ICMA.

FALL 2013 (FEBRUARY 2014) EXAMINATION

Wednesday, the 26th February 2014
BUSINESS TAXATION (LA-402)

Pakistan

Time Allowed: 02 Hours 30 Minutes

(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)

Q.2

SEMESTER-4
Maximum Marks: 80

Roll No.:

Attempt all questions.

Answers must be neat, relevant and brief.
In marking the question paper, the examiners take into account clarity of exposition, logic of arguments,
effective presentation and language.
Read the instructions printed inside the top cover of answer script CAREFULLY before attempting the paper.
Use of non-programmable scientific calculators of any model is allowed.
DO NOT write your Name, Reg. No. or Roll No., or any irrelevant information inside the answer script.
Question Paper must be returned to invigilator before leaving the examination hall.

(a) Define the term Electronic Record as per the Income Tax Ordinance, 2001.

Marks
03

(b) Macro Trading (MT) is a sole proprietorship owned by Mr. Waheed. He is engaged in the
manufacturing and supplying of herbal products for last many years. His taxable income
for the year ended June 30, 2013 was Rs.1,000,000. Mr. Waheeds Tax Advisor apprised
him to pay advance tax for the tax year ended June 30, 2014.
Required
Keeping in view his Tax Advisors advice, Mr. Waheed need explanation with regards to
the following queries as per the Income Tax Ordinance, 2001:
(i)
(ii)

How the amount of advance tax liability would be calculated for the tax year ended
June 30, 2014?

01

What would be the period of quarter and last date for payment of advance tax
under each of the following quarter namely:
Serial
No.
1
2
3
4

Quarter Ended

Period of Quarter

September
December
March
June

?
?
?
?

Last Date for Payment

of Advance Tax
?
?
?
?

04

(iii) As amount of advance tax is calculated on the basis of the assessed tax liability of
the latest tax year, which sources of income shall not be included while computing
taxable income and tax liability of the latest tax year?

02

(iv) If Mr. Waheed is of the opinion that his tax liability for the current year is less than
the previous year, then how will he adjust the amount of his advance tax
installments?

01

Q.3 (a) Noorani Merchant and Co., is a tax consultancy firm. It has a list of clients who seek
advices in respect of various tax matters.
Required:
Assume that you have been working as a Tax Advisor of Noorani Merchant and Co., and
is given a task to determine the residential status of the following clients for the tax year
ended June 30, 2014 under the given three scenarios. Also substantiate your answer with
reasons in the light of the provision of the Income Tax Ordinance, 2001 and the Income
Tax Rules, 2002:
(i)
Mr. Fahim resides in London and works as Chief Accountant in a British Company.
Assume that he has come to Pakistan for the first time on a special assignment from
his company on March 1, 2014 and left Pakistan on October 31, 2014.
(ii) Mr. Saleem is a Federal Government employee. Assume that he is posted to the
United Arab Emirates for taking special training on Petroleum Exploration Project
from July 1, 2013 to June 30, 2014.

02

02
PTO

BT-Feb 2014

1 of 4

Marks
(iii) Ms. Saima has got a job in St. Micheal Pharma, a reputable company of United
State of America (USA). She went to USA on December 28, 2013 to assume her
responsibilities as a Managing Director of the company. Assume that in April, 2014
her company sent her to China on training. On May 31st 2014 on her way back to
USA she stayed in Karachi for three days due to cancellation of flights.
(b)

Q.4

02

There are various modes of charging Income Tax under the Income Tax Ordinance, 2001
commonly known as Tax Regimes. Briefly describe each of the following modes of
taxation:
(i)

Normal Tax Regime (NTR)

02

(ii)

Separate Tax Regime (STR)

02

(iii) Final Tax Regime or Presumptive Tax Regime (FTR)

02

(iv) Minimum Taxation Regime (MTR)

02

Mr. Samiullah has been working as Assistant Manager-Marketing for last 15 years in M/s.
Moonlight Limited, a public limited company. In addition to salary, perks and allowances given
to him by the company, he has various other sources of income. Assume that Mr. Samiullah is
62 years and has been retired from the company services on June 30, 2014. You are his Tax
Consultant. He has submitted the following information for the tax year ended June 30, 2014 in
order to seek your advice in respect of the calculation of his taxable income and tax liability.
Rupees
500,000

