Lumbini Banijya Campus

1st Terminal Examination, 2069

BBS 3rd Year Subject: Taxation in Nepal Time: 2 hours Candidates are required to give their answers in their own word as far as practicable. FM: 50 PM: 20

Attempt all the questions.

1. Explain the meaning of tax and differentiate between direct and indirect tax. (2+3=5) 2. Mr. Krishna furnished the following details of income and expenses of investment pertaining to previous year. Gain on sale of land used for agriculture purpose Rs. 5, 60,000 Royalty received from books (net) Rs. 1, 70,000 Dividend received Rs. 24,000 Interest from banks on fixed deposit Rs. 43,000 Rent from house let out Rs. 60,000 Interest from private money lenders Rs.35, 000 Bad debts recovered Rs. 30,000 (60% allowed previously) Natural resource payment received Rs. 80,000 He claimed the following expenses for deduction: Rent paid on house let out Rs.15, 000 Donation given to national political party Rs 32,000 Interest on loan taken for investment purpose Rs. 10,000 Required : Assessable income from investment and tax liability. (4+2=6) 3. Dr Singh joined a private hospital on 1st Shrawan of previous income year as a senior surgeon. He disclosed following particulars with respect to his employment income. As a tax auditor, you are requested to compute his assessable income, taxable income and tax liability. ( 5+2+1=8) Salary Rs. 50,000 pm Leave encashment Rs 20,000 pm Dearness allowance Rs 1,200 pm Overtime pay Rs 60,000 Awarded with a prize worth Rs 2,50,000 as the best doctor of the year Remote area allowance Rs 60000 Bonus Rs 5,00,000 Business-promotion allowance Rs 25,000 pm He enjoyed a quarter facilities from hospital. He enjoyed a car facility for both official and private purpose. Petrol and drivers salary were borne by the hospital Rs 15,000 He was also provided a loan Rs 2,50,000 at a concessional rate of 8% p.a. On 1st Magh, previous year. The prevailing rate of interest is 10% p.a. Hospital had directly paid tution fees Rs 20,000 pm for his children. He contributed 20% of his salary to Karmachari Sanchaya Kosh The hospital is located in remote area E classified by Government of Nepal. Life insurance premium paid Rs 40,000 on life policy of Rs 6,00,000 4. A trading company had 4 automobiles in Block C. Opening WDV of the block was Rs 2,85,000. During the year, the company purchased two automobiles: one costing Rs 50,000 on 1st kartik and another costing Rs 90,000 on 1st Baishak. The company disposed off one automobile at Rs 75,000 during the year whose book value was Rs 40,000. Required: a. Depreciation for the year.

b. Depreciation base for next year

(3+2=5)

5. Following are the performance result of a company for various years. Year 1 2 3 4 5 6 7 8 9 Profit (loss) 30,000 (50,000) 2,00,000 60,00 (40,000) 70,000 50,000 80,00 30,000 0 0 The company has provided donation Rs 40,000 in year 2 which is already adjusted in profit and loss account and depreciation expenses Rs. 80,000 has omitted to record in year 4. In first year, pollution control cost Rs. 40,000 incurred by the company which was not adjusted in profit. Required: Taxable income giving explanation where necessary. (3+2=5) 6. Mr. Sharma is a practicing lawer. He keeps his books of account on a cash basis. Following is his summarized cash statement during previous income year. Receipt and Payment A/C Receipt Amt. Payment Amt. To Balance b/d 32,750 Subscription to law journals 10,000 Consultancy fees 60,000 Staff salary 60,000 Legal fees (TDS Rs 34,235) 1,94,000 Vehicle expense 25,000 Commission received 50,000 Electricity, telephone charge 15,000 Dividend from Nabil Bank Ltd. (Net) 9,500 Drawings 10,000 Gifts from clients 15,500 Donation 40,000 House rent received (net) 9,000 Gift to friends 10,000 Sales of old journals 10,400 Household expenses 40,000 Loan from finance company 2,50,000 Life insurance premium 27,500 Royalty received (after TDS Rs 3,000) 17,000 Miscellaneous expenses 1,00,000 Office expenses 85,000 Balance c/d 2,25,650 6,48,150 6,48,150 Additional information: Vehicle was used equally for personal and professional purpose. Office expenses include Rs 10,000 interest paid to finance company and Rs 10,000 relating to royalty income. Consultancy fees include Rs 15,000 received in advance. Household expenses include Rs 20,000 incurred for his medical treatment. He claimed it for tax credit. Electricity and telephone charges include Rs 2,000 fine for late payment. Required: Assessable income from profession. (6) 7. Following is the trading and profit and loss account of Dharan Rice Mill a special industry for the previous income year. Dr. Trading and Profit and Loss Account Cr. Particulars Amount Rs. Particulars Amount Rs. To Opening stock 3,50,000 By Sales 1,45,00,000 To Purchase 16,80,000 By Natural resource payment 3,50,000 To Manufacturing expenses 8,00,000 By Bad debts recovered 1,00,000 To Freight inwards 3,20,000 By Exchange gain 80,000 To Salaries 24,00,000 By Income accepting restriction 1,85,000 To Legal expenses 1,20,000 By Exchange gain 1,00,000 To Miscellaneous expenses 85,000 By closing stock 3,00,000 To Transportation expenses 1,00,000 To Bad debts 40,000 To Allowable depreciation 60,000 To Interest 90,000 To Stock insurance premium 4,000

To Provision for bad debts To Donation To Net profit

1,54,15,000 Additional information: Opening stock and closing stock are overvalued by 10%. Donation was given to Lumbini development trust with pre-approval of IRD. Legal expenses includes Rs.10,000 incurred for income tax appeal and Rs. 20,000 for defending the title of business assets. Advance salary paid Rs. 50,000 was not included in above statement. Cash payment of Rs. 60,000 for Freight inward whether banking service is available. Required: a) Assessable income from business. b) Assessable income from Investment. c) Taxable income and tax liability. (10+3+2=15)

1,00,000 13,30,000 81,36,000 1,54,15,000