Pakistan Institute of Public Finance Accountants

Winter Exam-2017
Corporate Sector
Taxation (06.11.2017)
Marks-100 D u r a t i o n : 3 hrs
Additional time – 15 min for Paper Reading
[Instructions]
 Ensure that the question paper delivered to you is the same, in which you intend to appear.
 Read the instructions given on the title page of Answer Script.
 Start each question from fresh page.

Attempt all Questions

Q.1. List different types of direct and indirect taxes applicable in Pakistan and also explain their 09
scope.

Q.2. Define the following in view of the Income Tax Ordinance, 2001:
(i) Public Company 04
(ii) Profit on Debt 02
(iii) Non-Profit Organization 03
(iv) Filer 02

Q.3. Define the following in view of the Sales Tax Act, 1990.
(i) Distributor 02
(ii) Person 03
(iii) Time of Supply 04
(iv) Similar Supply 02

Q.4. Manama Ltd (ML) is engaged in the sale and import of cosmetics for past many years.
While reviewing the company’s tax calculations, you being tax advisor observed that the
following amounts are deducted from total income for the year ended June 30th, 2017.

 Expenditure of Rs.900,000 on promotion of a product which is expected to

generate revenue for twenty years.
 Bad debt in respect of a staff loan, Rs.50,000.
 Initial allowance of Rs.7,500,000 on a used equipment acquired locally from
XYZ Limited.
 Financial charges amounting to Rs.200,000 and depreciation amounting to
Rs.400,000 on a machine acquired on finance lease from Moon Leasing. Lease
rentals paid during the year amounted to Rs.800,000.
Required:
Explain the admissibility of the above mentioned expenses for the year ended on 09
June 30th, 2017 as per provision of Income Tax Ordinance, 2001.

Q.5. Discuss the provisions of Minimum Tax under the Income Tax Ordinance, 2001. 15

Q.6. a) Define the term “Association of Persons” under Income Tax Ordinance, 2001. 02

Contd. on back
 2

b) Explain the rules relating to residential status of an Association of Person (AOP). 02

c) Discuss the taxability of income of AOP, in the hands of the firm and its members. 03
d) State the rules relating to set-off and carry-forward of losses of AOP and its members. 03

Q.7. Define the following in view of the Federal Excise Act, 2005.
(i) Conveyance 02
(ii) Franchise 02
(iii) Establishment 02

Q.8. Royal Enterprises (RE), a manufacturer and supplier of electrical goods, is registered under
the Sales Tax Act, 1990. RE’s summarized business transactions for the month of January
2017 are as follows:
Rs.
Purchases of raw materials from unregistered persons 2,000,000
Purchases of raw materials from registered persons 8,190,000
Taxable sales made in the local market to registered persons 4,000,000
Taxable sales made in the local market to unregistered persons 6,000,000
Export of taxable goods to Taiwan 2,000,000

Additional information:
 All payments for purchases made are stated inclusive of Sales Tax at the rate
of 17%, where applicable.
 All amounts for the sale of electrical goods (including exports) are stated
exclusive of Sales Tax.
 The normal rate of tax on sales made to registered persons is 17%.
 RE has a Sales Tax credit brought forward from December 2016 of
Rs.300,000.
 Supplies of Rs.500,000 were returned by a registered person in January 2017.
Proper debit and credit notes were issued in this regard.
 Electrical goods having a list price of Rs.600,000 were given to one of friend
of owner of RE, free of charge. He is not a registered person under the Sales
Tax Act, 1990.
Required:

Compute the Sales Tax liability of Royal Enterprises (RE) in respect of its Sales Tax Return 13
for the month of January 2017.

Q.9. Akram, aged 45 and a resident of Pakistan, is marketing director of Mushroom Services Ltd
(MSL). The following information relates to Akram for the year ended 30th June 2017:

 In accordance with his employment contract with MSL, Akram received a

basic salary of Rs.360,000 per month inclusive of a medical allowance of
Rs.36,000. In addition, in June 2017 he received a bonus payment of
Rs.720,000.
 MSL pays Akram a house rent allowance of Rs.120,000 per month, but he
only pays rent of Rs.90,000 per month for his rented house.

Contd……….
 3

 MSL provides Akram with a company car, which he also uses for private
purposes. The car was acquired by MSL in April 2015 for Rs.2,000,000. The
value of the car on 30th June 2017 is estimated to be Rs.2,400,000 due to the
general rise in the price of cars.
 MSL paid medical expenses for Akram to a private clinic of Rs.150,000 as per
the terms of his employment.
 MSL provides all of its employees, including Akram, with annual membership
of an Executive Club in the town. The Club’s annual membership is normally
available for Rs.400,000 but MSL receives a discount and pays Rs.360,000 per
membership.
 Akram is entitled to 20 days earned leave a year. He did not avail of any leave
during the current year and MSL compensated him with a payment of
Rs.280,000.
 Akram employs a security guard at his apartment at a monthly salary of
Rs.40,000. Akram is reimbursed 50% of the guard’s salary by MSL.
 Akram took out a loan from a scheduled bank for the acquisition of an
apartment in Faisalabad in which his son lives in connection with his
education there. During the year ended 30th June 2017, Akram paid profit of
Rs.500,000 to the scheduled bank on this loan.
 Akram paid a charitable donation of Rs.50,000 to a school run by the local
government in Lahore.
 Akram received agricultural income of Rs.800,000.
 Akram received first prize in a quiz on a TV show of Rs.1,600,000, net of
income tax of Rs.400,000 withheld by the TV channel. Akram gave a party
for his friends in a hotel to mark this achievement, which invoiced him
Rs.250,000.
 Tax deducted on payments made by MSL to Akram during the year ended
30th June 2017 was Rs.600,000.
Required:
Compute Akram’s taxable income, the income assessable under the Final Tax 16
Regime (FTR) and his total tax payable for the tax year 2017. Give reasons for the
treatment of any items excluded from the taxable income or for which no
expense/deduction/tax credit is allowed.

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