You are on page 1of 67

Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Chapter

21
SOLVED PAST PAPERS INCOME TAX NUMERICALS OF MOD-
C (2001 TO 2015)
Note: All the following questions have been solved under the Income tax Ordinance, 2001 effective from July 01, 2015.

Q.NO.1 Spring 2015 On 1 July 20X4, Tahir commenced business of manufacturing garments. Income statement of
the business for the year ended 30 June 20X5 is as follows:

Notes Rs. in 000


Sales 49,330
Less: Cost of sales (i) (39,150)
Gross profit 10,180
Less: Administrative and selling expenses (ii) (9,140)
Financial charges (iii) (2,500)
Other charges (iv) (1,358)
(2,818)
Add: Other income 3,875
Profit before taxation 1,057

Notes to the income statement:


i. On 15 July 20X4, used machinery was imported from China valuing Rs. 1,500,000. Depreciation @ 15% was
charged on machinery for the whole year and is included in cost of sales.
ii. Administrative and selling expenses include:
        Rs. 975,000 paid for the purchase of computer software. The software is likely to be used for twelve years.

        Cost of preparation of a feasibility study amounting to Rs. 250,000 which was issued prior to the commencement of business.
         Salary of Rs. 50,000 per month was paid to Tahir’s brother who handles the financial matters of the business.
iii. Financial charges include Rs. 80,000 pertaining to a vehicle obtained on lease from a leasing company. The cost of vehicle was Rs.
1,300,000. Depreciation of Rs. 260,000 has been included in administrative and selling expenses. Lease rentals paid during the year
amounted to Rs. 300,000.
iv. Other charges include:
         running and maintenance expenses of vehicle amounting to Rs. 295,450. Use of vehicle for personal purposes was
approximately 20%.
         provision for bad debts amounting to Rs. 25,000.

Other information:
i. Tahir was working in UAE for the past five years and had come back to Pakistan in April 20X4. He received an amount
equivalent to Rs.150,000 from his ex-employer as differential amount on his final settlement in August 20X4.
ii. He sold a plot for Rs. 3,500,000 which was inherited from his father in 20X1. Fair market value of the plot at the time of
inheritance was Rs. 1,500,000.
iii. 5,000 shares were purchased for Rs. 600,000 from initial public offering of a new listed company.

Conceptual Approach to Taxes _______ ___ _______________ __ 323


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

iv. Premium of Rs. 300,000 was paid on Tahir’s life insurance policy.

Required:
Under the provisions of the Income Tax Ordinance, 2001 compute the taxable income and tax liability of Tahir for the tax
year 20X5. Provide comments in respect of items which do not appear in your computation.

Mr. Tahir
Resident : Individual
Tax Year : 2016
Computation of Taxable income and tax thereon
Income from Business (W-1) 1,939,840
Total Taxable Income 1,939,840

Tax on Rs. 1,939,840


[144,500 + (1,939,840 - 1,500,000) x 20%] 232,468
Less: Rebate on shares and life Insurance
( 232,468 / 1,939,840 x 387,968 ) (W-3) (46,494)
Tax Payable with Return 185,974

Working - 1
Income from Business

Profit before taxation 1,057,000


Add: Accounting Depreciation 225,000
Pre-commencement Expenses 250,000
Computer software 975,000
Depreciation on Lease Asset 260,000
Lease charges 80,000
Vehicle used for private purpose 59,090
Provision for bad debts 25,000 1,874,090
2,931,090
Less: Amortization of software (975,000 / 10 ) 97,500
Lease rentals paid during the year 300,000
20% Amortization of pre-commencement Expense 50,000
Tax Depreciation (W-2) 543,750 (991,250)
Taxable income from business 1,939,840

Working - 2
Depreciations WDV Depreciation
Cost of Machinery 1,500,000
Less: 25% Initial allowance (375,000) 375,000
1,125,000
Less: Depreciation (168,750) 168,750
Total 956,250 543,750
Working - 3
Higher of investment in shares OR Life Insurance

Shares of listed company A 600,000


Insurance Premium B 300,000
Or C 1,500,000
Or 20% of 1,939,840 D 387,968
Lower of A , B, C & D 387,968

324_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Note -1 As the taxpayer is a returning expatriate hence no treatment of foreign source salary has been made as the same
is exempt under section 51 of the Income tax ordinance, 2001.

Note -2 No treatment of gain on disposal of plot has been made as the same is not taxable due to its disposal after two
years from the date of its inheritence.

Q.NO.4(b) Spring 2015 On 1 July 2014, Fahim agreed to rent out a house to Mirza at a monthly rent of
Rs. 180,000 with effect from 1 August 2014 and received one year’s rent in advance. He also received Rs. 800,000 as a
security deposit which was partly used to repay the security deposit amounting to Rs. 400,000 received from the
previous tenant in July 2010 and partly used for renovation of the house.

Fahim also incurred the following expenses in respect of the above house:
(i) property tax of Rs. 15,000.
(ii) payment of interest amounting to Rs. 200,000 to his friend against amount borrowed for renovation of the
house.
(iii) insurance premium of Rs. 110,000.
(iv) Rs. 5,000 per month to Wasif for collection of rent.

Required:
Under the provisions of the Income Tax Ordinance, 2001 compute the taxable income of Fahim for tax year 2015
assuming he has no other income.

Mr. Fahim
Tax Year 2016
Computation of taxable income
Income from Property
Rent (180,000 x 11) 1,980,000
Unadjustable advance (W-1) 64,000
2,044,000
Less: Deductions u/s 15A
1/5th repair allowance 408,800
Property tax 15,000
Profit on debt for renovation of rented house 200,000
Insurance premium 110,000
Lower of actual collection & admin charges or 6% of RCT 55,000 (788,800)
Taxable Income 1,255,200

W-1
Working for Unadjustable advance
[ 800,000 - ( 400,000 / 10 x 4 ) ] / 10 64,000

Q.NO.6 Spring 2015 Aslam is a resident taxpayer who operates his business from Lahore (LHR) and Paris
(PAR). In August 2014, he established a new branch in Berlin (BER).

Following information is available in respect of his business operations for tax year 2015:

LHR PAR BER


----- Rs. in million -----
Income / (loss) from business 29 40 -15
Advance taxes paid in respective countries during the year 10 5 3
Income from capital gain (net of income tax of Rs. 3 million) - 27 -
Carried forward losses:
Loss from business - 55 -

Conceptual Approach to Taxes _______ ___ _______________ __ 325


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Capital loss - 6 -

The following amounts paid by Aslam in respect of BER have been charged to LHR:
(i) salaries for the first three months amounting to Rs. 5 million.
(ii) rent expense for the year amounting to Rs. 7 million.

Required:
Under the provisions of the Income Tax Ordinance, 2001 calculate the tax payable by Aslam in the tax year 2015
and foreign tax losses to be carried forward to next year, if any.

Tax Year 2016


Computation of taxable income and tax thereon
LHR PAR BER
Rs. In million Rs. In million Rs. In million
Income / Loss 29 40 (15)
Add / (Less): salaries wrongly charged 5 - (5)
Rent wrongly charged 7 - (7)
41 40 (27)
Income From Business 41 40 (27)
Less: Adjustment against loss from Business b/f (55-40)= 15 c/f - (40)
(A) 41 - (27)

Income from Capital Gain - 30 -


Set-off Capital Loss - (6) -
(B) - 24 -

Total Income [A + B] 41 24 (27)


Total Taxable Income 41 24 (27)

The un-adjusted business loss of PAR of Rs. 15 million and Ber of 27 million shall be carried forward for adjustment
against succeeding years foreign source business income with limitation of maximum upto six tax years.

COMPUTATION OF TAX LIABILITY:


Tax on Rs. 65,000,000
[1,319,500 + (65,000,000 - 6,000,000) x 35%] = 21,969,500 22

Less tax credit for foreign source capital gain (Lower of Pakistan (3)
average tax OR Foreign tax paid)
19
Less advance tax paid (10)
Balance tax payable 9

No tax credit on foreign (PAR) source business income has been computed as the tax on such income in Pakistan is nil
as comared to Rs. 3 million in Ber.

Q.1    CAF September 2014   Sultan is working as electronic engineer with Ansari Electrical Company Limited (AECL). He
has provided you with the following information for the tax year ended 30 June 2014:

(a)    His monthly cash remuneration in AECL is as follows:


Rupees
Basic salary 480,000
Medical allowance 48,000
Utilities allowance 55,000
Market value of rent free accommodation 75,000

326_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

(b)   He was also provided the following benefits in accordance with the terms of his employment:
(i)      Leave encashment amounting to Rs. 300,000.
(ii)    Hospitalization cost is covered by an insurance policy up to the amount of Rs. 1.5 million. The insurance
premium relating to this benefit amounted to Rs. 55,000.
(iii)   He is allowed to use his personal car for office use. Reimbursement of car running and maintenance expenses
amounted to Rs. 550,000. 15% of these expenses pertain to personal use.

(c)    Rs. 200,000 were received from a private limited company for attending board meetings.
(d)   A lump sum amount of Rs. 1.2 million was received as the author of a literary work.
(e)   Sultan took three years to complete this literary work.
(f)  Sultan is also a part time singer and owns a studio. He sold the premises in which the studio was situated for Rs. 10
million and shifted his musical instruments to new premises which he purchased for Rs. 15 million. He received Rs. 2.5
million from his father in cash as loan to pay for his new studio. The previous premises was purchased several years ago
for Rs. 1.4 million and had a tax written down value of Rs. 600,000 at the time of disposal.
(g)    The net income from the studio for tax year 2014 was Rs. 990,000. The expenses include salaries of two
workers at Rs. 15,000 and Rs. 18,000 per month and utility bills amounting to Rs. 110,000. All expenses were paid in
cash.
(h)   He won a car, in a competition held by Star Motor Limited for promotion of its sales. The fair market value of the car
was Rs. 850,000.
(i)      He gifted 40 fans having a fair market value of Rs. 100,000 to an approved charitable organisation.
(j)     An amount of Rs. 500,000 was paid by him as contribution to an approved pension fund.

Required:
Under the provisions of the Income Tax Ordinance, 2001 compute the taxable income and tax thereon for the tax year
2014.

Mr. Sultan
Resident : Individual
Tax Year 2016
Compitation of taxable income and tax thereon
Rs. Rs.
Income from Salary
Basic Salary 5,760,000
Medical allowance 576,000
Utilities allowance 660,000
Accommodation
Rent free accommodation 900,000
45 % of 5,760,000 2,592,000 2,592,000
Leave encashment 300,000
Conveyance allowance 82,500
9,970,500
Income from Business
Studio Income 990,000
Inadmissible expense 216,000
Gain on sale of studio 800,000 2,006,000

Income from other sources


Fee for attending BOD meetings 200,000
Loan received from father 2,500,000
Literary work as an author 1,200,000
Winning a car 850,000 4,750,000
Total Income 16,726,500
less: Winning a car covered under FTR (850,000)

Conceptual Approach to Taxes _______ ___ _______________ __ 327


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Taxable Income 15,876,500

Computation of Tax Liability


Tax on Rs. 12,944,500
[1,425,000 + (15,876,500 - 7,000,000) x 30%] 4,087,950
Less: Rebate on donation
4,087,950 / 12,944,500 x 100,000 (25,748)
Less: Rebate on contribution to APF
4,087,950 / 12,944,500 x 500,000 (128,742)
Tax payable with return 3,933,459

Q. NO. 1 Spring 2014 Qamar is engaged in the business of manufacturing and repair of electric motors. His
accountant has prepared the following tax computation for the tax year 20X4:

Rs. in '000' Rs. in '000'

Sales of manufactured motors 45,000


Less: Cost of sales and administrative expenses
(excluding depreciation for the year) (33,000)
Income before depreciation 12,000
Less: Tax depreciation for the year (9,000)
3,000
Less: Brought forward business loss from tax year 20X3
(Total business loss was Rs. 4 million) (3,000)
Business income after adjusting business loss -
Add: Interest income received from a commercial bank 500
Income form other sources 850 1,350
Taxable income 1,350

Computation of tax
Tax liability 125
Less: Tax deducted by bank on interest income (500,000 x 10%) (50)
Tax payable 75

Following expenses are included in the cost of sales and administrative expenses:

Description Rs. In 000


Travelling expenses include travel and hotel expenses of Qamar's
visit to Malaysia for attending a trade fair 100

Electricity charges paid for Qamar's residence 150


Damages paid to a distributor for delayed supplies 200
Donations to a non-profit organization 300
Salary paid to Bari who is Qamar's brother. Advance tax has been 720
deducted from the salary
Fine paid to the Ministry of Environment for infringment of
200
environmental and safety laws
Unabsorbed depreciation brought forward from previous tax year 500

Qamar is not satisfied with the tax return prepared by his accountant and has requested you to review the return.

Required:
(a) Compute the revised taxable income of Qamar and tax payable by or refundable to him for the tax year 20X4.
(b) Briefly comment on treatment of the above items of expenses in your tax computation.

328_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Solution: (a)

MR. QAMAR
Revised taxable income & tax thereon
For the tax year 2016
Rs. in '000'
INCOME FROM BUSINESS U/S 18

Sales of manufactured motors 45,000


Less: Revised cost of sales and administrative expenses
(excluding depreciation for the year) (N - 2) (31,850)
13,150
Less: Brought forward business loss from tax year 20X3
(Total business loss was Rs. 4 million) (4,000)
9,150
Less: Tax depreciation for the current year (9,000)
Unadjustable tax depreciation - brought forward (b - 1) (500)
Total business loss for the year (350)

INCOME FROM OTHER SOURCES U/S 39

Income form other sources (assumed net of allowable expenses and fully
covered under normal tax regime) 850
Total income 500
Less straight deduciton U/C 61 of Part II of 2nd Schedule to the

Income tax Ordinance, 2001. [Rs. 300,000 or 30% of Rs. 500,000] (b - 2) 150
Taxable income 350

COMPUTATION OF TAX LIABILITY:

As the income is less than Rs. 400, 000 (maximum non taxable limit) hence no tax liability has been
computed under normal tax regime (read with N - 1).

Tax under NTR -


Tax under FTR on profit on PLS account 50
50
Less tax already deducted at source - on bank profit 50
Balance tax -

ASSUMPTIONS / BASIS:

(N - 1) In the absence of information no minimum tax under section 113 of the Income Tax Ordinance, 2001 has been
computed.

(N - 2) Revised cost of sales


Rs. Rs.
Cost of sales as per question 33,000
Add:

Less:
Electricity charges - residence 150
Donation to a non-profit Orgnization 300
Unabsorbed depreciation brought forward from previous tax year 500
Fine paid for infringement of environmental laws 200
(1,150)
Revised cost of sales 31,850

Conceptual Approach to Taxes _______ ___ _______________ __ 329


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Solution: (b)

(1) Un-absorbed depreciation of (current year and brought forward) may be adjusted against any other head of income
chargeable to tax (except income under the head salary or income from property) under section 57(4) read with section
56(1) of the Income Tax Ordinance, 2001.

(2) It has been assumed that the limitations of clause 61 has been met by the AOP in order to claim the same as
straight deduction from total income.

(3) As the personal expenses are not allowable under section 21(h) of the Income tax Ordinance, 2001 hence the
electricity charges of residence has been accordingly deducted from the given cost of sales amount.

(4) As the fine or penalty for voilation of any law, rule or regulation is not allowable under section 21(g) of the Income tax
Ordinance, 2001 hence the fine paid for infirngment of enviornmental laws has been accordingly deducted from the given
cost of sales amount.

Q. NO. 4 Spring 2014 Basher and Jamil jointly own a house in Karachi. Basher has 75% share in the house. On 1
September 20X3, the house was let out at an annual rental of value of Rs. 6,500,000. This amount includes Rs. 186,000
per month for utilities, cleaning and security.

During the tax year 20X4, owners incurred the following expenditures in relation to the house:

Rupees
Utilities, cleaning and security 650,000
Repair and maintenance 810,000
Insurance premium 240,000
Collection charges 25,400
Mark-up on amount borrowed for extension of the house 840,000

Basher and Jameel have no other sources of income. All the above expenses were incurred by them jointly.

Required
Calculate taxable income of Basher and Jameel under appropriate heads of income for the tax year 20X4.

Solution:

COMPUTATION OF TAXABLE INCOME


FOR THE TAX YEAR 2015

INCOME FROM PROPERTY U/S 15: Rs. Rs. Rs.

Rent [(Rs. 6,500,000 / 12 x 10) - 1,860,000] 3,556,667

Less: allowable deductions u/s 15A

Repair allowance (Rs. 3,556,667 x 1/5) 711,333


Insurance premium 240,000
Actual collection & admin charges 25,400
6% of rent chargeable to tax 213,400
Lower of two amounts 25,400
Mark-up on amount borrowed 840,000 1,816,733
Net income from property of Co-owners 1,739,934

INCOME FROM OTHER SOURCES U/S 39:

Income from utilities, cleaning and securities (Rs. 186,000 x 10) 1,860,000

330_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Less expenses of utilities, cleaning and securities (650,000)


Total taxable income 1,210,000

COMPUTATION OF TAX LIABILITY AS AOP:

Tax on Rs. 1,210,000 [Rs. 32,000 + (Rs.1,210,000 - Rs. 750,000) x 15%] 101,000
Divisible income afer tax 1,109,000

Taxable income of Co-owners: Property income Income from Total


other sources
after tax (N - 1)
Rs. Rs. Rs.

Bashir 75% 1,304,950 831,750 2,136,700


Jameel 25% 434,983 277,250 712,233
Total taxable income 1,739,934 1,109,000 2,848,934

(N - 1) Share of both the members in income from other sources of the AOP has been included for rate purposes of
respective member of the AOP.

Q.1 Autumn 2013

Mrs. Aslam was employed with Sahal Limited (SL) as a Marketing Manager. On 30 June 2012 she resigned from her
employment with SL. On 1 July 2012, she joined Hassan Pakistan Limited (HPL), a quoted company, as a Marketing
Director. She has provided you the following information in respect of the tax year 2013:

(i) In July 2012, she received following amounts from SL in final settlement:
●     Leave encashment amounting to Rs. 95,000.
●     Gratuity of Rs. 500,000 from an unrecognized gratuity fund maintained by SL.
●     Reimbursement of Rs. 100,000 against a health insurance policy. The insurance claim was lodged by SL on
behalf of Mrs. Aslam in January 2012.

(ii) In accordance with the terms of her employment, income tax related to her salary and benefits is to be borne by HPL.
Her emoluments / benefits during the tax year were as follows:

●     Basic salary of Rs.200,000 per month.
●     Medical allowance of Rs. 60,000 per month.
●     Rent free accommodation with annual letting value of Rs. 480,000.
●     Travelling allowance of Rs. 50,000 per month. 60% of the amount was spent in the performance of official
duties.
●     Provident fund @ 10% of basic salary. An equal amount was contributed by HPL.

