Draft Exam Practice Kit For CA Professional Level Tax Planning & Compliance Covering Finance Act 2018

CA Professional Level
Tax Planning & Compliance

EXAM PRACTICE KIT
(COVERING FINANCE ACT 2018)
Prepared by:
Saiful Islam Mozumder
simbd@outlook.com
ShirazkhanBasak& Co.
Cell: +8801867837237
Exam Practice Kit
Syllabus area Weighting
(indicative
%)
1 Critical aspects of income tax and its
administrative functioning 15
2 Tax computation of business entities and
individuals 25
3 Special provisions, recovery, refund and
dispute resolution in Tax Law 20
4 International taxation and ethical
consideration 15
5 Tax Research, planning, compliances,
VAT and other taxes (i.e. Custom Duty,
Supplementary Duty, Gift Tax and Property/Holding Tax) 25
Total 100
Courtesy:
Saiful Islam Mozumder
simbd@outlook.com
ShirazkhanBasak& Co.
Cell:+8801867837237
Tax Planning & Compliance – 100 Marks
Module aim
To develop students’ understanding of the critical aspects of Bangladesh Taxation; application of the
knowledge gained at the Certificate Level study in the areas of tax planning, compliances, tax principles,
management, administration, computation, collections, payments, return preparation, filing, dispute issues
and Value Added Tax (VAT) rules.
On completion of this module, students will be able to:
Critical aspects of income tax and its administrative functioning
LO1: explain the objectives, concepts, characteristics of taxation and describe the basic structure
of tax administration, management in Bangladesh.
Tax computation of business entities and individuals
LO2: apply the knowledge of tax calculation, tax rates, incomes, allowances, exemptions,
credits, accounting of income tax, tax return preparation, payments, collections as per Income
Tax Rules of Bangladesh.
Special provisions, recovery, refund and dispute resolution in Tax Law
LO3: identify liabilities in special cases, avoidance of tax, recovery, refund, penalty,
appeal and dispute resolution provisions in Income Tax Law.
International taxation and ethical consideration
LO4: explain the provisions of double taxation relief, transfer pricing, and solution to ethical
issues.
Tax Research, planning, compliances, VAT and other taxes
LO5: Explain tax research, tax compliances, tax planning and operations of VAT and other taxes
in Bangladesh.
Method of assessment
The module is assessed by a 3.0 hours exam.
Specification Grid
This grid shows the relative weightings of subjects within this module and should guide the relative
study time spent on each. Over time the marks available in the assessment will equate to the weightings
below, while slight variations may occur in individual assessments to enable suitably rigorous questions
to be set.
Syllabus area Weighting

(indicative %)
1 Critical aspects of income tax and its administrative functioning 15
2 Tax computation of business entities and individuals 25
3 Special provisions, recovery, refund and dispute resolution in Tax Law 20
4 International taxation and ethical consideration 15
5 Tax Research, planning, compliances, VAT and other taxes 25
Total 100
The following learning outcomes should be read in conjunction with the relevant sections of the
technical knowledge grids.
Critical aspects of income tax and its administrative functioning: L01

1 Objectives, concepts, characteristics of taxation and describe the basic structure of tax
administration, management in Bangladesh.
Candidates will be able to explain the general principles and administration of taxation in
Bangladesh.
In the examination, candidates may be required to:
Basic concepts of taxation

a)
describe the meaning, importance and characteristics of tax
b)
explain the different types of tax, the tax structure in Bangladesh
c)
define, importance and scope of Bangladesh tax law
d)
define tax incidence, tax impact, tax shifting
Country Fiscal Management & Taxation
e) explain the country Fiscal Management procedures and tax for social welfare issue
f) importance of tax for country's development and relation between tax and economic
development
g) identify the changes made in the Finance Act regarding tax and its relation with
National Budget of Bangladesh
h) why tax is important for citizen social security and how it can have adverse effect
Introduction to Bangladesh income tax

i)
describe the history of taxation system in Sub continent and in Bangladesh
j) explain the tax structure in Bangladesh (Scope of Bangladesh Income Tax) and the
enactment procedures (Amendments, Deletion & Introduction) of tax
Basics of income tax

k) describe the concept of income, income tax, capital or revenue receipts and
expenditures, different income tax rate for individual and business
l) describe the rules for determining residential status of assesse and effects of
residential status of an assesse in income computation
m) scope of income as per Bangladesh Income Tax Law, computation of taxable income
and Tax liability on income
Administration of taxation
n)
explain subordination, control, power, functions of Income Tax authority
o) meaning and formation of Taxes Appellate Tribunal

p)
commencement and application of Alternate Dispute Resolution (ADR)
q) identify the records to be maintained by individuals and companies for the purpose of
tax
r)
determine the periods for which records must be maintained
s)
explain the key features of Bangladesh tax system
t) explain the key features of the self assessment system for companies and individuals
u)
explain the due dates for tax return, tax payments
v) identify and calculate the interest and penalties for late submissions or incorrect return
and payment of tax
Tax computation of business entities and individuals: L02
2 Tax calculation, tax rates, incomes, allowances, exemptions, credits, accounting of

income tax, tax return preparation, payments, and collections as per Income Tax Rules
of Bangladesh.
Candidates should be able to describe how taxation in Bangladesh is applied to the income,
expenditure, assets, liabilities or transactions of business entities and individuals.
Charge of tax
a) describe the provision regarding charge of income tax, charge of surcharge, charge of
additional tax, charge of excess profit tax, charge of minimum tax and scope of total
income
b) explain the income deemed to accrue or arise in Bangladesh
c) describe the provision regarding un-explained investments, income or expenditures and

special tax treatments in respect of some investments
Depreciation allowances
d) explain the written down value (tax base) of assets for the depreciation purpose,
disposal of assets & depreciation allowances
e) describe the difference between accounting & tax depreciation and its accounting
Computation and adjustments of income tax
f) definition of income from salaries, income from interest on securities, income from
house property, agricultural income, income from business or profession, income from
capital gain and income from other sources
g)
explain the adjustment of timing differences under various heads of income
h) define set off losses, carry forward & adjustment of losses, adjustment of depreciation
expenses (unadjusted) in calculation of income tax liability
Tax incentives and exemptions

i) describe the conditions and exemption procedure of Tax Holiday Scheme for various
industry (industrial undertaking, EPZ entity, cooperative society, trust, benevolent
institutes, etc.)
j) describe the eligibility and conditions of tax holiday, application procedures for
tax holiday, withdrawal and cancellation of tax holiday, maintenance/compliance

requirements for tax holiday
k) describe of investment tax credit, fully exempted income, tax at reduced rate and
special tax treatments
Tax collection (Withholding/TDS, Advance Taxation, Tax Payments)
l) brief procedure of deduction or collection of tax at source
m) describe the computation and payment of advance tax, consequences of failure to pay
advance tax, the payment of tax on the basis of return
Tax reporting (Various Returns)

n)
when to file a return and submission of return of withholding tax
o)
identify the obligation to furnish Annual Information Return
Tax assessment of individual (complex) and business entities
p) Tax assessment of individuals, entity (other than corporate) and corporates (complex)
Introduction to accounting of income tax

q)
explain the required & mandatories books & records regarding tax
r)
describe the tax provisioning, current tax, tax liability, tax payable, deferred tax
Special provisions, recovery, refund and dispute resolution in Tax Law LO3
3 Liabilities in special cases, avoidance of tax, recovery, refund, penalty, appeal and dispute
resolution provisions in Income Tax Law.
Candidates should be able to identify liabilities in special cases, avoidance of tax, recovery,
refund, penalty, appeal and dispute resolution provisions in Income Tax Law.
Liabilities in special cases
a) explain the liability of representative in certain cases (u/s 95), the persons to be treated as
agents (u/s 96), the rights of representatives to recover tax paid (u/s 97), the liability of
firm or association for unrecoverable tax due from partners or members (u/s 98), the
liability of partners, etc., for discontinued business of a firm, etc. (u/s 99), the liability of
directors for unrecoverable tax of private companies (u/s 100), the liability of liquidator
for tax of private companies under liquidation (u/s 101), the liability to tax in case of
shipping business of non-resident (u/s 102), the liability to tax in case of air transport
business of non-residents (u/s 103A)
Special provisions relating to avoidance of tax
b) Describe the provision of avoidance of tax through transactions with non-residents (u/s
104), avoidance of tax through transfer of assets (u/s 105), avoidance of tax by transactions in securities
(u/s 106), tax clearance certificate required for persons leaving Bangladesh (u/s 107)
Imposition of penalty
c)
describe the penalty for not maintaining accounts in the prescribed manner
d) describe the penalty for failure to file return, certificate, statement, accounts or
information, penalty for using fake Tax-payer's Identification Number, penalty for
failure to pay advance tax, penalty for non-compliance with notice, penalty for failure
to pay tax on the basis of return, penalty for concealment of income, penalty for default
in payment of tax.
e) describe the previous approval of Inspecting Joint Commissioner for imposing penalty,
the bar to imposition of penalty without hearing and penalty to be
with prejudice to other liability
f) describe the Orders of Appellate Joint Commissioner, Commissioner or Appellate

Tribunal to be sent to Deputy Commissioner of Taxes
Recovery of tax
g)
Explain the notice of demand
h) Describe the penalty for default in payment of tax, certificate for recovery of tax,
method of recovery by Tax Recovery Officer, power of withdrawal of certificate and
stay of proceeding, validity of certificate for recovery not open to dispute, recovery of
tax through Collector of District, recovery of tax through special Magistrates, other
modes of recovery
Refunds
i) explain the requirement to issue refund, entitlement to refund, claim of refund for
deceased or disabled persons, correctness of assessment, etc., not to be questioned,
refund on the basis of orders in appeal, form of claim and limitation, interest on
delayed refund and adjustment of refund against tax
Offences and prosecutions

j)
describe the provision of punishment for non-compliance of certain obligations
k)
explain the rules regarding punishment for false statement
l) explain the punishment for improper use of TIN, for furnishing fake audit report, for
obstructing an income tax authority, for unauthorized employment,
for concealment of income, for disposal of property to prevent attachment
m) describe the provision of sanction for prosecution and the provision of power to
compound offences, the trail by special judge
Appeal and reference

n) describe the procedure of disposal of appeal by the Appellate Tribunal, Reference to the
High Court Division, decision of the High Court Division, appeal to the Appellate
Division
Power of Income Tax Authorities including search & seizure

o)
introduction of Income Tax Authorities
p) describe the power to call for information, to inspect register/records of assesse, the
power of survey, the additional power of enquiry & call for productions of
books/supporting, the power of search & seizure, the power of imposing injunction, the
retention of seized assets/property, power to take evidence under oath
Alternative dispute resolution

q)
what is alternative dispute resolution
r) describe the eligibility for application, the application procedure for ADR, the
procedures of disposal by the ADR, the eligibility for appointment as facilitator, the
decision of the ADR
s) identify the effect of agreement, the limitation for appeal where agreement in not
concluded, the fees to be paid to facilitator
International taxation and ethical consideration LO4
4 Provisions of double taxation relief, transfer pricing, and solution to ethical issues.
Candidate should be able to explain the provisions of double taxation relief, transfer pricing,
and solution to ethical issues.
Double taxation relief
a) explain the basic concepts of double taxation relief, the agreement to avoid Double
Taxation, the methods of avoiding double taxation and how the methods work
b)
describe the relief in respect of income arising outside Bangladesh
c)
describe the Tax Treaty and some other concepts used in DTAA
Miscellaneous
d) describe the proceeding against companies under liquidation, indemnity, the Bar of
suits and prosecution, the ordinance to have effect pending legislative provision for
charge of tax, the requirement of certificate or acknowledgement receipt of return in
certain cases
e) explain the issuance of temporary registration number, displaying of TIN certificate,

the reward for outstanding performance collection and detection of evasion of taxes,
the assistance to income tax authorities, the ordinance to override other laws
International Taxation
Transfer pricing
f)
describe the concepts of transfer pricing
g)
Introduction of transfer pricing regulations in Bangladesh
h) Meaning assigned to certain connotations relating to transfer pricing in tax law (u/s
107A)
i)
describe the arm's length price the basis of determining transfer pricing
j) describe the methods of computation of arm's length price (u/s 107C), the most
appropriate method for determining the arm's length price (Rule 72)
k) describe the factors to be considered in judging uncontrolled international transaction,

the reference to transfer pricing officer (u/s 107D), the reporting of information
relating to international transaction (u/s 107E), the assessment of transfer pricing and
the penalties in transfer pricing regulation
Ethics
l) define five fundamental principles of ethics, the threats and safeguards framework and
ethical conflict resolution
m) explain the conflicts of interest, disclosure of information for taxation, confidentiality

of information regarding tax, new client procedures, money laundering, tax avoidance
and tax evasion and tax professional responsibilities in tax practice
Tax Research, planning, compliances, VAT and other taxes LO5
5 Tax research, tax compliances, tax planning and operations of VAT and other taxes in
Bangladesh
Candidates should be able to explain Tax research, tax compliances, tax planning and should
be able to describe the general knowledge on VAT and other indirect taxes, some relevant
terms, scope, registration, measurement, administration, turnover tax, supplementary duty
and exempt goods and services.
Practical project
a) explain tax research and writing project, volunteer income tax, tax planning project and
tax return project
Tax compliance
b)
explain the taxpayer filling requirements (due dates, extensions etc.)
c)
describe the books of accounts and records to be maintained by the taxpayer
d) describe the meaning of tax audits, tax law sources, tax research, taxpayer and tax
practitioner penalties
Tax planning
e) describe the tax planning measures to minimize tax liabilities, tax strategies to meet
business objectives
f) explain alternative tax strategies relating to corporate transformation, alternative tax

treatments arising from past transactions
g)
explain the limitations to tax planning strategies, tax avoidance vs. tax evasion
h)
explain the ethical and professional issues in giving tax planning advice
Value Added Tax and other taxes:
VAT
i) define the VAT books of accounts & records, VAT provisioning, VAT rates and its
application, vat returns
j) computation and adjustments of VAT collection (Withholding, Advance VAT, VAT

Payments)
k) explain social security & VAT incentives, exemptions and economic developments
l) describe VAT reporting, liabilities in special cases, special provisions relating to

avoidance of VAT, imposition of penalty for non-compliance of VAT rules
m) Explain recovery of VAT, refunds of VAT, offences and prosecutions for non-
compliance of VAT rules, appeal and reference regarding VAT, the provision
regarding alternative dispute resolution
n)
explain value added tax assessment project
Other Taxes
o) Describe the meaning and implementation of Custom Duty, Supplementary Duty, Gift
Tax and Property/Holding Tax
1.Critical aspects of income tax and its administrative functioning (15%)
S.L Question Year
PE — Ill
Briefly describe the provisions of section 82C and give example of three heads of May —
deduction of advance tax at source, which are subject to assessment under June, 2002
section 82C Income Tax Ordinance, 1984 as final discharge.
Section 82C deals with Income in respect of which tax has been deducted or collected at
source on account of supply of goods or execution of contract, manufacture of cigarettes, import of
goods, value of property for the purpose of collection of tax, interest on savings instruments, winnings,
export of manpower, remuneration or reward ,auction purchase ,payment on account of survey ,payment
on account of fees for technical services shall be deemed to be the final discharge of tax liability under this
Ordinance.
Examples:
a) the amount representing the payments on account of supply of goods or execution of
contract to which tax is deductible under section 52 of ITO 1984;
b) the amount of the value of the banderols computed for the purpose of collection of tax on
account of the manufacture of cigarettes under section 52B of ITO 1984;
c) the amount as computed for the purpose of collection of tax under section 53 of ITO
1984 in respect of goods imported, not being goods imported by an industrial undertaking
as raw materials for its own consumption;
State the provisions of law for availing tax holiday by a tourist industry mentioning PE — Ill
at least five documents that are required to be submitted along with application for May —
tax holiday. June, 2002
Tax holiday for tourist Industry u/s 46 2A,2B &2C

a) Conditions for tax holiday
i) Tourist Industry set-up in Bangladesh between the first day of July, 1995 and the
thirtieth day of June, 2000 (both days inclusive).
ii) Tourist industry means a business, industry or undertaking which caters for the
tourists including setting up, establishments, running of hotels, motels, hunting lodges,
amusement and theme park, holiday home, tourist resort, family fun and games, energy
park and private picnic spots of such standard as the National Board of Revenue specify.
iii) The industry is owned and managed by a Bangladeshi Company having a
subscribed and paid up capital of not less than one lakh taka on the date of
commencement of commercial services.
iv) 30% per cent of the income
exempted is invested in the said undertaking or in any new industrial undertakings or in
stocks and shares of a public company during the period of exemption or within one year
from the end of the period to which the exemption.
Provided that the quantum of investment shall be reduced by the amount of dividend. if
any, declared by the company enjoying tax holiday.
v) Tourist Industry must by approve by the board.
The National Board of Revenue vide S.R.O No. 200-L/2000 dated 3 July, 2000 specified the following
rd
standards to be maintained by a tourist industry for the purpose of tax holiday

The number of guest rooms should not be less than 30 if the industry is set up at Dhaka, Chittagong
and Khulna and 10 if it is set up in other places and each such industry should have adequate public
facilities, such as dining hall, lobby space etc.
Each guest room should have an attached bathroom equipped with modern sanitary fittings;
At least 50% of the guest rooms should be air conditioned;
Each guest room should be fitted with a telephone or there should be at least one telephone for each floor.
b) Approval procedure
i) An application is made to the Board within 180 days from the date on which the tourist
industry is put into commercial services.
ii) The Board shall give its decision within three months from the date of receipt of the
application by the Board, failing which the undertaking shall be deemed to have been approved by
the Board.
c) Period of exemption
For "Special Economic Zone" 12 Years
For " Least Developed Areas" 9 Years
For " Less Developed Areas" 7 Years
Courtesy: Saiful Islam Mozumder, ShirazkhanBasak& Co. smozumder@outlook.com cell-01711-981920

For the city of Dhaka, Chittagong, or K h u l n a , o r t h e M u n i c i p a l i t y o f 5 Years
Narayangonj or within 15 milies from the outer limits thereof.
The following documents are required to be submitted along with application money:
The application shall be accompanied by ---
(a) an attested copy of certificate of incorporation;
(b) an attested copy or the certificate of commencement of services;
(c) an attested copy of the letter of the Government conveying sanction to the issue of
capital;
(d) an attested copy of the Memorandum and Articles of Association of the company;
(e) in case the company has already commenced services certified copy of the audited
balance sheet and profit and loss accounts for the three latest completed years or any
lesser period which the accounts have been prepared (for and incomplete year trial balance
may submitted);
(f) an attested copy of the complete scheme of the unit as submitted to the Government
at the time of obtaining the sanction;
(g) a certified copy of blue print of the building where the tourist industry for which
exemption of income sought is located, showing the installed position of the machinery
PE — Ill
May —
State the provisions regarding information to be furnished to the Tax Authorities in June, 2002
connection with payment of salary, interest and dividend.
According to section 108,109,110 of ITO 1984
The following information is to be furnished to the Tax Authorities in connection with payment of Salary.
Interest and Dividend:
In case of Salary:
(a) the name and address of every person to whom such payment has been made, or
was due, during the preceding financial year if the payment (
exceeds such
amount as may be prescribed;
(b) th e a m o u n t o f p a ym en t s o m a d e , o r d u e ;
(c) the amount deducted as tax from such payment; and
(d) such other particulars as may be prescribed:
In case of Interest:
(a) the name and address of every person to whom such payment has been made. or
was due, during the preceding financial year;
(b) the amount of pa yment so made or due ; a nd
(c) such other particulars as may be prescribed.
In case of Dividend:
(a) the name and address of every shareholder, as entered in the register of
shareholders, to whom a dividend or the aggregate of dividends has been paid or distributed
during the preceding financial year if such payment exceeds such amount as may be
prescribed;
(b) the amount of dividend or dividends so paid or distributed; and
(c) such other particulars as may be prescribed.
Define the following in relation to Income Tax Ordinance. 1984:- PE — Ill

i. Employee; Nov— Dec,
ii. Perquisites; 2002
iii. Written Down Value
(i)According to Section 2(28) of ITO 1984:
Employee:
"Employee", in relation to a company, includes the managing director, or any other director or other
person, who irrespective of his designation performs, any duties or functions in connection with the
management of the affairs of the company;
(ii)According to Section 2(45) of ITO 1984:

