Collection of Excise duty under the Central Excise Act, 1944.
d. Essential elements of a valid contract under the Contract Act, 1872.
(2 + 2 + 3 + 3 = 10 marks)
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