(iii) Under an employee share scheme, Mrs. Aslam was awarded 5,000 share in HPL on 1 January 2013. Under the
scheme she was not allowed to sell the shares up to 31 March 2013. she sold all the shares in HPL on 1 May 2013. Fair
value of the shares on the above dates was as follows:

●     Rs. 20 per share on 1 January 2013
●     Rs. 28 per share on 31 March 2013
●     Rs. 32 per share on 1  May  2013

(iv) On 31 December 2012, she received a loan of Rs. 400,000 from HPL. The loan carries a mark-up of 4% per
annum. The prescribed benchmark rate is 10%.

(v) She won the best executive employee award of HPL and received a laptop having a fair market value of Rs.
100,000
(vi) An amount of Rs. 355,000 was received from her spouse as support payment, under an agreement to live apart.

Conceptual Approach to Taxes _______ ___ _______________ __ 331


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

(vii) She paid Rs. 105,000 as zakat under the Zakat and Ushr Ordinance, 1980.
(viii) Donation of Rs. 70,000 was paid to an approved organization.

Required:
Compute the taxable income, tax liability and tax payable for the tax year 2013.
Note: Show all relevant exemptions, exclusion and disallowances.

Solution
MRS. ASLAM
SALARIED RESIDENT INDIVIDUAL
COMPUTATION OF INCOME & TAX THEREON
FOR THE TAX YEAR 2016
Rupees Rupees Rupees
Exempt /
Total income income not Taxable income
taxable
INCOME FROM SALARY U/S 12

From sahal limited (SL)


Leave encashment 95,000
Gratuity (N-1) 500,000 75,000 425,000

Reimbursement of insurance -

From hassan pakistan (HPl)


Basic salary 2,400,000
Medical allowance (N-2) 720,000 240,000 480,000

Rent free accommodation 480,000


Higher of Rs. 480,000 or Rs. 1,080,000 (45% of 2,400,000) 1,080,000 1,080,000
Travelling allownce (N-3) 600,000 360,000 240,000
Contribution to Provident fund (N-4) -
Employee share scheme 140,000 - 140,000
Loan from employer (N-5) 400,000 -
Award of best executive employee (N-6) 100,000
Total salary 4,960,000

CAPITAL GAINS U/S 37

Amount received to live apart (N-7) 355,000 -


Income before SBI 4,960,000
Less: Zakat (105,000)
Donation (assumed that organization was specified in clause 61 of 2nd schedule) (N-8) (70,000)
Taxable income 4,785,000

Separate Block of Income


capital gain on shares [Rs. (32-28) x 5,000 ] 20,000

COMPUTATION OF TAX LIABILITY:

Tax on Rs. 4,785,000 [597,000 + 27.5% x (4,785,000 - 4,000,000)] 812,875


Tax on capital gain on shares of listed company (Rs. 20,000 x 15% as sold within one year) 3,000
Total tax liability 815,875

ASSUMPTIONS / BASIS:

332_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

N-1 Gratuity
Contribution to un-recognised gratuity fund U/C 13 is exempt upto Rs. 75,000 or 50% of the amount whichever is lower.

N-2 Medical allowance


It is exempt upto 10% of the basic salary remaining is taxable.
N-3 Travelling
It is assumed that the travelling allowance is given for both office and personal use so 60% of it is exempt for office use.

N-4 Provident fund


It is not mentioned in question what is the type of provident fund it is so it is assumed that the provident fund is un-
recognised provident fund so it is not taxable.
N-5 Loan from employer
Amount of loan is below Rs. 500,000 so it is exempt.
N-6 Award
Any benefit given by employer to employee is taxable under the head income from salary like commission paid to
employees.
N-7 Agreement to live apart
It is exempt under non-recognition rule.

N-8 Donation
No comparison with amount worked out at 30% of taxable income has been made as the actual donation amount is
already less than the same.

Q.3 Autumn 2013

Gulzar is a Pakistani resident and operates various businesses. He disposed off the following assets during the tax
year 2013:

(i) An immovable property was sold for Rs. 50 million. The cost of the immovable property was Rs. 25 million. Tax
depreciation of Rs.4 million had been allowed on the immovable property up to the tax year 2012.

(ii) A car was disposed of for Rs. 1.2 million. The car was acquired on 1 July 2011. The tax written down value of the car
at the beginning of tax year 2013 was Rs.0.9 million. The car was being used partly (70%) for business purposes. The
rate of depreciation for tax purposes is 20%.

(iii) An antique sculpture was purchased for Rs. 350,000 on 30 August 2000. It was sold for Rs. 1,500,000 an 28
February 2013 through auction. The auctioneer was paid a commission of Rs. 15,000 . Tax was deducted and paid by
Gulzar from the amount of commission within due date.

(iv) Listed securities were sold as follows :

purchase cost Sale proceeds


securities Date of purchase Date of sale
(Rs.) (Rs.)
A 20-Nov-12 500,000 17-Mar-13 400,000
B 05-Aug-12 320,000 08-Jun-13 600,000
C 01-Jun-12 650,000 17-Jun-13 700,000

Required:
Compute the amount of capital gain / loss arising on the above transactions under the provisions of the Income Tax
Ordinance, 2001.

Solution

MR. GULZAR

Conceptual Approach to Taxes _______ ___ _______________ __ 333


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

NON SALARIED RESIDENT INDIVIDUAL


COMPUTATION OF INCOME & TAX THEREON
FOR THE TAX YEAR 2016

Rs. Rs.
Immoveable property:
Consideration received from the sale of immovable property 50,000,000
Less: WDV of immovable property
Cost of asset U/S 22(13)(d) 50,000,000
Less: Depreciation charged upto 2013 (4,000,000) 46,000,000
Gain on sale of immovable property taxable under the head 4,000,000
Business income U/S 18

Antique sculpture:

Sale price U/S 76(10) 1,500,000


Cost of antique (including disposal expenses) (Rs. 350,000 + 15,000) 365,000
1,135,000
As holding period is more than 1 year, therefore 25% is exempt (283,750)
Capital gain on sale of antique 851,250

Depreciable motor vehicle:

Consideration received from the sale of depreciable motor vehicle 1,200,000

Less: WDV of motor vehicle


Cost of motor vehicle (Rs. 900,000 x 100 / 85) 1,058,824
Less tax depreciation allowed upto tax year 2012 (Rs.1,058,824 x Note attached (111,177) 947,647
15% x 70%)

Gain on sale of depreciable motor vehicle taxable under the 252,353


head Business income

Note: The cost of motor vehicle not plying for hire is well within the
maximum limit of Rs.2.5 million for pessanger transport vehicle &
further no initial allowance has been claimed on the assumption
that the motor vehicles are not for hiring purposes. Although the
normal depreciation rate of 20% on motor vehicles has been given
however 15% applicable rate as per 3rd Schedule has been used
for the solution.

Listed Companies shares: Company C

Sale price 700,000


Less: cost of shares at the date of disposal 650,000
50,000 50,000

Listed Companies shares: Company A

Sale price 400,000


Less: cost of shares at the date of disposal 500,000
(100,000) (100,000)
As holding period is less than one year therefore its loss may be
adjusted against capital gain from other taxable securities

Listed Companies shares: Company B

334_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Sale price 600,000


Less: cost of shares at the date of disposal 320,000
As holding period is less than 1 year, therefore its gain may be 280,000 280,000
adjusted against capital loss of Company A
Taxable capital gain under section 37A 230,000

Q.1 Spring 2013


Mr. Creative is working as Director Human Resources at Artistic Technologies Limited (ATL). Following are the details of
his income / receipts during the latest tax year.

(a) Monthly cash remuneration from ATL:

Basic salary Rs.300,000


Utility allowance 15% of basic salary
Medical allowance 12% of basic salary

(b) In addition to above, he was also provided the following benefits in accordance with his terms of employment:
(i)  Rent-free furnished accommodation in a bungalow situated on a 500 square yard plot of land. Rent for comparable
accomodation facility in the vicinity is Rs 150,000 per month.

(ii) An 1800cc company – maintained car. The car was purchased two years ago at a cost of Rs. 1,600,000 and is used
both for official and personal purposes.

(c) A house owned by Mr. creative had been leased out by him at a monthly rent of Rs 50,000.
The Lease expired on 31 December. Mr. Creative refused to renew the lease in spite of the tenant's offer to renew the
lease offer after increasing the rent by 10%.
He returned the non-adjustable deposit of Rs.300,000 to the tenant, which was received two years ago. The house was
immediately leased to his cousin without any security deposit on a monthly rent of Rs.48,000.

(d) Five years ago, Mr. Creative had purchased 20,000 shares of Rs.10 each, of an unlisted public company at the rate of
Rs.140 per share. After one year of acquisition, he received 8,000 bonus shares from the company. During the latest tax
year, he sold 75% of the bonus shares at a price of Rs. 145 per share.

e) During the latest tax year, following investments were made:


Rs.
Approved voluntary pension fund 600,000
Open – end mutual fund 1,100,000

(f) During the latest tax year, he redeemed 4,000 units of an open-end mutual fund at Rs. 50 per unit and Mr. creative had
claimed a tax credit of Rs.40,000 on this investment.

(g) Donations of Rs.50,000 were paid to charitable institutions listed in the second schedule to the Income Tax
Ordinance, 2001.

(h) Tax deducted at source from his salary was Rs.737,000.

Required:
Compute the taxable income, tax liability and tax payable for the latest tax year.

Solution

Mr. Creative (Resident)


Computation of taxable income and tax liability
For the tax year 2016

INCOME FROM SALARY U/S 12 Note Rupees Rupees

Conceptual Approach to Taxes _______ ___ _______________ __ 335


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Basic salary (Rs. 300,000 × 12) 3,600,000


Utility allowance (300,000 × 12 × 15%) 540,000
Medical allowance (300,000 × 12 x 12%) 432,000
Less: Exempt up to 10% of basic salary U/C 139 (360,000) 72,000
Rent free furnished accommodation (Higher of fair market rent Rs. 1,800,000
1,800,000 or 45% of basic pay (1,620,000) shall be added in the
taxable salary income)
Company maintained car (1,600,000 × 5%) U/R 5 80,000
6,092,000
INCOME FROM PROPERTY U/S 15

Rent (Rs. 50,000 × 6 months) + (Fair market rent Rs.55,000 x 6 N-1 630,000
months) (Assumed after allowable deductions)

INCOME FROM CAPITAL GAINS U/S 37

Gain on sale of bonus shares of unquoted Company (8,000 x 75% 870,000


x Rs.145 each)
Less cost of bonus shares (Rs.6,000 x 2,800,000 / 28,000) (600,000)
(In the absence of information it has been assumed that the cost of
bonus shares computed as above is equal to fair market value at
which 5% tax U/S 236N has already been paid under final tax
regime, otherwise the fair market value on which 5% tax has been
paid shall be considered as cost of bonus issue)
Capital gain 270,000
75% capital gain taxable 202,500

Total income 6,924,500


Less: Donation to charitable institutions (Lower of 30% of taxable (50,000)
income or actual amount paid hence acutal amount considered
under 2nd Schedule)
Taxable income 6,874,500

COMPUTATION OF TAX LIABILITY:

Tax on Rs. 6,874,500 [597,000 + 27.5% x (6,874,500 - 4,000,000)] 1,387,488

Less tax credit on


Approved voluntary pension fund (lower of actual amount 600,000
Rs.600,000 or 20% of taxable income i.e. Rs. 1,374,900)

Open – end mutual fund (No tax credit computed on this N-2 -
investment as the same was made in the latest tax year and further
due to partial encashment within 24 months period the tax credit of
preceeding tax year shall be adjusted in the latest tax year and not
in the current tax year).
600,000
Less tax credit Rs. 1,387,488 / 6,874,500 x 600,000 (121,099)
1,266,389
Less tax deducted at source against salary income (737,000)
Balance tax payable 529,389

Notes
N-1: No treatment of security refunded after two years has been made in the current year as no further security
received by the landlord.

336_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

N-2: In the absence of information it has been assumed that all the open end fund units sold during the current tax
year.

Q.No. 3 (b) Spring 2013

Imaginative Enterprise (IE) is an Association of persons and was formed two years ago. During the latest tax year, IE's
Pakistan source income amounted to Rs.2,500,000 and tax payable thereon amounted to Rs. 722,500.

Following are the details of its foreign source incomes, tax paid thereon and foreign losses brought forward for the latest
tax year:
Heads of income Foreign income Foreign tax paid Foreign losses
brought forward
RUPEES RUPEES RUPEES
Speculation business 500,000 125,000 (250,000)
Non- Speculation business (1,000,000) - -
Capital gains 750,000 75,000 (1,500,000)
Other sources 1,250,000 187,500 -
The foreign tax credit relating to Income from other sources which remained unadjusted during the last tax year
amounted to Rs.50,000.

Required:
Calculate total tax payable and foreign tax losses to be carried forward to next year (if any).

Solution

Imagivative Enterprise (Resident AOP)


Computation of taxable income and tax liability
For the tax year 2016
Rs. Rs.
Foreign source of incomes :
Non speculation:
Current year loss (N - 1) (1,000,000)

Capital gain U/S 37


Current year income 750,000
Brought forward losses 1,500,000
(750,000)
The unadjusted capital loss to c/f for adjustment against succeeding years capital 750,000 -
gains.

Other sources U/S 39


Current year income 1,250,000
Balance income from other sources 250,000

Speculation U/S 18
Current year income 500,000
Brought forward losses (250,000) 250,000
Net foreign source of income 500,000
Add Pakistan source of income 2,500,000
Total taxable income 3,000,000

COMPUTATION OF TAX LIABILITY:

Tax on Rs. 3,000,000 [344,500 + 25% x (3,000,000 - 2,500,000)] 469,500

Conceptual Approach to Taxes _______ ___ _______________ __ 337


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Less: tax credit on foreign source of income under respective


heads:
Tax credit on income from other sources shall be allowed on lower
- Foreign tax paid on income from other sources or 187,500
- Pakistan tax on net foreign source of income
(Rs.469,500 / 3,000,000 x 250,000) 39,125
Hence lower allowed as tax credit (39,125)

Less: tax credit on foreign source of income under respective


heads:
Tax credit on speculation income shall be allowed on lower of:

- Foreign tax paid on speculation income or 125,000


- Pakistan tax on net speculation income
(Rs.469,500 / 3,000,000 x 250,000) 39,125
Hence lower allowed as tax credit (39,125)
Balance tax payable 391,250

Notes:
1. Non speculation losses adjusted against firstly income form other sources and balance against specualtion
income.
2. Last year unadjusted foreign tax credit on income from other sources is not allowed to be refunded, carried
forward or carried back.
3. The income tax given in question only on Pakistan source of income has been ignored as credit shall be on total
tax liability basis that is Pakistan source income plus foreign source income.

Q.1 Autumn 2012

Beena Sikandar is a lawyer and owns a law firm under the name Beena and Co. She is also Director Legal Affairs at
Ayesha Foods Limited. Details of her income for the tax year 2012 are as follows:
(A) INCOME FROM BEENA and CO.
Income Statement Note Rupees
Revenue (i) 8,500,000
Less: Expenses
Salaries (ii) 2,000,000
Gifts and donations (iii) 400,000
Lease charges (iv) 900,000
Professional fee (v) 400,000
Property expenses (vi) 350,000
Travel expenses 150,000
Other expenses (vii) 600,000
Tax withheld by clients 200,000
5,000,000
Net profit 3,500,000

Notes to the Income Statement


(i) Revenue includes Rs. 750,000 recovered from Rafia in respect of bad debts that had been written off while calculating
the taxable income for the tax year 2010. The amount was receivable against professional services rendered to Rafia.

(ii) Salary expenses include amount of Rs. 50,000 and Rs. 75,000 per month paid to Beena and her brother respectively.
Her brother looks after administration and financial matters of the firm.
(iii) Gifts and donations include gifts to clients, gift to her son and donation to Edhi Foundation amounting to Rs. 100,000,
Rs. 50,000 and Rs. 250,000 respectively.
(iv) A vehicle was obtained solely for official purposes on operating lease, from a bank. The lease commenced on 1 March

338_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)
(iv) A vehicle was obtained solely for official purposes on operating lease, from a bank. The lease commenced on 1 March
2012. Lease charges include Rs. 500,000 paid as security deposit to the bank.
(v) The professional fee includes an amount of Rs. 150,000 paid to a legal firm for defending a law suit filed against
Beena, in a family court.
(vi) Beena lives in an apartment situated above her office, and two-fifths of the total property expenses relates to this
apartment.
(vii) Other expenses include an amount of Rs. 150,000 paid for Beena's Golf Club membership which she exclusively
used to promote her business interests. The payment to the club was made in cash.
(B) DIRECTOR'S REMUNERATION FROM AYESHA FOOD LIMITED
(i) Beena received monthly remuneration of Rs. 100,000 from AFL.
(ii) During the year, she also received two bonus payments of Rs. 100,000 each. One of the bonus pertains to tax year
2011. It was announced last year but disbursed to her in the current year.
(iii) Beena has also been provided a vehicle, by AFL, for her personal as well as business use. The car was acquired by
AFL in May 2007 at a cost of Rs. 2,000,000. The fair market value of the car as at 30 June 2012 was Rs. 1,500,000.

(iv) She received a fee of Rs. 150,000 from AFL for attending the meetings of the Board of Directors (BOD).
(v) Details of tax deducted by AFL are as follows:
Rupees
From salaries 390,000
From fee received for attending the meetings of BOD 9,000
Required:
Compute the taxable income, tax liability and tax payable by Beena Sikandar for the tax year 2012. Provide appropriate
comments on the items appearing in the notes which are not considered by you in your computation.

Solution
Beena Sikandar (Resident)
Computation of taxable income and tax liability
For the tax year 2016
Notes Rs.
INCOME FROM BUSINESS U/S 18
Profit before tax as per accounts 3,500,000
Add:
Tax withheld by clients 200,000
Salary paid to Beena 600,000
Gifts to clients and son 1 150,000
Donation to Edhi Foundation 1 250,000
Security deposit on operating lease 2 500,000
Legal charges paid for personal law suit 150,000
Rent related to personal apartment (2/5 x 350,000) 140,000
Club membership fee paid in cash 150,000
2,140,000
5,640,000
INCOME FROM SALARY U/S 12
Monthly remuneration from AFL (Rs. 100,000 x 12) 1,200,000
Bonus received in tax year 2012 3 200,000
Conveyance (2,000,000 x 5%) U/R 5 100,000
Fee as employee for attending meeting of the BOD (N - 4) 150,000
1,650,000
Total taxable income 7,290,000

COMPUTATION OF TAX LIABILITY:

Conceptual Approach to Taxes _______ ___ _______________ __ 339


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Salary is less than 50% of taxable income, hence rates of non-salaried individual applied.
Tax on Rs. 7,290,000 [1,319,500 + 35% x (7,290,000 - 6,000,000)] 1,771,000
Less: Proportionate tax on income chargeable to tax under
minimum tax liability (1,771,000 / 7,290,000 x 5,640,000) 1,370,156
400,844
Proportionate tax (as above) (A) 1,370,156
Minimum tax (deductible) (8,500,000 x 10%) (B) 850,000

Higher of (A) or (B) 1,370,156


1,771,000
Less: tax credit on donation
Tax credit shall be allowed on lower of:
- Actual amount of donation i.e. Rs. 250,000
- 30% of taxable income i.e. Rs. 2,187,000
Tax credit = [250,000 x 1,771,000 / 7,290,000] 60,734
Tax liability 1,710,266
Less: tax already paid or deducted at source
Tax withheld by clients 200,000
Tax deducted on salaries 390,000
Tax deducted on fee received as employee 9,000
599,000
Balance tax payable 1,111,266

Comments on items not considered in computations


a. Bad debts recovered
As bad debts of Rs. 750,000 was allowed as expense in tax year 2010 and now this amount has been recovered,
therefore, this amount is chargeable to tax. No treatment is required as this amount has already been included in revenue.