Perquisite:
i. any payment made to an employee by an employer in the form of cash or in any other form
excluding basic salary, festival bonus, incentive bonus not exceeding ten percent of disclosed
profit of relevant income year, arrear salary, advance salary, leave encashment or leave fare
assistance and overtime, and
ii. any benefit, whether convertible into money or not, provided to an employee by an employer, called
by whatever name, other than contribution to a recognized provident fund, approved pension
fund, approved gratuity fund and approved superannuation fund.
(iii)According to section 2(68) and Third Schedule para 11(5)
"Written down value" means-
a) where the assets were acquired in the income year, the actual cost thereof to the assessee;
b) where the assets were acquired before the income year, the actual cost thereof to the assessee
as reduced by the aggregate of the allowances for depreciation allowed under ITO 1984 or the
Income-tax Act, 1922 (XI of 1922), in respect of the assessments for earlier year or years;
State the power of an Inspecting Additional Commissioner of Taxes u/s 120 of PE — Ill
Income Tax Ordinance, 1984. Nov— Dec,
2002
Acco rding to Se ctio n 120 o f ITO 1984:
The Inspecting Joint Commissioner may call for from the Deputy Commissioner of Taxes and examine
the record of any proceeding under this Ordinance, and .if he considers that any order passed therein by
the Deputy Commissioner of Taxes is erroneous in so far as it is prejudicial to the interests of the revenue, he
may, after giving the assessee an opportunity of being heard, and after making or causing to be made. such
inquiry as he thinks necessary, pass such order thereon as in his view the circumstances of the case would
justify, including an order enhancing or modifying the assessment or canceling the assessment and directing a
fresh assessment to be made.
Exception:
No order shall be made after the expiry of four years from the date of the order sought to be revised.
stion Briefly describe the provision of law for carry forward of:- PE — Ill
Nov— Dec,
i .Business loss; 2002
ii .L os s f r o m Ag ri cu l tu r e;
ii i .C a p i t a l G a i n
Business Loss: Business loss other than speculation business which cannot be
According to Section 38 of wholly set off
ITO 1984: under section 37 of ITO 1984 can be carried forward to the next
following
assessment year, and—
(a) it shall be set off against the income, if any, from the business or
profession for which the loss was originally computed
(b) if the loss cannot be wholly so set off, the amount of the loss
not so set off shall be carried forward to the next assessment year
and so on for not more than six successive assessment years.
Loss from Agriculture:

According to Section 41 of Loss from Agriculture which cannot be wholly set off under-section 37 of
ITO 1984: ITO 1984 can be carried forward to the next following assessment year, and—
a) it shall be set off against agricultural income, if any, of the assessee
assessable for that assessment year; and
b) if the loss cannot be wholly so set off the amount not so set off shall
be carried forward to the next assessment year and so on for not more
than six successive assessment years.
Capital gain
Loss under the head "Capital Gains" can be set off against income
According to Section 40 of
from the same head during the income year. If the loss cannot be
ITO 1984:
set off in the above manner, the loss or portion thereof can be
carried forward to the next assessment year and set off against
income under the same head in that year. The loss can be carried
forward upto 6 successive assessment years.
Loss upto Tk. 5,000/- cannot be carried forward .

PE — Ill
State the provision of law for filing return under self-assessment scheme by a Nov— Dec,
P rivate Limited Company. 2002
Self-assessment of Private Limited companies
According to Section 83AA and Rule38
A private limited company may also file return under the self- assessment procedure by fulfilling the
conditions as mentioned below:
a) Files a return on or before the date specified in clause (c) of sub-section (2) of section 75,
b) The income shown in such return is higher by not less than 5% over the last assessed income and
has also increased by at least a further sum of 5% for each preceding assessment year in
respect of which the assessment is pending
c) Pays tax on the basis of such income or Tk.50,000 whichever is higher on or before the date on
which the return is filed.
d) Such return shall be accompanied by a copy of the accounts of the company audited by a
chartered accountant;
e) Tax shall be paid on or before the date on which the return is filed
f) The assessment on the basis of such return shall not result in any refund.
PE — Ill
State the provision of law for tax clearance certificate required for persons Nov— Dec,
leaving Bangladesh. 2002
According to Section 107 of ITO 1984
A person who is not domiciled in Bangladesh, or a person who being domiciled in Bangladesh at the time
of his departure is not, in the opinion of an income tax authority likely to return to Bangladesh, shall not
leave Bangladesh without obtaining from the Deputy Commissioner of Taxes authorized in this behalf by
the Board.--
(a) a tax clearance certificate, or
(b) if he has the intention of returning to Bangladesh, an exemption certificate which shall be issued only if
the Deputy Commissioner of Taxes is satisfied that such person has such intention; and such
exemption certificate may be either for a single journey or for all journeys within the period specified
in the certificate.
PE — III
Under what conditions a newly established hospital will be eligible for exemption from Income Tax? May-June —
Please explain. 2003
A newly established private hospital will be eligible for exemption from income tax for five years subject to the following
conditions which was came into existence as per SRO No. 180-L/99 Dated 1st July 1999.
(1) the hospital is owned by a company registered under the companies Act, 1913 or the Companies Act, 1994.
(2) The hospital is established between the period from 1st July, 1999 to 30th June, 2005.
(3) The hospital is housed in a building constructed on the company's own land.
(4) The hospital has number of beds as mentioned below :
(a) 200 beds in the case of general hospital.
(b) 50 beds in the case of specialized hospital for heart, kidney and cancer patients.
(5)10% of the beds must be kept reserved for treatment of poor patients free of charge.
The owner of the hospital enjoying exemption from tax shall file return of return of income to the concerned Deputy Commissioner
of Taxes along with statement of accounts and relevant documents & evidences in respect of the concerned year of exemption
and the Deputy Commissioner of Taxes will determine the income u/s. 28 and 29 along with the owner's income from other
sources if any, and make the income-tax assessment accordingly.
PE — III
State the provision of law for tax clearance certificate required for persons leaving Bangladesh. Or May-June —
2003
The Provisions for clearance certificate required for persons leaving Bangladesh u/s 107 f I.T.O. 1984 are
as follows :
(1) subject to such exceptions as the Board may make in this behalf, a persons who is not domiciled in Bangladesh, or a
person who being domiciled in Bangladesh at the time of his departure is not, in the opinion of an income tax authority
likely to return to Bangladesh, shall not leave Bangladesh without obtaining from the Deputy Commissioner of Taxes
authorised in this behalf by the Board -
(a) a tax clearance certificate,
State the provision of law in the following cases: PE — III

(a) Exemption in respect of investment (sec. 19AAA). May-June —
(b) Special tax treatment in respect of investment in house property (sec.
2003
19B)
(c) Special tax treatment in respect of investment in land property
(sec.19BB).
(d) Under what circumstances and by whom an assessment can be reopened
under section 120 of Income Tax Ordinance, 1984?
State the remedies under section 120 of Income Tax Ordinance, 1984 available to an aggrieved
assessee on receipt of an order.
The Provisions of Law in the following cases are as follows :

(a) Exemption in respect of investment: Section 19AAA
Any investment made by an individual, firm, Association of persons or a private limited company between the 1 st July,
2002 and the 30 th June, 2005 in any trade, commercial or individual venture engaged in production of goods or services
shall be exempted from tax without any question.
Also the invested in the purchase of shares of a listed company between the 1 st July, 2003 and the 30 th June,2005 shall
be accepted without raising any question and without imposing any tax thereon.
Provided that this provision will not apply to shares so purchased which are transferred within two years from the date
of their purchase.
(b) Special Tax treatment in respect of Investment in House Property : Section 19B
Provision has been made in the above newly inserted section that the source of investment in the construction
or purchase of any building or apartment shall not be raised if the assessee pays tax, before the assessment is completed
for the relevant assessment year at the following rates:
Size of plinth area of the building or the apartment Rate of Tax
(i) Where the plinth area of the building or apartment does not Take 150/- per square metre
exceeds 200 square metre.
(ii) Where the plinth area of the building or apartment exceeds Take 250/- per square metre
200 square metre.
(c ) Special Tax treatment in respect of Investment in Land : Section 19BB
This section was introduced by Finance Act, 2002. No question will be raised above the source of any investment made by any
person in purchase of land in city corporation. Pourashava or cantonment Board if the assessee pays tax at 5% of the deed
value before the assessment is made.
(d) The Inspecting Joint Commissioner u/s 120 of I.T.O. 1984 may call for from the Deputy Commissioner of
Taxes and examine the record of any proceeding under this Ordinance, and, if he considers that any order passed therein by the
Deputy Commissioner of Taxes is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving
the assessee an opportunity of being heard, and after making or causing to be made, such inquiry as he thinks necessary, pass
such order thereon as in his view the circumstances of the case would justify, including an order enhancing or modifying the
assessment or canceling the assessment and directing a fresh assessment to be made.
(e) Any assessee, being aggrieved by any order of an Inspecting Joint Commissioner may prefer an appeal to
the Additional Commission (Appeals) / Commissioner (Appeals) against the order of section 120 of I.T.O. 1984.
(a) Who is an assessee? (b) What is meant by residential status of an assessee? PE — III
(C) How would you find out residential status of an assessee with reference to the following? May-June —
(I)Individual.
2003
(ii)Company.
(a)
(a)As per u/s 2(7) of I.T.O. 1984 an "Assessee" means a person by whom any tax or other sum of money ispayable under this
Ordinance, and includes -
(a) every person in respect of whom any proceeding under this Ordinance has been taken for the assessment
of his income or the income of any other person in respect of which he is assessable, or of the amount of refund
due to him or to such other person;
(b) every person who is required to file a return under section 75, section 89 or section 91;
(c) every person who desires to be assessed and submits his return of income under this Ordinance; and
(d) every person who is deemed to be an assessee, or an assessee in default, under any provision of this Ordinance;
(b)
The residential status of an assessee as defined u/s 2(55) of Income Tax Ordinance 1984 has nothing to do with the nationality
of a particular individual. A foreign national may be treated as a 'Resident' for a particular year if he or she fulfills the legal
requirements as stated below, whereas a Bangladeshi national may be treated as a 'Non-Resident' if he, or she does not fulfill
the legal requirements.
Under the Income Tax Ordinance a person is charged to tax on the basis of his residential status in Bangladesh during the
relevant 'income year'. An individual is treated as a resident in Bangladesh in respect of any income year;
(a) If he or she has been in Bangladesh for a total period of 182 days or more in that year; or
(b) If he or she has been in Bangladesh for a period or for periods amounting in all to ninety days or more in that year
having previously been in Bangladesh for a period of or for a periods amounting in all to three hundred sixty-five days or
more during four years preceding that year.
If any individual fails to fulfill the above conditions, he or she will be treated as a 'Non-Resident' for the purpose of taxation.
(C)
The residential status of an assessee with reference to (I) individual (II) Company will be determined as follows :
(I) Individual :
(a)an individual is resident in Bangladesh if he remains in the income year in Bangladesh for a period of, or for periods
amounting in all to, one hundred and eighty-two days or more in that year; or
(b) For a period of, or periods amounting in all to, ninety days or more in that year having previously been in Bangladesh for a period of,
or periods amounting in all to, three hundred and sixty five days or more during four years preceding that year;
(II) Company :
a Bangladeshi company or any other company is resident in Bangladesh if the control and management of whose affairs is
situated wholly in Bangladesh in that year;

State the power of inspecting joint commissioner to revise orders of deputy PE— III
Commissioner of taxes. Nov- Dec, 2003
Power of inspecting joint commissioner to revise orders of deputy Commissioner of taxes.
According to Section 120 of ITO 1984:
The Inspecting Joint Commissioner may call for from the Deputy Commissioner of Taxes and examine the
record of any proceeding under this Ordinance, and , if he considers that any order passed therein by the
Deputy Commissioner of Taxes is erroneous in so far as it is prejudicial to the interests of the revenue, he may,
after giving the assessee an opportunity of being heard, and after making or causing to be made, such inquiry
as he thinks necessary, pass such order thereon as in his view the circumstances of the case would justify,
including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh
assessment to be made.
Exception:
No order shall be made after the expiry of four years from the date of the order sought to be revised.
State briefly the tax exemption and reduction in rate of tax in some case PE— III
that have been b r o u g h t t h r o u g h t h e c h a n g e s i n t h e F i n a n c e A c t , Nov- Dec, 2003
2003
Exemption made by the changes in ITO 1984 through Finance Act 2003 are the followings:-
(U/s 19AAA of ITO 1984 :Exemption in respect of investment
No question as to the source of any sum invested by an assessee, being an individual, firm, association of
persons or a private limited company,-
(a) between the first day of July, 2002 and thirtieth day of June, 2005 (both days are inclusive)
in any trade, commercial or industrial venture, engaged in production of goods or services shall
be raised and no tax thereon shall be imposed; and
(b) between the first day of July, 2003 and the thirtieth day of June, 2005 (both days are inclusive)
in the purchase of shares of a company listed with any stock exchange shall be raised and no
tax thereon shall be imposed:
provided that the provisions of this clause shall not apply in respect of shares so purchased which are
transferred within two years from the date of their purchase.
Under Paragraph 22 of Part A of the sixth schedule
Any income from dividend for which dividend distribution tax is payable by the company under section 16D
Under Paragraph 22A of Part A of the sixth schedule
Any income from dividend of a mutual fund or a Unit Fund where such dividend does not exceed
twenty five thousand taka
Under Paragraph 31A of Part A of the sixth schedule
Any income from capital gains from transfer of machinery or plant used for the purpose of business or
profession.
Define the following in relation to income Tax Ordinance, 1984:- PE — III

(i) Income Nov- Dec, 2003
(ii) Assessment year:
(iii) Resident.
(i) Income:
According to Section 2(34) of ITO 1984:
 any income, profits or gains, from whatever source derived, chargeable to tax under the income
tax ordinance 1984 which includes income from salary, income from house property, income
from interest, income from business or profession, agricultural income, income from capital gain
and income from other sources;
 any loss of such income, profits or gains;
 the profits and gains of any business of insurance carried on by a mutual insurance
association ;
 Any sum deemed to be income or any income accruing or arising or received, or deemed to accrue
or arise or be received in Bangladesh.
Exception:
 Provided that the amount representing the face value of any bonus share or the amount of any
bonus declared, issued or paid by any company registered in Bangladesh under the Companies
Act 1994 to its shareholders with a view to increase its paid-up share capital shall not be
included as income of that share holder.
(ii) Assessment Year:

"assessment year" means the period of twelve months commencing on the first day of July every year;
and includes any such period which is deemed, under the provisions of this Ordinance, to be assessment
year in respect of any income for any period;
(iii) Resident
Individual:
An individual who has been in Bangladesh:
(i) for a period of, or for periods amounting in all to, one hundred and eighty-two days or more
in that year; or
(ii) for a period of, or periods amounting in all to, ninety days or more in that year having
previously been in Bangladesh for a period of, or periods amounting in all to, th r ee hundred
and sixty-five days or more during four years preceding that year;
Hindu Undivided family:
A Hindu undivided family, firm or other association of persons, the control and management of whose
affairs is situated wholly or partly in Bangladesh in that year; and
Company:
A Bangladeshi company or any other company the control and management of whose affairs is situated
-
wholly in Bangladesh in that year;
Do you think that the judicial character of the taxes appellate tribunal cannot PE — III
be restored unless it is reconstituted with judicial personnel and made May — June, 2004
accountable to Ministry of Law and parliamentary Affairs? State your arguments.
In pursuance with sec. 11 of the ITO 1984 Taxes Appellate Tribunal is consisting of a President and
such other members as th e Government may, from time to time appoint. Th e law
prescribed 8 categories of person to be member of the Tribunal out of whom one is appointed President
thereof. There was a provision for judicial member shall be a person who is or has been a District Judge
or who has practiced as an advocate in a District or Session Judge court for a period of not less than ten
years. Finance Act 2002 omitted the provision and thereafter employment of judicial member became
optional. The Taxes Appellate Tribunal is with quasi-judicial authority and absence of judicial member has
undermined its judicial character.
Further the Taxes Appellate Tribunal is administered by the Ministry of Finance being the enforcing
agency of tax laws. Administration of judiciary function by enforcing agency is contradictory to the
principle of independent judgment.
In view of above, reconstitution of the Tribunal with judicial person and to make it accountable to the
Ministry of Law and Parliamentary Affairs seems essential to restore its judicial character.
PE — III
State the tax rates for corporate tax payers on incomes including the May — June, 2004
changes that have been given effect to by the Finance Act, 2003.
Particulars Tax rate
Every company which is publicly traded At 30% on total taxable income except dividend
company except Bank, Insurance and income.
financing organizations Condition 1:If anypubliclytradedcompany pay
dividend @ 20% or more then it will get tax
rebate @ 10% on applicable income tax. i.e. 27%.
Condition 2: If a publicly traded company pay
dividend less than 10% or fails to pay dividend
within the prescribed time as declaredby SEC then
tax rate will be chargeable @37.5%.
Every company other than publicly traded At 37.5 on total taxable income except dividend
companies income.
In case of Bank,Insurance and finance At 45% on total taxable income except dividend
Organizations income.

