INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN Fall (Winter) 2010 Examinations

Saturday, the 27th November 2010

BUSINESS TAXATION - (S-302) STAGE 3

Time Allowed 2 Hours 45 Minutes

(i) (ii) (iii) (iv) (v) (vi) (vii) Attempt ALL questions. Answers must be neat, relevant and brief.

Maximum Marks 80

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.

Marks Q.2 (a) Define the following terms under the Income Tax Ordinance, 2001: (i) Association of Persons (ii) Resident Company (iii) Profit on Debt (b) What are the various amounts received by an employee as profit in lieu of or in addition to salary and wages, which would be considered as part of salary? Describe the various provisions of the Income Tax Ordinance, 2001 regarding bad debts allow ability. Define the term tax avoidance scheme. (i) State the Rule 4 of the Income Tax Rules, 2002 for valuation of accommodation provided by an employer to the employee for the purpose of computing the income chargeable to tax under the head salary. (ii) Which books of account, documents and records, a taxpayer deriving income chargeable under the head income from business is required to maintain as per the Rule 29 (1) of the Income Tax Rules, 2002? 05 05 05

05

Q. 3 (a)

08 02 05

(b) (c)

05

Q. 4 (a)

Define the following terms under the Sales Tax Act, 1990: (i) Person (ii) Cottage Industry 03 02

(b)

(i) What are the goods that shall be charged to tax at zero percent under the Sales Tax Act, 1990? (ii) What are the exceptions to the above Rule?

03 02
PTO

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Marks Q. 5 Mr. Ahmad is a resident individual and employed in a company. During the year ending on June 30, 2010, following amounts have been paid to him:
Basic pay House rent Bonus Utilities Medical allowance Cost of living allowance Leave encashment Rs. 27,470 P.M. 12,362 P.M. 54,940 2,747 P.M. 4,247 P.M. 4,121 P.M. 29,668

(i)

He has been provided a company maintained car, which was used partly for official and partly for personal purposes. The employer leased the car from a bank. Fair value of the leased car was Rs.1,200,000 at the inception of the lease.

(ii) He has paid Zakat amounting to Rs.100,000/- to an approved institution. (iii) He has purchased newly issued shares of listed companies amounting to Rs.250,000/through initial public offering (IPO). (iv) He has paid donations to an un-approved institution amounting to Rs.50,000/- and to an approved institution, specified in Clause (61) of Part I of Second Schedule, amounting to Rs.50,000/-. (v) Capital gain on sale of shares of a private limited company amounted to Rs.25,000. Shares were retained by Mr. Ahmad for more than one year. (vi) Company provided a driver to Mr. Ahmad and he was paid Rs.6,000 per month. (vii) Company also provided an interest-free loan to Mr. Ahmad amounting to Rs.500,000 at the beginning of the year. Benchmark rate is 12% for tax year 2010. Required: Compute the taxable income and tax liability of Mr. Ahmad for the tax year 2010.

20

Q. 6

(a)

As per the Customs Act, 1969: (i) Under what conditions the drawbacks are not allowable? (ii) What is the time limit for claiming the refund of overpaid custom duties?

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(b) Under the Federal Excise Act, 2005, on which excisable goods and services, federal excise duty is levied? (c) Define the following terms under the Federal Excise Act, 2005: (i) Non-tariff area (ii) Establishment THE END
TAX RATES FOR SALARIED TAXPAYERS FOR TAX YEAR 2010 (E XTRACT) Sr.# 1 2 3 4 5 6 7 8 9 10 11 Where the taxable income does not exceed Where the taxable income exceeds Where the taxable income exceeds Where the taxable income exceeds Where the taxable income exceeds Where the taxable income exceeds Where the taxable income exceeds Where the taxable income exceeds Where the taxable income exceeds Where the taxable income exceeds Where the taxable income exceeds Taxable Income Rs.200,000 Rs.200,000 Rs.250,000 Rs.350,000 Rs.400,000 Rs.450,000 Rs.550,000 Rs.650,000 Rs.750,000 Rs.900,000 Rs.1,050,000 Tax Rate 0% 0.50% 0.75% 1.50% 2.50% 3.50% 4.50% 6.00% 7.50% 9.00% 10.00%

01 01

but but but but but but but but but but

does does does does does does does does does does

not exceed not exceed not exceed not exceed not exceed not exceed not exceed not exceed not exceed not exceed

Rs.250,000 Rs.350,000 Rs.400,000 Rs.450,000 Rs.550,000 Rs.650,000 Rs.750,000 Rs.900,000 Rs.1,050,000 Rs.1,200,000

Provided further that where the total income of a taxpayer marginally exceeds the maximum limit of a slab in the Table, the income tax payable shall be the tax payable on the maximum of that slab plus an amount equal to:
(i) 20% of the amount by which the total income exceeds the said limit where the total income does not exceed (ii) 30% of the amount by which the total income exceeds in each slab but total income does not exceed (iii) 40% of the amount by which the total income exceeds in each slab but total income does not exceed (iv) 50% of the amount by which the total income exceeds in each slab but total income does not exceed (v) 60% of the amount by which the total income exceeds in each slab but the total income exceeds The rate of tax payable on bonus as IDPT as income tax shall be 30% for the tax year 2010.

Rs. 550,000 Rs.1,050,000 Rs.2,250,000 Rs.4,550,000 Rs.4,550,000

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