Notes
1. Gifts and donation
It is assumed that gifts are given in personal capacity, therefore not allowed for tax purposes. Tax credit shall be allowed
on donation to Edhi Foundation.
2. Security deposit on lease
It is assumed that security deposit does not form part of the lease rentals and shall be refunded by bank on repayment of
all lease rentals.
3. Bonus
Salary including bonus is chargeable to tax on receipt basis.

4. Meeting fee to director


As the meeting fee has been recived by the taxpayer as an employee hence the same is taxed as income under the head
salary income instead of taxation under the head income from other sources.

Q.5 (a) Autumn 2012

In May 2012, Hameeda sold certain personal assets at the following prices:
Rupees
Plot in DHA Karachi 10,000,000
Paintings 2,000,000
Jewellery 5,000,000

Additional information
(i) Plot in DHA Karachi was inherited by her from her father in May 2006. It was purchased by her father for Rs. 4,000,000
and market value at the time of inheritance was Rs. 5,000,000.

340_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

(ii) Paintings were inherited from her mother in July 2011. these paintings were purchased by her mother for Rs.
1,000,000 and market value at the time of inheritance was Rs. 2,350,000.

(iii) Jewellery costing Rs. 3,000,000 was purchased and gifted to her by her husband in March 2009.

Required: Discuss the taxability of Hameeda in respect of the above gains/ losses on sale of assets in the context of
Income Tax Ordinance, 2001.

Solution

Hameeda (Resident)
Computation of taxable income and tax liability
For the tax year 2016

CAPITAL GAINS U/S 37 Rs. Rs.

Paintings:
Sale price 2,000,000
FMV at the date of inheritance 2,350,000 (350,000)
As the loss on painting is covered under section 38(5) hence the same
has not been considered for computation of taxable gain.

Jewellery:
Sale price 5,000,000
FMV at the date of inheritance (assumed equal to cost) 3,000,000
2,000,000
As holding period is more than 1 year, therefore 25% is exempt (500,000) 1,500,000

Plot in DHA: (Separate block of income)


Sale price 10,000,000
FMV at the date of inheritance 5,000,000
5,000,000
As holding period is more than 2 year, therefore gain is exempt (5,000,000) -
Taxable income under normal law 1,500,000

COMPUTATION OF TAX LIABILITY:

Tax on Rs. 1,500,000 [32,000 + 15% x (1,500,000 - 750,000)] 144,500

Q.5 (b) Autumn 2012

On 1 July 2010, Kashmala and Shumaila formed an Association of Persons (AOP) with the objective of providing
information technology support services to corporate clients. They contributed Rs. 1.2 million and Rs. 0.8 million
respectively in their capital accounts and agreed to share profits and losses in the ratio of their capitals.
For the year ended 30 June 2011, business loss and unabsorbed depreciation of Rs. 0.4 million and Rs. 0.3 million
respectively were assessed and carried forward. The total turnover of the AOP in 2011 was Rs. 40 million.
During the year ended 30 June 2012, the AOP incurred a net loss of Rs. 0.8 million on a turnover of Rs. 50 million. The
cost for the year was arrived after adjustment of the following:

(i) Salaries amounting to Rs. 0.5 million and Rs. 0.3 million were paid to Kashmala and Shumaila respectively.
(ii) Accounting depreciation on office assets amounted to Rs. 0.3 million.
The taxes withheld by the clients, for the year ended 30 June 2012 amounted to Rs. 0.55 million. AOP is entitled to claim
tax depreciation of Rs. 0.25 million in respect of the office assets.
Required: Calculate the taxable income, net tax payable and unabsorbed losses (including unabsorbed depreciation), if
any , to be carried forward by the AOP for the year ended 30 June 2012.

Conceptual Approach to Taxes _______ ___ _______________ __ 341


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Solution

AOP
Computation of taxable income and tax liability
For the tax year 2016
INCOME FROM BUSINESS U/S 18 Rs.
Accounting loss 800,000
Add:
Salaries paid to partners (500,000 + 300,000) 800,000
Accounting depreciation 300,000
1,100,000

Business income as per tax 300,000


Less: B/f business loss (Rs.400,000 - 300,000 = 100,000 balance business loss shall be c/f) 300,000
Income for the year -
Less:
Tax depreciation for the year 250,000
Total loss related to unabsorbed depreciation for the year (250,000)
Less: brought forward unabsorbed depreciation 300,000
Total unabsorbed depreciation to be carried forward (550,000)

COMPUTATION OF TAX LIABILITY:


As there is nil income under normal law hence minimum tax under NTR is computed as under.
Minimum tax liability:
In the absence of information it has been assumed that the AOP has realized all the services income on which the
corporate sectors have partially deducted tax on the same, however the AOP is under obligation to pay the 10% minimum
tax on the entire gross receipts even when the corporate sectors clients have not fully deducted tax on the same.

10% minimum tax on gross receipts of Rs.50 million against services 5,000,000
Less tax deduted under section 153 550,000
Balance tax payable 4,450,000

As there is nil income during the tax year after adjustment of brought forward losses, hence business loss of Rs. 100,000
for current year shall be carried forward for the succeeding six tax years whereas the unabsorbed brought forward
depreciation loss shall be carried forward to the extent of Rs. 550,000 without any time limitation.

Q.1 Spring 2012


Dr. Sona is a leading Eye Specialist and is listed on the panels of two hospitals. He also manages a private clinic. A
summary of his receipts and payments for the latest tax year is as follows:

Receipts Note Rupees Payments Note Rupees


Consultation fees Rent of clinic 300,000
Household
- Hospitals (i) 1,880,000 1,960,000
expenses
Purchase of
- Clinic 2,400,000 640,000
motor car
Surgical
Income from surgery 500,000
equipment
Salary to
- Hospitals (i) 1,504,000 180,000
assistant
Clinic running
- Clinic 2,350,000 240,000
expenses

342_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Property income (ii) 1,012,000 Car expenses (iv) 200,000


Other income (iii) 75,000 Donation (v) 300,000
Notes to the receipts and payments are presented below:
(i) The amount received from hospitals is net of withholding tax.
(ii) Dr. Sona owns a commercial building which he has rented out. Details of net receipts are as follows:

Rupees
Rent for the year 870,000
Non-adjustable security deposit:
- received from a new tenant 700,000
- paid to old tenant (received three years ago) -500,000
Tax withheld -50,000
Property tax on building -8,000
Net receipts 1,012,000

(iii) The amount was received for writing an article in an international magazine on World Health Day.
(iv) 60% of the motor car expenses were incurred in connection with his personal use.
(v) Donation was given to a Government medical college for upgrading its library.
(vi) Depreciation on motor car and surgical equipment, under the 3rd Schedule of the ITO, 2001 is Rs. 96,000
and Rs. 75,000 respectively.
Required: Compute the taxable income, tax liability and tax payable by Dr. Sona for the latest tax year. Provide
appropriate comments on the items which are not relevant for your computations,

Solution of Q. NO. 1 Spring 2012


Dr. Sona
Tax year 2016 Clinic Hospital Total
Rs. Rs. Rs.
INCOME FROM BUSINESS U/S 18
Consultation fee from clinic 2,400,000
Surgical fee from clinic 2,350,000
4,750,000
Less: Admissible expenses
Clinic rent 300,000
Surgical equipments depreciation 75,000
Depreciation on motor vehicle 38,400 / 8,388,710 x 4,750,000 21,744
Car expenses (Rs.200,000 x 40%) = 80,000 / 8,388,710 x 45,299
4,750,000
Salary to assistant 180,000
Clinic running expenses 240,000
Business income 862,042
3,887,958 3,887,958
INCOME FROM PROPERTY U/S 15 & 16
Rental income 870,000
Advance against property (700,000 - 150,000) / 10 55,000
500,000/10 = 50,000 x 3 = 150,000
925,000
Less: Property tax paid (8,000)
1/5th repair allowance (185,000) 732,000

INCOME FROM OTHER SOURCES U/S 39


Other income 75,000 75,000
Fee from hospital (assumed net of tax hence grossed up 1,880,000 2,088,889
x 100 /90)

Conceptual Approach to Taxes _______ ___ _______________ __ 343


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Surgery fee from hospital (assumed net of tax hence grossed up 1,671,111
1,504,000 x 100 / 90)
3,760,000
Less: proportionate expenses:
Depreciation on motor vehicle 38,400 / 8,510,000 x 3,638,710 16,419
Car expenses (Rs.200,000 x 40%) = 80,000 / 8,510,000 x 34,206
3,638,710
Other income
3,709,374 3,709,374
Total taxable income 8,404,332

COMPUTATION OF TAX LIABILITY:


Tax on Rs. 8,404,332 [1,319,500 + 35% x (8,404,332 - 6,000,000)] 2,161,016

Less: Tax credit on donation made of Rs. 300,000


(2,161,016 / 8,404,332 x 300,000 (77,139)
Tax payable 2,083,877
Less: proportionate tax on hospital services [(2,083,877 / 8,404,332 (A) 919,749
x 3,709,374)
Balance tax under NTR 1,164,127

Minimum tax deducted on hospital services:


(3,760,000 x 10%) (B) 376,000
Tax under NTR as above 1,164,127
Add: higher of A and B 919,749
Total tax liability 2,083,877

Less: already deducted on hospital services (376,000)


Less: tax withheld on property income (50,000)
Balance tax payable 1,657,877
Notes
1. Rental income
The rent received or receivable by a person for a tax year shall be chargeable to tax in that year under the head “Income
from property”. Therefore, only three months’ rent is included in the taxable income of Mr. Khursheed which is below the
minimum threshold limit for the taxability of rent.
2. House hold expenses
House hold are expenses not allowable against any head of income, so there is no treatment made in solution.
3. Purchase of motor car
Motor car purchased is not a business expense.

Q. NO. 1 Autumn 2011

Mr. Khursheed, a Pakistani national, was employed as the chief financial officer in Zulfiqar Gas Company (ZGC), since
1990. Following information pertains to his income for the tax year 2011:
(1)   Income from ZGC
Khursheed was employed with ZGC up to 31 December 2010. During this period he received the
following emoluments:
-       Basic salary of Rs. 400,000 per month, medical allowance of Rs. 75,000 per month and utility allowance equivalent
to 10% of basic salary.

-       A company-maintained car for official and private use. The car was purchased two years ago at a cost of Rs. 5
million. According to the company’s policy, ZGC deducted Rs. 10,000 per month from his salary, for private use of the car.

344_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

On 31 July 2010, Khursheed had undergone a major surgery and incurred an expenditure of Rs. 1,500,000. ZGC
reimbursed the entire amount as a special case as it was not covered under the terms of employment.
Due to poor health, Khursheed opted for early retirement on 31 December 2010 under the company’s voluntary retirement
scheme. He received the following benefits on his retirement:
-       Rs. 7,500,000 as a golden handshake under the voluntary retirement scheme.
-       Rs. 9,100,000 from an unapproved gratuity fund maintained by ZGC.
-       Transfer of company’s car for Rs. 2,600,000. The amount was deducted from his final settlement. The fair market
value of the car as of 31 December 2010 was Rs. 2,800,000.
The tax deducted at source for the tax year 2011 amounted to Rs. 3,750,000.
(2)   Other Information
-       On 1 January 2011, Khursheed commenced business of marketing of horticultural plants and related items.
However, due to intense competition, he had to wind-up this venture on 31 May 2011. During this period, he had incurred
a loss of Rs. 750,000.
-       He purchased 5000 shares for Rs. 500,000 from initial public offering of a new listed company on 1 June 2010. He
claimed a tax credit of Rs. 60,000 on such investment, against the tax payable for the tax year 2010. On 15 June 2011, he
sold these shares for Rs. 700,000.
-       He incurred a loss of Rs. 500,000 on the sale of his shareholdings in a private limited company.
-       He sold his personal car at a profit of Rs. 300,000.
-       On 1 March 2011, he purchased an apartment for Rs. 5,000,000. 60% of this amount was financed by a scheduled
bank. During the tax year 2011, he paid markup amounting to Rs. 127,500. On 1 April 2011, he rented out the flat to Mr.
Abdul Sattar at a monthly rent of Rs. 25,000 and received advance rent for eight months.
-       His average tax rate for the preceding three years is 18%.
Required:
(a) Compute the amount of taxable income, tax liability and tax payable / (refundable), if any, for the tax year 2011.
(b) Briefly comment on the items which are not considered by you in the above computation.

Solution of Q. No. 1 Autumn 2011


Mr. Khursheed
Tax year 2016

INCOME FROM SALARY U/S 12 Notes Rupees Rupees

Basic salary (Rs. 400,000 × 6) 2,400,000


Utility allowance (400,000 × 6 × 10%) 240,000
Medical allowance (75,000 × 6) 450,000
Less: Exempt up to 10% of basic salary U/C 139 (240,000) 210,000
Medical reimbursement (totally taxable as not covered by the terms 1,500,000
of employment)
Company maintained car (5,000,000 × 5% × 6/12) U/R 5 125,000
Less: Amount deducted from salary (10,000 × 6) (60,000) 65,000
Golden handshake payment 7,500,000
Gratuity (Rs. 9,100,000 - Exempt upto Rs. 75,000) 9,025,000
Difference in purchase value and FMV of vehicle as benefit for 200,000
employee
21,140,000
INCOME FROM PROPERTY U/S 15

Rent (Rs. 25,000 × 3 months) 1 75,000

INCOME FROM BUSINESS U/S 18


Loss from business 2 (750,000)

INCOME FROM CAPITAL GAINS U/S 37

Gain on sale of quoted shares 3 200,000 -

Conceptual Approach to Taxes _______ ___ _______________ __ 345


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Capital loss on sale of private company shares 4 (500,000) -


Sale of personal car 5 300,000 -
Taxable income 21,215,000

Taxable income 21,215,000


Less: Income to be taxed separately-Golden handshake (7,500,000)
13,715,000
COMPUTATION OF TAX LIABILITY:

Tax on Rs. 13,715,000 [1,422,000 + 30% x (13,715,000 - 3,436,500


7,000,000)]
Tax on Rs. 7,500,000 (golden handshake) at 18% 6 1,350,000
4,786,500
Less: Tax credit relating to markup on housing loan
(Rs. 127,500 x 4,786,500 / 21,215,000) (28,766)
4,757,734
Add tax on capital gain on quoted Company shares (Rs. 200,000 x 25,000
12.5%) covered under Fixed tax regime
4,782,734
Add recouped tax credit U/S 62 3 60,000
Tax deducted at source by bank from salary income (3,750,000)
Balance tax payable 1,092,734
Notes

1. Rental income
The rent received or receivable by a person for a tax year shall be chargeable to tax in that year under the head “Income
from property”. Therefore, only three months’ rent is included in the taxable income of Mr. Khursheed. Further it has been
assumed that the same is after allowable deducitons under section 15A of the Ordinance.

2. Business loss
No loss (including Loss under the head business income) shall not be set off against income from salary and income from
property. However the loss shall be carried forward to adjust the same against the business income of six subsequent tax
years.

3. Gain on sale of quoted shares


Since, the sale of listed company's shares is made after holding the shares for more than twelve months but less than
twenty four months, the gain on sale of shares is taxable @ 12.5%.
Furthermore, the tax credit of Rs. 60,000 allowed in the tax year 2013 will be recouped as the same has been disposed off
within twenty four months from the date of purchase has been elapsed.

4. Capital loss
Where a person sustains a loss on sale of shares of a private company it is construed as a capital loss and it cannot be
set-off against any other head of income, but shall be carried forward to the next year and set off against the capital gain,
if any.

5. Sale of personal car


Income under the head ‘Capital gains’ can arise only on the disposal of a capital asset. Since movable assets held for
personal use are excluded from the definition of capital asset, gain on sale of car is not a taxable income in the hands of
the Mr. Khursheed.

6. Golden handshake
It is assumed that last three years' average rate of tax for golden handshake is 18% and further it is more beneficial
for the taxpayer to opt for taxation of golden handshake at last three year's average rate as compared to this to
include the same in the current year's income.

346_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Q.5 Autumn 2011


Mr. Feroz has been the CEO of Aziz Foods Pakistan Limited (AFPL) for several years. He was given 2000 shares on 1
June 2009 by Aziz AG, Germany (the parent company of AFPL) at a price of €2.5 per share. The market price on that
date was €8.2 per share. The shares were transferable on completion of one year of service, from the date of issue of
shares.

The market price of the shares as on 1 June 2010 was €12.5 per share. On 10 April 2011, Mr. Feroz sold all shares at €13
per share. He paid a commission of €50 to the brokerage house.

The relevant exchange rates are as follows:


1 June 2009 €1 = Rs. 118.10
1 June 2010 €1 = Rs. 121.40
10 April 2011 €1 = Rs. 123.90

Required: Compute the amount to be included in the taxable income of Mr. Feroz for tax years 2009, 2010 and 2011 and
specify the head of income under which the income would be classified.

Solution of Q. NO. 5 Autumn 2011

Mr. Feroz
Computation of taxable income

Tax year 2014 Rs.

Shares were issued in tax year 2014, however, transferability of the shares is restricted in tax year 2014 hence
nothing is taxable in tax year 2009.

