SZ Ltd. is a company listed at Bombay Stock Exchange. Company is engaged in manufacturing and selling of Cars. Company was established in the year 2000. Since its establishment till March 2018, company has a strong track record and achieved its targets in consistent manner. SZ Ltd felt that automatic transmission was the need of the hour for India. There were numerous constraints in offering this feature in small and price sensitive cars. Nevertheless, it made all efforts to offer a cost-engineered product to fulfil customer expectations. This path-breaking technology enhanced convenience for Indian consumers. Traditional auto transmissions are not only expensive to own, but have a high running cost as well. AGS technology overcame both these disadvantages. At the core of SZ's strategy is the desire to meet customer expectations and delight them with exciting products, features and technology relevant to market conditions. During the year 2017-18, there was continued progress on product development. The Company was able to launch 3 new vehicles, all in new segments, pioneering new technologies and a disciplined focus on cost efficiency. In hindsight, the decision to develop a state-of-the-art R&D centre in India, taken in 2012, has proved to be a pivotal step in augmenting the Company's capability in vehicle design and development. It would help SZ Ltd meet the specific needs of Indian customers. The Karnal centre is now an integrated facility with different test tracks, requisite testing and safety labs, which help the Company conceptualise, design and develop new products and upgrade the existing portfolio at a faster pace. The R&D centre is also helping the company test and validate products to meet newer regulations. While India will move to new safety and emission regulations over the next two to three years, two of the company's models are already certified and approved for advanced vehicle safety regulations, ahead of the deadline. With regard to production, the situation became challenging due to limited capacity on the one hand and the popularity of certain models on the other. To meet unserved demand, the Company needed to manufacture beyond planned capacity. Through various innovations at the shop-floor and strong team work, the Company could achieve a production volume beyond the combined production canacity of Nagpur and Pune plants. the company Company's Articles empower the Board of Directors to appoint additional director. The Board of Directors, therefore, appointed Mr. K as the additional director. It may, however, be pointed out that earlier, the proposal to appoint Mr. K, as a director on the Company's Board was rejected by the members at the company's Annual General Meeting. His wealth of experience and knowledge would be of immense benefit to the Company. Mr. A is one of the directors of the company. He intends to construct a residential building for his own use. The cost of construction is estimated at Rs. 1.50 Crores, which Mr. A proposes to finance partly from his own sources to the tune of Rs. 60 lacs and the balance Rs. 90 lacs from housing loan to be obtained from a housing finance company. For the purpose of obtaining the loan, he has approached the housing finance company which has in principle agreed to grant the loan, but has put a condition. The condition put by the housing finance company is that the Company SZ Ltd. of which Mr. A is a director should provide the guarantee for repayment of the loan and interest as per the terms of the proposed agreement for granting the loan to Mr. A. Is The total revenue is Rs 5000 Lakhs as against 4500 Lakhs and 4000 Lakhs in the immediately preceding previous year showing an increase of 11 percent in the current year. Sale of vehicles in the domestic market was 1015 units as compared to 925 units in the previous year showing an increase of 10 percent. A calendar of meetings is prepared and circulated in advance to the Directors. During the year, five board meetings were held, the details of which are given in the Corporate Governance Report. The Company was awarded the highest financial credit rating of AAA on its bank facilities by CRISIL. The rating underscores the financial strength of the Company in terms of the highest safety with regard to timely fulfillment of its financial obligations. The Company was awarded ISO/IEC 27001:2005 certification by STQC Directorate (Standardization, Testing and Quality Certificate), Ministry of Communications and Information Technology, Government of India after re-assessment. In 2015, the certification has been upgraded to 27001:2013. hecim for renlacement of It has also furnished the following information in respect of purchases made by it in that tax period: Particulars (Rs. In Lakhs) 150 Intra-State purchases of Spare parts Inter-State purchases of spare parts 25 ITC with the company at the beginning of the tax period: Particulars (Rs. In Lakhs) 15 3 CGST SGST 15 IGST 35 Note: () Rate of CGST, SGST and IGST to be 9%, 9% and 18% respectively. (ii) Both inward and outward supplies are exclusive of taxes, wherever applicable. (ii) All the conditions necessary for availing the ITC have been fulfilled. The net profit of the company as per Statement of Profit and loss for the year ending 31-3-2018 is Rs. 150 lakhs after debiting or crediting the following: 0 One time licence fee of Rs. 20 lakhs paid to TEESLA INC., a foreign company for obtaining know how on 20.07.2017. 0 One time licence fee of Rs. 20 lakhs paid to TEELA INC., a foreign company for obtaining know how on 20.07.2017: () Dividend of Rs. 12 lakhs received from ALFA INC., a foreign company in which the company holds 32% of equity share capital of the company. Rs. 50,000 was also expended on earing this income. (iii) The company had provided an amount of Rs. 25 Lakhs being sum estimated as payable to workers based on agreement to be entered with the workers union towards periodical wage revision once in 3 years. The provision is based on a fair estimation on wage and reasonable certainty revision (iv) Company used railway platforms for advertising different models of cars by way of hoardings, banners etc. and the company is likely to make payment in the month of June, 2018 Rs. 5 Lakhs Also, Payments due to railways for use of the assets for transportation of cars during F.Y 2017-18, the company is likely to make the payment in the month of December 2018 Rs. 2 lakhs. (v) Contributions made to an approved research association used for the purpose of research in social science or statistical research under section 35(1)(ii) Rs. 5 Lakh. (vi) Depreciation charged to the statement of profit and loss account Rs.20 lakhs. (vii) The opening and closing stock for the year were Rs. 90 lakhs and Rs. 68 lakhs, respectively. They were overvalued by 10%. (vii) Payment of Rs. 8,000, Rs. 9,000 Rs. 9,000 and Rs. 4,000 by cash on 15th September, 2018 by four separate vouchers to a contractor who carried out work at office premises. (ix) Legal fees incurred in defending title of factory premises of the company Rs. 3 lakhs. (x) Profit of Rs. 3 lakhs from hedging contracts entered into for meeting out the loss in foreign currency payment towards an imported machinery purchased from Germany for Rs. 90 lakhs, which was installed on 20.12.2017. (xi) The company, during the year, employed 100 new workers in the factory which was 15% of the existing work force employed on the last day during the earlier year. It paid Rs. 15 lakhs as additional wages. The workmen were employed from 01.05.2017. (xii) Profit on sale of land Rs. 20 lakhs. (xiii) Rs. 6 lakhs paid to H Ltd. towards feasibility study conducted for examining proposals for technological advancement relating to existing business; however, the project was abandoned without creating a new assets. Additional Information: (a) Normal depreciation allowable as per the Income tax Act, 1961 Rs. 22 lakhs. (b) Additional depreciation on plant and machinery imported and installed during December 2017 has not been considered while calculating depreciation as per the Income tax Act, 1961 as tion under section 35AD of the Income-tax B. DescripU nerical Questions 11. Compute the Company's income under the head Profits and Gains of Business or Profession. ((giving reasons for treatment of each item) Ignore MAT provisions. (10 Marks) 12. Compute the total income and tax payable by SZ Ltd. for the A.Y. 2018-19. (5 Marks) 13. Compute the net GST payable by the company during the tax period. Make suitable assumptions as required. (5 Marks) 114. Applying the provisions of the Companies Act, 2013, answer the following: Whether Mr. K's appointment as additional director by the Board of Directors is valid? (ii) Whether the Company's Annual General Meeting can appoint Mr. K as the additional director when the proposal to appoint comes before the meeting for the first time? 7