The company who is registered under
companies act 1994 and declares dividend
whether interim or otherwise on or after the first
day of july, 2003 shall pay, in addition to tax
payable under this ordinance dividend
distribution tax at the rate of 10% on such
dividend within sixty days from the date of such
declaration.
PE — III
Point out various forms of assessment. State the procedures of best judgment May — June, 2004
assessment and reassessment in case of income escaping assessment.
Forms of assessment:
Particulars Section reference
according to ITO 1984
Provisional assessment 81
Assessment on correct return 82
Assessment under simplified procedure 82A
Assessment on the basis of return 82B
Tax on income of certain persons(Final settlement) 82C
Spot assessment 82D
Assessment after hearing 83
Self assessment 83A
Self assessment of private limited companies 83AA
Assessment on the basis report of a Chartered Accountant 83AAA
Best judgment assessment 84
Special provisions regarding assessment of firms 85
Assessment in case of change in the constitution of a firm 86
Assessment in case of constitution of new successor firm 87
Assessment in case of succession to business otherwise than on death 88
Assessment in case of discontinued business 89
Assessment in case of partition of a Hindu undivided family 90
Assessment in case of persons leaving Bangladesh 91
Assessment in case of income of a deceased person 92
Assessment in case of income escaping assessment, etc 93
Best judgment assessment:
Where any person fails -
(a) To file the return required by a notice under section 77
(b) Has not filed a return or revised return under section 78
(c) To comply with the requirements of a notice under section 79 — Production of accounts and documents
(d) To comply with the requirements of a notice under section 80 — Statement of assets, liabilities and
life style.
(e) To comply with the requirements of a notice under section 83(1)- Assessment after hearing.
Consequence: Best Judgment assessment
The Deputy Commissioner of Taxes shall, by an order in writing, assess the total income of the assessee to
the best of his judgment and determine the sum payable by the assessee on the basis of such
assessment; and in the case of firm, may refuse to register it or may cancel its registration if it is already
registered, and communicate such order to the assessee within thirty days next following.
Relevant information
Deputy Commissioner of Taxes shall be construed as misconduct; if he/she has proved by the Board that
the best judgment assessment made by him/her shows lack of proper evaluation of legal and factual
aspects of the case, which has resulted in an arbitrary and injudicious assessment.
Income escaping assessment: Section 93 of ITO 1984.
If, for any reason, any income chargeable to tax for any assessment year
 has escaped assess ment
 has been under assessed or
 has been assessed at too low a rate or

 has been the subject of excessive relief or refund
The Deputy Commissioner of Taxes may issue a notice to the assessee containing all or any of the
requirements which may be included in a notice under section 77(Notice for filling return) and may
proceed to assess or determine, by an order in writing, the total income of the assessee or the tax
payable by him,
Rate of tax
The tax shall be charged at the rate or rates applicable to the assessment year for which the assessment
is made
Special Conditions
No proceeding shall be initiated unless definite information has come into the possession of the Deputy
Commissioner of Taxes and he has obtained the previous approval of the Inspecting Joint
Commissioner in writing to do so, except in a case where a return has not been filed under section 75 or 77.
Issuance of notice with time limitation
The DeputyCommissioner of Taxes may issue a notice
i. Any case in which he has reason to believe that the assessee or any other person on his behalf has
not filed a return under section 75 or 77, at any time;
ii. Any case in which he has reason to believe that the assessee has for any assessment year
concealed
 particulars of his income or
 furnished inaccurate particulars thereof or
omitted or failed to disclose all material facts necessary for the assessment for such year, within five
years from the end of the assessment year for which the assessment is to be made
iii. any other case, within two years from the end of the assessment year for which the assessment
is to be made.
Where an assessment or any order has been annulled, set aside, cancelled or modified, the concerned
income tax authority may start the proceedings from the stage next preceding the stage at which such
annulment, setting aside, cancellation or modification took place
"Incomes are subject to deduction of tax at source under section 49(1)." List PE III —
the heads of income from which such deductions are applicable. Explain in Nov- Dec,2004
brief the provision of rate of such deduction from at least ten heads of Income.
Income under the following heads are subject to the deduction of tax at source under Section 49(1) of
ITO 1984:
 Salary to an employee.
 Discount on the real value of Bangladesh Bank Bills,
 Interest on securities,
 Supply of goods, or execution of contracts,
 Import of goods,
 Indenting commission,
 Winning from lottery or crossword puzzles,
 Income from house property,
 Export of manpower,
 Purchase of goods or property (other than plot of land) by public auction,
 Acting in films,
 Shipping agency commission,
 Commission, discount or fees payable to a distributor or marketing agent of a manufacturer,
 Interest on savings deposits, fixed/term deposits and share of profits on term deposits,
 Insurance commission payable to an insurance agent,
 Income under 'capital gains',
 Fee for professional or technical services,
 Royalty or technical know-how fee,
 Commission receivable by a clearing and forwarding agent,
 On the sale of banderols of cigarettes manufactured manually,
 Compensation against acquisition of property,
 Interest on savings instruments,
 Income derived by brick manufacturers,
 Services rendered by doctors to a hospital or a diagnostic centre,
 Commission on letters of credit,
 Fee to a surveyor of general insurance company,
 Commission or charges to a foreign buyer's agent,
 Di vidends,
 Stevedoring and private security services,
 Shipping business of a resident,
 Business of real estate and land developer,
 Export of knitwear or woven garments,
 Transactions of shares, debentures, mutual funds, bonds or securities by a member of stock exchange,
 Income of courier business by a non-resident,
 Export cash subsidy,
 Use of credit card by a credit card holder,
 Transfer of property,
 Income chargeable under the Ordinance payable to a non-resident,
 On registration or renewal of fitness of bus, truck, minibus, coaster, etc,
 On registration or renewal of certificate for marine vessels plying on inland water including cargo, coaster,
dumb barge but excluding oil tanker.
Ten heads of income from which tax deducted at source and the applicable rates:
1 53A Income from House Property: Up to Tk15,000/month = Nil
classifiable under the head "income Above Tk 15,000 to 35,000 /month @
from house property" 3%
Above Tk35,000/month @ 5%
2 53B Export of Manpower: 10% Final
DeemedIncome derived on account of discharge
export of manpower
3 53C Purchase of Public Auction: Deemed 3% of Sale price Final
Income derived on account of purchase by discharge
public auction excluding land
4 53D Income of Actors: when 5%
exceeding Tk 36,000 in a year derived on
account of acting in films-
5 52 Shipping AgencyCommission: Income 5%
derived on account of shipping agency .
Commission -
6 53E Distributor's Commission: 5%
Income derived fromcommission. discount or
fees payable to distributorsfor Distribution or
marketing of manufactured goods
7 53F Interest on Saving Deposit e t c : 10%
I n c o m e d e r i v e d o n account of
interest on saving deposits, fixed
deposits or term deposits and/or share of
profit on term deposits from
Banks or w.e.f 01July'05Financial Institutions
8 53G Insurance Commission:
including Leasing at House Finance 5% Final
Income derived on account of insurance discharge
commission or otherwise
9 53H Property Transfer: DeemedIncome-on 5% Final
transfer/ registration of "immoveable" discharge
PropertyFee - Payable by any hospital or
10 53A Doctor' 5%
(1) diagnostic Centre.
In every income tax case the first and most important factor is the PE III —
residentialstatus of the assessee". Discuss the factor, distinguishing the various Nov- Dec,2004
residential categories andstate how the appropriate category is determined in
the case of an individual, a firm and a company. To what extent is the taxable
income or the rate of tax is affected by the residential status.
Distinguishing factor:
a) Days the person (Individual) has been in Bangladesh
b) In case of company the control and management;
c) In case of firm the control and management.
d) Income;
e) Rat e di ff e r en c e
Determination of residential status: According to Section 2(55) of ITO 1984:
Individual:
An individual who has been in Bangladesh:
(i)for a period of, or for periods amounting in all to, one hundred and eighty-two days or more in that
year; or (ii)for a period of, or periods amounting in all to, ninety days or more in that year having
previously been in Bangladesh for a period of, or periods amounting in all to, three hundred and sixty-five
days or more during four years preceding that year:
Hindu Undivided family:
A Hindu undivided family, firm or other association of persons, the control and management of whose
affairs is situated wholly or partly in Bangladesh in that year; and
Company:
A Bangladeshi company or any other company the control and management of whose affairs is situated
wholly in Bangladesh in that year;
Taxable income and the rate:
Resident Non-resident
U/s 2(55) U/s 2(42)
Tax on "Global' (work) income Tax on Bangladesh income only
Tax at prescribed rate(s): Tax at prescribed rate(s):
Individual: Entitled to threshold exemption of Tk 150K Individual: At a maximum rate of 25%having no such
and investment allowance (30% of total income-limit benefits.
Tk=250K) rebate at 15%
Company: At prescribed applicable rate — including Company: Not entitled to
entitlement to tax-holiday(4/6 years) or reduced rate (i) Publicly traded status
(10%-20%) exemption in applicable case(s) ( i i ) T a x - h o l i d a y Or
(iii)Certain reduced rate or exemption
Discuss the legality of action where property is attached in lieu of tax in PE III
—
arrearswhen no intimation of arrears was received by the assessee and Nov- Dec,2004
explain whether or not fee paid to advocate for defending the transfer of factory
land under the settlement scheme are exempt from levy of tax.
The DCT is empowered to issue certificate for the recovery of tax to the Tax Recovery Officer(TRO)
U/S 138 of ITO 1984. On receiving the certificate the TRO may proceed for the attachment and sale, or
sale without attachment, of any moveable or immovable property of the assessee U/S 139. However,
intimation of arrear to the assessee is a pre-requisite for the attachment of the property( MisriBai V. ITO
ITR 487 and N.B Films V. Daya Shankar, ITR 676)
Since legal fee paid to advocate for defending the property under settlement scheme is a genuine
business expenditure, the amount would be an allowable expenditure U/S 29 of ITO 1984.
"Certain conditions and procedures are to be fulfilled in case of self - —PE III
assessmentfor private limited company". Discuss the provisions relating to self- Nov- Dec,2004
assessment under section 83AA for Private Limited Companies.
Self-assessment of Private Limited companies
According to Section 83AA and Rule38
A private limited company may also file return under the self-assessment procedure by fulfilling the
conditions as mentioned below:
a) Files a return on or before the date specified in clause ( c) of sub-section(2)of section75,
b) The income shown in such return is higher by not less than 5% over the last assessedincome
and has also increased by at least a further sum of 5% for each preceding assessment year in
respect of which the assessment ispending
c) Pays tax on the basis of such income or Tk.50,000which ever is highe r on or before the data on
which the return is filed.
d) Such return shall be accompanied by a copy of the accounts of the company audited by a
charte red ac countan t;
e)Tax shall be paid on or before the date on which the return is filed
f ) The assessment on the basis of such return shah not result in any refund.
PE III
—
Nov- Dec,2004
Pointout the distinctions between setoff of losses and carrying forward of losses.

Particulars Set off loss u/s 37 Carry forward oflosses: u/s 38-42
Income from Businessor Loss arising year: Limit six years: only
Professionexcept Setoff asmentionedu/s37and if not set off againstbusiness loss
Speculation business fully thencarryforwardto the
subsequent year.
Speculation loss Setoffagainst speculationloss Limit six years:onlyagainst

speculation income
Loss under capital gain Set offagainst capitalgainfrom other Limit six years: only if in e x c e s s
sources of capital gain. o f T k 5 , 0 0 0 against capital
gain
Agricultural income Loss arising year: Limit sixyears:
Set off as mentionedu/s37andif not set off onlyagainstAgricultural
fullythencarryforwardto the subsequent income
year
a) In which scenario tax depreciation is allowed on straight line method? PE — III
b) In which case, reduced rate of tax are applicable? May- June,
c) In which case capital gains arising on transfer of shares are exempted 2005
(a): When Straight line method of depreciation is allowable

Straight line method is allowed in case of second hand Ocean —going ship.
According to SRO #177 —IT/2002 under 44(4)(b) of 03 July 2002 wef (July 1 2002)
New (Industrial/infrastructure/tourism) ventures neither expansion unit not take the privilege of tax
holiday (u/s 46A) or accelerated depreciation or not entitled to those, set up in between 01 July 2002 -30
June 2005 are entitled to reduce @20% rate of tax for five years. In this case the ventures use straight
line depreciation method rather than written down value method.
(b): Reduced rate of tax are applicable in the following cases:
Cases Rate
According to SRO #177 —IT/2002 under 44(4)(b) of 03 July 2002 wef (July 20%
1 2002 New (Industrial/infrastructure/tourism) ventures neither expansion unit
not take the privilege of tax holiday (u/s 46A) or accelerated depreciation or
not entitled to those, set up in between 01 July 2002 -30 June 2005 are
entitled to reduced rate of tax for five years.
According to SRO #218 —IT/2003 under 44(4)(b) of 19 July 2003 15%
Textile sector industries not enjoying tax holiday
Ready made garments (RMG) not enjoying tax holiday
Jute sector industries not enjoying tax holiday
According to SRO #169 —L/2001 under 44(4)(b) of 28 June 2001 25%
Local authorities rendering public utility services, having NBR approval
(c): The following cases where capital gains arising on transfer of shares areexempted
According to section 32(7) of ITO 1984:
where a capital gain arises from the transfer of a capital asset being Government securities and stocks and
shares of public companies listed with a stock exchange in Bangladesh, then no tax shall charged.
According to SRO#114-L/99 of 26 May 1999 —On transfer of shares of "PrivatePower
Generation Company"
Mention the rate of normal depreciation of the following class of assets as per the PE — III
Third schedule, ITO 1984: May- June,
I) Building (general) 2005
II) Factory building
III) Machinery & plant
IV) Mineral oil concern-below ground installation
Normal depreciation rate:

According to clause 3(1) of Third Schedule of ITO 1984:
Particulars Depreciation rate

i) Building (General) 10%
ii) Factory Building 20%
iii) Machinery & Plant- General 20%
iv)
Machinery & Plant- Ships 12-24%
Machinery & Plant- Cinema machinery, Battery 20%
Machinery & Plant- Motor vehicles plying for hire 24%
Machinery & Plant- Motor vehicles Not plying for hire 20%
iv)Mineral oil concerns —below ground installation . 100%
Writeshort notes on the following in relation to Income Tax Ordinance 1984: PE — III
a)Business connection May- June,
b)Excess perquisites on employer's assessment 2005
c)Excess profi t tax
d)Unabsorbed depreciation
e)Dividend distribution tax
(a) Business Connection
In generality there should be a business in Bangladesh and a connection between the person sought to be
taxed and that business or person should have earned income from that connection.
Business connection is referred to the following Sections and Rules of ITO and ITR 1984:
Section 18(2) (a) of ITO 1984
Income deemed to accrue or arise in Bangladesh
Any income accruing or arising, whether directly or indirectly, through or from any business connection
in Bangladesh.
Any business carried on between a resident and a non-resident, arranged in a manner that relevant
transactions produces to the resident either no profit or profit less than the ordinary profit is treated as
business connection by the Deputy Commissioner of Taxes.
According to Rule 34 of ITR 1984
If the actual amount of the income, profits or gains accruing or arising to any person residing out of
Bangladesh whether directly or indirectly through or from any business connection in Bangladesh or
through or from any property in Bangladesh or through or from any asset or source of income in
Bangladesh in cash or in kind cannot be ascertained, a reasonable percentage of the turnover so
accruing or arising treated as income.
(b) Excess perquisites on employer's assessment

Perquisite means
(i)any payment made to an employee by an employer in the form of cash or in any other form excluding
basic salary, festival bonus, incentive bonus not exceeding ten percent of disclosed profit of relevant
income year, arrear salary, advance salary, leave encashment or leave fare assistance and overtime, and
(ii)any benefit, whether convertible into money or not, provided to an employee by an employer, called by
whatever name, other than contribution to a recognized provident fund, approved pension fund,
approved gratuity fund and approved superannuation fund.
(iii)According to Section 30(e) of ITO 1984:
Excess perquisites on employer's assessment means so much of the expenditure by an assesseeon the
definition of perquisites, as defined above, to any employee exceeds taka two lakh
(c) Excess profit tax

According to Section 16 (C) of ITO 1984:
Where a banking company shows profit in its return of income for an income year at an amount exceeding
fifty per cent of its capital as defined under the said Act together with reserve, the company, in addition to
tax payable, shall pay an excess profit tax for that year at the rate of fifteen per cent on so much of
profit as it exceeds fifty per cent of the aggregate sum of the capital and reserve as aforesaid.
(d) Unabsorbed depreciation

According to Section 42(6) & (7) of ITO 1984:
The amount of depreciation allowance of any year which cannot be absorbed due to the non-availability of
profits or gains chargeable for that year or such profits or gains being less than the allowance then, the
allowance or part of the allowance to which effect has not been given is treated as unabsorbed
depreciation. The amount of unabsorbed depreciation of any year shall be added to the amount of the
allowance for depreciation for the following year and be deemed to be part of that allowance or if there is
no such allowance for thatyear, be deemed to be the allowance for that year and so on for succeeding
years.
When depreciation allowance is carried forward, then it can be set off after giving effect of business
loss and speculation loss.
(e) Dividend Distribution tax

According to Section 16(D) of ITO 1984:
Where a company registered under Company's Act 1994 declares otherwise, on or after the first dayof
July,2003, the company shall pay, in addition to tax payable, dividend distribution tax at the rate of ten
percent on such dividend within sixtydaysfrom the date of such declaration.
Dividend distribution tax was withdrawn by Finance Act 2005.
PE— III
What are the changes brought in the Finance Act 2005 in section 46A of the ITO 1984 Nov Dec,
regarding investment of exempted income of a tax holiday company? 2005
The following changes/brought in the Finance Act 2005 in section 46:

a) 30% of the exempted income to be invested during the period of the exemption or within one year
there after in the said undertaking or in any new industrial undertaking
b) 10% of the exempted income to be invested within 3(three) months of the year closing in listed shares.
Provided that the quantum of investment shall be reduced by the amount of dividend, if any, declaredby the
company enjoying tax exemption under this section.
PE— III
Prepare, in brief a schedule of incomes that are included in "Income from other Nov Dec,
sources". Under section 33 of the Income Tax Ordinance, 1984. What are the 2005
admissible and inadmissible expenses under this head?
According to section 33 of ITO 1984
The following income of an assessee shall be classified and computed under the head "Income from other
sources", namely:
a)Dividend and interest;
b)Royalties and fees for technical services;
c)Income from letting of machinery, plants or furniture belonging to the assessee,and also of buildings
belonging to him if the letting of buildings is inseparable from the letting of the machinery, plant or furniture;
d)Any income which falls under section
19 (1)-Unexplained credit.
19(2) —Under recorded investment in bullion, jewellery
19(3) — Unexplained expenditure
19(4) — Unexplained investment
19(5) - Unrecorded investment
19(8)- Purchase value of assets is shown lessthan the fair market value.
19(9)- Lump sum amount received for salami or premia
19(10) Goodwill money received
19(11)- Cancellation of indebtness
19(12) —Managing agency commission
19(13)- Winning from lotteries &
19(21) or 19(21A) applies.
(e)Any other income of any kind or from any source that is not classifiable under any of the other heads
Admissible items
According to section 34 of ITO 1984 the followings are admissible items:
(1) The amount of interest paid in respect of money borrowed for the purpose of acquisition of shares of a
company.
(2) Any expenditure, not being in the nature of capital expenditure or personal expenses of the
assessee, incurred solely for the purpose of making or earning the relevant income.
(3) Where the income is derived from letting on hire of machinery, plant or furniture belonging to the
assessee and also of building belonging to him if the letting of the building is inseparable from the
letting of such machinery, plant or furniture.
Inadmissible items
(a) Any interest chargeable under this Ordinance which is payable outside Bangladesh on which tax has
not been paid and from which tax has not been deducted at source.
(b) Any payment. which is chargeable under the head "Salaries" if tax has not been paid thereon or
deducted there from
Write short notes on the following in relation to Income Tax Ordinance,1984: PE— III
a) Double taxation avoidance agreement Nov Dec,
b) Best Judgment assessment 2005
d) Capital gain
c) Refund of tax
(a) Double taxation avoidance agreement
The Government of Bangladesh may enter into an agreement with the Government of any other country for
the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income
leviable under this Ordinance and under the corresponding law in force in that country.
Objectives of Double taxation avoidance agreement
(a)Relief from the double tax payable;
(b)Determining the income accruing or arising, or deemed to be accruing or arising, to non-residents from
sources within Bangladesh;
(c)Where all the operations of business or profession are not carried on within Bangladesh,determining
the income attributable to operations carried on within or outside Bangladesh, or the income chargeable
to tax in Bangladesh in the hands of non-residents, including their agencies, branches or establishments in
Bangladesh;
(d)Determining the income to be attributable to any person resident in Bangladesh having any special
relationship with a non-resident;
(e)Recovery of tax leviable
(f)Exchange of information for the prevention of fiscal evasion
(g)To attract FDI in Bangladesh.
Bangladesh generally follows UN model of Avoidance of Double Taxation Agreement, which consists 29
Articles. Instances are Scope of the convention; Taxes covered, General definitions, Permanent
establishment, Dividends, Interest, Royalties etc.
Name of countries to which Double taxation agreement in force:Republic of
Korea,Canada, Pakistan , United Kingdom of Great Britain and Northern Ireland, Singapore, Sweden,
Romania, Sri Lanka, France, Japan, India, Malaysia, Germany, Italy, The Netherlands, Denmark,
China, Belgium, Thailand, Poland, Philippines, Norway, USA.
(b) Best Judgment assessment