Tax year 2015

Income from salary U/S 12


Market value of shares on 1 June, 2010 (12.5 x 2,000 x 121.40) 3,035,000
Less: cost of shares (2.5 x 2,000 x 118.10) 590,500
2,444,500
Tax year 2016

Capital gain U/S 37A

Consideration received (13 x 2,000 x 123.90) 3,221,400


Less: cost
Cost of shares after acquisition of the same (including salary income) 3,035,000
Commission expense (50 x 123.90) 6,195
3,041,195
Capital gain 180,205

Q. NO. 3 Spring 2011

Carrot Ltd (CL) is engaged in the manufacture, import and sale of electronic appliances for the past twenty years. When
reviewing the company's tax provisions, you noticed the following amounts appearing in the tax calculation for the year
ended June 30, 20X2.
1. Profit on debt of Rs. 500,000 paid on a working capital loan obtained from a foreign bank.CL did not deduct
withholding tax while paying profit on debt considering the bank does not have a Permanent Establishment in
Pakistan.
2. Expenditure of Rs. 450,000 on promotion of a product which is expected to generate revenue for twelve years.
3. Bad debt in respect of a staff loan, Rs. 25,000.
4. Reimbursement of expenses of Rs. 300.000 to CL by the parent company- This amount was incurred by CL in
20X1 on marketing a new product imported from Dubai.

Conceptual Approach to Taxes _______ ___ _______________ __ 347


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

5. Initial allowance of Rs. 4,000,000 on a used equipment acquired locally from MSD Limited.
6. Financial charges amounting to Rs. 100,000 and depreciation amounting to Rs. 300,000 on a vehicle acquired
on finance lease from Radish Leasing. Lease rentals paid during the year amounted to Rs. 400,000.
Required:
Under the provisions of CIR, 2001 discuss the admissibility of the above amounts for tax purpose.

Solution of Q. NO. 3 Spring 2011

1. It is not admissible as the withholding tax @ 20% under section 152(2) of the Income tax Ordinance, 2001 was not
deducted by CL limited.
2. It is an admissible expense as it is incurred for the purpose of business of company.
3. Bad debts in respect of loan to employees shall not be admissible under the Income Tax Ordinance, 2001 because the
same is not against a trading liability already allowed.
4. As the amount is the reimbursement of expenses incurred on behalf of parent company so the same shall be adjusted
against the receivable balance from parent and has no impact on taxable income.
5. Initial allowance on locally purchased equipment shall not be allowed as the asset is already used in Pakistan.
6. Amount of rental payment shall be allowed as deduction, however the amount of depreciation and financial charges
shall not be allowed as deduction.

Q.1 Autumn 2010

Mr. Zameer Ansari is working as a Chief Executive Officer in Wimpy (Private) Limited (WPL). Following are the details of
his income / receipts during the tax year 2010:

(a) His monthly cash remuneration in WPL is as follows:


Rupees
Basic salary 200,000
Medical allowance 30,000
Utilities allowance 10,000

(b) In addition to the above, he was also provided the following benefits in accordance with his terms of
employment:

(i) Medical insurance for hospitalization and surgery, limited to Rs. 1,500,000 per annum.
(ii) Payment of his children's school fees of Rs. 15,000 per month. The fee is deposited directly into the
school's bank account.
(iii) Rent free furnished accommodation on 1000 square yards. The accommodation is located within the
municipal limits of Karachi.
(iv) Two company-maintained cars. One of the cars was purchased by WPL for Rs. 3,000,000 and is
exclusively for his business use. The second car was obtained on lease on February 1, 2009 and is used
partly for official and partly for personal purposes. The fair market value of the leased vehicle at the time of
lease was Rs. 1,800,000.
(v) Leave encashment amounting to Rs. 100,000 was paid to Mr. Zameer on July 5, 2010.
(vi) An amount equal to one basic salary was paid by WPL to an approved pension fund.

(c) Mr. Zameer had received 15,000 shares of WPL on December 1, 2006 under an employee share scheme. He
had the option to transfer the shares on or after January 1, 2009. However, he sold all the shares on April 1,
2010

Fair value of the shares were as follows:


· Rs. 35 per share on December 1, 2006
· Rs. 42 per share on January 1, 2009
· Rs. 48 per share on April 1, 2010
(d) An apartment owned by Mr. Zameer was rented on July 1, 2009 to Mr. Abdul Ghaffar at a monthly rent of Rs.
22,000. He received a non-adjustable security deposit of Rs. 150,000 which was partly used to repay the
non-adjustable security deposit amounting to Rs. 90,000 received from the previous tenant in July 2007.
He also incurred Rs. 20,000 on account of repair charges.

348_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

(e) He earned profit amounting to Rs. 750,000 on fixed deposit account maintained with a bank. The bank
withheld income tax amounting to Rs. 75,000 and Zakat amounting to Rs. 250,000.
(f) Tax deducted at source from his salary, amounted to Rs. 650,000.

Required: Compute the taxable income, tax liability and tax payable by Mr. Zameer Ansari for the tax year 2010.

Solution of Q.1 Autumn 2010

Mr. Zameer Ansari


Tax Year 2016
Individual
Resident

Computation of taxable income and tax liability


INCOME FROM SALARY U/S 12 Rs. Rs.
Basic salary (Rs. 200,000 x 12 months) 2,400,000
Medical allowance (Although exempted upto 10% of basic salary, 360,000
clause 139 of 2nd schedule, however as the medical facility has
also been given in the question therefore the same is fully
chargeable to tax)
One month basic salary employer contributed towards pension fund 200,000
(As benefit)
Utility allowance (Rs. 10,000 x 12 months) 120,000
Medical insurance and hospitalization fully exempt U/C 139 -
Payment of his children's school fees 180,000
Rent free furnished accommodation (45% of basic salary shall be 1,080,000
included in the salary income assumed equal to FMV)

Conveyance provided by employer:


Wholly for business use (Fully exempt)
Partly for personal and business use (5% of FMV of leased vehicle) (1,800,000 x 5%) 90,000

Leave encashment received on 5 July 2012 (N-1) -


FMV of shares at the date when employee has free right to transfer -
(already included as benefit in the salary income of the tax year
2011)
4,430,000
INCOME FROM PROPERTY U/S 15 & 16

Rental income (Rs. 22,000 x 12 months) 264,000


Non-adjustable advance ((150,000-(90,000 / 10 x 2)/10) 13,200
Income from property 277,200

Less: 1/5th of rent as fixed repair allowance (55,440) 221,760

CAPITAL GAINS U/S 37

On sale of (Pvt.) Ltd. company shares after retention of more than 67,500
12 months therefore gain shall be taxable as capital gain shares
{15,000 x (Rs.48-Rs.42) x 75%}

INCOME FROM OTHER SOURCES U/S 39


Profit on fixed deposit account maintained with a bank (SBI as 750,000
FTR)

Conceptual Approach to Taxes _______ ___ _______________ __ 349


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Total income 4,719,260


Less: Allowable deductions
Zakat paid under the Zakat and Ushr Ordinance (250,000)
Total taxable Income 4,469,260

COMPUTATION OF TAX LIABILITY:

Tax liability under NTR


Tax on Rs. 4,469,260 [597,000 + 27.5% x (4,469,260 - 4,000,000)] 726,047

Less: Tax credit on contribution to approved pension fund (although paid by


employer but the same is on behalf of employee)
Tax credit shall be allowed on lower of:
- Actual amount of contribution i.e. Rs. 200,000
- 20% of taxable income i.e. Rs. 893,852
Tax credit = (200,000 x 726,047 / 4,469,260) 32,491
693,556
Tax liability under FTR
Tax on Income from other sources
Tax on 750,000 @ 10% 75,000
Total tax liability 768,556
Less: Tax deducted at source from his salary (650,000)
Tax deducted on PLS (75,000)
Balance tax payable 43,556

NOTES
N-1 Leave encashment has been ignored as received after the tax year. Salary and perquisites are charged on the receipt
basis.

Q.1 Spring 2010

Sohail, Khaled and Qazi are members of an AOP and share profit and loss in the ratio of 2:2:1. The principal activity of the
AOP is trading of rice and wheat. Following are the details of the annual income / (loss) of the AOP and its members:

(i) The AOP suffered loss before tax amounting to Rs. 1,500,000. The loss has been arrived at after adjusting
rental income earned by the AOP, the details of which are as follows:

Rupees
Rental income 2,000,000
Related expenses:
Property tax 40,000
Depreciation 457,500
Net rental income 1,502,500

No tax was withheld on the rental income.

(ii) The expenses debited to profit and loss account include the following amounts paid to the members of the
AOP:

Sohail Khaled Qazi


Rs. Rs. Rs.
Salary 900,000 600,000 -
Interest on capital 300,000 300,000 500,000

350_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

(iii) Sohail earned Rs. 800,000 from another business, of which he is the sole proprietor.
(iv) Khaled received an amount of Rs. 255,000 as share of income after tax, from another AOP where he is
entitled to 40% of the total profit. Tax on annual income of that AOP amounted to Rs. 112,500. He also earned
income of Rs. 900,000 from a sole proprietorship concern owned by him.
(v) Qazi works as a Freelance IT Consultant and provides consultancy services to corporate clients. He received
Rs. 940,000 from his clients after deduction of tax amounting to Rs. 60,000. The total expenses incurred in
providing the consultancy services amounted to Rs. 150,000.

Required: Assuming that the above data pertains to the tax year 2010, compute the taxable income and tax liability of the
AOP and each of its members.

Solution of Q.1 Spring 2010

Name of Taxpayer : AOP


National Tax Number :
Tax Year Ednded on : 30th June, 2015
Tax Year : 2016
Personal Status : AOP

TAXABLE INCOME OF THE FIRM

INCOME FROM BUSINESS U/S 18 (Rs.) (Rs.)

Loss as per P and L A/c (1,500,000)


Less: net rental income (1,502,500)
(3,002,500)
Add: Inadmissible Expenses
Salaries to partners:
Sohail 900,000
Khalid 600,000 1,500,000
Interest on Capital
Sohail 300,000
Khalid 300,000
Qazi 500,000 1,100,000
Loss under the head "Income from Business" (402,500)

INCOME FROM PROPERTY U/S 15

Rental income 2,000,000


Less: 1/5th repair allowance (400,000)
Less: Property tax (40,000) 1,560,000

COMPUTATION OF TAX LIABILITY:

In the absence of information no minimum tax under section 113 has been computed.

Tax liability under NTR on business loss (A) -

Tax liability under NTR on Property income


Tax on first Rs.1,560,000 [144,500 + 20% x (1,560,000 - (B) 156,500
1,500,000)]
Total tax liability of firm (A + B) 156,500

Total income of the firm (Property income less business loss) 1,157,500

Conceptual Approach to Taxes _______ ___ _______________ __ 351


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Less firm tax liability 156,500


Divisible income 1,001,000

COMPUTATION OF SHARE FROM AOP Total Sohail Khaled Qazi


Rs. Rs. Rs. Rs.

Salary 1,500,000 900,000 600,000 -


Interest 1,100,000 300,000 300,000 500,000
Balance loss divided in profit sharing ratio (1,599,000) (639,600) (639,600) (319,800)
Total income 1,001,000 560,400 260,400 180,200

COMPUTATION OF INCOME and TAX LIABILITY OF PARTNERS Sohail Khaled Qazi

Rs. Rs. Rs.


Net income from another business as proprietor covered under 800,000 900,000 850,000
NTR (net taxable)
Share from another AOP under NTR after tax (included for rate - 255,000 -
purposes)
Share from AOP under NTR after tax (included for rate purposes) 560,400 260,400 180,200

Total share from AOP included for rate purposes 560,400 515,400 180,200
Total income 1,360,400 1,415,400 1,030,200

COMPUTATION OF TAX LIABILITY OF EACH PARTNER:

Tax on Rs. 1,360,400 [32,000 + 15% x (1,360,400 - 750,000)] 123,560


Tax on Rs. 1,415,400 [32,000 + 15% x (1,415,400 - 750,000)] 131,810
Tax on Rs. 1,030,200 [32,000 + 15% x (1,030,200 - 750,000)] 74,030

Less tax on share from AOP 50,899 47,997 12,949


Tax liability under NTR (A) 72,661 83,813 61,081
Minimum tax under NTR (B) - - 60,000
Tax liability: higher of (A) or (B) 72,661 83,813 61,081

Q.NO. 6(b) Spring 2010

Mr. Shahbaz, a resident individual, earned Rs. 700,000 from the sale of assets as shown below:

Purchase Price in Sale Price in Gain /


(loss)
Date Rupees Date Rupees Rupees
Shares of a listed company 10-12-08 350,000 7/31/2009 200,000 (150,000)
Shares of an unlisted company 15-07-08 500,000 11/30/2009 900,000 400,000
Jewellery 15-05-08 750,000 12/20/2009 1,400,000 650,000
Sculpture 01-07-05 400,000 1/31/2010 300,000 (100,000)
Shares of a (Pvt.) Ltd. Co. 01-01-09 1,300,000 2/15/2010 1,200,000 (100,000)

Discuss the treatment and the implications of each of the above transactions with brief reasons under the Income
Tax Ordinance, 2001.

Solution of Q.NO. 6(b) Spring 2010

Name of Taxpayer : Mr. Shahbaz


National Tax Number :
Tax Year Ednded on : 30th June, 2016
Tax Year : 2015

352_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Personal Status : Individual


Residential Status : Resident

INCOME FROM CAPITAL GAIN

Shares of a listed company U/S 37A


Loss on sale of shares of a listed company (securities) can only be adjusted against gain from any other securities
chargeable to tax under section 37A and any unadjusted loss shall not be carried forward.

Shares of unlisted company, private limited company and Jewellery U/S 37


- As the holding period of shares of unlisted company is more than one year, hence 25% of the capital gain shall be
exempt.

- Similarly the holding period of jewellery is more than one year, hence 25% of the capital gain shall also be exempt.

- Loss on sale of shares of private company shall be adjusted against gain on sale of unlisted company and
jewellery.

Loss on Sculpture U/S 38(5)


Loss on sale of Sculpture shall not be recognized.
Rs.
Gain on shares of unlisted company (400,000 x 75%) 300,000
Loss on shares of private company (100,000)
Gain on Jewellery (650,000 x 75%) 487,500
Capital gain chargeable to tax 687,500

Q.NO. 1 Autumn 2009

Mr. Zulfiqar, a senior executive of Mirza Petroleum Limited (MPL), retired on March 31, 2009 after completion of nineteen
years of dedicated service. The details of Mr. Zulfiqar’s income for the tax year 2009 are given below:

Income from MPL


(i) Monthly remuneration:
Rupees
Basic salary 280,000
Medical allowance 45,000
Utilities allowance 45,000
Cost of living allowance 25,000
Total monthly salary 395,000

Market value of rent free accommodation provided 120,000

(ii) As per terms of employment, tax liability of Mr. Zulfiqar to the extent of Rs. 200,000 is to be borne by MPL.

(iii) On his retirement, he received gratuity of Rs. 2,660,000 from an unrecognized gratuity fund maintained by
MPL.

(iv) He is receiving pension amounting to Rs. 50,000 per month from the date of his retirement.

Other Information
(v) He is also receiving pension of Rs. 12,000 p.m. from a multinational company where he worked from 1975 to
1990.

(vi) A plot inherited from his father was sold for Rs. 5,000,000. Fair market value of the plot at the time of
'inheritance was 'Rs. '1,000,000

(vii) On January 1, 2009, he rented out one of his residential bungalows to a private school for Rs. 100,000 per

Conceptual Approach to Taxes _______ ___ _______________ __ 353


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

month and received advance rent for two years.

(viii) Rs. 500,000 were invested in new shares offered by a listed company.

(ix) He paid mark up amounting to Rs. 250,000 on a house loan obtained from a scheduled bank.

(x) He incurred a loss of Rs. 20,000 on sale of a painting.

Required:
(a) Compute taxable income and tax liability of Mr. Zulfiqar for the tax year 2009.
(b) Briefly comment on the items which are not considered in the above computation.

Solution of Q.NO. 1 Autumn 2009

Name of Taxpayer : Mr Zulfiqar


National Tax Number :
Tax Year Ednded on : 30th June, 2016
Tax Year : 2016 Rs. Rs.
Personal Status : Individual

INCOME FROM SALARY U/S 12


Basic salary (Rs. 280,000 x 9 months) 2,520,000
Cost of living allowance (Rs. 25,000 x 9 months) 225,000
Salary for provident fund 2,745,000
Medical allowance (Rs. 45,000 x 9 months) 405,000
Less: exempt upto 10% of basic salary U/C 139 (Rs. 2,520,000 x (252,000) 153,000
10%)
Utilities allowance (45,000 x 9 months) 405,000
Rent free accommodation (N-2)
Higher of Rs. 120,000 or (45% x Rs. 2,520,000) will be taxable 1,134,000

Tax liability of Mr. Zulfiqar to the extent of Rs. 200,000 is to be 200,000


borne by MPL
Gratuity from an unrecognized gratuity fund exempt upto lesser of 2,660,000
75,000 or 50% of amount received
Less: Lesser of Rs. 75,000 or (50% x Rs. 2,660,000 = 1,330,000) 75,000 2,585,000

Pension amounting to Rs. 50,000 per month from the date of his 150,000
retirement (Rs. 50,000 x 3 months) (N-3)
Pension of Rs. 12,000 p.m. from a multinational company where he 144,000 144,000
worked from 1975 to 1990 (Rs. 12,000 x 12 months) (N-3)

Plot inherited from his father was sold for Rs. 5,000,000. N-1 -
Total salary income 7,366,000

INCOME FROM PROPERTY U/S 15

Rental income (6 months x Rs.100,000) assumed net amount after 600,000


expenses (N-4)
Total income income under NTR 7,966,000
Less deductible allowance for profit on debt (N - 6) (250,000)
Taxable income under NTR 7,716,000

COMPUTATION OF TAX LIABILITY:

Tax on Rs. 7,716,000 [1,422,000 + 30% x (7,716,000 - 7,000,000)] 1,636,800

354_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Less: Tax credits


Invested in new shares offered by a listed company U/S 62 (N - 7) 500,000
500,000
Tax liability / Taxable income x Investment in shares (1,636,800 / 106,065
7,716,000) x 500,000
Total tax payable 1,530,735
Less: Tax paid by employer 200,000
Balance tax payable 1,330,735

NOTES
N-1 Plot inherited from father was sold is not taxable on the assumption that the same is being held for more than two
years.
N-2 Higher of the FMV of rent or 45% of (MTS or Basic Salary)
N-3 Only one pension with the higher amount is exempted so Rs.150,000 is exempted.
N-4 Advance rent received is adjustable against rent therefore it is ignored. Just the rent for 6 months will be taxable.

N-5 Loss on sale of painting shall not be recognized.


N-6 Lower of actual amount Rs. 250,000, 50% of Taxable income (Rs.7,716,000 x 50%) = 3,858,000 or Rs. 1,000,000
hence Rs. 250,000 has been taken into consideration.

N-7 Lower of actual investment Rs. 500,000, 20% of Taxable income (Rs. 7,716,000 x 20%) = 1,543,200 or Rs.
1,500,000, hence lower amount of Rs. 500,000 has been taken into consideration.

Q. NO. 3(b) Autumn 2009

During the tax year 2009, Ishaq Enterprise disposed off the following assets:

(i) an immovable property was sold for Rs. 200 million. The cost of immovable property was Rs. 100 million. Upto tax
year 2008, tax depreciation of Rs. 10 million had been allowed on the immoveable property.

