ICMA.

EXTRA ATTEMPT, NOVEMBER 2013 EXAMINATIONS

Wednesday, the 27th November, 2013
BUSINESS TAXATION (LA-402)

Pakistan
Time Allowed: 02 Hours 45 Minutes
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)

SEMESTER-4
Maximum Marks: 90

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, language and use of clear diagram/ chart, where appropriate.
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. anywhere inside the answer script.
Question No.1 Multiple Choice Question printed separately, is an integral part of this question paper.
Question Paper must be returned to invigilator before leaving the examination hall.

Marks
Q. 2

(a)

(b)

(c)

Define the following terms in the light of Income Tax Ordinance, 2001:
(i)
Business
(ii) Fee for technical services

02
03

As per section 79 of the Income Tax Ordinance, 2001 there are certain cases where no
gain or loss shall be taken to arise on the disposal of an asset. Identify such cases
where no gain or loss to be recognized on the disposal of an asset.

06

Mr. Wasim has recently joined M/s. Wilson Pharma Limited (WPL) as an Accountant.
The Chief Financial Officer of the company has assigned a task to Mr. Wasim for
preparing annual income tax return of WPL for the financial year ended June 30, 2013.
While preparing the returns Mr. Wasim is facing problems in identifying admissible and
inadmissible expenditures.

Required:
You being a tax advisor of the company advise him as to which of the following
expenditures are admissible/inadmissible and also state the reason in case of
inadmissible expenditures:

05

Sr. No.
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2
3
4
5
6

Q. 3

(a)

Nature of Payment /Expenditure

Electricity bill not paid through cross cheque
Provision for post employment benefits
Accounting depreciation
Finance charges on leased hold asset (not included in lease rental)
Lease rentals
Payment of expenditure exceeding Rs. 50,000 on which taxes are not withheld

As per rule 80 of the Income Tax Rules, 2002 an application for a National Tax Number
Certificate shall be in the form specified in Part IX of the First Schedule to the Income
Tax Rules, 2002 and shall be accompanied by documentary evidence of the applicants
Identity.

Required
List out the documentary evidence which shall be provided by the following applicants
for their identity along with the above mentioned application to the Commissioner
having jurisdiction over the applicant:

an individual

a company (other than a trust)

a trust

a firm

an association of persons(other than a firm)

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(b)

Mr. Rafiq is a Manager in an autonomous corporation. The employer of Mr. Rafiq has
provided him various perks during the tax year. He wants to calculate his tax liability and
seeking your advice in respect of the following perquisites and allowances provided by
his employer:

Required:
Being his tax advisor, explain him how the following perquisites shall be included in the
calculation of tax liability under the head of salary as per: Section 13 of the Income Tax Ordinance, 2001:
(i) The service of driver and gardener provided by the employer.
(ii) Domestic bills i.e., water, telephone, electricity and gas are paid by his
employer.
(iii) The employer has waived a loan of Rs.35, 000 receivable from Mr. Rafiq.
Rule 5 of the Income Tax Rules, 2002:
(iv) Value of conveyance by the employer.
(c)

As per section 19 of the Income Tax Ordinance, 2001 define speculation business and
also discuss businesses which are not included in speculation business.

01
01
01
04

05

Q. 4 M/s. Alpha Petroleum Limited (APL) is a renowned public limited company, established in
1980. 70% shares of APL have been acquired by Federal Government and remaining 30% are
subscribed by general public. Mr. Habib is one of the officers of APL and is planning to file his
annual income tax return first time. For calculation of his income tax liability he has provided
you the following particulars of his sources of income pertaining to the year ended June 30,
2013:
Rupees
Rupees
Basic Salary
231,000
Bonus
20,000
Furnished accommodation (annual value)
110,000
Conveyance allowance (per month)
1,650
Medical allowance ( actual expense Rs.18,500)
25,000
Utility expense
26,400
Entertainment allowance
13,200
Property income (including Rs.2,500 per month for rent of furniture & fittings)
132,000
Expenditures claimed against property income:
Legal expenses
8,250
Property tax
5,500
Insurance premium
3,300
17,050
Mr. Habib is entitled as per service rules free passage for travel abroad for self and his
dependents after every three years. The expenditures incurred during the year in this
respect are as under:
Air tickets
Hotel expenses
Car rental
Dividend (zakat deducted Rs. 275 and tax deducted Rs.1,100)
Leave encashment preparatory to retirement
Birthday present received through cross-cheque by closed relative
Insurance money received on maturity of policy
Expenses on children education (receipts are available)
Zakat paid
Tax deducted at source