Where any person fails -
(a)To file the return required by a notice under section 77
(b)Has not filed a return or revised return under section 78
(c)To comply with the requirements of a notice under section 79 - Production of accounts and documents
(d) To comply with the requirements of a notice under section 80 - Statement of assets,liabilities and
life style.
(e)To comply with the requirements of a notice under section 83(1)- Notice for the production of evidence
and supporting and for hearing.
The Deputy Commissioner of Taxes shall, by an order in writing, assess the total income of the assessee to
the best of his judgment and determine the sum payable by the assessee on the basis of such
assessment; and in the case of firm, may refuse to register it or may cancel its registration if it is already
registered, and communicate such order to the assessee within thirty days next following.
The assessment under section 84 of ITO 1984 is commonly known as exparte or best judgment assessment.
An exparte assessment shall be construed as misconduct of concerned Deputy Commissioner of Taxes
if the Board proves him/her that the best judgment assessment made by him/her shows lack of proper
evaluation of legal and factual aspects of the case, which has resulted in an arbitrary and
injudicious assessment.
(c) Refund of tax

A person, who satisfies the Deputy Commissioner of Taxes or other authority appointed by the Government
in this behalf that the amount of tax paid by him or on his behalf, or treated as paid by him or on his
behalf, for any year exceeds the amount with which he is properly chargeable for that year, shall be
entitled to a refund of any such excess.
Claim of refund for deceased or disabled persons u/s 147of ITO 1984
In case of death, incapacity, insolvency, liquidation or other cause, a person, is unable to claim or
receive any refund due to him, his legal representative, or the trustee, guardian or receiver, can claim or
receive such refund for the benefit of such person or his estate.
Correctness of assessment, etc., not to be questioned u/s 148 of ITO 1984
No question shall be raised by the claimant regarding correctness or validity of any assessment or other
matter, which has become final and conclusive
Interest on delayed refund u/s 151 of ITO 1984
Interest at the rate of 7.5% per annum shall be payable to the assessee on the amount of refundfrom the
month following the said two months to the date of issue of the refund. Where a refunddue to an
assessee is not paid within two months of the date of the claim for refund.
(d) Capital gain

Tax shall be payable by an assessee under the head "Capital gains" in respect of any profits and gains
arising from the transfer of a capital asset and such profits and gains shall be deemed to be the income of
the income year in which the transfer took place:
What is capital gain?
In a transfer of capital asset, amount remaining after deduction of the followings from the full value of
consideration receivable or the fair market value of the asset whichever is higher, would be treated as
capital profit or capital gain.
(a)Any expenditure incurred solely in connection with the transfer of thecapital asset.
(b)The cost of acquisition of the capital asset and any capital expenditure incurred for any improvements
"Cost of acquisition of the capital asset" means--
(i)Where it was acquired by the assessee by purchase, the actual cost of acquisition; and
(ii) Where it became the property of the assessee-
 Under a deed of gift, bequest or will; or
 Under a transfer on a revocable or irrevocable trust; or
 On any distribution of capital assets on the liquidation of a company; or
 On any distribution of capital assets on the dissolution of a firm or other association
of persons or the partition of a Hindu undivided family;
The actual cost of acquisition to the previous owner of the capital asset as reduced by the amount of
depreciation, if any, allowed to the previous owner; and where the actual cost of acquisition to the
previous owner cannot be ascertained, the fair market value at the date on which the capital asset
became the property of the previous owner:
Where in the opinion of the Deputy Commissioner of Taxes the fair market value of a capital asset
transferred by an assessee as on the date of transfer exceeds the full value of the consideration
declared by the assessee by an amount of not less than 15% of the value so declared, the fair market
value of the capital asset shall be determined with the previous approval of the Inspecting Joint
Commissioner.
Where in the opinion of the Deputy Commissioner of Taxes the fair market value of a capital asset
transferred by an assessee as on the date of the transfer exceeds the declared value thereof by more
than 25% of such declared value, the Government may offer to buy the said asset in such manner as may
be prescribed.
Where a capital gain arises from the transfer of a capital asset being Government securities and stocks and
shares of public companies listed with a stock exchange in Bangladesh, then no tax shall be charged.
Example:
Cost of a capital asset Tk.100, 000
Written down value Tk. 60,000
Sales value or consideration received Tk.120, 000
Here Capital gain= Tk (120,000-100,000)= Tk.20,000
Write short notes in relation to the PE — Ill

ITO 1984:- May- June,
a) Advance tax 2006
b) Self-assessment
c) Tax holiday
(a) Advance tax:
The provision for the payment of tax in advance of assessment is commonly known as advance tax. In
pursuance with section 64 of ITO 1984 advance tax shall be payable by an assessee during each
financial year if the total income excluding Agricultural income and Capital gain of the latest income year
in respect of which hehasbeen assessed by way of regular assessment, or has been provisionally assessed
exceedsthree lakh taka.
As per section 65 of ITO 1984 the amount of advance tax payable by an assessee in a financial year shall
be the amount equal to the tax payable on his total income of the latest income year as assessed on
regular basis or provisionally, as the case may be, as reduced by the amount of tax required to be
deducted or collected at source. Advance tax could also be paid on the basis of estimate, when tax
payable by the assessee for relevant assessment year is likely to be less than the amount of tax as
computed under section 65.
The tax is calculated at the rates in force in respect of the financial year for which income applying and
payable in four equal installments on 15th September, 15th December, 15th March, 15th June.
(b) Self-assessment
The scheme of assessment of tax by assessee himself is known Self -assessment. As provided in
Sections 83A and 83AA of ITO 1984 and Rule 38 of ITR 1984, subject to certain conditions a ll a ssessee
other tha n publi c limi te d compa nie s derivin g income under a n y h ead ca n submit their ret u rn
under the scheme. The return shall be ma rked as 'self assessment'. There need not be any
separate assessment order, however, the receipt issued by the tax department shall be deemed to
be an assessment orde r under section 82 of the ITO 1984.
(C) Tax holiday
Tax holiday means tax exemption. Subject to certain conditions the profits and gains of an industrial
undertaking, tourist industry or physical infrastructure facility are exempted from tax under section 46A and
Rules 59A of ITO/ITR 1984. The application for tax holiday is made to the Board within six months from
the end of the month of commencement of commercial production or operation and the Board shall
give its decision within forty -five days from the date of receipt of the application. The period of tax
holiday is 4 years for developed area and 6 years for least develop area.
The profits and gains of the undertaking shall be computed separately from other income, profits and gains
of the assessee and loss could only be set off against the profits and gains of the same undertaking but
could not be carried forward beyond the period of exemption. The capital gain earned by a tax holiday unit
and the dividend distributed out of exempted profit shall not be exemp t f rom tax.
What are the income that are excluded as per the 6th Schedule, part A of the ITO PE — Ill
1984 in computing total income of the following assessees : May- June,
a)Non GovernmentOrganisation registered with NGO Bureau: 2006
b)T r u s t :
c)Religious or charitable institution
Issues Section/Schedule reference Income that are excluded

Non-Government Organization Clause 1A of Part-A of Income derived from Micro credit
(NGO) registered with NGO 6 th Schedule under section 44(1) operation.
Affairs Bureau of ITO 1984
Trust Clause 1of Part-A of 6th Income from housepropertywhere the

Schedule under section 44(1) of house property is used wholly for
ITO 1984 r e l i g i o u s o r c h a r i t a b l e purpose
and in the case of property so held in
part only f o r s u c h
p u r p o s e s , t h e income applied or
finally set a p a r t f o r a p p l i c a t i o n
Religious or charitable Clause 2 of Part-A of 6 th thereto.
Income from voluntarycontribution and
institution Schedule under section 44(1) of used solely for religious or charitable
ITO 1984 purpose. The part of thetotal income of
a private religious trust that does not
ensure the benefit of the public
shall not be exempt from tax.
PE — Ill
Discuss the provisions of section 93 of the ITO 1984 for assessment in case of May- June,
income escaping assessment. 2006
Assessment in case of income escaping assessment
If, for any reason, any income chargeable to tax for any assessment year
 has escaped assess ment
 has been under assessed or
 has been assessed at too low a rate or
 has been the subject of excessive relief or refund

The Deputy Commissioner of Taxes may issue a notice to the assessee containing all or any of the
requirements which may be included in a notice under section 77(Notice for filling return) and may
proceed to assess or determine, by an order in writing, the total income of the assessee or the tax
payable by him,
Rate of tax
The tax shall be charged at the rate or rates applicable to the assessment year for which the assessment
is made.
Special Conditions
No proceeding shall be initiated unless definite information has come into the possession of the Deputy
Commissioner of Taxes and he has obtained the previous approval of the Inspecting Joint
Commissioner in writing to do so, except in a case where a return has not been filed under s e c t i o n 7 5 o r
77.
Issuanceof notice with time limitation
The Deputy Commissioner of Taxes may issue a notice
i) In any case in which he has reason to believe that the assessee or any other person
on his behalf has not filed a return under section 75 or 77, at any time:
ii) In any case in which he has reason to believe that the assessee has for any
assessment year concealed
 particulars of his income or
 furnished inaccurate particulars thereof or
 omitted or failed to disclose all material facts necessary for the assessment
for such year, within five years from the end of the assessment year for which the
assessment is to be made.
iii)In any other case, within two years from the end of the assessment year for which
the assessment is to be made.
Where an assessment or any order has been annulled, set aside, cancelled or modified, the concerned
income tax authority may start the proceedings from the stage next preceding the stage at which such
annulment, setting aside, cancellation or modification took place.
a) What are the basic information an individual assessee is required to provide in IT PE — Ill
10BB? May- June,
b) How the information provided in IT 10BB is linked with the information contained in IT- 2006
10B of the assessee?
(a)
IT 10BB referred to section 75(2) (d) (i),section 80 and rule 25 A of ITO/ITR 1984
An individual assessee is required to file the following basic information in IT 10 BB:
1.Information about residence
2.Information regarding vehicle
3.Annual expenses on electricity and telephone
4.Information children's education institution and expenses
5.Information regarding foreign visit(s) during the year
(b)
IT 10 B is the prescribed proforma of assets, liabilities and expenses of self, spouse, minor children or
dependents of an assessee which he require to file under section 75(2) (d) (i), section 80 and rule 25 of
lTO/ITR 1984.
IT 10BB asked for the information regarding ownership of assessee's house and vehicle whereas IT 10 B is for
the disclosure of house and vehicle owned by the assessee. IT10 B asked for thedisclosure of family
expenditure and other special expenditure and IT 10BB called for children education expenses, electricity,
telephone and car maintenance expenses.
Write short notes on the following in relation to Income Tax Ordinance 1984: PE — Ill
a) Annual value of the house May- June,
b) Accelerated depreciation 2006
c) Set off & carry forward of losses —change made by FA 2005.
d) Intangible additions
e) Tax audit
(a) Annual value of the house
According to section2(3) of ITO 1984
"Annual value" in relation to any property let out,—
(i)the sum for which property might reasonably be expected to let from year to year; or
(ii)where the annual rent in respect thereof is in excess of the sum referred to in paragraph (i), the amount
of the annual rent;
(b) Accelerated Depreciation
According to paragraph of 7 of 3 rd schedule of ITO 1984
(
In the case of any machinery or plant (other than office appliances and road transport vehicles)
which,nothaving been previously used in Bangladesh, has been or is used in an industrial undertaking
set up in Bangladesh between the first day of July, 1977 and the thirtieth day of June, 2008(both days
inclusive), an amount by way of accelerated depreciation allowance shall, be allowed and computed
subject to fulfillment of certain conditions:
i) The industrial undertaking is owned and managed by a Bangladeshi
company, or a body corporate formed in pursuance of an Act of Parliament, having
its registered office in Bangladesh;
ii) It belongs to such class of industries as the Board may, by notification in the
official Gazette, specify in this behalf;
iii) The particulars as required have been furnished
Accelerated Depreciation rate

(a) for the first year in which the undertaking 50% of the actual cost of plant andmachinery to the assessee
starts commercial production
(b) for the next following second year -- 30% of the actual cost of plant andmachinery to the
assessee
(c) for the next following third year- 20% of the actualcost of plant andmachinery to the assessee.
The machinery or plant on which accelerated depreciation has been allowed under this
paragraph shall not be entitled to any other depreciation allowance under this Ordinance or the
Income-tax Act,1922 (XI of 1922)
According to paragraph of 7(A) of 3 rdschedule of ITO 1984 (Expansion unit)

Accelerated depreciation is also applicable on machinery and plant subject to fulfillment of certain
conditions:
In the case of machinery or plant (other than office appliances and road transpor t vehicles) which not
having been previously used in Bangladesh, has been or is used-
a) In the expansion unit, set-up between the first day of July, 1995 and the thirtieth day of
June,2005(both days inclusive) in any existing undertaking
b)Between the first day of July, 1995 and the thirtieth day of June, 2005(both days inclusive) in
the treatment and disposal of toxic and environmentally hazardous wastes
(a) for the first year in which the expansion unit starts 80% of the actual cost of plant and machinery to the
commercial production assessee
(b)for the next following year-- 20% of the actual cost of plant and
machinery to the assessee
(c) The set off and carry forward of losses -change made by Finance Act 2005
The changes made by Finance Act 2005 relating set off and carry forward of losses undersection
37 of ITO 1984 is as follows;
Provided that any loss in respect of any speculation business or any loss under the head "Capital
gains" or any loss from any other source, income of which is exempted from tax shall not be so set off,
but shall, excluding any loss from any other source, income of which is exempted from tax, in
accordance with the provisions of the Income Tax Ordinance 1984, be set off, or be carried forward to
succeeding assessment year or years for set off, against any income in respect of speculation
business or any income under the head "Capital gains"
Provided further that for the purpose of this section the Deputy Commissioner of Taxes shall, in com
puttingany loss, deduct any amount received in cash as subsidy from the Government.
(d)Intangible additions
These are like Goodwill, Patent, Trademark or Brand, which are capitalized, items -not allowable as revenue
expenses.
(e) Tax Audit

Tax audit referred to Section 83AAA of ITO 1984
Where a return or revised return is filed by an assessee being a company and the Board has reasonable
cause to believe that the return or revised return is incorrect or incomplete, the Board may appoint a
registered chartered accountant to examine the accounts of that assessee.
Key point:
i. The chartered accountant shall exercise the powers and functions of the Deputy Commissioner
of Taxes
ii. The chartered accountant, after examination of the accounts shall submit a report in writing to the
Board along with findings within specified time
iii. On receipt of the report the Board shall forthwith forward the report to the concerned Deputy
Commissioner of Taxes for consideration.
iv. On receipt of the report the Deputy Commissioner of Taxes shall serve a notice upon the assessee
for hearing.
v. The Deputy Commissioner of Taxes shall, after hearing the person appearing and considering the
evidences by an orderin writing, assess within thirty days after the completion of hearing or
consideration, as the case may be, the total income of an assessee and shall determine the sum
payable by the assessee on the basis of such assessment, and communicate the said order to the
assessee within thirty days from the date of such order.
PE — Ill
Discuss the conditions relevant to charging tax on house property. What deductions May- June,
are allowed for determining taxable amount for charging income tax? 2006
Conditions relevant to charging tax on house property According to section 24 of
ITO 1984:
Tax shall be payable by an assessee under the head "Income from house property" in respect of the
annual value of any propertywhether used for commercial or residential purposes, consisting of any
building and land appurtenant thereto of which he is the owner, other than such portions of the property
as he may occupy for the purposes of any business or profession carried on by him.
Annual value as referred in section 2(3) of ITO 1984 in relation to any property let out, -
(i)The sum for which property might reasonably b e expected to letfrom year to year; or
(ii)Where the annual rent in respect thereof is in excess of the sum referred to above, the amount of the
annual rent;
Where two or more persons own the property and their respective shares are definite and ascertainable,
the owners are assessable on their respective share of income from the property.
Deductions are allowed
According to section 25 of ITO 1984:
i)any sum payable to Government as land development tax or rent on account of the land comprised in the
property;
ii)the amount of any premium paid to insure the property against risk of damage or destruction:
iii)where the property is subject to mortgage or other capital charge for the purpose of extension or
reconstruction or improvement, the amount of any interest payable on such mortgage or charge;
iv)where the property is subject to an annual charge not being a capital charge, the amount of such
charge:
v)where the property is subject to ground rent, the amount of such rent
vi)where the property has been acquired, constructed, repaired, renewed or reconstructed with
borrowed capital, the amount of any interest payable on such capital;
vii)where the property has been constructed with borrowed capital and no income was earned from that
property during the period of such construction, the interest payable during that period on such capital, in
three equal proportionate installments for subsequent first three years for which income is assessable
from that property;
viii)in respect of expenditure for repairs, collection of rent ,w ater and sewerage, electricity and
salary of darwan, security guard, pump -man, lift-man and caretaker and all other expenditure related
to maintenance and provision of basic services;
a. an amount equal to 1/4 of the annual value of the property is used for residential purpose
b. an amount equal to 30% of the annual value of the property where the property is used for
commercial purpose;
ix) where, the whole of the property is let out and it was vacant during a part of the year, a sum equal
to such portion of the annual value of the property as is proportionate to the period of the vacancy;
and
x)where, the property is let out in parts, a sum equal to such portion of the annual value appropriate to
the vacant part as is proportionate to the period of thevacancy of such part.
No deduction is allowed under section 25 in respect of any interest or annual charge payable outside
Bangladesh on which tax has not been paid or deducted as per provisions of chapter VII of ITO 1984.