(ii) a plant was exported to Nepal. The export proceeds amounted to Rs. 28 million. The cost and written down value of
the plant was Rs. 25 million and Rs. 18 million respectively.

(iii) three trucks were disposed off for Rs. 2.5 million. They were acquired in tax year 2008. The tax written down value of
trucks at the begning of tax year 2009 was Rs. 2.4 million. The trucks were being used partly i. .e. 60% for business
purpsoes. The rate of deprciation for tax purposes is 20%.

Required:
Compute the tax gain or loss on disposal of each of the above assets.

Solution of Q. NO. 3(b) Autumn 2009


Rs. Rs.

Consideration received from the sale of immovable property 200,000,000


Less: WDV of immovable property
Cost of asset U/S 22(13)(d) 200,000,000
Less: Depreciation charged upto 2008 (10,000,000) 190,000,000
Gain on sale of immovable property 10,000,000

Consideration received from the export of plant 25,000,000


Less: WDV of plant
Cost of an asset U/S 22(14) 25,000,000
Less: Depreciation charged upto 2008 7,000,000 18,000,000
Gain on sale of plant 7,000,000

Conceptual Approach to Taxes _______ ___ _______________ __ 355


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Consideration received from the sale of trucks 2,500,000


Less: WDV of trucks 2,400,000
Add: disallowed tax depreciation portion in the tax year 2008 Note attached 169,412 2,569,412
(2,400,000 x 100 / 85 x 15% x 40/100)

Loss on sale of motor trucks (69,412)

Note: There is no limitation on value of motor trucks as they are not passenger transport vehicle & further no initial
allowance has been claimed on the assumption that the motor trucks are not for hiring purposes.

Q. No. 5(a) and (b) Autumn 2009

Mr. Abdullah, an employee of a Malaysian based company, has been assigned to work in Karachi, in its subsidiary
company which is registered under the Companies Ordinance, 1984. The initial assignment of two years commenced on
March 1, 2009 and would be extended subject to mutual agreement. Mr. Abdullah’s remuneration will be paid in Malaysia,
details of which are given below:

Nature of Income Amount in Equivalent:


Rupees
Pakistan source salary income for the tax year 2009 5,750,000
Pakistan source salary income for the tax year 2010 17,250,000
Foreign source salary income for the tax year 2009 12,000,000
Foreign source salary income for the tax year 2010 3,000,000

Required:
(a) Explain the residential status of Mr. Abdullah under the ITO, 2001 for the tax years 2009 and 2010.
(b) Compute taxable income of Mr. Abdullah for the tax years 2009 and 2010 with supporting comments.

Solution of Q. 5(a) and (b) Autumn 2009

a) RESIDENTIAL STATUS

YEAR 2015
Mr. Abdullah is a non-resident person because his stay in Pakistan was for 120 days that is less than 183 days in tax year
2009.

YEAR 2016
Mr. Abdullah is a resident person because he was in Pakistan for 183 days or more in tax year 2010.

b) TAXABLE INCOME Rs. Rs.


YEAR 2015 - As non resident individual Total
Pakistan source salary 5,750,000
Foreign source salary - 5,750,000

YEAR 2016 - As residnet individual


Pakistan source salary 17,250,000
Foreign source salary (See note below) - 17,250,000

Note: Foreign source salary of a resident shall be ignored for tax computation as tax on the same has already been
paid, however if foreign tax on the same is not paid within two years then the same shall be taxed in Pakistan.

Q.NO.1 Spring 2009

Mr. Manto worked as an employee in Berlin Hotel, Germany for a period of five years. During the said period he did not
visit Pakistan for a single day. He returned to Pakistan on July 1, 2008 and immediately joined as a General Manager in a
well-reputed hotel, based in Karachi.

356_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Assume that the details of his income for the tax year 2009 are as follows:

(i) Basic salary (per month) Rs. 100,000 House rent allowance (per month) Rs. 30,000 Medical 'allowance (per
month) 'Rs. '10,000

(ii) Besides medical allowance, he is also entitled to free medical treatment at approved hospitals.

(iii) He has been provided a company maintained 1600cc car which was used partly for official and partly for
personal purposes. The hotel has leased the car from a bank. The gross lease rentals payable over the
period of lease amount to Rs. 2,700,000. The fair market value of the car at the time of lease was
Rs. 1,600,000. The total lease rentals paid by the hotel during the year amounted to Rs. 800,000.

(iv) He is entitled to lunch at the hotel’s restaurants where the usual charges are Rs. 400 per person. He is
entitled to concessional rate of Rs. 40 per day which is deducted from his salary. Assume that there are 300
working days in the year.

(v) He went for a training course to Islamabad where boarding and lodging cost amounting to Rs. 150,000 was
borne by the hotel. He incurred a further expense of Rs. 125,000 which was reimbursed by the hotel.

(vi) Provident fund was deducted @10% of his basic salary. An equal amount was contributed by the hotel.
Interest credited to his provident fund account amounted to Rs. 48,000.

(vii) As per terms of employment agreed with Mr. Manto, tax of Rs. 249,200 on salary will be borne by the hotel.
(viii) During the year, he also received an amount of Rs. 94,000 (net of 6% withholding tax) from a local university
where he gave lectures on hotel management.
(ix) On July 15, 2008, he received a lump sum amount of Rs. 4,000,000 through a normal banking channel as final
settlement from Berlin Hotel.

(x) On August 1, 2008, he inherited 25,000 shares of a private limited company. The estimated fair market value
of the shares, on the date of inheritance, was Rs. 42 per share. He sold all the shares on February 28, 2009
at Rs.62 per share.
(xi) He paid zakat amounting to Rs. 200,000 to an approved organization, through cross cheque.

Required:
(a) Compute Mr. Manto’s taxable income and tax payable for the tax year 2009.
(b) Briefly explain the treatment of items which are not considered in the above computation.

Solution of Q.NO.1(a) Spring 2009

Name of Taxpayer : Mr. Manto


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Individual
Residential Status : Resident
(Rs.) (Rs.)
INCOME FROM SALARY U/S 12

Basic salary (Rs.100,000 x 12 months) 1,200,000


House rent allowance (Rs.30,000 x 12months) 360,000
Medical allowance (Rs.10000 x 12 months) 120,000
(As the free medical facility seperately been provided hence
medical allowance shall be totally taxable)
Value of conveyance (5% of FMV (1,600,000 x 5%) of leased car) 80,000
Lunch at concessional rate (Exempt U/C (53A) as marginal cost to
employer) [(Rs.400 - 40) x 300 days] 108,000 -
Training and boarding and lodging cost (Exempt being for official purposes) 275,000 -

Employer's contribution for recognized provident fund 120,000

Conceptual Approach to Taxes _______ ___ _______________ __ 357


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Less: Exempt upto lower of 10% of basic salary or 100,000 (100,000) 20,000
Lessor of (10% x Rs.1,200,000)120,000 or Rs.100,000
Employee contribution (not to be included as already included in salary) -
Interest on provident fund 48,000
Less: Exempt upto higher of 1/3rd of salary or calculated @ 16% (400,000) -
Tax liability paid by hotel 249,200
Amount received as final settlement from Berlin Hotel (not to include in income u/s 51 & 102) -
Total income from salary 2,029,200

CAPITAL GAINS U/S 37

Sale of inherited shares in (Pvt.) Ltd. Company Rs.(62-42) x 25,000 shares 500,000

INCOME FROM OTHER SOURCES U/S 39


Amount received on lecture given on hotel management (gross amount) 100,000
Total Income 2,629,200
Less: Deductible allowance
Zakat paid to an approved organization [Lower of 30% of taxable income or actual Zakat paid] (200,000)
Taxable income 2,429,200

COMPUTATION OF TAX LIABILITY:

Tax on Rs. 2,429,200 [137,000 + 17.5% x (2,429,200 - 1,800,000)] 247,110


Less: proportionate tax on service income
(100,000 x 247,110 / 2,429,200) (A) 10,172 236,938

Tax deducted on services (Minimum tax) (B) 6,000

Add: higher of (A) or (B) 10,172


247,110
Less: Tax deducted on services income (6,000)
Tax deducted on salary income (249,200)
Balance Tax refundable (8,090)

Solution of Q.NO.1(b) Spring 2009

As all the information has been considered while solving the Part (a) of this question hence there is not need any answer
for this part.

Q.NO. 3(b) Spring 2009

Mr. Qasm is in the business of manufacturing of leather products. The financial results of the business for the tax year
2009 are as follows:

Rupees

Sales 12,000,000
Cost of sales 10,000,000
Gross profit 2,000,000
Selling, administrative and other expenses 2,500,000
Net loss (500,000)

He had rented out the ground floor of his house and received Rs. 300,000 as rent thereof. No tax was deducted by his
tenant. Advance tax paid during the year includes the following:

Import of raw materials 200,000

358_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Electricity bills 70,000


Telephone bills 50,000

Required:
Compute the tax payable/refundable by Mr. Qasmi for the tax year 2009.

Solution of Q.NO. 3(b) Spring 2009

Name of Taxpayer : Mr. Qasim


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Individual
Residential Status : Resident

Computation of income and tax thereon Rs. Rs.

As there is loss under normal law hence 5% minimum tax liability on industrial (A) 18,000
electricity bill is to be paid by the tax payer upto monthly bill of Rs. 30,000 that comes
to Rs. 1,500 p.m. (Rs. 1,500 x 12 months)

Taxable income from property


Rent chargeable to tax (Assumed after allowable expenses) 300,000
Tax payable on income from property
Tax on 300,000 @ 0% (B) -
Higher of (A) & (B) is to be paid by the taxpayer 18,000

Less: tax paid / deducted at source


Import of raw materials 200,000
Electricity bills 70,000
Telephone bills 50,000 320,000
Balance tax refundable (302,000)

Note: Business loss is not allowed to set off against income from property, however the same shall be carried forward and
adjusted against business income only in succeeding six tax years.

Q.NO. 1: Autumn 2008

Mr. Ali Raza is working as a Senior Executive in DD Pakistan Ltd. The details of his income/receipts during the tax year
2008 are as follows:

(i) He received basic salary of Rs. 65,000 per month.


(ii) He was provided with furnished accommodation for which DD Pakistan Limited paid a rent of Rs. 25,000 per
month.
(iii) A company owned car was provided to him which was used partly for official and partly for private purposes.
The car was purchased at a cost of Rs. 500,000 but had a fair market value of Rs. 520,000.
(iv) Medical allowance of Rs. 150,000 was paid to him during the year. The actual medical expenses incurred by
him amounted to Rs. 40,000.
(v) He earned an income of Rs. 45,000 on the sale of jewellery but incurred a loss of Rs. 28,000 on sale of an
antique.
(vi) An apartment owned by him was rented on July 1, 2007 at a monthly rent of Rs. 10,000. He received a
non-adjustable security deposit of Rs. 100,000, which was partly used to repay the non-adjustable security
deposit received from previous tenant in July 2005, amounting to Rs. 70,000.

(vii) He incurred the following expenses on the apartment:


Rupees
Repairs 8,000

Conceptual Approach to Taxes _______ ___ _______________ __ 359


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Share of rent to House Building Finance Corporation 15,000


(viii) Gross dividend of Rs. 12,000 was received from a listed company.
(ix) Provident fund was deducted @ 12% of his basic salary. An equal amount was contributed by the
company.
(x) He withdrew cash from the bank on which the bank deducted tax of Rs. 400.
(xi) Tax deducted by the company amounted to Rs. 170,000.

Compute his taxable income, total tax payable and tax payable with the return.

Solution of Q.NO. 1: Autumn 2008

Name of Taxpayer : Mr. Ali Raza


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Individual
Residential Status : Resident

INCOME FROM SALARY U/S 12 Rs. Rs.

Basic salary (Rs.65,000 x 12 months) 780,000


Rent-free accommodation higher of FMR or 45% of basic salary
higher of (Rs.25,000 x 12 months) 300,000 or (45% x 780,000) 351,000 351,000
conveyance facility partly for personal use (Rs.500,000 x 5%) 25,000
Medical Allowance 150,000
Less: 10% of basic pay (78,000) 72,000

Employer provident fund contributoin (12% of Basic pay) 93,600


Less: Exempt lower of 1/10th of salary (Rs.780,000 x 0.1) or Rs.100,000 (78,000) 15,600
Employee's contribution shall not be considered as already included in salary -
Total salary income 1,243,600

CAPITAL GAIN U/S 37

Gain on sale of Jewellery 45,000


Loss on sale of an antique shall not be recognized. - 45,000
Taxable income under NTR excluding SBI income 1,288,600

INCOME FROM PROPERTY U/S 15


Rental Income (Rs.10,000 x 12 months) 120,000
Add: Non-adjustable Advance [Rs.(100,000 - (70,000 / 10 x 2) /10] 8,600
128,600

Less 1/5th fixed repair allowance irrespective of actual repair expenses (25,720)
Share in rent to HBFC (15,000) 87,880
Taxable income 1,376,480

COMPUTATION OF TAX LIABILITY:


Tax on Rs. 1,376,480 [14,500 + 10% x (1,376,480 - 750,000)] 77,148

Tax on income covered under FTR


10% tax on gross dividend of Rs. 12,000 1,200
78,348
Less: Tax paid / deducted under sections
Cash withdrawal 231 A (400)
Salary income 149 (170,000) (170,400)

360_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Balance tax refundable (92,052)

NOTES:
N-1 Loss on sale of antique shall not be recognized.

Q.NO. 3(a): Autumn 2008

Mr. Henry is a UK national and provides independent consultancy services in his individual capacity, to United Autos
Limited, a Pakistani company. Mr. Henry has entered into a contract with the company. The company’s accountant has
treated payment under this contract as being under an employment contract with the company.

Mr. Henry stayed in Pakistan for eight months during the tax year 2008. During the said period, he was only involved in
providing in-house independent consultancy services to different departments of the Company. Mr. Henry is of the view
that:

(i) Being a UK national, he will be a non-resident for Pakistan tax purpose;


(ii) His income from consultancy services provided by him under the contract of employment should be
classified as ‘fees’ for technical services’ and shall be chargeable to tax at 15% of the gross amount of the
consideration received by him;
(iii) No tax was deducted from his remuneration. However, United Autos deposited an amount of Rs.275,000 in
the government treasury on his behalf. Mr. Henry believes that tax deposited on Mr. Henry’s behalf does not
attract any additional tax incidence for him as he has not received the amount in cash, from the company.
(iv) Since his remuneration was agreed to be paid in Pound Sterling, the rate of conversion for tax purpose shall
be the rate applicable on the date of agreement. Any increase in value of Pound Sterling against Pakistan Rs.
should be non-taxable.
Briefly explain whether or not Mr. Henry’s assumptions in (i) to (iv) above are in accordance with relevant provisions of the
CIR, 2001.

Solution of Q.NO. 3(a) Autumn 2008

i) Mr Henry assumption that being as UK National he is a non-reisdent for Pakistan tax purposes is not correct as the
residential status is being decided on number of days stay in Pakistan instead of Nationality base. As his stay in Pakistan
is for 183 days or more hence he is a reisdent for Pakistan tax purposes.

ii) As Mr. Henry is providing independent consultancy services to various departments of local company and the same
shall not be treated under the term employment hence a contract of services shall be treated as service contract and
higher of minimum tax at the rate of 10% or tax under normal tax regime on taxable profit, if any, is to be paid by Mr.
Henry.

iii) Tax paid by the company on behalf of Mr. Henry shall be treated as income and tax on the same is to be paid by Mr.
Henry on the same basis as given in Note 2 above.

iv) The presumption of Mr. Henry is again not correct as the conversion rate to the remuneration in pound sterling shall be
the date at which the amount received by Mr. Henry and not the date of agreement.

Q.NO.1 Spring 2008

Saleem, Rashid and Moin are partners in a partnership concern carrying on the business of manufacturing and sale of
consumer goods. They share profit and loss in the ratio 2:3:5 respectively. The results of operations of the firm are as
follows:

Rs. ‘000’
Sales (including rental income) 76,000
Cost of sales 53,000
23,000
Selling, administrative and other expenses 16,250
Profit before tax 6,750

Conceptual Approach to Taxes _______ ___ _______________ __ 361


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Tax deducted at source on import of raw material 900


Tax deducted at source on sale of goods 1,750

Other information:
(i) The firm has rented out a vacant portion of its factory to a company at an annual rental of Rs.1 million. Tax
was duly deducted by the lessee.
(ii) Mr. Saleem has earned income of Rs. 325,000 from another business as a sole proprietor. He also sold his
personal car for a loss of Rs. 50,000.
(iii) Mr. Rashid earned a gross income of Rs. 200,000 from another partnership firm where he is entitled to 25%
of the total profit of the firm. He also earned dividend of Rs. 50,000 from a listed company.
(v) Mr. Moin has no other source of income.

Required:
Assuming that the above data pertains to the tax year 2008, compute the tax liability of the firm and each of its partners
and the amount of tax payable by them alongwith the return of income.

Solution of Q.NO.1 Spring 2008

Name of Taxpayer : AOP


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : AOP
Rs. Rs.
INCOME FROM BUSINESS U/S 18

COMPUTATION OF TAXABLE INCOME:

In the absence of information it has been assumed that the sale of the AOP is wholly to the persons that have
deducted withholding tax at source. Hence the income of the firm is fully covered under FTR.

Gross receipts of AOP on sale of goods manufactured Rs.1,750,000 x 100 / 4.5 38,888,889

Property Income 1,000,000


Less 1/5th repair allowance (200,000)
Rent chargeable to tax 800,000

COMPUTATION OF TAX LIABILITY:

4.5% tax on gross receipts as above 1,750,000


Add tax on income from property (32,000 + 15% (800,000 - Rs.750,000) ) 39,500
Total tax liability under the Ordinance 1,789,500

Less: Tax deducted at source

On import of raw materials 900,000


On property income (Rs. 1,000,000 - 150,0000) x 10% 85,000

On sale of goods 1,750,000 2,735,000


Balance tax refundable (945,500)

The income of the AOP coverved under FTR shall not be included in the income of the respective partner for rate
purposes.
TAX LIABILITY OF PARTNERS

Saleem

362_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Loss on sale of personal car shall not be recognized. -


Share in rental income after tax (Rs.800,000 - 39,500) x 2/10 152,100
Business income from sole proprietorship 325,000
Total Income 477,100
Tax liability 7% of [ Rs.476,500 - 400,000] 5,355

Rashid

Share from another AOP 200,000


Share in rental income after tax (Rs.800,000 - 39,500) x 3/10 228,150
Dividend Income (Rs. 50,000 not to be included in income) -
Total Income 428,150

Tax liability 7% of [ Rs.427,250 - 400,000] 1,908


Add tax on dividend income 5,000
Tax liability 6,908

Moin
Business Income from AOP -

No tax liability has been computed as there is no taxable income from any head of income hence the share from AOP in
retanl income shall also not included for rate purposes.

