Life Education Ltd., a Mumbai based entity, is an eligible start-up incorporated in May 2019 and has been successfully managing its online education…

Life Education Ltd., a Mumbai based entity, is an eligible start-up incorporated in May 2019 and has been successfully managing its online education services for various exams all over India. Business model of the Company is such that Division 1 takes care of educational services and Division 2 is engaged in the manufacturing of tabs which are given to the students taking classes, whether offline or online. Life Education Ltd. launched a free online service to all the students as regards how to derive maximum benefits in usage of its products. Also, it provided online expert guidance service for competitive exams on payment basis to its students. The pricing strategy decided was that the charge to student will be based on level of services availed. Initially for basic services, users were just required to provide their basic information without involvement of money and later on depending upon the level of service, a separate upgradation fee would be charged. Company has presented the following summary of the financial results for the year ended 31.03.2025: Profit and Loss Account ₹ in lakhs Balance Sheet ₹ in lakhs Revenue 2,500.00 Fixed assets (PPE) 2,000.00 Direct cost 800.00 Current assets 500.00 Admin. expenses 875.71 2,500.00 EBIT 724.29 Equity 1,500.00 Interest 100.00 Reserves 300.00 EBT 600.00 Non-current borrowings 300.00 Current liabilities & provisions 400.00 2,500.00 Note: Current liabilities include the income tax liability. A bad debt provision of 50 lakhs is included in administration expenses and the corresponding amount is reduced from current assets. The pre-tax cost of debt is 15%. The company has opted for section 115BAB of the Income-tax Act, 1961. Effective Tax is to be calculated using Surcharge and Higher Education Cess. Cost of equity may be taken as 9% (i.e. shareholders expected rate of return). The company wanted to expand its expertise and had solicited the services of Dr. Bhalla a reputed academician to be on its Board in F.Y. 2020-21 who is still rendering his services to the company. The company issued ESOP 50,000 equity shares of 10 each to Dr. Bhalla in September, 2024. The value of each equity share was 50but it was issued at face value of 10to Dr. Bhalla, who exercised the option in the first week of October, 2024. Shares were allotted to him in the next 10 days and he is still holding the shares. The annual salary of Dr. Bhalla for the financial year 2024-25 was 60 lakhs from Life Education Ltd. without considering the ESOP given to him at a concessional price. Life Education Ltd. has a cash generating unit "Wing W" acquired on 1st April, 2017 with a carrying amount of 2,000 lakhs. "Wing W" was acquired under a business combination and goodwill of 400 lakhs was allocated to it, same is depreciated on straight line basis. "Wing W" has a useful life of 20 years with no residual value. On 31st March, 2025, "Wing W" has a recoverable amount of 1,100 lakhs. During the year, company received various GST notices wherein department has alleged that the GST paid by the company is incorrect due to wrong GST rate selection and thereafter the scrutiny proceedings started. During scrutiny, department ordered special audit under the CGST Act, 2017 of the books of accounts of Life Education Ltd. The GST Commissioner nominated ABC LLP, Chartered Accountants on 10th June, 2024 to conduct special audit for the financial year 2021-22. The remuneration was fixed at 2 lakhs plus applicable GST. Radhika is director of Life Education Ltd. and also of PQR Ltd. based at Delhi. PQR Ltd. did not file its financial statements for the year ended 31.03.2021, 31.03.2022 and 31.03.2023. On 25th September, 2023 Radhika was re-appointed as director in the AGM of Life Education Ltd. The Board of Directors of Life Education Ltd. became aware of her position as director in PQR Ltd. and its failure to file the financial statements for the earlier 3 years only in March, 2024. Radhika tendered her resignation from the Board of Life Education Ltd. on 10th April, 2024 and the Board of Directors reappointed her again as a director in the AGM held on 15th September, 2024 since PQR Ltd. had filed its financial statements up to the financial year ended 31st March, 2023 on 8th May, 2024. Life Education Limited entered into a joint venture with Online Platform Limited to form a company by name Online Education Ltd. (OEL) for a project to be completed in 2 years relating to a particular line of online education, share of Life Education Limited being 50%. It was decided that project would be reviewed after a period of five years to assess the future viability. Life Education Limited transferred equipment to OEL for 8 crores being its Market value while the carrying value in its books of account is 9 crores. TSP & Co. are the auditors of the company for the financial year ended 31.03.2025. The Audit Report for that year was signed by TSP & Co. on 04.05.2025. The Annual General Meeting was decided to be held during the month of August 2025. On 06.05.2025, the Company had received a communication from the Central Government that an amount of 58 Crores kept pending on account of incentives pertaining to financial year 2024-25 has been approved and the amount was received by the Company on 28.05.2025. To a query to Chief Financial officer of the Company by the Board, it was informed that this amount had not been recognized in the Audited Financial Statements as same was not released before the close of the Financial Year and due to uncertainty of receipt. Now, having received the amount, the Board of Directors wished to include this amount in the Financial Statements of the Company for the Financial Year ended on 31.03.2025. On 01.06.2025, the Board amended the accounts, approved the same and requested the Auditor to consider this event and issue a fresh audit report on the Financial Statements for the year ended on 31.03.2025. Multiple Choice Questions: [Please provide the correct option to the following questions]