How would you compute the income from the following sources? PE — Ill
i)Income from tea gardens May- June,
ii) Income from Rubber plantation 2006
iii) Income from Tobacco Industry
(i) Income from tea gardens

According to Rule 31 of ITR 1984:
Allocation of income:
a) 60% agricultural income
b) 40% business income ,
Allowable deductions:
Cost of replacing bushes and development of "new" area under plantation
(ii)Income from Rubber plantation
According to Rule 32 of ITR 1984:
Allocation of income:
a) 60% as agricultural income
b) 40% as business income
Allowable deductions:
Development expense for new plantation area.
(iii)Income from Tobacco Industry
According to Rule 30 of ITR 1984, in the case of income which is partially "agricultural income "and
partially income from “business", in determining that part of income which is from “business” the
market value of any agricultural produce which has been raised by the assesseeor received by him in
kind and which has been utilized as raw material in such business or the sale proceeds of which are
included in the accounts of the business shall be deducted and nofurther deduction shall be made in
respect of any expenditure incurred by the assessee as a cultivator or receiver of the produce in kind.
State the provisions of law in respect of following sections of Income Tax Ordinance PE — Ill
1984: May- June,
i)19AA 2006
ii) 19AAA
iii) 19B
iv) 19BB
v) 19BBB
(i): 19AA: Special tax treatment in certain cases of investments

i)No question as to the source of any sum invested by any person in the expansion or balancing,
modernization, renovation and extension of an existing industry or in thepurchase of stocks and shares of
public limited company listed with any stockexchange in Bangladesh or any sum used for repayment of
industrial loan during the period between the first day January, 1997 and thethirty first day of
December, 1999 (both days inclusive), shall be raised if theassessee pays, before the filing of the return for
the relevant income year, tax at the rate of 7.5% on such sum.
ii)To qualify for the special tax treatment noted in (i) above, stock and shares of a public limited company
purchased from secondary market to be held by the assessee at least for one year from the date of
acquisition.
(ii) : 19AAA: Exemption in respect of investments
i) No question as to the source of any sum invested by an assessee ; being an individual, firm, association of
persons or a private limited company-
(a) Between the first dayof July, 2002and thirtieth day of June, 2005 (both days inclusive) in any trade,
commercial or industrial venture, engaged in production of goods or services shall be raised and no tax
thereon shall be imposed; and
(b) Between the first day of July, 2003 and he thirtieth day of June, 2005 (both days are inclusive) in the
purchase of shares of a company listed with any stock exchange shall be raised and no tax thereon shall be
imposed
ii)Purchase of shares of a company listed with any stock exchange must be hold for 2 years
(iii) 19B Special tax treatment in respect of investment in house property
i)No question as to the source of any sum invested by any person in the construction or purchase of any
building or apartment shall be raised if the assessee pays, before the assessment is completed for the
relevant assessment year, tax at the rate of

Areas Upto200SM Beyond 200SM
(Tax rate) (Tax rate)
Gulshan Model Town, Banani, Baridhara, Defence Officers Tk 300 per SM Tk. 500 per SM
Housing Society(DOHS), Dhanmondi Residential Area, Lalmatia
Housing Society, Uttara Model Town, Bashundhara Residential
Area , Dhaka Cantonment, Motijheel Commercial Area, Dilkusha
Commercial Area ,Kawran Bazar
Commercial Area of Dhaka and Khulshi Residential Area,
Panchlaish Residential Area of Chittagong;
Other areas Tk 200 per SM Tk 300 per SM
(iv) 19BB Special tax treatment in respect of investment in land property

No question as to the source of any sum invested by any person in purchasing of any landshall be
raised if the assessee pays, before the assessment is completed for the relevantassessment year,
tax at the rate of seven and half percent of the deed value of the said land.
(v): 19BBB Special tax treatment regarding investment in motor vehicles
i)No question as to the source of any sum invested by any person in purchasing of motor vehicle, not
plying for hire, shall be raised if the assessee pays tax at the following rate, at the time of registration of
the motor vehicle or before the assessment is completed for the relevantyear:
a) 15% of the purchase value where the car or jeep exceeds 1500 c.c
10% of the purchase value where the car or jeep does not exceed 1500 c.c
What is meant by a company under Income Tax Ordinance 1984? What are the PE - Ill
tax free incomes of a company? State the procedure of assessment of a company and Nov - Dec,
its taxrate. 2006
According to Section2 (20) of ITO 1984:

"Company" means a company as defined in the Companies Act, 1913 (VII of 1913) or Companies Act
1994 and includes—
 a body corporate established or constituted by or under any law for the time being in force;
 any nationalized banking or other financial institution, insurance body and industrial or business
enterprise;
 an association or combination of persons, called by whatever name, if any of such persons is a
company as defined in the Companies Act, 1913 or Companies Act 1994.
 any association or body incorporated by or under the laws of a country outside Bangladesh; and;
 any foreign association or body,[ not incorporated by or under any law], which the Board may, by
general or special order, declare to be a company for the purposes of this Ordinance;
Tax free incomes of a company:
 50% of the income derived from export business. The exemption would not be allowed to a company not
registered in Bangladesh and the company who is enjoying exemption of tax or reduction in the rate
th
of tax by any notification made under ITO 1984(clause 28 of Part A of 6 Schedule of ITO 1984).
 Income from capital gains from transfer of machinery or plant used for the purpose of business or
th
profession (clause 31A Part A of the 6 schedule of ITO 1984).
 Any income not exceeding twenty five thousand taka received from interest on savings
th
instruments(clause 31B Part A of the 6 schedule of ITO 1984),
 Any income from dividend of a mutual fund or a Unit Fund where such dividend does not exceed
th
twenty five thousand taka (clause 22A Part A of the 6 schedule of ITO 1984).
 Any interest classifiable under the head "Interest on securities" receivable by an assessee on any
security of the Government, which is issued with the condition that interest thereon shall not be liable
th
to tax (clause 24 Part A of the 6 schedule of ITO 1984).
 Any income received by an assessee in respect of any share of income out of the capital gains on
th
which tax has been paid by the firm of which the assessee is a partner(clause 18 Part A of the 6
schedule of ITO 1984).
 Capital gain arises from the transfer of capital being buildings or lands to a new company registered
under the Companies Act, 1913 (VII of 1913) or Companies Act 1994 for setting up of an industry, and
if the whole amount of capital gain is invested in the equity of the said company, then the capital gain
shall not be charged to tax as income of the year in which the transfer took place[Sec.32(10) of ITO
1984].
 Where a capital gain arises from the transfer of a capital asset being Government securities and stocks
and shares of public companies listed with a stock exchange in Bangladesh, then no tax is
chargeable [Sec.32(7) of ITO 1984].
Procedure of assessment of a company and its tax rate:
The procedure of assessment of companies as noted in ITO 1984 are the followings: -
a) Provisional assessment u/s 81
b) Assessment on correct return u/s 82
c) Assessment under simplified procedure (other than public limited company) u/s 82 A
d) Assessment on the basis of return u/s 82 B
e) Assessment after hearing u/s 83
f) Self assessment for private limited companies u/s 83AA
g) Assessment on the basis of report of chartered accountant u/s 83 AAA
h) Best judgment assessment u/s 84
The rate of tax for companies are as follows
Nature of company Rate of tax Remarks
Publicly traded company 30% 10% rebate for the company

who pay more than 20%
dividend and 40% tax for the
company who pay less than
10%.
For company other than publicly 40%
traded company
For Bank, Insurance and 45%
Financial Institution
PE - Ill
Explain the provision of Income Tax regarding granting, renewal and cancellation of Nov - Dec,
registration of a partnership firm. 2006
Granting, renewal and cancellation of registration of a partnership firm.
Section 111 of ITO 1984 referred to granting, renewal and cancellation of registration of a partnership firm.
However, the section was omitted by Finance Act 1995
Additional Information regarding cancellation:
If a firm fails to
 Comply with notice for filling return u/s 77;
 Comply with filling of revised return u/s 78;
 Production of accounts and documents u/s 79;
 Statement of assets and liabilities u/s 80
 Comply with notice u/s 83(1)
In the case of firm, m a y r e f us e t o r eg is te r or m a y c a nc el its re g is tra t io n if i t is a lr ea d y registered
Discuss the provision of new section 16CC and 19(24) inserted in the Finance Act, 2006 PE - Ill
regarding minimum tax for company and income from other sources. Nov - Dec,
"The provision of section 16CC is ill framed and contradicts with section 17 of the Income 2006
Tax Ordinance". Please comment in the context of computation of income and tax liability
thereon under the provisions of Income Tax Ordinance, 1984
According to section 16CC regarding minimum tax:

A company for any reason whatsoever, including the sustaining of a loss, the setting off of a loss of an
earlier year, the application of tax credits or rebates, or the claiming of allowances or deductions (including
depreciation and amortization deductions) allowed under this Ordinance or any other law for the time being in
force, tax is not payable or paid by such company for an assessment year, or tax payable or paid by such
company for an assessment year is less than 0.25% of the amount representing such company's turnover
from all sources for that year or taka five thousand whichever is higher.
 the aggregate of the company's turnover assessed for the assessment year shall be deemed to be the
income of such company for the year chargeable to tax;
 such company shall pay as income tax for the assessment year an amount equal to 0.25%of the turnover
assessed for the year or taka five thousand whichever is higher.
Explanation:
For the purposes of this section, "turnover" means-.
a. the gross receipts derived from the sale of goods;
b. the gross fees for rendering services or giving benefits including commissions or discounts;
c. the gros s r ec eipts der i ved f r om an y he ads of inc om e ex c luding inc o m e from capital gains
and receipts under speculation business;
d. the company's share of the amounts stated above of any association of persons of which the
company is a member.
According to section 19(24) regarding income from other sources:
Where an assessee, being a private limited company or a public limited company not listed with a stock
exchange, discloses investments in it's equity received from any shareholder or director during any income year,
the amount so received as equity not being received by crossed cheque or bank transfer, shall be deemed
to be the income of such assessee for that income year classifiable under the head "Income from other sources".
The provision of section 16CC is ill framed and contradicts with section 17 of the Income Tax Ordinance
According to section 17 the total income from whatever source derived of a person who is a resident
includes
(i) is received or deemed to be received in Bangladesh by or on behalf of such person in such
year; or
(ii) accrues or arises, or is deemed to accrue or arise to him in Bangladesh during that year; or
(iii) accrues or arises to him outside Bangladesh during that year; and
So under sec 17 it is clear that a person is liable to pay tax only when he has income from any
source whereas under 16CC a company has to pay tax even if it is sustaining a loss.
Example: ABC, a private limited company, engaged in Garments business for last few years. For the income
st
year ended on 31 December 2006 the company submitted a return showing a loss of Tk1,000,000 whereas
enclosed financial statement disclosed a sales of Tk. 20,000,000.
In that case According to section 17 the company is not liable to pay any tax as it has shown a net loss of
Tk. 1,000,000.
But under section 16CC the sales of the company amounts to Tk. 20,000,000 should be treated as
income of the company and a tax of Tk 50,000 (20,000,000*0.25%) to be levied thereon.
Therefore, section 16CC has clear contradiction with section 17 of ITO 1984.
Write short notes in relation to Income Tax Ordinance, 1984:- PE - Ill

a) Unabsorbed depreciation Nov - Dec,
b) Exparte assessment 2006
c ) T ax au d it :
d) Perquisite.
(a)Unabsorbed depreciation
According to Section 42(6) & (7) of ITO 1984:
The amount of depreciation allowance of any year which cannot be absorbed due to the non-availability of profits
or gains chargeable for that year or such profits or gains being less than the allowance then, the allowance or part
of the allowance to which effect has not been given is treated as unabsorb ed depreciation. The amount of
unabsorbed depreciation of any year shall be added to the amount of the allowance for depreciation for the
following year and be deemed to be part of that allowance or if there is no such allowance for that year, be
deemed to be the allowance for that year and so on for succeeding years.
When depreciation allowance is carried forward, then it can be set off after giving effect of business
loss and speculation loss.
(b) Exparte assessment
Where any person fails –
a) T o f i l e t h e r e t u r n r e q u i r e d b y a n o t i c e u n d e r s e c t i o n 7 7
b) Has not filed a return or revised return under section 78
c) To comply with the requirements of a notice under section 79 - Production of accounts and documents
d) To comply with the requirements of a notice under section 80 - Statement of assets, liabilities and
life style.
e) To comply with the requirements of a notice under section 83(1)- Notice for the production of evidence and
supporting and for hearing.
The Deputy Commissioner of Taxes shall, by an order in writing, assess the total income of the assessee to the
best of his judgment and determine the sum payable by the assessee on the basis of such assessment; and in
the case of firm, may refuse to register it or may cancel its registration if it is already registered,andcommunicate
such order to the assessee within thirty days next following.
The assessment under section 84 of ITO 1984 is commonly known as exparte assessment.
An exparte assessment shall be construed as misconduct of concerned Deputy Commissioner of Taxes if the
Board proves him/her that the best judgment assessment made by him/ her shows lack of proper evaluation
of legal and factual aspects of the case, which has resulted in an arbitrary and injudicious assessment.
(c)Tax audit
According to Section 83AAA of ITO 1984
Where the Board has reasonable cause to believe that the return or revised return filed by a company is
incorrect or incomplete, the Board may appoint a registered chartered accountant to examine the accounts of that
assessee.
Key point:
i) The chartered accountant shall exercise the powers and functions of the Deputy Commissioner of
Taxes
ii) The chartered accountant, after examination of the accounts shall submit a report in writing to the
Board along with findings
iii) On receipt of the report the Board shall forthwith forward the report to the concerned Deputy
Commissioner of Taxes for consideration.
iv) On receipt of the report the Deputy Commissioner of Taxes shall serve a notice forhearing .
v) The Deputy Commissioner of Taxes shall, after hearing the person appearing and considering the
evidences by an order in writing, assess within thirty days after the completion of hearing or
consideration, as the case may be, the total income of an assessee and shall determine the sum
payable by the assessee on the basis of such assessment, and communicate the said order to the
assessee within thirty days from the date of such order.
(d) Perquisite
(i) any payment made to an employee by an employer in the form of cash or in any other form excluding basic
salary, festival bonus, incentive bonus not exceeding ten percent of disclosed profit of relevant income year,
arrear salary, advance salary, leave encashment or leave fare assistance and overtime, and
(ii) any benefit, whether convertible into money or not, provided to an employee by an employer, called by
whatever name, other than contribution to a recognized provident fund, approved pension fund , approved
gratuity fund and approved superannuation fund.
1 .Write short notes on the following in relation to the ITO 1984: Nov Dec
a. Universal self-assessment. 2010
b. Final discharge.
c. Technical know-how
d. Accelerated depreciation.
a. Universal Self Assessment: Sec 82BB
Where an assessee furnishes a correct and complete return of income either manually or electronically, Subject to sub-
section (3), the Deputy Commissioner of Taxes shall received such return himself or cause to be received by any other
official authorized by him and issue a receipt of such return manually or electronically and the said receipt shall be
deemed to be an order of assessment for the assessment year for which the return is filed.
A return shall be taken to be complete, if it is filed in accordance with the provisions of section 75(2) or 75(3) and tax
has been paid as per section 74.
Notwithstanding anything contained in sub-section (1) and section 93, the Board or any authority subordinate to the
Board, if so authorised by the Board in this behalf, may select, in the manner to be determined by the Board, a number
of these returns filed under sub-section (1) and refer the returns so selected to the Deputy Commissioner of Taxes for
the purpose of audit and the Deputy Commissioner of Taxes shall thereupon proceed, if so required, to make the
assessment under section 83 or section 84, as the case may be
Provided that a return of income filed under this section shall not be selected for audit where such return shows at least twenty per
cent higher income than the income assessed or shown in the return of the immediate preceding assessment year and-
(a) does not have any income which is exempted from tax; or
(b) does not have receipt of Gift; or
(c) does not have loan other than from a bank or financial institution; or
(d) sum of accretion of net wealth and shown expenditure is covered by the income.
No question as to the source of investment made by a new assessee deriving income from business or profession shall
be raised, if he shows income at least not less than twenty five percent of the capital invested in business or profession
and pays tax on such income before filing return.
The initial capital investment or any fraction thereof shall not be transferred in any manner or lent out within five years
from the end of the assessment year in respect of which assesse's return of income has been filed under this section.
1 What will be the consequences of failure to deduct income tax and to pay the same to the Nov Dec
credit of the Government in the above cases? 2010
2 Write shorts notes on the following: May June

a. Company. 2013
b. Dividend.
c. Income.
d. Market Value.
e. Principal Officer.

a. ‗Company‘ means a company as defined in the Companies Act, 1913 or Companies Act 1994 and
includes
i) a body corporate established or constituted by or under any law for the time being in force;
ii)any nationalized banking or other financial institution, insurance body and industrial or businessenterprise:
iii)an association or combination of persons. called by whatever name. if any of such persons is a
company as defined in the Companies Act, 1913 or Companies Act 1994.
iv) any association or body incorporated by or under the laws of a country outside Bangladesh; and;
v) anyforeign association or body, not incorporated by or under any law, which the Board may, by general
or special order, declare to be a company for the purposes of this Ordinance;
Reference: Section 2(20) of the Income Tax Ordinance 1984 (ITO 1984)
b. Dividend includes —
i) any distribution by a company of accumulated profits, whether capitalized or not, if such

distribution entails the release by the company to its shareholders of all or any part of its assets or
reserves:
ii) any distribution by a company, to the extent to which the company possesses accumulated profits,
whether capitalized or not, to its shareholders of debentures, debenture-stock or deposit certificates
in any form, whether with or without interest;
iii) any distribution made to the shareholders of a company on its liquidation to the extent to which the
distribution is attributable to the accumulated profit of the company immediately before its
liquidation, whether capitalized or not;
iv) any distribution by a company to its shareholders on the reduction of its capital, to the extent to
which the company possesses accumulated profit, whether such accumulated profits have been
capitalized or not:
v) any profit remitted outside Bangladesh by a company not incorporated in Bangladesh under
Companies Act 1994.
vi) any payment by a private company by way of advance or loan to a shareholder or any payment by
any such company for the individual benefit of such shareholder, to the extent to which the
company, in either case, possesses accumulated profit.
Reference: Section 2(26) of the ITO 1984
c. „Income‟ includes —
i) any income, profit or gains, from whatever source derived, chargeable to tax under any provision of
Section 20 of the ITO 1984.
ii) any loss of such income, profits or gains;
iii) the profits and gains of any business of insurance carried on by a mutual insurance association
computed in accordance with paragraph 8 of the fourth Schedule to ITO 1984:
iv) any sum deemed to be income, or any income accruing or arising or received, or deemed to accrue
or arise or be received in Bangladesh under any provision of ITO 1984.
d. ‗Market Value‘, in ITO 1984 referred to agricultural produce, which means —
i) where such produce is ordinarily sold in the market in its raw state or after application to it of any
process employed by a cultivator to render it fit to be taken to the market, the value calculated
according to the average price at which it has been sold during the year previous to that in which
the income derived from such produce first becomes assessable; and
ii)where such produce is not ordinarily sold in the market in its raw state,'the aggregate of —