Q.NO.1 Autumn 2007

Mr. Ayub, after retirement from a multinational company as a senior executive, was rehired on contract for a period of
three years. However, due to certain reasons, the contract was prematurely terminated six months earlier i.e. on
December 31, 2006. The detail of emoluments received by him during the tax year 2007 are given below:

Rupees
Basic salary (per month) 70,500
Rent of furnished accommodation (per month) 30,000
Utilities allowance (per month) 12,000
Medical benefits reimbursed during the year 25,000

House rent was paid by the company directly to the landlord. Medical benefits were reimbursed against bills submitted by
Mr. Ayub.

On his retirement as a permanent employee, he had been paid gratuity from the approved fund. According to the rules of
the fund, he was also entitled to a special gratuity in lieu of his services rendered under the contract. Accordingly, an
amount of Rs. 120,000 was also paid out of the fund, on termination of the contract.
In lieu of premature termination, the following additional benefits were allowed to Mr. Ayub:
(i) A compensation for early termination of Rs. 150,000 was paid.
(ii) Mr. Ayub had obtained an interest free loan of Rs. 200,000 on July 1, 2006 which was payable in lumpsum on
March 31, 2007. 25% of the outstanding balance was waived and remaining amount of loan was deducted
from his final settlement. The benchmark rate according to the ITO, 2001 is 10%.
(iii) He was allowed to retain a 1600cc car which was in his use, at accounting book value of Rs. 650,000. The
fair market value of the car at the time of settlement was Rs. 700,000.
Required: Compute the taxable income and tax liability for the tax year 2007.

Solution of Q.NO.1 Autumn 2007

Name of Taxpayer : Mr. Ayub


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016

Conceptual Approach to Taxes _______ ___ _______________ __ 363


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Personal Status : Individual


Residential Status : Resident

INCOME FROM SALALRY U/S 12 Rs. Rs.

Basic Salary (Rs. 70,500 x 6 months) 423,000


Rent of furnished accommodation (30,000 per month) higher of
Fair market rent or 180,000
45% of MTS or basic salary 190,350 190,350
Utilities allowance (Rs.12,000 x 6 month) 72,000
Medical benefits reimbursed during the year (fully exempted) -
Gratuity from the approved fund (N - 1)
A compensation for early termination (included in current year 150,000
income in the absence of last 3 year's income and tax thereon)
Interest on interest free loan (As the loan is less than Rs. 500,000 -
and rate is within benchmark rate hence no addition in the income
has been made)
Amount waived of loan (Rs. 200,000 x 25%) 50,000
Conveyance facility retained by employee at FMV 700,000
Total taxable income 1,585,350

COMPUTATION OF TAX LIABILITY:

Tax on Rs. 1,585,350 [92,000 + 15% x (1,585,350 - 1,500,000)] 104,803

NOTES
N-1 Assumed that Gratuity received is approved by Commissioner therefore it is totally exempted.

Q NO. 3(a) Autumn 2007

Mr. Zia inherited certain assets from his father in the year 2004. The fair market values of the assets on the date of
inheritance were as follows:

Fair Market Value


(Rs.)
25,000 shares of a private limited company 2,500,000
21,000 shares of a public listed company 462,000
Membership card of Karachi Stock Exchange 20,000,000
Jewellery 1,500,000
During the tax year 2007, Mr. Zia undertook the following transactions:
(1) He gifted some of the assets to his 20-year old son Mr. Ishaq. The detail and fair market values of the assets
are as follows:

Fair Market Value (Rs.)


10,000 shares of the private limited company 2,000,000
10,000 shares of the public listed company 1,700,000
Membership card of Karachi Stock Exchange 40,000,000
(2) The remaining shares were sold as follows:
−    shares of private limited company for Rs. 3,000,000,
−    shares of public limited company for Rs. 1,500,000.

Mr. Ishaq sold all the assets transferred through gift in the same year. The assets fetched the following amounts:

Sales Proceeds (Rs.)


10,000 shares of a private limited company 2,500,000
10,000 shares of a public listed company 1,500,000
Membership card of Karachi Stock Exchange 55,000,000

364_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Required:
(i) Based on the above information, compute the taxable income of Mr. Zia and Mr. Ishaq for the tax year 2007.
(ii) Give brief explanation for the items not included in the taxable income.

Solution of Q NO. 3(a) Autumn 2007

Mr. Zia
Gain on disposal of Assets Rs. Rs.
Gain from sale of shares of public listed company is taxable as SBI 1,258,000
@ 7.5% as it is held for more than 24 months (Rs. 1,500,000 -
242,000 FMV of sodl shares at the date of gift)

Gain on sale of shares of private company


Consideration received 3,000,000
Less: FMV at the time of inheritance Rs.(2,500,000 / 25,000 x (1,500,000)
15,000)
Gain on disposal 1,500,000
Capital gain for taxable purposes (Rs.1,500,000 x 0.75) 1,125,000

Gain on Acquisition of Jewellery


No gain or loss shall be recognized on the acquisition of any asset received by way of inheritance or gift.

Mr. Ishaq
No gain or loss shall be recognized on the acquisition of any asset received by way of inheritance or gift.

Gain on disposal of Assets


Loss from sale of shares of public listed company can neither be (200,000)
adjusted against gain realized under section 37 nor it can be carried
forward. Rs.(1,500,000 - 1,700,000)

Gain on sale of shares of private company


Consideration received 2,500,000
Less: FMV at the time of inheritance (2,000,000) 500,000

Gain on membership card of stock exchange


Consideration received 55,000,000
Less: FMV at the time of gift as deemed as cost (40,000,000) 15,000,000
Taxable Income 15,500,000

Solution of Q NO. 3(a) Autumn 2007

No gain or loss shall be recognized on the acquisition of any asset received by way of inheritance or gift.

Q.NO. 4(b) Autumn 2007

During the tax year 2007, Mr. Yahya, a resident person, derived an income of Rs. 1,500,000 from his business in
Pakistan. He has also earned an amount of US$ 30,000 from his business in a foreign country on which he paid income
tax to tax authorities of that country, amounting to US$ 10,500.

Compute the tax liability of Mr. Yahya for the tax year 2007.
Note: Applicable Tax Rate in Pakistan = 25%; US$ 1 = Pak Rupees 60.

Solution of Q.NO. 4(b) Autumn 2007

Conceptual Approach to Taxes _______ ___ _______________ __ 365


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Name of Taxpayer : Mr. Yahya


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Individual
Residential Status : Resident

TOTAL TAXABLE BUSINESS INCOME U/S 18 Rs. Rs.

Pakistan source business income 1,500,000


Foreign source business income ($ 30,000 @ Rs. 60) 1,800,000
Total taxable business income 3,300,000

COMPUTATION OF TAX LIABILITY:

Tax on Rs. 3,300,000 [344,500 + 25% x (3,300,000 - 2,500,000)] 544,500


Less: Foreign tax credit i.e. Lower of
(A) Foreign income tax paid ($10,500 x Rs.60) 630,000
(B) Pakistan income tax (tax liability x Foreign source income /
Taxable income)
Rs.(544,500 x 1,800,000 / 3,300,000) 297,000 297,000
Balance tax payable 247,500

Q.NO. 2(a): Spring 2007

Explain the correct tax treatment in each of the following situations:

(i) In 1998, Mr. Hamid inherited a rare sculpture of Buddha which had a fair market value of Rs. 200,000 on the
date of inheritance. In February 2007, the sculpture was sold by him at Rs. 500,000.
(ii) In December 2006, Mr. Yahya entered into an agreement for sale of his residential plot to Mr. Moosa, who paid
an advance of Rs. 500,000. According to the agreement, Mr. Moosa was required to pay the balance by
February 28, 2007. However, instead of paying the balance amount, he terminated the sale agreement.
Mr. Yahya forfeited the advance of Rs. 500,000 in accordance with the terms of the agreement.
(iii) In September 2006, Mr. Saleem sold his personal car, Toyota Corolla, to one of his cousins at a price of Rs.
50,000 whereas the fair market value of the car was Rs. 200,000. The car was purchased by him in the year
2000 at a cost of Rs. '300,000
(iv) Mr. Ibrahim was working as a Chief Financial Officer in Dawood Pakistan (Pvt.) Limited, which is a wholly
owned subsidiary of Dawood AG, Germany. According to the Company’s policy, Mr. Ibrahim was sent on
secondment to Germany on January 1, 2007 for a period of five years. During this period, half of his salary
will be credited to his bank account in Pakistan, whereas the remaining portion will be received by him in
Germany.

Mr. Zubair provided consultancy services to a listed company. In consideration for his services, he received a net amount
of Rs. 47,000 after tax deduction of Rs. 3,000.

Solution of Q.NO. 2(a): Spring 2007

i) Gain on sale of Sculpture Rs. Rs.


Consideration received 500,000
Less: FMV at the time of inheritance (200,000)
300,000
Taxable gain on sale of sculpture (as holding period is more than 1 225,000
year so 75% is chargeable to tax) (Rs.300,000*0.75)

366_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

ii) Any forfeited money as advance against sale agreement of land 500,000
and building is included in the definition of "Rent". So, the amount
of forfeited money shall be chargeable to tax.

iii) As the sale of personal car is neither a business transaction nor a capital asset. There will be no tax treatment on the
disposal of personal asset. So, the cost, FMV or consideration are irrelevant.
iv) Mr. Ibrahim's salary income is taxable in Pakistan in 2007 and foreign source income in next 5 years as his
employment based in Pakistan according to section 101.

v) Any tax deducted at source on consultancy services is treated as minimum tax however the tax under normal law shall
be computed and higher from both is to be paid by Mr. Zubair.

Q.NO. 3(b) Spring 2007

The income of Mr. Yousuf during the tax year 2006 amounted to Rs. 120 million which included capital gains of Rs. 10
million and dividend income of Rs. 12 million. The tax liability for 2006 was Rs. 32 million out of which Rs. 4 million related
to tax on capital gains and dividend income. The following information is available for the quarter ended December 31,
2006:

Rs. in million
Tax deducted at source by the customers 3
Tax paid on import 2
Compute advance tax liability for the quarter ended December 31, 2006.

Solution of Q.NO. 3(b) Spring 2007

Name of Taxpayer : Mr. Yousaf


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Individual
Residential Status : Resident
Rs. (in millions) Rs. (in millions)
COMPUTATION OF ADVANCE TAX LIABILITY UNDER SECTION
147:

Total Income 120


Less: Capital Gain (See note - 1 below) -
Dividend Income (12) (12)
Net income (excluding income covered under SBI / FTR) 108

Computation of advance tax Liability


Total Tax 32
Less: Tax on dividend income 1.20
Balance tax under NTR (including capital gain covered U/S 37) 30.80

As the latest tax year income under NTR of Mr. Yousaf is more
than Rs. 500,000 therfore the quarterly advance tax liability on the
basis of latest tax year is as under.

Latest tax year tax liability under NTR 30.80


Quarterly advance tax liability shall be 1 / 4 th of the above amount 7.70

Conceptual Approach to Taxes _______ ___ _______________ __ 367


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Note-1 In the absence of information it has been assumed that the capital gain is on capital assets covered under section
37 that is under NTR hence the same has also been considered while computing advance tax under section 147 of the
Income tax Ordinance, 2001.

Note-2 As for individual the dividend income is fully covered under SBI hence the same has been ignored for the
computation of advance tax under section 147.

Note-3 In the absence of information it has been assumed that the individual is engaged in trade business hence the tax
deducted at source on sale of goods and commercial import have not been deducted from the advance tax liability as the
same are fully covered under Final tax regime.

Q.NO. 2(b) Autumn 2006

Mr. Dollar has been working as a senior engineer in a local company. The detail of his monthly emoluments is as
under:

Basic salary Rs.100,000


Medical allowance Rs.15,000
Utilities allowance Rs.10,000

In addition to the above cash emoluments, he is entitled to the following perquisites:


(i) A car for his personal and official use, having cost of Rs.700,000 to the employer.
(ii) Rent free accommodation having monthly rent of Rs.20,000 or cash in lieu thereof. However he has opted to
take rent free accommodation.
(iii) Special allowance of Rs.15,000 to meet travelling, boarding and lodging expenses to be incurred by him in the
normal course of his employment duties.

You are required to compute the amount of tax to be deducted each month, from his salary for tax year 2007.

Solution of Q.NO. 2(b) Autumn 2006

Name of Taxpayer : Mr. Dollar


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Individual
Residential Status : Resident

INCOME FROM SALARY U/S 12 (Rs.) (Rs.)

Basic salary (Rs.100,000 x 12 months) 1,200,000


Medical allowance (Rs.15,000 x 12 months) 180,000
Less: 10% of basic salary exempt U/C 139 (Rs.1,200,000 x 10%) (120,000) 60,000

Utilities allowance (Rs.10,000 p.m) 120,000


Conveyance facility provided for personal and official use
Taxable at 5% of cost of conveyance (700,000 x 5%) 35,000
Rent free accommodation (Higher of FMR or 45% of MTS or B.S)
Higher of (Rs.240,000 (20,000 x 12) or Rs.540,000 (45% x 540,000
1,200,000))
Special allowance is not taxable as it is reimbursed for business purposes -
Total taxable income 1,955,000

COMPUTATION OF TAX LIABILITY:

Tax on Rs. 1,955,000 [137,000 + 17.5% x (1,955,000 - 1,800,000)] 164,125


Per month tax to be deducted by employer (Rs. 164,125 / 12 months) 13,677

368_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Q.NO. 1 Spring 2006

Ms. Fatima Hasan was working as a Marketing Head with Consumer Products Limited (CPL) at following emoluments:

(i) Basic salary Rs. 100,000 per month


(ii) House rent allowance Rs. 40,000 P.M.
(iii) Utilities allowance Rs. 15,000 per month
In addition to the above cash emoluments, she was provided with a Honda Civic car, exclusively for official use. The cost
of car to the Company was Rs. 1,000,000. As per Company’s policy, the car was sold to Fatima in January 2005 at the
written down value of Rs. 100,000 whereas the fair market value of the same at the time of sale was Rs. 300,000.

In May 2005, Fatima was approached by Pharma Industries (Pvt.) Limited (PIL). They offered her employment at a higher
salary and some extra benefits, alongwith a one time payment of Rs. 200,000 as an inducement to accept their offer.
Fatima accepted PIL’s offer by resigning from CPL with effect from June 1, 2005. She joined PIL from July 1, 2005. The
amount of Rs 200,000 was, however, paid to her on June 29, 2005.
During the year, Fatima has also undertaken the following transactions:
(i) Shares in QP (Pvt.) Ltd. were sold for Rs. 500,000. These shares were acquired in the year 1999 at a cost of
200,000
(ii) A residential plot inherited in the year 2000 was sold for Rs. 1,000,000. The fair market value of the plot at the
time of inheritance was Rs. 200,000.
(iii) A painting purchased at a cost of Rs. 100,000 was sold for Rs. 75,000.
(iv) She had won a cash prize of Rs. 250,000 in a quiz show. Tax of Rs. 50,000 was deducted from the prize
money u/s 156.
(v) Dividend of Rs. 50,000 was received on account of shareholding in a listed Company. Tax of Rs. 5,000 was
deducted u/s 150.
(vi) She received a fee of Rs. 100,000 in consideration for preparing a research paper for a foreign University.
Fatima incurred Rs.10,000 on the printing of research paper and courier charges for sending the paper abroad.
(vii) An amount of Rs. 50,000 was donated to an approved charitable institution.
In the light of above information, compute the taxable income of Ms. Fatima for the tax year 2005 by giving brief
explanation for the items not included in the taxable Income.

Solution of Q.NO. 1 Spring 2006

Name of Taxpayer : Fatima Hassan


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Individual
Residential Status : Resident

INCOME FROM SALARY U/S 12 Rs. Rs.

Basic salary (Rs.100,000 x 11 months) 1,100,000


House rent allowance (Rs. 40,000 x 11 months) 440,000
Utilities allowance (Rs. 15,000 x 11 months) 165,000
Benefit on purchase of car from employer
FMV at the time of purcahase 300,000
Less: Consideration paid to employer (100,000) 200,000
Benefit from Pharma Industry (Pvt.) Limited 200,000
2,105,000
CAPITAL GAIN U/S 37

Gain on sale of shares in QP (Pvt.) Ltd. 500,000


Consideration received on disposal (200,000)

Conceptual Approach to Taxes _______ ___ _______________ __ 369


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

300,000
Taxable capital gain (holding period more than 1 year) 75% x Rs.300,000 225,000
Loss on sale of painting is not recognized (N - 1)

INCOME FROM OTHER SOURCES U/S 39

Consideration for preparing a research paper for a foreign University. 100,000


Less: Expenses paid on the printing of research paper and courier charges (10,000) 90,000
Total Income 2,420,000

Income taxable under FTR


Cash prize (gross amount) 250,000
Dividend received (gross amount) 50,000

NOTE: N-1 Gain on the sale of residential plot after two years of retention is not taxable under capital gains.

Q.NO. 7(b) Spring 2006

The records of Mr. A show the following results:

Particulars Rupees
Loss from ‘income from other source’ after setting off dividend income of Rs. 30,000 (20,000)
Income from speculation business 10,000
Capital gains on disposal of shares of private limited companies 20,000
Loss from business of textiles after considering tax depreciation of Rs. 290,000 410,000

Required:
You are required to work out the following:
(i) taxable income;
(ii) tax liability; and
(iii) amount of loss that can be:
(a) adjusted against any other head of income;
(b) carried forward for maximum 6 years;
(c) carried forward for indefinite period.

Solution of Q.NO. 7(b) Spring 2006

Name of Taxpayer : Mr. A


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Individual
Residential Status : Resident

i) Taxable Income Rs. Rs.


Loss from business (excluding depreciation loss Rs. 290,000) (120,000)
Income from speculation business 10,000
Income from capital gain (assumed within one year under section 37) 20,000
Loss from other sources after dividend income (20,000)
Less: dividend income (30,000) (50,000)
Business loss (140,000)
Less tax depreciation (290,000)
Total loss as per tax (430,000)

ii) Computation of tax liability

370_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

As there is loss under normal law and information regarding


turnover under normal law has not been given, hence tax only on
dividend income is to be computed as under.
Tax on dividend income (Rs. 30,000 x 10%) assumed at normal 3,000
rate

iii) Amount of loss that can be:


(a) adjusted against any other head of income
Loss under the head income from other sources and total business 460,000
loss (including depreciation) may be adjusted against profit from
any other head of income.

(b) Carried forward for maximum 6 years


Business loss (excluding depreciation loss) shall be carried forward 140,000
for 6 years.

(c) Carried forward for indefinite period.


Unabsorbed depreciation loss shall be carried forward for indefinite 290,000
period.