A. i) Basic salary per annum

ii) Perquisites and allowances paid by the employer:
Bonus
80,000
Entertainment allowance
10,000
Dearness allowance
180,000
House rent allowance
225,000
Gratuity (scheme approved by FBR)
625,000
Encashment of leave preparatory to retirement
120,000
B. Property Income:
Mr. Samiullah rented his house @ Rs. 12,000 per month w.e.f 1st July, 2013. He
received a deposit of Rs.150,000, not adjustable against rent, out of which he
refunded Rs.75,000 to previous tenant, who vacated the house after 3 years'
occupancy. Tenant also paid property tax of Rs. 6,000 as per lease agreement.
Assume that Mr. Samiullah claimed the following expenditures for the year ended
30th June, 2014:
Rupees
Rupees
Interest on borrowed capital
7,000
Insurance premium paid to cover the risk for property
damage
10,000
Repair and maintenance expenses
25,000
C. Other information
Share from unregistered firm (AOP).
20,000
D. Zakat deducted at source
8,000
Required:
(a) Calculate the taxable income and tax liability of Mr. Samiullah for the year ended June,
30, 2014.

20

(Note: See page # 4 for tax rates of salaried-person for the tax year, 2014)

(b) Mr. Samiullah is 62 years. Can he claim a tax rebate @ 50% available to senior citizens?
Why or why not? State the reasons in support of your answer.

BT-Feb 2014

2 of 4

02

Marks
Q.5 (a)

As per the Sales Tax Special Procedure (Withholding) Rules, 2007 answer the following:
(i)
For the purpose of deduction and deposit of sales tax who can be regarded as
withholding agents?
(ii)

(b) (i)

(ii)

04

The withholding agent is required to issue a certificate to the supplier showing

certain particulars. Enumerate those particulars.

02

As per section 8(1) of the Sales Tax Act, 1990 in respect of which goods, a
registered person is not entitled to deduct or reclaim the input tax? Specify any five
(05).

05

Briefly state in the light of the provisions of the Sales Tax Act, 1990 whether the
following persons can reclaim input tax?

Alpha Private Limited is a renowned company established in 1990. It is

registered under the said Act and deals in taxable and non-taxable supplies.
Mr. Amir is a non-registered person under the said Act, deals in taxable supplies
only.

(c) Shalimar Private Limited (SPL) manufactures and supplies household electrical goods to
Altamash Enterprises (AE). Both the companies are registered under the Sales Tax Act,
1990. During the month of January, 2014 SPL had supplied 30 washing machines to AE.
However, AE decided to return 16 washing machines to SPL due to sub-standard quality.
Required:
Under the provision of the Sales Tax Rules, 2006 describe the procedure to be followed
by Altamash Enterprises (AE) for returning the goods.

01
01

05

Q.6 (a) Beta (Pvt.) Limited is engaged in imports, trading and local manufacturing of certain
taxable consumer goods including products like detergents which are subject to levy of
sales tax on retail price basis. During the month of December, 2013 the following
information of the company is compiled:
Rs. 000
Sales:
Sales of locally manufactured taxable goods (other than detergents)
20,000
Sales of imported finished goods on value addition basis
2,750
Sales of imported detergents to wholesalers
[31,250 packets @ Rs.240 each packet]
7,500
Sales of locally manufactured detergents to wholesalers
[30,000 packets @ Rs.225 each packet]
6,750
Imports and Local Purchases:
Import of raw materials for in-house consumption Taxable
Import of finished goods other than detergents
Import of finished goods detergents
Local purchases of raw materials - Taxable

10,000
2,000
1,000
8,750

Additional Information:
Retail price of detergents (imported and locally manufactured) is Rs.250 per
packet of 1.5 kilograms each
Note : All above amounts are exclusive of sales tax.
Required :
In the light of the provisions of the Sales Tax Act, 1990 and rules made there under, calculate
the sales tax liability of Beta (Pvt.) Limited for the month of December, 2013.
(b)

Define the following terms as per section (2) of the Federal Excise Act, 2005:
(i)
Establishment
(ii) Non-Fund Banking Service

(c) The tax on the capital value of the assets is called the capital value tax. Identify the
situations where capital value tax would be payable.

07

02
02
04
PTO

BT-Feb 2014

3 of 4

Extract of Tax Rates for Salaried Person

Sr.
No.

Taxable Income (Rupees)

Rate of Tax

Where the taxable income does not 0%

exceed Rs.400,000

Where the
Rs.400,000
Rs.750,000

Where the taxable income exceeds Rs. 17,500 + 10% of the amount exceeding
Rs.750,000 but does not exceed Rs.750,000
Rs.1,400,000

Where the taxable income exceeds Rs. 82,500 + 12.5% of the amount exceeding
Rs.1,400,000 but does not exceed Rs.1,400,000
Rs.1,500,000

Where the taxable income exceeds Rs. 95,000 + 15% of the amount exceeding
Rs.1,500,000 but does not exceed Rs.1,500,000
Rs.1,800,000

taxable income exceeds 5% of the amount exceeding Rs.400,000

but does not exceed

THE END

BT-Feb 2014

4 of 4