1) the expenses of cultivation:
2) the land development tax or rent paid for the lands in which it was grown; and
3) such amount as the deputy Commissioner of Taxes finds, having regard to the circumstances of
each case, to represent a reasonable rate of profit on the sale of the produce in question as
agricultural produce;
e.„Principal Officer‟ as per ITO 1984, is applicable to a local authority, a company, any other public
body or any association of persons and includes —
i) managing director, manager, secretary, treasurer, agent or accountant (by whatever designation
known), or any officer responsible for management of the affairs, or of the accounts, of the
authority, company, body or association; and
ii) any person connected with the management or the administration of the local authority, company,
body or association upon whom the Deputy Commissioner of Taxes has served a notice of his
intention to treat him as principal thereof:
Reference: Section 2(48) of theITO 1984
3 Write short notes on the following: May

(a) Royalty June
(b) Speculative Business 2011
(c) Transfer
(d) Amalgamation
(e) Market value.
Answer:
(a) Royalty
As per section 2(56) of the ITO 1984, ―royalty‖ means consideration (including any lump sum
consideration but excluding any consideration which is classifiable as income of the recipient under the
head ―Capital Gains‖) for
(i)transfer of all or any rights, including the granting of a license in respect of a patent, invention,
model, design, secret process or formula, or trade mark or similar property;
(ii) the imparting of any information concerning the working of, or the use of, a patent, invention,
model, design, secret process or formula, or trade mark or similar property;
(iii) the use of any patent, invention, model, design, secret process or formula, or trade mark or
similar property;
(iv) the imparting of any information concerning technical, industrial, commercial, or scientific
knowledge or experience or skill;
(v) the transfer of all or any rights, including granting of a license, in respect of any copyright,
literary, artistic or scientific work, including films or video tapes for use in connection with
television or tapes for use in connection with radio broadcasting, but not including consideration
for sales, distribution or exhibition of cinematograph films; or
(vi) the rendering of any services in connection with any of the aforesaid activities.
(b) Speculative Business

As per Section 2 (61) ―Speculation business‖means business in which a contract for the purchase or sales
of any commodity including stocks and shares, is periodically or ultimately settled otherwise than by the
actual delivery or transfer of the commodity or scripts, but does not include business in which-
(i) a contract in respect of raw materials or merchandise is entered into by a person in the course of his
manufacturing or mercantile business to guard against loss through future price fluctuations;
(ii) a contract in respect of stocks and shares is entered into by a dealer or investor therein to guard
against loss in his holdings of stocks and shares through price fluctuations; and
(iii) a contract is entered into by a member of a forward market or stock exchange in course of any
transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the
ordinary course of business as such members;
(c) Transfer
Section 2(66) defines “Transfer” as under :
―Transfer‖ in relation to a capital asset, includes the sale, exchange or relinquishment of the asset, or the
extinguishments of any right therein, but does not include :
(i) Any transfer of the capital asset under a gift, bequest, will or an irrevocable trust;
(ii) Any distribution of the assets of a company to its shareholders on its liquidation; and
(iii) Any distribution of capital assets on the dissolution of a firm or other association of persons or on the
partition of a Hindu undivided family.
(d) Amalgamation.
Section 2 (2) ―amalgamation‖, in relation to companies, means the merger of one or more companies with
another company, or the merger of two or more companies to form one company (the company or companies which
so merged being referred to as the amalgamating company or companies and the company with which they merge or
which is formed as a result of the merger as the amalgamated company) in such a manner that by virtue of, and for
reasons attributable to the merger—
(i) all the property of the amalgamating company or companies immediately before the merger, becomes the
property of the amalgamated company;
(ii) all the liabilities of the amalgamating company or companies immediately before the merger, become the
liabilities of the amalgamated company; and
(iii) the shareholders holding not less than nine-tenths in value of the shares in the amalgamating company or
companies (other than shares already held therein immediately before the merger by, or by a nominee for, the
amalgamated company or its subsidiary) become shareholders of the amalgamated company;
(e) Market Value
As per section 2 (40) for the purpose, ‗market value‘ in respect of agricultural produce, means-
1. where such produce is ordinarily sold in the market in its raw state or after application to it of any process
employed by a cultivator to make it marketable, the value calculated according to the average price at
which it has been sold during the year previous to that in which the income derived from such produce first
becomes assessable; and
2. where such produce is not ordinarily sold in the market in its raw state, the aggregate of-
(i) the expenses of cultivation;
(ii) the land development tax or rent paid for the lands in which it was grown; and
(iii) such amount as the Deputy Commissioner of Taxes finds, having regard to the
circumstances of each case, to represent a reasonable rate of profit on the sale of the produce
in question as agricultural produce.
4 May
.Write short notes on the following:
June
a) Capital Assets.
2012
b) Fair Market Value
c) Fees for Technical Service
d) Agricultural Income
e) Perquisites
a) Capital Assets:
Capital Assets means property of any kind held by an assessee, whether or not connected with business or
profession, but does not include-
1. Any stock-in-trade (not being stocks and shares) consumable stores or raw materials held for the
purposes of business or profession,
2. Personal effects, that is to say, movable property (including wearing apparel, jewelers, furniture,
fixture, equipment and vehicles), which are held exclusively for personal use by, and are not used for
purposes of the business or profession of the assessee or any member of his family dependent on him.
3. Rural agricultural land
b) FairMarket Value:
Fair Market Valuemeans, in relation to capital assets-
1) The price which such asset would ordinarily fetch on sale in the open market on the relevant day, and,
where such price is not ascertainable, the price which the Deputy Commissioner of taxes may, with
the approval in writing of the Inspecting Joint Commissioner of Taxes, determine.
2) The residual value received from lessee in case of an asset leased by a financial institution having
license from the Bangladesh Bank on termination of lease agreement on maturity or otherwise subject to
the condition that such residual value plus amount realized during the currency of the lease agreement
towards the cost of the asset is not less than the cost of acquisition to the lessor financial institution.
c) Fees for Technical Service:

Fees for Technical Service means any consideration (including any lumpsum consideration) for rendering of
any managerial, technical or consultancy services but does not include consideration for any construction,
assembly, mining or like project undertaken by the recipient, or consideration which would be income of the
recipient classifiable under the head ―Salaries‖.
d)Agricultural Income means:
Agricultural Income means-
1) any Income derived from any land in Bangladesh and used for agricultural purposes-
i) by means of agricultural or
ii) by the performance of any process ordinarily employed by a cultivator torender the produce
ofsuch land fit to be taken to market or
iii) by the sale of the produce raised in theland by the cultivator where no process other than to
rendering the produce marketable has been performed or
iv) by granting a right to any person to use the land for any period.
2) It also includes any income derived from any building which-
i) is occupied by the cultivator of such land where any process is carried on to render the produce of
land marketable;
ii) is on or in the immediate vicinity of such land and
iii) is required by the cultivator for dwelling or storehouse or out house by reason of his connection of
such land.
e)Perquisites:
There is an exclusive definition of perquisite at section 2(45) where perquisite means any payment or benefit made
to an employee in the form of cash or any other form but excluding the following:
i. Basic Salary
ii. Festival bonus
iii. Incentive bonus
iv. Arrear Salary
v. Advance Salary
vi. Leave encashment
vii. Leave Fare Assistance (LFA)
viii. Overtime
ix. Contribution by the employer to-
1) Recognized provident fund.
2) Approved Pension Fund.
3) Approved Gratuity Fund and
4) Approved Superannuation Fund.
5 Nov
Write short notes on the following in relation to Income Tax Ordinance 1984
Dec
a) Double taxation avoidance agreement 2012
b) Best Judgment assessment
c) Refund of tax
d) Capital gain
(a) Double taxation avoidance agreement

Double taxation avoidance agreement is usually an agreement between 2 countries seeking to avoid double
taxation by defining the taxing rights of each country with regard to cross border flows of income and providing
tax credits or exemptions to eliminate double taxation. The Govt. of Bangladesh also may enter into an
agreement with the Govt of other countries for the avoidance of double taxation and the prevention of fiscal
evasion. Income tax policy wing of the National Board of Revenue (NBR) is entrusted to negotiate the double
taxation treaty with foreign countries to promote foreign direct investment in Bangladesh. Such agreement will
come into force through notification in the official Gazette. It will be treated as an international law and
accordingly its legislative position would be over and above our Bangladesh tax law. The objectives of such
agreement are:-
a) Relief from the double tax payable;
b) Determining the income accruing or arising, or deemed to be accruing or arising to non-residents from
sourceswithin Bangladesh;
c) Where all the operations of business or profession are not carried on within Bangladesh, determining the
incomeattributable to operations carried on within or outside Bangladesh, or the income chargeable to tax in
Bangladesh in the hands of non- residents, including their agencies, branches or establishments in Bangladesh;
d) Determining the income to be attributable to any person resident in Bangladesh having any special
relationship with a non-resident;
e) Recovery of tax livable:
f) Exchange of information for the prevention of fiscal evasion.
g) To attract FDI in Bangladesh.
(b) Best Judgment assessment

Where any assessee fails to file return required by a notice u/s 77/93 and has not filed a return or revised return
u/s 78 or to comply with the requirements of notices u/s 79, 80 or 83(I), the D.C.T. shall assess income to
the best of his judgment.
The DCT shall, by an order in writing, assess the total income of the assesse tothe best of his judgment and
determine the sum payable by the assessee on the basis of such assessment and communicate such order to the
assessee within 30 days.
c)Refund of Tax:

A person, who satisfies the DCT or other authority appointed by the Government that the tax paid by him or on his
behalf or treated as paid by him or on his behalf for any year exceeds the amount with which he is properly
chargeable for that year, shall be entitled to a refund of any such excess payment.
In case of death, incapacity, insolvency, liquidation or other cause, person, is unable to claim or receive any refund
due to him, his legal representative, or the trustee, guarding or receiver, can claim or receive such refund for the
benefit of such person.
No questions can be raised by the claimant regarding correctness or validity of any assessment after claiming refund.
(d) Capital Gain:
Tax shall be payable by an assessee under the head ―Capital gains‖ in respect of any profits and gains arising from the
transfer of a capital asset and such profit and gains shall be deemed to be theincomeof the income year in which the
transfer took place. In computing capital gain the following expenditure is deductible from the full value of
consideration receivable or the fair market value of the asset whichever is higher, would be treated as capital profit or
capital gain.
i. Any expenditure incurred solely in connection with the transfer of the capital asset.
ii. The cost of acquisition of the capital asset and any capital expenditure incurred for any improvements
Where a capital gain arises from the transfer of a capital asset being Government Securities and stocks and shares of
public companies listed with a stock exchange in Bangladesh, then no tax shall be charged.
Example:
Cost of a capital asset Tk. 100,000
Written Down Value Tk. 60,000
Sales Value or Consideration Received Tk. 120.000
Here Capital gain = (120,000 -100,000) = 20,000

6 Write short notes on the following in relation to I.T.O 1984: Nov 10
(a) Assessment on the basis of report of a Chartered Accountant: u/s 83 AAA Dec
(b) Carry forward of loss under the head ―Capital Gains‖: u/s 40. 2011
(c) Revisional power of the commissioner of Taxes: u/s 121A.
(d) Interest payable by the government on delayed refund: u/s 151.
(e) Rent free accommodation Rule:33B
(a) Assessment on the basis of report of a Chartered Accountant: u/s 83 AAA
When NBR has reasonable cause to believe that a return submitted by any company assessee is incorrect or
incomplete, then the Board may appoint a chartered accountant to examine the books of accounts of that
company.
He will then exercise the powers and functions of a DCT only relating to section 79 and other than clause
(f) of section 113.After examination of the books of accounts he will submit report to the Board and the Board
will then forward the report to the DCT for consideration. After receiving the report DCT will proceed to
assess the income of the company by issuing notice u/s 83(1)
(b) Carry forward of loss under the head “Capital Gain”: u/s 40.
Loss under the head ―Capital Gain‖ can be set-off against income from the same head during the income year. If
the loss cannot be set-off in the above manner, the loss or portion thereof can be carried forward to the next
assessment year and set-off against income under the same head in that year. The loss can be carried forward
up to 6 successive assessment years.
Loss up to Taka 5.000/- cannot be carried forward. Amount in excess of Taka 5,000/- can only be carried
forward and set-off in the aforesaid manner.
(c) Revisional power of the Commissioner of Taxes: u/s 121A.
An assessee may file revision petition before the Commissioner of Taxes within sixty days of receipt of
Order of the Deputy Commissioner of Taxes or Appellate Joint or Additional Commissioner of Taxes on
payment of fees of Taka 200/- along with payment of admitted tax liability. Revision petition will be deemed to
have been allowed if the commissioner fails to give judgment within sixty days from the date of filing the
revision application.
(d) Interest payable by the government on delayed refund: u/s 151.

Where a refund due to an assessee is not paid within two months of the date of claim of refund, interest @ seven
and a half per cent per annum shall be payable to the assessee on the amount of refund from the month following
the aforesaid two months to the date of issue of the refund.
(e) Rent free accommodation Rule: 33B

(i) Where the employee is provided with rent free accommodation, the rental value of the
accommodation or twenty five per cent of the basic salary of the employee, whichever is less, shall
be included in his income.
(ii) Where the accommodation is provided to the employee at a concessional rate, the difference between
the rent actually paid by him and the amount determined to be includible in an employee's salary
under rule (1) shall be added to his income.
7 Nov
Discuss the tax payment provisions of income tax law with regard to the following: Dec
(i) Income from trading in stocks and shares of public companies listed with 2010
Stock Exchange(s).
(ii) Sale of shares of a company for raising its share capital through public
offering at a premium over face value.
(iii) Trading income of a member of CSE and DSE, engaged in brokerage
business.
8 What are the time limits and relaxation thereof, if any, in respect of filing of an appeal to Nov
the various Income Tax Appellate Authorities and making application for reference to Dec
the High Court Division under the ITO 1984? 2010
6
9 What is the minimum amount of tax, if any, that needs to be paid at each of the Nov
above stages? Dec
2010
10 Nov
Dec
What do you understand by a point of fact and a point of law? 2010
11 Section 30 has been amended to restrict the claim of deduction against income from Nov
business or profession in the following cases: Dec
(i) Perquisites 2014
(ii) H. O. Expenses
(iii) Royalty, Technical know-how fees etc.
(iv) Incentive Bonus
State, with examples, how the above will be determined in computation of Total Income
when net profit is arrived at after charging such expenses.
Section 30 of the Income tax Ordinance, 1984 puts some restriction on extent of admissibility of certain
expenditures in computing ―income from business or profession‖.
(i) Section 30(e) states the limit of amount of admissible perquisite to an employee, in anincome year is
Tk. 350,000. If an employee is given perquisite of Tk. 380,000 in an income year, the excess amount
over Tk 350,000 of Tk 30,000 (380,000 - 350,000) will be added to business income of the
employer.
(ii) Section 30(g) states the limit of amount of admissible ―head office expense‖ of a company not
incorporated in Bangladesh at 10% of net profit disclosed in the statement of account. For example a
company (not incorporated in Bangladesh) states net profit in the Profit &Loss Account at Tk. 500,000
after charging ―head office expenses‖ at Tk. 80,000. In determining income for tax purpose ―head
office expenses‖ will be admissible up to Tk 50,000 (10% of net profit). The remaining Amount of
Tk.30,000(80,000 - 50,000) will be added to net income of Tk. 500,000.
(iii) Section 30(h) states the limit of amount of admissible ―royalty, technical know howfee‖ in computing
business income at 8% of net profit disclosed in the statement of account. For example a business states net
profit in the Profit & Loss Account at Tk.400,000 after charging ―royalty ,technical know how fee‖ at Tk.
60,000. In determining income for tax purpose ―royalty, technical know how fee‖ will be admissible up
to 32,000 (8% of net profit of Tk 400,000) The remaining amount of Tk. 28,000 (60,000 - 32,000)
will be added to net income of Tk. 400,000.
(iv) Section 30(j) states the limit of amount of admissible ―incentive bonus‖ in computing business income at
10% of net profit disclosed in the statement of account. For example a business states net profit in the
Profit &Loss Account at Tk. 600,000 after charging ―incentive bonus‖ paid to all employees at Tk.
80,000. In determining income for tax purpose ―incentive bonus‖ will be admissible up to Tk60,000 (10%
of net profit of Tk. 600,000) .The remaining amount of Tk. 20,000 (80,000 – 60,000) will be added to
net income of Tk. 600,000.
12 Mention the allowable limits for the following expenses under the Income Tax May
Ordinance, 1984: June
i. Perquisites under Section 30 (e) of the Income Tax Ordinance 1984: 2014
ii. H. O. Expenses in the case of a foreign company not incorporated in Bangladesh.
iii. Royalty, Technical Services fees, and technical know how fee.
iv. Entertainment expenses incurred by a company
v. Overseas Travelling Expenses by a director of a company.
The allowable limits for the stated expenses under the ITO 1984 are as follows:
S.L Expenses Allowable limits
(i) Perquisites as defined in Tk. 3.50 lakh in an income year as per Section 30 (e) of the ITO
section2(45) 1984
(ii) H. O. Expenses in the case of 10% of the net profit disclosed in the statement of accounts,
foreigncompany not incorporated Section 30 (g)
inBangladesh
(iii) Payment of Royalty, Technical 8% of the net profit disclosed in the statement of accounts,
Services fees, and Technical Section 30 (h)
know how fee
(iv) Entertainment expenses incurred a) On the first taka 10 lakh of income, profits and gains of the
by a company business or profession computed before making any allowance in
respect of expenditure on entertainment : at the rate of 4%.
b) On the balance of income, profits and gains of the business or
profession computed in the manner aforesaid: at the rate of
2% (Rule 65 of the Income Tax Rules 1984).
(v) Overseas Travelling Expenses by a Limited to 1% of the disclosed turnover 30(k)
director of a company
13 May
Explain the following :- June
i. Undistributed Profit of a listed company under Section 16B of the Income Tax 2014
Ordinance 1984
ii. Excess Profit Tax of a banking company under Section 16C of the Income Tax
Ordinance 1984
iii. Charge of minimum tax on a firm under Section 16CCC of the Income Tax
Ordinance 1984
i)According to Section 16B of the Income Tax Ordinance 1984 (ITO 1984) where a public limited
company, not being a banking or insurance company, listed with any stock exchange in
Bangladesh, has not issued, declared or distributed dividend or bonus share equivalent to at least 15%
of its paid up capital to its shareholders within a period of six months immediately following any
income year, the company shall be charged additional tax at the rate of five percent on the
undistributed profit in addition to tax payable under said Ordinance. Here ―undistributed profit‖ means
accumulated profit including free reserve.
(ii) According to Section 16C of the ITO 1984 where a banking company shows profit in its
return of income for an income year at an amount exceeding fifty percent of its capital together with
reserve, the company, in addition to tax payable under said Ordinance, shall pay an excess profit tax for
that year at the rate of fifteen on so much of profit as it exceeds fifty percent of the aggregate sum of the
capital and reserve as aforesaid.
(iii) According to Section 16CCC of the ITO 1984 every firm having gross receipts of more
than taka fifty lakh or every company shall, irrespective of its profits or loss in an assessment year for
any reason whatsoever, including the sustaining of a loss, the setting off of a loss of earlier year or
years or the claiming of allowances or deductions (including depreciation) allowed under the
Ordinance, be liable to pay minimum tax at the rate of 0.30% (reduced from 0.50% by Finance Act
2014) of the amount representing such firm's or company's gross receipts from all sources for that year.
Here ‗gross receipts‘ means-
 all receipts derived from the sale of goods;
 all fees or charges for rendering services or giving benefits including commissions
ordiscounts;
 all receipts derived from any heads of income.
14 AL Nov
Who is liable to pay advance tax? How advance tax is computed and payable? Dec 2013;
Or PE — III
Who is liable to pay advance tax?How advance tax is computed?How advance tax is Nov-Dec,
payable? 2005