Q.NO. 2 Autumn 2005

Mr. Imran is a citizen of Pakistan. During the first nine months of the tax year 2005, he worked as financial controller of a
Pakistan based subsidiary of a multinational group. After that he was transferred and employed as Head of Finance of the
UAE based subsidiary of the Group. Mr. Imran’s family stayed in Dubai throughout the year. The detail of income earned
by him during the tax year 2005 is given below:

From the UAE company:


Mr. Imran earned US $ 30,000 during the three-month’s employment in the UAE. No tax is deducted from salary earned
and paid in the UAE. To relocate Mr. Imran in UAE, the UAE Company incurred one time miscellaneous cost of Rs.
100,000 to move the household items of Mr. Imran from Pakistan to Dubai.

From Pakistan subsidiary:


(a) Basic salary Rs. 500,000 p.m.
(b) Medical allowance Rs. 45,000 p.m (no free medical or hospitalization facility is given to Mr. Imran under the
terms of employment).
(c) The company has provided Mr. Imran a TV and VCR costing Rs. 40,000 on which the company charges
depreciation at the rate of 20% in its books of accounts.
(d) Company has provided interest free loan to Mr. Imran amounting to Rs. 5 million which remained
outstanding throughout his employment with the company. Mr. Imran acquired a flat from the amount of loan
and rented it out at the rate of Rs. 50,0000 p.m. for a period of seven months. He also paid Rs. 35,000 as
property tax during the period.
(e) His family’s housing cost in Dubai, borne by the company amounts to Rs. 30,000 p.m.
(f) Mr. Imran’s travelling and related cost borne by the Pakistan subsidiary to meet his family, amounts to Rs.
30,000 p.m.
(g) During the employment with the Pakistan subsidiary, Mr. Imran had exercised option to acquire 300 shares of the
parent company at the rate of US $ 8 per share. At the time when the option was exercised, the value of the share was
US $ 10 (Rs.58) per share. Furthermore, during the year Mr. Imran sold 200 options previously received by him at a price
of US $ 3 per option (Rs. 171) after holding it for more than a year. Neither the Pakistan subsidiary nor Mr. Imran incurred
any cost in this regard.

Required:
Compute the taxable income of Mr. Imran for the tax year 2005 based on the data provided above.

Solution of Q.NO. 2 Autumn 2005

Name of Taxpayer : Mr. Imran

Conceptual Approach to Taxes _______ ___ _______________ __ 371


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

National Tax Number :


Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Individual
Residential Status : Resident

SALARY FROM UAE COMPANY U/S 12 Rs. Rs.

Basic salary ($30,000 x Rs.90 assumed) 2,700,000


Expenses borne by company to move the household items 100,000 2,800,000

SALARY FROM PAKISTAN SUBSIDIARY U/S 12

Basic salary (Rs.500,000 x 9 months) 4,500,000


Medical allowance (Rs.45,000 x 9 months) 405,000
Less: 10% of basic salary (Rs.4,500,000 x 10%) 450,000 -
Cost of TV and VCR (Rs.40,000 x 20%) 8,000
Interest free loan (Rs.5,000,000 x 10% x 9 / 12) 375,000
Family’s housing cost in Dubai (Rs.30,000 x 12 months) 360,000
Imran’s travelling and related cost borne by the Pakistan subsidiary (Rs.30,000 x 9 months) 270,000
Share option scheme
Benefit on acquisition of shares (300 shares x 2 x 58) (Note 1 attached) 34,800
Benefit on sale of share options (200 options x 171) 34,200 69,000
Total Income 8,382,000

INCOME FROM PROPERTY U/S 15


Rental Income (Rs. 50,000 x 7 months) (assumed after allowable 350,000
expenses)
Taxable income 8,732,000

Note -1 Grant of an option or right is not taxable whereas exercise of an option to acquire shares is taxable where
the same is without restriction and limitation.

Q.NO. 15: Spring 2005

Mr “B” is the Chief Executive of a Multinational Company. Details of his emoluments are as follows:
Rs.
Basic Salary 8,800,000
Bonus 5,000,000
Utility allowance 880,000
Relocation allowance 200,000

Apart from the above he is provided with the following perquisites/benefits:


(i) A free unfurnished accommodation by the employer with land area of 2100 sq. yds.
(ii) Motor vehicle for both private and official use, cost of acquisition of which was Rs.2,000,000.
(iii) Children education fees for the year Rs.105,000.
(iv) House servant salaries for the year Rs.230,000.

According to the terms of employment the tax liability of Mr. “B” on the above benefits and perquisites from (i) to (iv) above
is borne by the employer. Tax liability on other remuneration is borne by himself.

Mr. “B” also owns a property which was let out on rent for a part of the year details of income and expenses incurred are
as follows:

(a) Rent Rs.50,000 per month.


(b) The property was let out on rent from December 2, 2003 to June, 2004
(c) Property tax paid Rs.35,000.

372_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

The Bank account of Mr. “B” was credited with profit during the year amounting to Rs.6,300. During the year the
following amounts were withheld at source as Income Tax:

Rupees
From salary income 4,541,250
Tax paid by the employer 446,820
From profit on bank account 630
On receipt of rent 17,500

You are required to compute the taxable income and tax liability of Mr. “B” for the tax year 2004.

Solution of Q.No. 15 Spring 2005

Name of Taxpayer : Mr. B


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Individual
Residential Status : Resident
(Rs.) (Rs.)
INCOME FROM SALARY U/S 12

Basic Salary 8,800,000


Bonus 5,000,000
Utility allowance 880,000
Relocation allowance 200,000
Free unfurnished house higher of (FMV or 45% of MTS or Basic pay)
(45% of Rs. 8,800,000) is taxable 3,960,000
Conveyance facility partly for personal use (5% of Rs. 2,000,000) 100,000
Children education fees for the year 105,000
House servant salaries for the year 230,000
Tax paid by employer 446,820
19,721,820
INCOME FROM PROPERTY U/S 15

Rental income (Rs.50,000 x 7 months) 350,000


Less fixed 1/5 th repair allowance (70,000)
Less property tax (35,000)
Net income from property 245,000
Total taxable income 19,966,820

COMPUTATION OF TAX LIABILITY:

Tax on Rs. 19,966,820 [1,422,000 + 30% x (19,966,820 - 7,000,000)] 5,312,046


Add Tax under FTR
10% tax on PLS profit of Rs. 6,300 630
5,312,676
Less: Tax already paid
Tax paid by emplyer 446,820
Tax deducted from salary 4,541,250
Tax paid on PLS profit 630
On receipt of rent 17,500 5,006,200
Balance tax payable 306,476

Q.NO.15: Autumn 2004

Conceptual Approach to Taxes _______ ___ _______________ __ 373


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Mr. A is the Chief Executive of a multinational company. Details of his emoluments are as follows:

Basic salary 4,004,520


Bonus 1,980,642
Utility allowance 400,452
Leave encashment 538,083
Other allowance 90,000
House rent allowance 1,802,040

Apart from the above he has received Director’s fee amounting to Rs. 52,000. During the year he has sold shares that
were acquired through exercise of a ‘Stock Option’(being the a share, of a UK company) two years ago. The gain on sale
amounts to Rs.4,206,000.

He also owns a property which has been let out on rent. The details of rent received and expenses incurred are as
follows:

(a) Rent Rs.10,000 per month. The property was let out on rent for the whole year. The annual letting
value of the house is 'Rs.100,000.
(b) He has paid property tax amounting to Rs. 11,500.
(c) During the year he has paid Rs.6,000 for repairs and maintenance.

He has also received profit on PLS Account at Rs.6,500.

During the year the following amounts were withheld at source towards income tax.

(a) From salary income Rs. 3,600,000


(b) From profit on PLS Account Rs.650

You are required to compute the taxable income and tax liability of Mr. A for the tax year 2004

Solution of Q.No 15 Autumn 2004

Name of Taxpayer : Mr. A


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Individual
Residential Status : Resident
(Rs.) (Rs.)
INCOME FROM SALARY U/S 12

Basic salary 4,004,520


Bonus 1,980,642
Utility allowance 400,452
Leave encashment 538,083
Other allowance 90,000
House rent allowance 1,802,040
Director’s fee (assumed as employee) 52,000
Total income 8,867,737

INCOME FROM PROPERTY U/S15

Rental Income (Rs.10,000 p.m x 12 months) 120,000


Less fixed 1/5th repair allowance (24,000)
Property tax (11,500)
Net income from property 84,500

374_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Taxable income 8,952,237

COMPUTATION OF TAX LIABILITY:

Tax on Rs. 8,952,237 [1,422,000 + 30% x (8,952,237 - 7,000,000)] 2,007,671

Tax on capital gain on disposal of Listed Company shares under 315,450


section 37A after two years (Rs. 4,206,000 x 7.5%)
Tax on profit on debt @ 10% 650
Total tax liability under NTR and FTR 2,008,321
Less: tax deducted at source from salary 3,600,000
Less: tax deducted at source on PLS profit on debt 650 3,600,650
Balance tax refundable (1,592,329)

NOTES

N-1 In the absence of information, it has been assumed that the shares of the company on which gain is given in
the question is in the definition of Public company hence tax has been levied accordingly u/s 37A of the Ordinance.
N-2 Profit on PLS is covered as SBI under final tax regime.

Q.NO. 2 Spring 2004

Mr. A is an employee of a multinational company incorporated in Pakistan. His remuneration during the year was as
follows -

(Rupees)
1 Basic Salary 1,117,245
2 Reward 22,062
3 Bonus 300,000
4 House Rent Allowance 643,514
5 Utility Allowance 111,724

The Company has provided him a car for personal and business use. The cost of the car was Rs.1,100,000. During the
year Mr. A has paid interest on loan borrowed for construction of a house amounting to Rs.115,000. In addition to the
above, Mr. A was granted Stock Option of 2500 shares by the Head Office of the Company at US$ 36 per shares. Out of
the above stock option, 1250 shares vested to him during the year were immediately exercised by him. The price of the
share at the time of exercise was US$ 41 per share. The exchange rate between US$ and Pak Rupee on the date on
which Mr. A exercised his option was US$ 1 = Rs.58.

During the year the company has withheld tax from his salary amounting to Rs. 695,000.
You are required to compute his taxable income and tax thereon for the Tax Year 2003.

Solution of Q.NO. 2 Spring 2004

Name of Taxpayer : Mr. A


Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Individual
Residential Status : Resident
(Rs.) (Rs.)
INCOME FROM SALARY U/S 12

Basic Salary 1,117,245


Reward 22,062
Bonus 300,000
House Rent Allowance 643,514
Utility allowance 111,724

Conceptual Approach to Taxes _______ ___ _______________ __ 375


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Conveyance facility for both official and for business use (5% of 1,100,000) 55,000
Employee stock option (1,250 shares x 58 x (41 - 36)) 362,500
Taxable Income 2,612,045

COMPUTATION OF TAX LIABILITY:

Tax on Rs. 2,612,045 [259,500 + 20% x (2,612,045 - 2,500,000)] 281,909


Less: tax withheld by employer 695,000
Balance tax refundable (413,091)
Notes
Note 1: In the absence of information, it has assumed that the loan availed is not fulfilling the requirements of section 64A
hence no deductible allowance has been claimed for the same.

Q.NO. 6 Spring 2004

Mr. A and B are equal partners of a Registered Firm (RF). The profit and loss account of RF shows profit before tax of Rs.
10 million for the year ended June 30, 2003. Assuming no other tax adjustment, the profit shown in the accounts is liable
to tax. You are required to compute the tax, if any, payable by the RF, Mr. A and Mr. B, assuming Mr. A and B have no
other source of income. Also give brief explanation of the treatment made in the computation.

Solution of Q.NO. 6 Spring 2004

Name of Taxpayer : AOP


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : AOP

Divisible Income of the Firm (Rs.)


Profit before tax 10,000,000
Tax on Rs. 10,000,000 [1,319,500 + 35% x (10,000,000 - 6,000,000)] 2,719,500
Profit after tax 7,280,500
Share of each Partner
Share of A (7,280,500 x 1/2) 3,640,250
Share of B (Rs. 7,280,500 x 1/2) 3,640,250
7,280,500
Note: The partners are not required to pay any tax liability as they have no other source of income. Income from
AOP shall be exempt from tax in the hands of partners as the tax paid by the AOP. If the partners have any other
source of income then the share in profit from AOP shall be added in taxable income for rate purposes.

Q.NO. 2 Autumn 2003

Mr. Bashir Ahmed is an employee who had joined his current employment during the tax year 2003. His details of salary,
allowance and perquisites received from company “A” his previous employer and company “B” his present employer are
as follows:

Description Company “A” Company “B”


Rs. Rs.
Basic Salary 714,158 572,572
Bonus 150,000 71,800
House Rent Allowance 258,663 222,746
Utility Allowance 71,415 57,257
Conveyance provided by employer partly used for business and private 1,100,000
use- Cost of the car purchased by the company
Leave encashment 77,783 NIL

376_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Medical reimbursement as per the terms of employment 35,000 25,000


Ex-gratia payment received under Golden Handshake Scheme 2,048,300 -

The details of assessed income and assessed tax in respect of past three years is as follows:
Assessment year Assessed Tax assessed
Income
Rs. Rs.
2000-2001 1,309,570 269,902
2001-2002 1,545,850 371,255
2002-2003 2,264,940 557,633

During the year Company “A” had deducted tax u/s 149 amounting to Rs.270,000 and Company “B” had deducted tax u/s
149 amounting to Rs.800,000 from payments made to Mr. Bashir.

Required:
Compute the taxable income and tax liability of Mr. Bashir based on the data provided above for the tax year 2003.

Solution of Q.NO. 2 Autumn 2003

Name of Taxpayer : Mr. Bashir Ahmed


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Individual
Residential Status : Resident

INCOME FROM SALARY U/S 12 Total (Rs.)


Co. A + Co. B
Basic Salary 1,286,730
Bonus 221,800
House Rent Allowance 481,409
Utility Allowance 128,672
Conveyance provided by employer partly for personal use (1,100,000 x 5%) 55,000
Leave encashment 77,783
Medical reimbursement as per the terms of employment (fully exempt) 0
Ex-gratia payment 2,048,300
Salary Income taxable under normal procedure 4,299,694

COMPUTATION OF TAX LIABILITY:

Tax under Option 1


Normal procedure:
Tax on Rs. 4,299,694 [Rs.597,000 + {(4,299,694 - 4,000,000) x 679,416
27.5%]

Tax under Option 2


Tax on income without golden handshake
Tax on Rs. 2,251,394 [Rs.137,000 + {(4,299,694 - 2,048,300-
1,800,000) x 17.5%]
215,994

Tax on golden hand shake: ( tax of last 3 years / Taxable Income 479,553
of last 3 years x 100) x Amount of golden hand shake Rs.
(1,198,790 / 5,120,360 x 2,048,300)
Total tax payable 695,547

Conceptual Approach to Taxes _______ ___ _______________ __ 377


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Tax liability
As tax under option 1 is lower than from tax payable under option 2 679,416
hence the tax payer shall opt to pay tax under option 1.
Less: Tax deducted at source 1,070,000
Balance tax refundable (390,584)

Note 1: for golden handshake payments Income Tax


year 1 1,309,570 269,902
year 2 1,545,850 371,255
year 3 2,264,940 557,633
Total 5,120,360 1,198,790
Golden handshake payment is taxed as separate block of income, if we include golden handshake payment in
salary income the higher amount of tax shall be payable on it.

Q.NO. 4 Autumn 2003

Compute the projected advance tax liability and net advance tax payable in respect of ABC Limited a public company, for
the quarter ended September 30, 2003. The data of turnover and tax liability assessed in respect of the latest assessed
tax year is as follows:

Rs.
(i) Gross sales (including sale of imported goods and export sales) 20,000,000
Sales of imported goods 2,000,000
Export sales 3,000,000
Agency commission 1,000,000
Sale of fixed assets 200,000
Dividend income 1,000,000
Miscellaneous income 1,500,000
(ii) Gross Tax Liability 1,200,000
Tax on export sales 30,000
Tax on Import of goods 108,000
Tax on dividend income 50,000
The projected turnover and taxes expected to be withheld at source are as follows:-
All figures are for the quarter ended September 30, 2003
(i) Gross sales 5,000,000
Sale of imported goods 500,000
Export sales 1,000,000
Dividend income Nil
Miscellaneous income 500,000
(ii) Tax collection/deduction:
- U/s 148 – on goods imported for sale 24,000
- U/s 153 – on sale of imported goods 95,000
- U/s 154 – on export sale 10,000

Solution of Q.NO. 4 Autumn 2003


Rs. Rs.
Advance Tax Payable
(Latest assessed tax under Normal tax regime (N-1) / Latest tax 59,033
year turnover under NTR (N-2) x Actual turnover for the September
quarter (N-3)) (Rs. 1,012,000 / 15,000,000 x 3,500,000) / 4

Less: tax deducted under section 153 on sale of imported goods 95,000

Balance tax excess paid during the quarter (35,967)

378_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

NOTES
N-1 Latest assessed tax under NTR
Gross Tax Liability 1,200,000
Less: Tax on export 30,000
Tax on import of goods 108,000
Tax on dividend 50,000 188,000
Net tax 1,012,000
N-2 Latest tax year turnover under NTR
Gross sales 20,000,000
Less: Export sales 3,000,000
Sales of imported goods 2,000,000 5,000,000
Net sales 15,000,000
N-3 Actual turnover for the quarter
Gross sales 5,000,000
Less: Export sales 1,000,000
Sales of imported goods 500,000 1,500,000
3,500,000

Q.NO.4 (a) Spring 2003

Mercury and Co. has provided you the following data:


Fair value of leased asset Rs.225,000
Interest rate 20.50%
10% of fair
Security Deposit paid
value
Depreciation of leased asset 33% per annum
Term of lease 3 years
Yearly rental in arrears Rs.96,890

Required:
You are required to compute the amount available for deduction from the taxable income of Mercury and Co for each
year. Please show proper working.

Solution of Q.NO.4 (a) Spring 2003

Name of Taxpayer : Mercury and Co.


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Company

1st Year Rs. Rs.


Business Income -

Add: Inadmissible deductions


Depreciation (Rs. 225,000 x 33%) 74,250
Interest Rs.(225,000 - 22,500) x 20.5% 41,513
115,763
115,763
Less:Admissible deductions
Security deposit as lease rental to claim after the expiry of lease period -
Lease rental 96,890
(96,890)
Taxable income 18,873
In every year Lease rental only is allowable as deduction.

