TABANIS SCHOOL OF ACCOUNTANCY

Send-up Examination Module - C

Taxation August 2!!
Time Allowed: 03 Hours Maximum Marks: 100
"# No# $a%
&s
1. Section 4 of the Income Tax Ordinance, 2001 lays down the manner in which various tax credits are allowed
to be reduced from the ross tax on taxable income of a tax!ayer. "iscuss these !rovisions.
0#
2. Section 11 of the Income Tax Ordinance, 2001 discusses the sco!e of eora!hical income of a !erson with
reference to residential status. $x!lain.
0#
#. Section %& of the Income Tax Ordinance, 2001 deals with the conce!t of fair mar'et value. $x!lains this
conce!t and illustrate its a!!licability on salary, rent, !er(uisite, service as well as on consideration received.
0#
4. "efine )non*!rofit orani+ation, as mentioned in clause -#%. of section 2 of the Income Tax Ordinance, 2001. 0#
/. 0hat do you understand by )small com!any12 0hat are the benefit-s. available to such a com!any. 0#
%. a. "efine )em!loyee share scheme,.
b. "iscuss the taxability under the em!loyee share scheme for the followin3
4rant of o!tion
$xercise of o!tion without restriction on transfer
$xercise of o!tion with restriction on transfer
"is!osal of o!tion
c. 0hat is the cost of shares once an amount has been ta'en to income under an em!loyee share scheme
0/
5. "efine )intanibles, and ex!lain the allowability of amorti+ation deduction for such intanibles. 6lso ex!lain
!rovisions relatin to dis!osal of an intanible.
0#
&. Section 27 of the Income Tax Ordinance, 2001 contains !rovisions relatin to allowability of bad debts.
8riefly discuss these conditions. 9urther, what is the treatment in case of bad debts subse(uently recovered2
0#
7. "efault in com!lyin with the withholdin tax !rovisions ma'es the !ayment an inadmissible deduction. In
this bac'round, state what !ayments are not allowed as deductions.
0#
10. $x!lain the !rovisions of section 145 of the Income Tax Ordinance, 2001 relatin to (uarterly !ayment of
advance tax. Illustrate your answer with a suitable exam!le coverin all as!ects of the aforesaid section.
0/
11. $x!lain the withholdin tax !rovisions in res!ect of3
:ayments to non*residents
:ayments for ood, services and contracts
:ayment of rent etc.
0%
12. $x!lain the !rinci!les of )taxation of association of !ersons,, )individual as member of association, and
)com!any as member of association, as contained in sections 72, && and &&6 res!ectively of the Income Tax
Ordinance, 2001.
0/
1#. 0hat do you understand by )income s!littin,2 0hat are the !rovisions relatin to )transfer of assets, and
)income of a minor child,2
0#
14. 8riefly ex!lain how income of a )deceased individual, is dealt with under the Income Tax Ordinance, 2001. 0#
1/. ;r. 6S has been successfully carryin out his !rofessional consultancy business for last many years and has
been ma'in substantial !rofits durin these years. <owever, he has no 'nowlede whatsoever of tax laws in
:a'istan and therefore has never filed any return of income for any of the tax years.
a. 8ein his tax consultant, advise him, by way of a letter, about the !rovisions of the Income Tax
Ordinance, 2001 hihlihtin3
9ilin of return under section 114= and
0&
From the desk of Azeem Siddiqi/Tariq Tuio/Moeed !hatti
1
9ilin of wealth statement under section 11%.
TA'ATION SEN(-U) E'A$
b. >eceivin your re!ly as well as a notice for filin from ;r. T<, the "e!uty ?ommissioner Inland
>evenue, ;r. 6S decided not to file his return as well as wealth statement. <owever, ;r. 6S had fear
in mind that ;r. T< may ta'e action aainst him by ma'in )best @udment assessment, or )!rovisional
assessment,. In a se!arate letter, advise ;r. 6S about the !rovisions of income tax Ordinance, 2001
relatin to these two ty!es of assessments and differentiate them as well.
1%. The Sales Tax 6ct, 1770 has laid down the !rocedure for determination of sales tax due and in the !rocess
has !rovided for ad@ustment of in!ut tax from out!ut tax. In this bac'round, 6dvise ;r. 6S about this
mechanism. Aour letter to ;r. 6S must cover the followin as!ects.