Advancetax shall be payable by an assessee during each financial year if the total income of the assessee for
the latest income year in respect of which he has been assessed by way of regular assessment, or has been
provisionally assessed exceeds four lakh taka. Income from ―Agricultural Income‖ and ―Capital gains‖
shall not included in computation of income.
A new assessee who has not been assessed to tax previously is also liable to pay advance tax if hisincome
during any financial year likely to exceed four lakh taka.
The amount of advance tax payable by an assessee in a financial year shall be the amount equal to the tax
payable on his total income of the latest income year as assessed on regular basis or provisionally, as the case
may be, as reduced by the amount of tax required to be deducted or collected at source.
The tax shall be calculated at the rates in force in respect of the financial year for whicli income applied.
Advance tax is payable in four equal installmentson 15th September, 15th December, 15th March. and 15th
June. If the estimated income of any financial year is less than the last assessed income, the assessee may
pay the advance tax on the basis of estimates.
In case of new assessee by 15 June of the financial
year.
Additional condition
If before the fifteenth day of May of the year, an assessment of the assessee is completed in respect of an
income year, later than that on the basis of which the tax was computed the assessee shall pay in one installment
on the specified date or in equal installments on the specified dates, if more than one falling after the date of
the said assessment, the tax computed on the revisedbasis as reduced by the amount, if any, paid in
accordance with the original computation.
15 May
Discuss in the form of a Chart showing Income Tax Authorities under the category June
i) Administrative 2011
ii) Judicial
Organization Structure of Income Tax Authorities both Administrative and Judicial Income Tax
Authorities
Organization Structure
NBR
VAT Income Tax Customs
Administrative Judicial
Chief DG- Commissioner DG- DG- Commissioner Commissioner

Commissioner Inspection of Taxes-LTU Training Intelligence of Taxes of Taxes
of Taxes Taxes (Appeals)
Additional Additional Additional Additional Additional Additional

DG Commissioner DG DG Commissioner Commissioner
Inspection (Appeals)
Joint Joint Joint Joint Joint Joint

DG Commissioner DG DG Commissioner Commissioner
Inspection (Appeals)
Deputy Deputy Deputy

DG DCT DG DG DCT
Tax Recovery Tax Recovery

Officer Officer
Asst. Asst.
Courtesy: Saiful Islam Mozumder, ShirazkhanBasak& Co. smozumder@outlook.com
Commissioner cell-01711-981920
Commissioner
Taxes
Extra. Asst. Extra. Asst.
Commissioner Commissioner
Inspector of Inspector
Taxes of Taxes
16 Explain the aspects relevant to formation, qualification of members and functioning May
of AppellateTribunal June
2011
Formulation, Qualification and Function of Appellate Tribunal [Sec 11]:
(1) For the purpose exercising the functions of the Appellate Tribunal under the Ordinance, the Government shall
establish a Taxes Appellate Tribunal consisting of a President and such other members as the Government may,
from time to time, appoint [Section 11(1)].
(2) A person shall not be appointed as a member of the Taxes Appellate Tribunal unless-
i) he was or is a member of the Board; or
ii) he was Commissioner of Taxes; or
iii) he is commissioner of Taxes; or
iv) he is a chartered accountant and practiced professionally for a period not less than 8 years; or
v) he is a cost and management accountant and practiced professionally for a period not less than 8
years; or
vi) he is an income-tax practitioner within the meaning of section 174(2)(f) and practiced
professionally for a period not less than 20 years; or
vii) he is a professional legislative expert having experience for a period not less than 8 years in the
process of drafting and making financial and tax laws; or
viii) he is an advocate and practiced professionally for not less than 10 years in any income-tax
office. [Section 11(3)]
ix) he is, was or has been a District Judge.
(3)The Government shall appoint a member of the Appellate Tribunal to be the Presidentthereof [Section
11(4)].
Exercise of Power of the Tribunal by Benches [Sec 12]:

(1) Unless the president in any particular case or class of cases otherwise directs, the powers and
functions of the Appellate Tribunal shall be exercised by Benches of the Appellate Tribunal,
hereinafter referred to as Bench, to be constituted by the President.
(2) A Bench shall be so constituted that it has not less than two members.
Decision of Bench [Sec 13]:
(1) Subject to the provisions of sections 13(2) and (3), the decision of bench in any case or on any point
shall be given in accordance with the opinion of the majority of its members.
(2) Any point on which the members of a Bench are equally divided shall be stated in writing and shall be
referred by the president to one or more other members of the Appellate Tribunal for hearing and the point
shall be decided according to the majority of the members of the Appellate Tribunal who have heard it
including those who first heard it.
(3) Where there are only two members of the Appellate Tribunal and they differ in any case, the Government
may appoint an additional member of the Appellate Tribunal for the purpose of hearing of the case and the
decision of the case shall be given in accordance with the opinionof the majority of the members of the
Appellate Tribunal as constituted with such additional member.
(4)Exercise of Power by one Member [Sec 14]:
Notwithstanding anything contained in section 12, the Government may direct that the powers and
functions of the Appellate Tribunal shall be exercised by any one of its member, or members or by two or
more members jointly or severally.
17 May
What are the different types of Depreciation allowances allowed under Income Tax June
Ordinance 1984? Explain ―Unabsorbed Depreciation‖. 2011
a) Different types of Depreciation allowances allowed under Third Schedule of Income Tax
Ordinance 1984:
 Normal depreciation allowance;

 Initial depreciation allowance;
 Accelerated depreciation allowance;
 Special depreciation allowance on ship.
b) When full effect of the depreciation as determined in accordance with provision of the Third Schedule of the
Income Tax Ordinance 1984 cannot be given that part of the depreciation is called ―Unabsorbed
Depreciation‖
In other way, where, in making an assessment for any year, full effect cannot be given to the depreciation allowances
referred to in section 29(1) (viii) owing to there being no profits or gains chargeable for that year or such profits or gains
being less than the allowance then, subject to the provisions of sub-section (7), the allowance or part of the allowance
to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation
for the following year and be deemed to be part of that allowance or if there is no such allowance for that year, be
deemed to be the allowance for that year and so on for succeeding years. Where, under section 42(6), depreciation
allowance is also to be carried forward, effect shall first be given to the provisions of sections 38 and 39(2).
18 Nov
Discuss in details regarding the insertion of new section 82C in place of existing section Dec
82C termed as final discharge of tax liability by the Finance Act 2011. 2011 10
The following new items added through Finance Act,2011:
(1) Tax deducted or collected at source from the sources mentioned in sub-section (2) shall not be adjusted
against refund due for earlier year or years or refund due for the assessment year from any source other
than those mentioned in sub-section (2).
(2) Income from the sources mentioned in sub-section (2) shall be determined on the basis of the tax deducted
or collected at source and the rate or rates of tax applicable for the assessment year.
(3) Income computed in accordance with sub-section (4) shall not be set off with loss computed under
any other source for the assessment year or with loss of earlier year or years.
(4) Any income shown or assessed in excess of the amount determined in sub-section (4) shall be liable to
tax at the rate or rates applicable for the assessment year.
(5) Any amount not admissible as allowances under section 30 shall be added to the income.
(6) Excess Income referred to in sub-section (6) and (7) shall be taxable at the rate or rates applicable
for the year after determining income under sub-section (4).
(7) The assessee shall have to pay surcharge where applicable.
19 May
.
What are the income that are excluded as per the 6th schedule, part A of ITO 1984 in June
Computing total income of the following assessees: 2012
a)NGO registered under NGO Bureau
b)Trust
c)Religious or Charitable institution
Issues Section/Schedule Income which are excluded

Reference
Non Clause 1A of Part - A of
GovernmentOrganisatio 6th schedule Income derived from Micro Credit Operation by a Non
n (NGO) registered with GovernmentOrganisation(NGO) registered with NGO
NGO Affairs Bureau. Affairs Bureau.
Trust Any income from House Property held under trust or other
Clause 1 of Part - legal obligation wholly for religious or charitable
A of 6th schedule purpose
Religious or Charitable
Institution Any income of a religious or charitable institution
Clause 2 of Part -A of 6th
Schedule derived from voluntary contribution and applicable solely
to religious or charitable purpose
20 A refund of tax becomes due to an assessee on reduction of total income in appeal filed Nov
by him, but the Deputy Commissioner of Taxes does not take any action to make the Dec
refund. What are the remedies open to the assessee? 2011
As per section 151, where a refund due to the assessee is not paid within two months from the date of
refund becoming due consequent upon any appeal order, interest @ 7.5% per annum shall be payable to the
assessee on the amount of refund from the end of the said two months upto the date of refund.
On the other hand, as per section 152, the assessee may set off the refundable amount against the tax
payable under Income Tax Ordinance or treated, at the option in writing of the assessee, as payment of tax
payable under section 64 or section 74 as the case may be.
21 Nov
Dec
Discuss on modes of recovery by the Tax recovery Officer. 2011
As per section 139 of Income Tax Ordinance 1984, the Tax Recovery Officer upon receipt of a certificate
forwarded by the DCT, shall take one or more of the following steps to recover the amount as stated in the
certificate:
(1) attachment and sale, or sale without attachment, of any movable or immovable property of the
assessee:
(2) arrest of the assessee and his detention in prison;
(3) Appointment of a receiver for the management of the movable and immovable properties of the
assessee.
If the Tax Recovery Officer is not able to recover entire amount, he may send the certificate to other Tax
Recovery Officer, where he has information that the assessee has property or resides.
22 A Private Limited Company is wound up but tax assessed on the company remains Nov
unpaid. Dec
Discuss the personal liabilities of the Directors of the Company in respect of the unpaid 2011
tax ofthe company.
(1) As per section 100 of Income tax Ordinance, 1984, where any private limited company is wound up
and any tax assessed on the company, whether before, or in the course of. or after its liquidation, in
respect of any income of any income year cannot be recovered, every person who was, at any time
during the relevant income year, a director of that company, shall, notwithstanding anything
contained in the Companies Act, be jointly and severally liable to pay the said tax.
(2) But the liability of the director(s) of a private company shall ceases if he proves to the DCT that non-
recovery of tax from the company cannot be attributed to any gross negligence, misfeasance or breach
of any duty on his part in relation to affairs of the company.
23 Discuss the changes made by Finance Act 2017 with its effect on the following items. Nov 10
a. Charge of Minimum Tax U/S. 16 CCC. Dec
b. Change of Investment Rebate U/S. 44. 2013
c. Deduction at source from salaries : newly added sub-section (2A) of
section – 50.
d. Additional powers to enquiry and production of documents by the
assessee sec.-116(1).
e. Requirements of certificate or acknowledgement receipts of return of
income in certain cases – Sec. 184A.
(a)
Changes : ―every Company‖ is replaced by ―every firm having gross receipts of more than taka fifty lakh or
every company‖.
Effect :
The jurisdiction of charging minimum tax has been widened - incorporating firmhaving gross receipts
exceeding taka 50 lakh.
The provision of this section apparently goes against the fundamental & traditional concept of income-tax
i.e. tax on income only. Income tax should be based on income, not on gross Receipts or Revenue. Rather
income is computed by deducting allowable expenses from Revenue. This basic postulate is obviously
ignored in formulating & applying this section.
(b)Changes :
i) The rate of tax rebate has been extended from 10% to 15%
ii) The aggregate amount of the investment allowance has been increased from Tk. 10 million to Tk. 1
crore 50 lakh
iii) The percentage of total income as maximum allowable limit of investment has been increased from
20% to 30%
Effect :
The changesare encouraging for investment. However, in short term there will be a drop in government
revenue but in long term will accelerate GDP growth and ultimately government revenue.
( c ) Changes : Incorporation of sub-section 2(A) to Section 50 of ITO 1984:
―2A) The payment under sub-section (1) shall be made by such person with or without deduction of tax in
accordance with a certificate, issued by the Deputy Commissioner of Taxes, after being satisfied on an
application made by the payee in this behalf, where such certificate specifies that:
(a)no tax shall be deducted from the payee in a case where the tax payable on the total income of the payee has
already been deducted or collected from such payee under this Ordinance for the rest of the income year; or
(b) taxshall be deducted at a lesser rate for the rest of the income year in a case where the payee may, after
adjusting the tax already deducted or collected from such payee under this Ordinance, be liable to pay a lesser
sum of tax than the tax chargeable on his/her total income."

Effect :
The requirement of certificate from Deputy Commissioner of Taxes in addition to assessment order of
previous income year may cause unnecessary harassment for the assessee.
(d)Changes : “require any such person to produce, or cause to be produced, any accounts or documents which
they may consider necessary‖ is replaced by:
―require any such person or any other person in relation to such enquiry to appear before him at the time and
place as directed for providing any information or to produce or cause to be produced necessary documents,
accounts or records including any electronic records and systems referred to in the Explanation of sub-
section (2) of section 117 (Power of search & seizure) under the possession or control of such person or
such other person‖
In this relation, Punishment for non-compliance of certain obligations-Section # 164(ee) of the ordinance
has been newly added: (ee) failsto comply with the requirement under sub-section (1) of section 116‖.
Effect
Enhancement of the power of relevant authority to ask for information and explanation from any person liable,
or believed by Them to be liable, to assessment under ITO 1984.
(e)Changes : ―either a certificate from the concerned Deputy Commissioner of Taxes or from any other person
authorized by the Board in this behalf, containing the tax payer‘s identification number or an acknowledgement
receipt of the return of income submitted for the immediate preceding assessment year shall be required to be
submitted‖ is replaced by:
―a person shall be required to submit an acknowledgement receipt of the return of income filed for the
immediate preceding assessment year or a certificate from the concerned Deputy Commissioner of Taxes or
a computer generated certificate communicated by a computer system as may be authorized by the Board in
this behalf or, in case of an old assessee, a certificate by the Deputy Commissioner of Taxes containing
Taxpayer‘s identification Number and assessment completion information‖
Effect :
Incorporation of ―computer generated certificate‖ is advancement while for an old assessee ―a certificate by the
Deputy Commissioner of Taxes‖ may cause harassment.
24 State the provision of law for tax clearance certificate required for persons leaving Nov
Bangladesh. Dec 5
2011
A person who is not domiciled in Bangladesh, or a person who being domiciled in Bangladesh at the time of
his departure is not, in the opinion of an income tax authority likely to return to Bangladesh, shall not leave
Bangladesh without obtaining from the Deputy Commissioner of Taxes authorized in this behalf by the Board. -
(a) a tax clearance certificate, or
(b) if he has the intention of returning to Bangladesh, an exemption certificate which shall be
issued only if the Deputy Commissioner of taxes is satisfied that such person has such intention; and such
exemption certificate may be either for a single journey or for all journeys within the period
specified in the certificate.
25 Discuss the provisions of section 93 of ITO 1984 for assessment in case of income May
.escaping assessment. June
2012

If, for any reason, any income chargeable to tax for any assessment year-
 has escaped assessment;
 has been under assessed or;
 has been assessed at too low a rate or;
 has been subject to excessive relief or refund.
The Deputy Commissioner of Taxes may issue a notice to the assessee containing all or any of the requirements
which may be included in a notice under section 77 (notice for filling return) and may proceed to assess or
determine, by an order in writing, the total income of the assessee and the tax payable by him.
Rate of Tax:
The tax shall be charged at the rate or rates applicable to the assessment year for which the assessment is made.
Special Conditions:
(i) Action under section 93 cannot be initiated unless definite information has come into the
possession of the D.C.T.
(ii) Before initiating the proceeding under section 93 previous approval in writing from the IJCT is to be
taken, except in a case where a return has not been filed u/s 75/77
(iii) Notice under section 93 can be issued within 6 years from the end of the assessment year in case it
isescaped assessment or under assessment and within 2 years from the end of the assessment year in case it
is assessed at too low a rate or has been subject to excessive relief or refund.
26 Discuss the conditions relevant to charging tax on house property.Whatdeductions are Nov
allowed
Dec 2012
for determining taxable amount for charging income tax ?
Conditions of charging tax on house property income according to section 24 of ITO 1984:
Tax shall be payable by an assessee under the head ―Income from house property‖ in respect of the annual
value of any house property whether let out for commercial or residentialpurposes, consisting of any
building and land appurtenant thereto of which he is the owner.
Income tax is levied not upon the actual income from the property but upon the notional income based on
annual value. Annual value is defined in section 2(3) as ―The sum for which the property might
reasonably be expected to let out from year to year‖
Where two or more persons own the property and if their respective shares are definite and ascertainable,
theowners are assessable separately on their respective share of income from the property.
In computing house property income the following allowances are deductible from the annual value:-
(1) Repairs and maintenance:-
The following expenditure relating to repairs, maintenance and provision of basic services is granted as
a deduction even if no evidence for such expenditure is produced. Where the property is let out for
residential purposes the allowable deduction is ¼ th of the annual value and where it is let out for
commercial purpose the allowable deduction is 30% of the annual value:
(a) Repairs;
(b)Expenditure relating to collection of rent;
(c) Water and sewerage;
(d) Common electricity;
(e) Salary of:-
i) Darwan;
ii) Security guard;
iii) Pump-man;
iv) L i f t - m a n ; a n d
v) C a r e t a k e r
(f)Allother expenditure related to maintenance and provision of basic services,
(2) Land development tax;

(3) Municipal tax;
(4) Ground rent;
(5) Insurance Premium;
(6) Vacancy allowance (if the property remain vacant during a part of the year):
(7) Where the let out property is acquired, constructed, repaired, renewed or reconstructed with loan then
the interest payable for the year on such loan;
(8)Where the let out property has been constructed with borrowed capital and there was no house
property income during the period of construction, the interest payable during the period of
construction will be allowable in 3 equal installments from first 3 years of letting out;
27 Define money laundering. Is it a tax related offence? Discuss. Nov Dec 2012
Money laundering is the process of changing large amounts of money obtained from crimes, such as drug
trafficking, into origination from a legitimate source.
Money Laundering is the process by which criminals attempt to conceal the true origin and ownership of the
proceeds of criminal activities. If successful, the money can lose its criminal identity and appear legitimate.
In terms of section 2 (tha) of Money Laundering Prevention Act. 2002, ―Money Laundering means (a) Properties
acquired or earned directly or indirectly through illegal means ; (b) Illegal transfer, conversion, concealment of
location or assistance in the above act of the properties acquired or earned directly or indirectly through legal means.‖
In this Act. ―Properties means movable or immovable properties of any nature and description‖
The terms Money Laundering is used for a number of offences involving the proceeds of crime or terrorist funds.
It now includes possessing or in any way dealing with, or concealing, the proceeds of any crime.
Someone is engaged in money laundering under where they.
 Acquire or earn properties directly or indirectly through illegal means;
 Transfer, convert, conceal location or assist in the above act of the properties acquired or earned directly or
indirectly through legal means.
Where a professional accountant suspects that client is involved in money laundering he should report this to the
authorities.
Tax related offences are not in a special category. The proceeds or monetary advantage arising from tax offences are
treated no differently from the proceeds of theft, drug trafficking or other criminal conduct.
28 Discuss the provision of assessment on the basis of report of a Chartered May June
Accountant Under section 83AAA of Income Tax Ordinance 1984. 2013
83AAA- of ITO 1984 Assessment on the basis of report of Chartered Accountants-
(i) Where a return or revised return is filed under Chapter VIII by an assessee being a company and the
Board has reasonable cause to believe that the return or revised return is incorrect or incomplete, the Board
may appoint a registered chartered accountant to examine the accounts of that assessee.
(ii) The chartered accountant appointed under sub-section (1) shall exercise the powers and functions of the
Deputy Commissioner of Taxes as referred to in section 79 and clauses (a), (b), (c), (d) and (e) of
section 113 of ITO 1984.
(iii) The chartered accountant, after examination of the accounts of that assessee, shall submit a report in
writing to the Board along with findings within a time as may be specified by the Board.
(iv) On receipt of the report referred to in sub-section (3), the Board shall forthwith forward the report to the
concerned Deputy Commissioner of Taxes for consideration.
(v) On receipt of the report under sub-section (4), the Deputy Commissioner of Taxes shall serve a notice
upon the assessee under sub-section (1) of section 8B
(vi) The Deputy Commissioner of Taxes shall, after hearing the person appearing and considering the
evidences produced including the findings stated in the report received under sub-section (5) and also
considering the other evidences, by an order in writing, assess within thirty days after the completion of
hearing or consideration, as the case may be, the total income of an assessee and shall determine the
sum payable by the assessee on the basis of such assessment, and communicate the said order to the
assesse within thirty days from the date of such order.