Conceptual Approach to Taxes _______ ___ _______________ __ 379


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

2nd Year
Business Income -
Add: Inadmissible deductions
Depreciation 74,250
Interest (225,000 - 22,500 - 96,890 + 41,513) x 20.5% 30,160 104,410
104,410

Less:Admissible deductions
Lease rental 96,890 96,890
7,520

3rd Year
Business Income -
Add: Inadmissible deductions
Depreciation 74,250
Interest (225,000 - 22,500 - 96,890 - 96,890 + 30,160 + 16,480 90,730
41,513) x 20.5%
90,730
Less:Admissible deductions
Lease rental 96,890 96,890
(6,160)

Q.NO.4 (b) Spring 2003

Sun and Moon have recently registered as partnership. They have incurred the following expenditure.

· Fees paid to consultants for preparation of registration deed Rs.50,000


· Preparation of feasibility report Rs.100,000
· Purchase of office equipment Rs.150,000
· Purchase of machinery Rs.1,000,000
· Trial run cost Rs.200,000
· Installation cost Rs.50,000

Required: You are required to explain the tax treatment by computing the amount allowable as deduction in
accordance with the provisions of Income Tax Ordinance 2001

Solution of Q.NO.4 (b) Spring 2003

Amount allowable as deduction


Business Income -
Less: Pre-commencement expenditure written off (N - 1) 70,000
Initial allowance on fixed Assets (N - 2) 262,500
Depreciation on fixed Assets (N - 3) 140,625
Taxable income 473,125

NOTES
N-1 Precommencement expenditure written off @ 20%

Fees paid to consultant for preparation of registeration deed 50,000


Preparation of feasibility report 100,000
Trial-run cost 200,000
350,000
Written off (350,000 @ 20%) 70,000

N-2 Initial allowance on Fixed Assets @ 25%

380_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Machinery 1,000,000
Installation cost 50,000
1,050,000
1,050,000 @ 25% 262,500

N-3 Depreciation on Fixed Asset @ 15%


Office Equipment 150,000
Machinery 1,050,000
Less: initial Allowance (262,500) 787,500
Depreciable amount 937,500
Depreciation on Rs. 937,500 @ 15% 140,625

Q.NO.5. Spring 2003

Mr Amir-ud-din has recently constructed an office complex for the purposes of letting out. The office complex is also
equipped with its own electric generators for which tenants are separately charged on a monthly basis. As per terms and
conditions, Mr Amir-ud-din is also entitled to signing amount, which is nonrefundable.

For the tax year 2003 following information has been provided to you for the computation of his income from property and
tax liability thereon:

Rupees
Rent for the year already received 1,150,000
Rent for the year though due but irrecoverable 50,000
Signing amount (non-adjustable non-refundable) 100,000
Fire and water tax paid to the local authority 20,000
Lawyers fee for suit to recover rent 50,000
Lawyers fee for drafting master rent agreement 10,000
Salary of the caretaker who also collects monthly rent 36,000
Insurance premium being one per cent of market value of the property 200,000
Repair maintenance expenditure 50,000

Solution of Q.NO.5. Spring 2003

Name of Taxpayer : Mr. Amir-ud-din


National Tax Number :
Tax Year : 2016
Personal Status : Individual
Residential Status : Resident

INCOME FROM PROPERTY U/S 15 Rs.

Rent for the year already received 1,150,000


Rent for the year though due but irrecoverable 50,000
Signing amount (non-adjustable / non-refundable) 100,000
Gross property income 1,300,000

Less admissible deductions u/s 15A

1/5the repair allowance as fixed allowance 260,000


Irrecoverable rent (Firstly added and then to deduct for the computation of correct amount
of rent chargeable to tax) 50,000
Fire and water tax paid to the local authority u/s 15A (1)(c) 20,000
Lawyers fee for suit to recover rent 50,000
Salary of caretaker who also collects monthly rent (not exceeding 6% of rent chargeable to tax) 36,000
Insurance premium being one per cent of market value of the property 200,000

Conceptual Approach to Taxes _______ ___ _______________ __ 381


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Total deductions 616,000


Net income from property 684,000

COMPUTATION OF TAX LIABILITY:

Tax on first Rs. 500,000 7,000


Tax on balance (Rs. 684,000 - 500,000) x 10% 18,400
Balance tax payable 25,400

Q.NO. 7 Spring 2003

Mr. Mushtaq has provided you with the following data for the computation of his total income and tax thereon for the tax
year 2003.

Basic salary 225,000 Bonus 50,000 Conveyance allowance 50,000 House rent allowance 101,250 Leave fare assistance
60,000

Cash paid to a non profit organization by way of donation Rs.20,000. Motor vehicle provided by employer and used partly
for personal and partly for business purpose. Running cost borne by employee Rs.30,000. During the year Mr. Mushtaq
was issued 5,000 shares under an employee share option scheme whereby he was offered shares at 25% discount to the
market value. The market value of shares is Rs.11 per share. House loan taken by Mr. Mushtaq Rs.200,000. Interest paid
on such loan during the year amounted to Rs.6,000.

Required:
You are required to compute his taxable income and tax thereon. Show all computations and assumptions, as
necessary.

Solution of Q.NO. 7 Spring 2003

Name of Taxpayer : Mr. Mushtaq


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Individual
Residential Status : Resident

INCOME FROM SALARY U/S 12


Rs. Rs.

Basic salary 225,000


Bonus 50,000
Conveyance allowance (N - 1) 50,000
House rent allowance 101,250
Leave fare assistance 60,000
Benefit from share option (N - 2) 13,750
Taxable Income 500,000

COMPUTATION OF TAX LIABILITY:

Tax on Rs. 500,000 [0 + 2% x (500,000 - 400,000)] 2,000

NOTES
N-1 The value of conveyance facility is not provided so there will be
no treatment. conveyance allowance is fully taxable.
N-2 Benefit from share option
FMV of shares 55,000
Less: Cost of shares (5,000 shares x 11 x 0.75) 41,250 13,750

382_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

N-3 Donation paid in cash is not entitled for tax credit

N-4 Deductible allowance on markup on house loan has not been claimed as the same has been assumed not fall within
section 64A.

Q. NO.4: Autumn 2002

ABC Associates owns a building which is 30 percent occupied for its business. The rest 70 percent is on rent.

The following information is available:


Rupees
·                Annual letting value of the property owned 2,000,000
·                Rent received from tenants 1,800,000
·                Depreciation on building under the
·                Third Schedule to the Ordinance 400,000
·                Property Tax 100,000
·                Municipal / local government taxes (agreements with tenants provide that tenants 100,000
·                should pay the taxes, cost to be allocated proportionately)
·                General and administration expenses 200,000

Rent received includes Rs. 600,000 for three years commencing from July 01 of the current year. ABC Associates follow
accrual basis of accounting and its income year is July-June 2002.

Required:
Please compute the income of ABC Associates under the head ‘income from house property’.

Solution of Q. NO.4: Autumn 2002

Name of Taxpayer : ABC Associates


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Company

INCOME FROM PROPETY U/S 15 Rs. Rs.

Annual letting value of the property owned being as Fair market (A) 2,000,000
rent
            Rent received from tenants 1,800,000
Less advance for next two years (Rs. 600,000 / 3 x 2) (400,000)
Add owners burden paid by tenant in the form of taxes 100,000
Actual rent for the tax year (B) 1,500,000

Higher of actual rent or Fair market rent i.e. higher of (B) & (A) 2,000,000

Less admissible deductions U/S 15A

            1/5th of rent chargeable to tax as repair allowance  400,000
            Tax depreciation (not an allowable expense) -
            Property Tax 100,000
            Muncipal / local Govt. taxes against property   (70% related to rented portion) 70,000
570,000
Net taxable income from property 1,430,000

Note - 1 It has been assumed that the data given in the question is only related to the rented out portion, unless where
specified.

Conceptual Approach to Taxes _______ ___ _______________ __ 383


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Note - 2 General and administration expenses are not admissible against property income under section 15A of the
Income Tax Ordinance, 2001.
Note - 3 Taxes paid on behalf of owner by tenant shall be treated as income in the hands of the owner by virtue of section
69 of the Income Tax Ordinance, 2001.

Q. NO.7(b): Autumn 2002

Unique Ltd. has following salary related data for the period July 1, 2001 to June 30, 2002 of its three employees.

S G O
Rupees
(Salary and allowances per month)
Basic salary 37,500 23,000 6,000
House rent allowance 16,875 10,350 2,700
Conveyance allowance - 2,300 300
Utility allowance 4,000 2,500 1,000
Recovery of Provident Fund Loan 2,000 1,500 500
Additional information is as follows:

(i) S is provided a fully maintained car of 1000cc which is used both for private and business purpose.
(ii) G owns his conveyance and also incurs its running and maintenance cost. The conveyance is used partly for
business and private purposes.
(iii) S, G and O all were entitled for annual bonus due in Sept. 2001, the term of bonus is one basic pay.

On the basis of above, compute tax withholding per month under the CIR read with the Income Tax Rules, 1982.

Solution of Q. NO.7(b): Autumn 2002:

Name of Taxpayer : S, G & O


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Individual
Residential Status : Resident

INCOME FROM SALARY U/S 12 Rs. Rs. Rs.


S G O
Basic salary 450,000 276,000 72,000
Bonus 37,500 23,000 6,000
House rent allowance 202,500 124,200 32,400
Conveyance allowance - 27,600 3,600
Utility allowance 48,000 30,000 12,000
Recovery of Provident Fund Loan 24,000 18,000 6,000
Conveyance facility (Assumed vehicle cost Rs.1,000,000 x 5%) 50,000 - -

Taxable income 812,000 498,800 132,000

Computation of tax liability (lower of A or B ):


under normal case:
Tax liability:
(A)
S [14,500 + 10% x (812,000 - 750,000)] 20,700
G [0 + 2% x (498,800 - 400,000)] 1,976
O (not taxable) 0

20,700 1,976 -

384_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Tax per month to be deducted (Annual tax / 12 months) 1,725 165

Q. NO.4: Spring 2002:

Mr. Ashraf made the following donations during the income year 2000-2001:
(a) Rs. 200,000 in cash to a relief fund sponsored by the Government.
(b) Personal car to an institution referred to in Clause (61) of the Second Schedule. This car was purchased by
Mr. Ashraf four years ago at the cost of Rs. 80,000.
(c) The fair market value is Rs.60,000

Medicines to a private hospital purchased at the total cost of Rs. 10,000.

Please advice Mr. Ashraf regarding the allowance for donation which may be claimed by him keeping in view the
requirement of Section 47 of the CIR 1979 if his income for the relevant income year has been assessed at Rs. 800,000.

Solution of Q. NO.4 Spring 2002:

Name of Taxpayer : Mr. Ashraf


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Individual
Residential Status : Resident
Rs. Rs.
Income assessed 800,000

(a) Less direct deduction is allowed of donation amounting Rs. (200,000)


200,000 in cash to a relief fund sponsored by the Government.

(b) Less direct deduction is allowed for donation of persoal car to


an institution referred to in Clause (61) of the Second Schedule.

Value of deduction will be cost less depreciation of 3 years


Cost of car 80,000
Less: depreciation 3 years straight line method (Rs. 80,000 x 10% 24,000 (56,000)
x 3)

c) Neither deduction nor tax credit is allowed for the donation of -


medicines to private hospital
Taxable income 544,000

Q. NO.5: Spring 2002

Explain whether the following are admissible as business expenditure under the ITO 1979:
(a) Repayment of principal amount of lease rentals of plant and machinery. (b)Sales tax paid on the purchase of raw
material to be used in the production of exempt supply. (c) Dividend (d) Provision in respect of doubtful debts.

(b) Penalty levied u/s 108 of the CIR, 1979 for failure to file statement u/s 139.

Solution of Q. NO.5: Spring 2002:

a) Repayment of principal amount of lease rentals: Lease rentals are admissible where leased asset is acquired for
business purposes. In this case the repayment is principal amount with markup although not given in question.
b) Sales tax paid on the purchase of raw material to be used in the production of exempt supply shall be allowed as
admissible expense.

Conceptual Approach to Taxes _______ ___ _______________ __ 385


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

c) Dividend is not an allowable deduction while calculating the business income because it is profit and loss approprriation
item.

d) Provision in respect of doubtful debt is not allowed. Only actual bad debts are allowed.

e)    Penalty levied under Section 108 of the Income Tax Ordinance, 1979 for failure to file statement under Section 139 
shall not be admissible under the income tax ordinance.

Q. NO.6: Spring 2002

Mr. Javaid, Managing Director of a multi national Company has submitted the following data for the income year ending 30
Rs.
Basic Salary 130,500 p.m
Bonus 325,500 full year
House rent allowance 43,500 p.m
Utilities 13,050 p.m

- Mr. Javaid has been provided with free use of a Company maintained car of 1,600 C.C.
- In accordance with terms of his employment Mr. Javaid was paid Rs. 60,000 being the cost of air ticket in
connection with a foreign tour. He last undertook a foreign tour three years ago.
- During the year Mr. Javaid sold 180,000 shares of Rs. 10 each purchased at par three years ago of
M/s Azmat (Pvt) Ltd for Rs. 65 per share.
- Zakat paid Rs. 12,000

Required:
You are required to calculate the total income of Mr. Javaid and tax payable thereon.

Solution of Q. NO.6: Spring 2002

Name of Taxpayer : Mr. Javed


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Individual
Residential Status : Resident

INCOME FROM SALARY U/S 12 Rs. Rs.

Basic Salary (Rs. 130,500 p.m) 1,566,000


Bonus 325,500
House rent allowance (43,500 p.m) 522,000
Utilities (13,050 p.m) 156,600
Free use of a Company maintained car of 1,600cc (N-1) -
Cost of air ticket in connection with a foreign tour (N-2) -
Total salary income 2,570,100

CAPITAL GAINS U/S 37

Consideration received (180,000 shares x 65) 11,700,000


Less: cost of shares (180,000 shares x 10) 1,800,000
Capital Gain 9,900,000
Taxable Capital Gian (9,900,000 x 75%) 7,425,000
9,995,100
Less: Zakat paid (12,000)
Total Taxable Income 9,983,100

386_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

COMPUTATION OF TAX LIABILITY:

Tax on Rs. 9,983,100 [1,319,500 + 35% x (9,983,100 - 6,000,000)] 2,713,585

Notes
N-1: The value of car not provided and further it is assumed that the car was being for office use only.
N-2: Air ticket for foreign trip treated as exempt as it is for the discharge of official duties.

Q. NO.7 Autumn 2001

Mr Amir Ali is manager finance in a multinational company. He has received the following salary and other perquisites
during the year ended on June 30, 2000:

Basic salary Rs. 35,000 p.m.


Bonus 180,000
House allowances 18,000 p.m
Utilities allowance 50,000 p.a.

The employer provided him a 1300 c.c. car for office/personal use and medical facility worth Rs.25,000 during the
year.

Compute the total income of Mr Amir Ali and tax payable thereon.

Solution of Q. NO.7 Autumn 2001:

Name of Taxpayer : Mr. Amir Ali


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Individual
Residential Status : Resident

INCOME FROM SALARY U/S 12 Rs. Rs.

Basic salary (35,000 p.m.) 420,000


Bonus 180,000
House allowances (18,000 p.m) 216,000
Utilities allowance (50,000 p.a) 50,000
1300 cc car for office / personal use ( Value assumed Rs.1,000,000 hence 5% of the 50,000
said cost shall be included in salary income) -
Medical facility ( Assumed it is in accordance with terms of employment.)
Taxable salary income 916,000

COMPUTATION OF TAX LIABILITY:


Tax on Rs. 916,000 [14,500 + 10% x (916,000 - 750,000)] 31,100

Q. NO.8 Autumn 2001

T and H Enterprises is a registered firm comprising of two equal partners named Tariq and Hamid. During the year ended
on 30th June 2001 the partners besides their shares in the firm enjoyed income and sustained losses from the sources
given below:

Tariq

(a) Income accrued abroad but not remitted to Pakistan. 72,000

Conceptual Approach to Taxes _______ ___ _______________ __ 387


Chapter 21 _______ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

(b) Shares of loss from an association of persons 5,000


(c) Zakat paid 26,500

Hamid
(a) Speculation loss 25,000
(b) Profit on sale of car 13,000
(c) Income tax refund 5,000
(d) Zakat paid 14,000

The profit and loss account of the registered firm for the year ended on 30th June, 2001, shows the following
position:

Rs. Rs.
Salaries 300,000 Gross profit b/d 480,000
Office maintenance 5,000 Dividend from
Public Co. 250,000
Repairs 38,000
Provision for bad debts 14,000
Super tax paid for last year 5,000
Legal expenses 15,000
Commission to Tariq 16,000
Premium of life policies of
Partners 5,000
Depreciation 34,000
Net profit:
Tariq 149,000
Hamid 149,000 298,000
730,000 730,000

Notes:
(i) Tariq and Hamid are paid Rs.45,000 and Rs.55,000 respectively as salary. This is included in total salary
expense.
ii) Repairs includes Rs.18,000 being cost of a typewriter to be depreciated by 10%.
(iii) Legal expenses include Rs.6,000, on which tax is deductible.
(iv) Tax Depreciation excluding typewriter Rs.14,000.

Compute:
(a) the total income of the firm and taxes payable by it. (b) the total income of each partner and tax thereon.

Solution of Q. NO.8 Autumn 2001:

Name of Taxpayer : T and H Company


National Tax Number :
Income year ended : 30th June, 2016
Tax Year : 2016
Personal Status : Company

INCOME FROM BUSINESS U/S 18 Rs. Rs.

Net profit as per profit and loss Account 298,000


Add: Inadmissible deductions
Salaries to partners (45,000+55,000) 100,000
Cost of typewritter 18,000
Provision for bad debts 14,000
Super tax paid for last year 5,000
Commission to Tariq 16,000
Premium on life policy of partners 5,000

388_________________ ____________ _______ _Conceptual Approach to Taxes


Chapter 21 ___________Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2015)

Accounting depreciation 34,000 192,000


490,000
Less: Admissible expenses
Dividend received (N - 1) 250,000
Tax depreciation (N - 2) 15,800 (265,800)
224,200
COMPUTATION OF TAX LIABILITY:
(a) Tax on taxable income of Rs.224,200 @ 0% -
Divisible income after tax 224,200

Partners share of profit from AOP T H Total


Salary 45,000 55,000 100,000
Commission 16,000 - 16,000
Life insurance premium 2,500 2,500 5,000
Share of profit on Equal proportion 51,600 51,600 103,200
115,100 109,100 224,200

Tariq
Total income from foreign source 72,000 -
Less: Zakat (26,500) -
Taxable income 45,500 -
Add: Share of profit from AOP 115,100 -
Taxable income for rate purposes 160,600 -

Computation of tax liability:


Income is below the taxable limit, so no tax shall be charged.

Hamid
He has a speculation loss which is set off only against speculation profit. So nothing shall be included from share
from AOP.

NOTES
N-1 Dividend covered under FTR, so not included in taxable income.

N-2 Tax depreciation excluding depreciation of typewritter 14,000


Add: depreciation on typewritter @ 10% 1,800
15,800

Conceptual Approach to Taxes _______ ___ _______________ __ 389