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ICM

Pakistan

EXTRA ATTEMPT, NOVEMBER 2013 EXAMINATIONS

Wednesday, the 27th November, 2013

BUSINESS TAXATION (LA-402)

SEMESTER-4

Time Allowed: 02 Hours 45 Minutes Maximum Marks: 90 Roll No.:

(i) Attempt all questions.

(ii) Answers must be neat, relevant and brief.

(iii) 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.

(iv) Read the instructions printed inside the top cover of answer script CAREFULLY before attempting the paper.

(v) Use of non-programmable scientific calculators of any model is allowed.

(vi) DO NOT write your Name, Reg. No. or Roll No. anywhere inside the answer script.

(vii) Question No.1 Multiple Choice Questionprinted separately, is an integral part of this question paper.

(viii) Question Paper must be returned to invigilator before leaving the examination hall.

MarksQ. 2 (a) Define the following terms in the light of Income Tax Ordinance, 2001:

(i) Business 02

(ii) Fee for technical services 03

(b) As per section 79 of the Income Tax Ordinance, 2001 there are certain cases where nogain or loss shall be taken to arise on the disposal of an asset. Identify such caseswhere no gain or loss to be recognized on the disposal of an asset. 06

(c) 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 forpreparing 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 andinadmissible expenditures.

Required:

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

inadmissible expenditures:

05\

Q. 3 (a) 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 IncomeTax Rules, 2002 and shall be accompanied by documentary evidence of the applicantsIdentity.

Required

List out the documentary evidence which shall be provided by the following applicantsfor their identity along with the above mentioned application to the Commissionerhaving jurisdiction over the applicant: 06

an individual

a company (other than a trust)

a trust

a firm

an association of persons(other than a firm)

Sr. No. Nature of Payment /Expenditure

1 Electricity bill not paid through cross cheque

2 Provision for post employment benefits

3 Accounting depreciation

4 Finance charges on leased hold asset (not included in lease rental)

5 Lease rentals

6 Payment of expenditure exceeding Rs. 50,000 on which taxes are not withheld

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Marks(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 andseeking your advice in respect of the following perquisites and allowances provided byhis employer:

Required:

Being his tax advisor, explain him how the following perquisites shall be included in thecalculation 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 hisemployer.

(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.

01

01

01

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(c) As per section 19 of the Income Tax Ordinance, 2001 define speculation businessandalso discuss businesses which are not included in speculation business. 05

Q. 4 M/s. Alpha Petroleum Limited (APL) is a renowned public limited company, established in1980. 70% shares of APL have been acquired by Federal Government and remaining 30% aresubscribed by general public. Mr. Habib is one of the officers of APL and is planning to file hisannual income tax return first time. For calculation of his income tax liability he has providedyou 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 13,200Property 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 hisdependents after every three years. The expenditures incurred during the year in thisrespect are as under:

Air tickets 110,000

Hotel expenses 55,000

Car rental 22,000 187,000

Dividend (zakat deducted Rs. 275 and tax deducted Rs.1,100) 11,000

Leave encashment preparatory to retirement 27,500

Birthday present received through cross-cheque by closed relative 11,000

Insurance money received on maturity of policy 110,000

Expenses on children education (receipts are available) 44,000

Zakat paid 11,000

Tax deducted at source 2,000

Required:

You being a Tax Consultant, compute taxable income and tax liability of Mr. Habib for the taxyear2013. 20

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MarksQ. 5 (a) Define the following terms as per section (2) of the Sales Tax Act, 1990:

(i) Sales tax

(ii) Supply

03

04

(b) Beta Engineering Limited (BEL) is registered under the Sales Tax Act, 1990. Thecompany is engaged in the manufacturing and supplying of appliances. Followinginformation has been extracted from the records of BEL for the month of June, 2013:

Description Rs. in Millions

Sale of exempted goods:

To the registered person 400

To un-registered person 100

Sale of taxable goods:

To the registered person 600

To un-registered person 150

Purchases:

Purchase from registered person 500

Purchase from un-registered person 300

Exports of taxable goods: 275

Imports:

Value as per commercial invoice 450

Custom duty 50

Federal excise duty 20

Assessed value -excluding sales tax and duties 430

Required:

Determine the sales tax liability of Beta Engineering Limited for the month of June, 2013.

06

Q. 6 (a) (i) Where a registered

person, after filing a sales tax return or retail tax return findsany omission or wrong statement in it, he may file a revised return. Specify theconditions which are required to be fulfilled by a registered person in order to file arevised sales tax return.

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(ii) What amount of penalty will be recovered from a registered person if he wishes tofile revised return along with deposit of the amount of tax short paid and defaultsurcharge, wherever it comes to his notice, before receipt of notice of audit? 01

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

Required:

Being a tax advisor advise Mr. Asim to be registered by enumerating the list of personsliable to be registered under the Rule 4 of the Sales Tax Rules, 2006. 06

(c) Mr. Akhtar is a registered person under the Sales Tax Act, 1990. He imports finishedice-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 importedand locally manufactured ice-cream products in view of the provisions of Section 3 ofSales Tax Act, 1990. 03

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MarksQ. 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 FederalBoard of Revenue may, by notification in the official Gazette, grant drawback ofduty paid. 02

(ii) Is the registration compulsory if the annual turnover of any manufacturingcompany 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 ordiscontinuation of any private company or business enterprise where amount ofduty cannot be recovered from that company or business enterprise. 02

(b) Under the provisions of the Customs Act, 1969 specify the documents which are usedfor customs clearance. 04

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 exceedingRs.750,000.