110,000
55,000
22,000

187,000
11,000
27,500
11,000
110,000
44,000
11,000
2,000

Required:
You being a Tax Consultant, compute taxable income and tax liability of Mr. Habib for the tax
year 2013.
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Q. 5

(a)

Define the following terms as per section (2) of the Sales Tax Act, 1990:
(i)

Sales tax

03

(ii) Supply
(b)

04

Beta Engineering Limited (BEL) is registered under the Sales Tax Act, 1990. The
company is engaged in the manufacturing and supplying of appliances. Following
information has been extracted from the records of BEL for the month of June, 2013:
Description
Sale of exempted goods:
To the registered person
To un-registered person
Sale of taxable goods:
To the registered person
To un-registered person
Purchases:
Purchase from registered person
Purchase from un-registered person
Exports of taxable goods:
Imports:
Value as per commercial invoice
Custom duty
Federal excise duty
Assessed value -excluding sales tax and duties

Rs. in Millions
400
100
600
150
500
300
275
450
50
20
430

Required:
Determine the sales tax liability of Beta Engineering Limited for the month of June, 2013.
Q. 6

(a)

(i)

(ii)

(b)

06

Where a registered person, after filing a sales tax return or retail tax return finds
any omission or wrong statement in it, he may file a revised return. Specify the
conditions which are required to be fulfilled by a registered person in order to file a
revised sales tax return.

03

What amount of penalty will be recovered from a registered person if he wishes to

file revised return along with deposit of the amount of tax short paid and default
surcharge, wherever it comes to his notice, before receipt of notice of audit?

01

Mr. Asim is a non-registered person under the Sales Tax Act, 1990. He is engaged in a
retail business of consumer goods having a chain of stores. Recently he has extended
his business in various areas of city and his value of supplies has exceeded five million
rupees during this year.

Required:

(c)

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Being a tax advisor advise Mr. Asim to be registered by enumerating the list of persons
liable to be registered under the Rule 4 of the Sales Tax Rules, 2006.

06

Mr. Akhtar is a registered person under the Sales Tax Act, 1990. He imports finished
ice-creams brands and also manufactures some local brands of ice-creams in Pakistan.
Briefly explain taxability and the value of taxable supply to be applicable for imported
and locally manufactured ice-cream products in view of the provisions of Section 3 of
Sales Tax Act, 1990.

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Q. 7

(a)

In the light of the provisions of Federal Excise Act, 2005, explain the following:
(i)

As per section 5(2) of the above Act, identify the goods on which the Federal
Board of Revenue may, by notification in the official Gazette, grant drawback of
duty paid.

02

Is the registration compulsory if the annual turnover of any manufacturing

company liable to Federal excise duty exceeds Rs. 10 million? Elaborate under
section 13(1) of the Federal Excise Act, 2005.

02

(iii) List down the persons liable for the payment of duty in case of closing or
discontinuation of any private company or business enterprise where amount of
duty cannot be recovered from that company or business enterprise.

02

Under the provisions of the Customs Act, 1969 specify the documents which are used
for customs clearance.

04

(ii)

(b)

THE END

EXTRACT OF INCOME TAX RATES

Sr.
No.

Taxable Income (Rupees)

Rate of Tax

1.

0 to Rs. 400,000

0%

2.

Rs. 400,000 to Rs. 750,000

5% of the amount exceeding Rs.400,000.

3.

Rs. 750,000 to Rs. 1,500,000

Rs. 17,500 + 10% of the amount exceeding

Rs.750,000.

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