6llowability of in!ut tax
>estrictions and limits on ad@ustments of in!ut tax
6!!ortionment of in!ut tax
?ertain inadmissible transactions
05
15. $x!lain the rules for issue of debit and credit notes. 0#
1&. 0rite down the !rovisions relatin to destruction of oods. 0#
17. ;r. 6S is a reistered !erson and has made the followin su!!lies durin the month of Bune, 2011
Taxable su!!lies to local reistered !ersons C >s. 1,000,000
Taxable Su!!lies to local un*reistered !ersons C 1,/00,000
$x!orts C >s. 1,/00,000
$x!ort to a restricted country C >s. 100,000
$xem!t su!!ly to local reistered !ersons C >s. /00,000
9ollowin further data is available for the month.
:urchases from reistered !ersons -Total. C >s. #,100,000
:urchases from reistered !ersons used exclusively for taxable su!!lies C >s. 1,/00,000
:urchases from reistered !ersons used exclusively for exem!t su!!lies C >s. &00,000
:urchases from reistered !ersons used for both taxable as well as exem!t su!!lies C >s. &00,000
Sales tax !aid on !urchase of !lant and machinery 1&0,000
Sales tax !aid on official annual dinner bill C >s. 15,000
It was noted that a !urchase of >s. 100,000 made from a reistered !erson on 20 9ebruary, 2011 was
still !ayable on #0 Bune, 2011.
On the basis of above, com!ute sales tax !ayable by ;r. 6S for the tax !eriod Bune, 2011.
12
20. ;r. DA is em!loyed at TS6 -:rivate. Eimited as its 9inance ;anaer in the time scale of >s. %0,000*10,000*F
00,000. <is relevant data for the year ended #0 Bune, 2011 is as follows3
8asic salary >s. 70,000 !er month
9ree furnished accommodation at value of >s. 2/,000 !er month
;edical reimbursement on actual basis is allowed whereas medial allowance at >s. #,000 !er month is
also !aid to him. "urin the year he was reimbursed >s. /4,000 on recei!t of medical bills.
6rrears of salary !ertainin to tax year 2010 received durin tax year 2011 amounted to >s. 200,000.
<is taxable income for tax year 2010 was earlier re!orted >s. &00,000.
Income from rentin of a buildin amounted to >s. 20,000 !er month 6 brand new machinery was
installed at the buildin durin tax year 2007 at a cost of >s.200,000. 6 se!arate rent of >s. 10,000 !er
month on account of rent of machinery was also received by ;r. DA durin tax year 2011. 6n
unad@ustable advance of >s. 1#/*000 was received on account of this buildin durin tax year 2011.
Securities !urchased on #1.0&.2007 at >s. 100,000 were dis!osed of on #0.07.2010 at >s. 12/,000.
Securities !urchased on #0.07.2010 at >s. %0,000 were sold on 20.02.2011 at >s. 5/,000. Securities
!urchased on 04 October 2010 at >s. /0,000 were sold on 22 6!ril, 2011 at >s. %/,000. Shares of
!rivate com!anies !urchased at >s. 1#1,000 two years ao were sold at >s. 1/7,000. Eoss on sales of
an scul!ture amounted to >s. 10,000.
<e made donations to a non*!rofit orani+ation amountin to >s. #0,000 as well as to one of his !oor
relatives amountin to >s. 21,#/0.
<e won >s. 2&0,000 in a (ui+ show on Goooooooooooooom TH on which withholdin tax deducted at
>s. /0,000. <e also received forein source lottery winnins amountin to >s. /0,000 on which >s.
1%
From the desk of Azeem Siddiqi/Tariq Tuio/Moeed !hatti
1
2,/00 forein tax was !aid.
Tax deducted by TS6 -:rivate. Eimited out of ;r. DA,s salary amounted to >s. 4&,000.
On the basis of above data com!ute ;r. DA,s taxable income as well as total tax !ayable to the income tax
de!artment whether for tax year 2011 or for tax year 2010 and whether on taxable income or under final tax
reime.
From the desk of Azeem Siddiqi/Tariq Tuio/Moeed !hatti
1