2 Tax Computation of Business Entities and Individuals (25%)
2a. Tax Computation of Business Entities
S. Question Year
L
Messrs Delton Limited, a public limited company with its registered office in PE — Ill
Dhaka, shown net profit of Tk. 837,413 in the audited accounts for the income May —
year 31st July,2000. June,
You are required to compute total income and tax payable on correct return u/s 2002
82 and rule 64A of ITO and ITR 1984 indicating the assessment year and after
considering the following facts:-
a) Excess perquisites calculated u/s 30 (e) Tk. 145,000
b) Salaries and allowances amounting to Tk. 176,200 section 30(a) not
complied with;
c) Registration Expenses and fees include Tk. 215,701 found to be
personal entertainment in nature;
d) Advertisement and publicity expenses include Tk. 125,000 as
donation to a local sports club;
e) Gratuity provision during the year is Tk. 677,937 but actual payment
is Tk. 276,434;
f) Rent, rates and taxes claimed at Tk. 368,212 out of which Tk.
214,640 paid as rent not complied with section 53A of ITO 1984.
g) Accounting depreciation as per audited accounts is Tk.
2,979,211 and tax depreciation as calculated with reference to previous
year assessment is Tk. 4,726,422
Messers Delton Limited

(A public limited company)
Income year
Ass ess m en t y ea r
Computation of total income Tk. Tk.
Income from business or profession:
Net profit as per profit and loss accounts 837,413
Add: Items for separate consideration
Accounting depreciation -------------------------------- ---------- -- 2,979,211
3,816,624
Add: Inadmissible expenses:
Excess perquisites (Note 1) ------------------------------------ 145,000
Salaries and allowances (Note 2) -------------------------------- 176,200
Registration expenses and fees ----------------------------------- 215,701
Donation to local sports club --- ----------------------------- 125,000
Gratuity provision less actual expenses (Tk. 677,937-Tk. 276,434)---- 401,503
Rent, rates and taxes -------------------------------------------- 214,640
1,278,044
5,094,668
Less: Tax depreciation .......... (4,726,422
Total taxable income- .................................... 368,246)
Tax payable @ 30% on 368,246 (assumed publicly traded company)-- 110,473
--
Arun & Company Ltd. is a public limited company listed with Dhaka Stock PE — Ill
Exchange. Its authorized capital is Tk. 250,000,000 and paid up capital is May —
Tk. 50,000,000. June,
During the year ended 30 June 2001,the company made a net profit of Tk. 2002
27,500,000 which included the following:-
a. The company is a first class construction contractor and a supplier
to Defense Department and made a profit of Tk. 7,500,000 in a contract
of construction of a bridge under Roads and Highways Department of the
Government of the Bangladesh, under Ministry of Communication and
made another profit of Tk. 2,000,000 from supply business.

b. A gain of Tk. 1,500,000 out of sale of a Mercedez Car purchased in
1994 at a cost of Tk. 2,500,000. The book value of the car was nil
as on 30 June, 2000.
c. A net dividend of Tk. 3,400,000 from a bank of which the company
is a shareholder and the Company's Managing Director is a director
of the bank.
d. An insurance claim of Tk. 4,500,000 received against a fire insurance
claim of Tk. 5,000,000 made three years back. The company wrote off
the fire loss in the year of claim but the taxes department did not allow
the same as a deduction on the ground that the insurance company did
not settle the claim in that year and as such the quantum of loss was
unascertained. No further amount is receivable from the insurance
company.
e. The company purchased a land of Tk. 2,000,000 in the year 1990 and sold
the same for Tk. 4,000,000 during the year making a capital gain of Tk.
2,000,000. The sale deed was registered on 31-03-2001;
a) The company is also a manufacturing of machine made
bricks from which a net profit of Tk. 5,900,000 has been earned
after allowing depreciation of TK. 1,600,000 on fixed assets. The
tax written down value of fixed assets as at 30 June,2000 was as
follows:-
i) F u r n i t u r e - - - - - - - - - - Tk. 1,816,348
ii) Motor car --------------------Tk. 629,145
iii) Office equipments-------- Tk. 4,532,582
iv) Construction equipments----Tk. 8,648,756
The directors have declared a dividend of Tk. 15,000,000 for the year 2000-01
,
and the same has been approved by the shareholders in the Annual General
Meeting held on 30-11-2001.
Considering the foregoing facts you are required to:-
Compute the total income of the company for assessment year 2001-02.
Arun & Company
Income year ended 30-06-2001
Assessment year 2001-2002
Notes Tk'000
Net profit as per Profit and Loss a/c 27,500
Separate considerable items:
Less: Dividend income (3,400)
Add: Accounting depreciation 1,600
Less: Capital gain on sale of land (2,000)
Less: Gain on sale of car 1 (1,500)
22,200
Deduct: Allowable or deductible items:
Loss on stock (500)
Tax depreciation 2 (2,944)
18,756
Add: Allowable Gain on sale of car 1 600
Total income from business or profession 19,356
Income from other sources
Dividend income 3,400
Income from capital gain:
Capital gain on sale of land 2,000
Total Income 24,756
Note 1: Allowable profit on sale of car:
Purchase of car in 1994 Tk. 2,500,000
Allowable as per 3 rd Schedule Para 11(3)(g)(proviso)of ITO 1984 Tk. 1,000,000
Sales amount Tk. 1,500,000

So allowable profit is (1,000,000/2,500,000)*1,500,000 Tk. 600,000
Note 2: Calculation of tax depreciation:
Calculation of tax depreciation:
Construction equipments = (8,648,756 X 20%) = Tk.1,729,751
Office equipments = (4,532,582X20%) = Tk.906,516
Furniture =(1,816,348X10%)= Tk.181,635
Motor Car =(629,145X20%)= Tk.125,829
Total tax depreciation= TK. 2,943,731
Motor Car = (629,145X20%)= Tk. 125,829
Bashakhi Limited is a hundred percent export oriented industrial company. It PE — Ill

enjoyed tax holiday up to 30-06-2001. For the year ended on 31-12-2001, it earn Nov —
a net profit of Tk. 16,000,000 which included the following:- Dec, 2002
a) A net income of Tk. 850,000 received as dividend from a Public Limited
Company;
b) A receipt on account of insurance claim amounting to Tk. 500,000 in
respect of an insurance claim for loss of Stock due to fire occurred in 1999.
The cheque was received on 29-06-2001 but the same was encashed by the
bank on 10-07-2001 and credited in the cash book on the same date.
The actual loss of fire was Tk. 525,000 which was charged in the accounts
for the year 1999 but was disallowed by the Deputy Commissioner of Taxes
in the said year.
c) An amount of Tk. 1.000,000 in respect of income from Sale of a Sedan
Car. The car was sold on 31-05-2001 and purchased in 1997 at a cost of Tk.
2,000,000. Its book value was nil. The company has purchased another car
for Tk. 2,500,000 during the year.
From the scrutiny of the accounts, the following further particulars were revealed:-
i) An amount of Tk. 1,200,000 was being carried forward from 1997
in respect of a trading liability;
ii) The accounting depreciation for the year, charged on a straight line
method @ 20% for all assets was Tk. 2,475,000. Irrespective of period
of use full depreciation is charged in the year of addition but no
depreciation is charged in the year of deletion:
iii) The Tax Written Down value of fixed assets were Factory Building
Tk. 6,278,000, Plant and Machinery Tk. 14,860,000 , Furniture and
Fixtures Tk. 316,000, Transport Vehicles Tk. 1,134,883.
iv) One machinery costing Tk. 15,000,000 purchased in 1996 was
sold to a leasing company for Tk.12,000,000 under buy back
arrangement for the same amount payable in four years in equal
monthly installments. This transaction was not reflected in the
accounts. However, eight installments paid within the year have been
shown as additions to fixed assets.
From the above, you are required to calculate the following:-
i) Total Income of the Company;
ii) Tax Payable by the Company.

Bashakhi Limited Taka in ‘000
Income Year ended 31-12-2001
Taxable
Notes Total Exempted
Net profit as per audited Profit and Loss a/c 16,000
Less: Dividend income (850)
(Less)/Add: Insurance claim (500)
Less: Income from sale of car (1,000)
13,650 6,825.0 6,825.0
Add: Accounting depreciation 1,237.5 1,237.5
Trading liability 1,200.0
-
Profit from sale of machinery 1 7,084.8
8,062.5
16,347.3
Loss on stock 25.0
Tax depreciation 2 2,243.1 2,243.1

1500.0 500.0
Rent payment 3
Loss from sale of car 5 557.2
Total income from business or profession 5319.4

12,579.2
Income from other sources:
850.0
Dividend income ……
6,169.4
Total Income 12,579.2
Tax thereon
1,233.9
On Business income: (Tk.6,169.4 x 50% x 40%) 4

127.5
On Dividend income: (Tk.850.0 X 15%, deducted

at source)
1361.4
Tax Payable
Note 1: Profit from sale of machinery:

Profit on sale of Machinery
Year Principal amount Rate Depreciation
1996 15,000,000 20% 3,000,000
1997 12,000,000 20% 2,400,000
1998 9,600,000 20% 1,920,000
1999 7,680,000 20% 1,536,000
2000 6,144,000 20% 1,228,800
10,084,800
Sold 12,000,000
WDV (15,000,000 – 10,084,800) 4,915,200
Profit 7,084,800
Note 2: Calculation of tax depreciation:
Calculation of tax depreciation: Taka
Factory Building: Tk. 6278,000 © 20% 1,255,600
Plant and machinery: Tk. 14,860,000 @ 20% 2,972,000
Furniture and fixtures: Tk. 316,000 @ 10% 31,600
Transport vehicles: Tk. 1,134,883 © 20% 226,976
Total tax depreciation 4,486,176
Note 3: Rent payment

Total rent payment Tk. 12,000,000
Number of installments 48 i.e 12X4years
Per Installment amount Tk.250,000
Already paid 8 installment
Amount shown in exempted period 6X Tk.250,000=1,500,000
Amount shown in taxable period 2XTk.250,000= 500,000
Note 4: Exemption on income from export business:

As per 6 th Schedule part A para 28 an exemption is allowed up to 50% on income on export
business.
Note 5: Calculation of profit on the sale of car
Taka Taka
Cost of acquisition (1997) 2,000,000
Depreciation:
1997 @ 20% on Tk. 750,000 = - 150,000
1998 @ 20% on Tk.6,00,000 = 120,000
1999 @ 20% on Tk. 480,000 =
- 96,000
2000 @ 20% on Tk. 484,000= 76,800
2001 year of disposal, no depreciation -
442,800
Fiscal WDV at the time of disposal
1,557,200
Sales proceeds
1,000,000
Fiscal loss
557,200

M/s John Morris Inc. is a multinational company doing business in Bangladesh Branch. The PE-III
company filed return of income for the assessment year 2002-2003 showing income at Tk. May-June
30,00,000. Examination of the audited statement of accounts filed with the return of income
— 2003
revealed the following:
a) Salary includes Tk. 3,30,000 paid to a Director working at the head office at California.
He has never Visited Bangladesh and no taxes, as such, has been deducted at the time of
making the payment.
b) Head office expenses charged Tk. 11,00,000. No evidence could be produced for this
other than HO
auditors certificate.
c) Fine Tk. 11,000 paid for violation of customs law charged to P & L Account.
d) Two Nissan Petrol Jeeps purchased for Tk. 45,00,000 during the year. Depreciation
@20% charged on the full cost of the full cost of the vehicles.
e) To procure business Tk. 10,00,000 has been paid as commission to a local agent. In
making the payment the provision of section 53E of. I.T. Ordinance, 1984 has not been
complied with.
f) The company sold a motor vehicle for Tk. 4,65,000. Original cost of the vehicle was Tk.
5,25,000 and the written down value was Tk. 3,25,000. This has not been reflected in the
accounts.
g) Tk. 15,000 donated a non-recognized school.
h) Miscellaneous expenses include Tk. 72,000 paid as salaries to three servants who are
working at the residence of the Managing Director.
i) Conveyance expenses include Tk. 2,20,000 paid for the plane fare of the wife and son of the
Managing Director for the visit of the neighbouring countries.
j) Interest expense claimed at Tk. 33,50,000. The company has outstanding bank loan of
Tk. 2.10 crores. The company advanced Tk. 75,00,000 interest-free loan to a sister
concern in Bangladesh
From the above information compute the total income of the company for tax purpose.
M/S. John Morris Inc.

Note Taka Taka
Returned Income 3,000,000
Add :- Disallowances :
( a) Salary 1 330,000
( b)Head office Expenses 2 -----
( c)Fine for Violation of customers law 3 11,000
(d)Depreciation on Vehicle @ 20% on Tk. 4,500,000 will be 4 900,000
considered later on
(e)Commission to local agent 5 1,000,000
(f)Sale of Motor Vehicle to be considered latter on 6 -----
(g)Donation to non recognised school 7 15,000
(h)Miscellaneous Expenses 8 72,000
( i) Conveyance Expenses 9 220,000
(j)Interest Expenses to be considered later on 10 3,350,000 5,898,000
8,898,000
Less : Depreciation 4 200,000
Interest Expenses 10 2,153,571 2,353,571
6,544,429
Add : Profit on sale of motor vehicle 6
1,40,000
Total Income for Tax 6,684,429
Purpose
Notes :
1. Since the company did not deduct tax while making payment of salary u/s 50 of I.T.O 1984 or the DCT has no
notice that head office at California has deducted tax from the said salary be covered under double taxation
relief. Thus the payment of salary will be disallowed.
2. Head Office expenses will be considered as verified by the H.O auditors certificates. So, will a allowable
expenses for this assessment year 2002-2003. (But if it would be for assessment 2003-2004, only 10% of the
total Head Office expenses is entitled to be allowed).
3. Fine paid for violation of customs law may not be considered business expenses hence will be disallowed.
4. Nissan Petrol Jeep purchased this year will be allowed depreciation on Tk. 1,000,000/- @ 20% p.a. So
depreciation will be Tk. 200,000/- instead of to be charged on full cost of the vehicle.
5. As the company did not deduct tax @ 5% u/s 53(E) while making payment of commission will be disallowed.
6. Profit on sale of motor vehicle will be as follows :
Sale Value Tk. 465,000
Less : Written down value Tk. 325,000
Profit on Sale Tk. 140,000
This will be included in the income being considered normal business profit.
7. Donation to non-recognized school considered non-business expenses and hence will be disallowed.
8. Assumed that salaries paid to servants working at Managing Director is not a part of contractual obligation of the
company and hence is be considered non-business expenses will be disallowed being personal expenses of M.D.
9. Conveyance expenses paid for MD's wife and son is a personal expenses of MD and will be disallowed.
10. Interest expenses claimed will allowed proportionately as full amount of loan has not been utilized. The
calculation will be as follows :

3,350,000 X 7,500,000
21,000,000 = 1,196,429
Allowable amount will be = 3,350,000 — 1,196,429 = 2,153,571
XYZ Ltd. is a publicly traded company carrying on the business of manufacture and sale of PE-III
textile goods. Accounts are maintained on mercantile basis. The audited profit and loss account May-June
for the year ended 30 June, 2002 disclosed a net profit of Tk. 20,15,000. In the course of the
— 2003
assessment proceedings, the following facts are ascertained:
(a) The opening and closing stocks of cloths, values of which were taken at Tk. 27,00,000 and
Tk. 45,00,000 respectively were valued at 10% less than their respective costs. The market
price thereof on 30 June, 2001 and 30 June, 2002 were higher than their costs.
(b) Goods to the value of Tk. 4,90,000 had been purchased from a relative of a Director and its
fair market value would be Tk. 4,10,000 (the genuineness of the transaction is not in
dispute).
(c) Out of the preliminary expenses, Tk. 25,000 was written off to the debit of Profit and Loss
Account.
(d) During the tax year, it had sold its machinery for Tk. 5 lakhs. Its original cost in 1993
and W.D.V as on 1 July, 2001 were Tk. 3 lakhs and Tk. 1 lakh respectively. The surplus
has been directly credited to Capital serve in the Balance Sheet.
(e) A sum of Tk. 1,20,000 (representing 2.5% of the total sundry debtors) was debited to
Profit and Loss Account and set apart for bad and doubtful debts. The auditors have
certified this as reasonable.
(f) Tk. 25,000 representing unclaimed wages was shown in the Balance Sheet as at 30
June, 1998 as a liability. It is ascertained that more than 3 years have passed since the
liability arose and the legal remedies for workers to claim the wages were not available.
(g) The services of a dishonest employee were terminated. He filed a suit against the company
for damages for termination of services without notice and was awarded a sum of Tk.
5,000. The company paid the damages. It also incurred an expenditure of Tk. 1,000 in
this connection. The total sum of Tk. 6.000 was debited to General Charges.
(h) Salary expenses include an amount of Tk. 4,00,000 paid to an engineer who supervised the
work of the installation of the machinery. Due taxes were not deducted at sources but the
engineer duly accounted for due taxes through his annual IT Return.
(i) Tk. 65,000 was paid for insurance against loss of profit in the event of strikes.
(j) Miscellaneous expenses include Tk. 15,000 paid as salaries to two servants who are
working at the residence of the managing director.
(k) Advertisement expenses of Tk. 5 lakhs representing charges for the five years ending 30
June, 2006 were paid to a cinema company for slides.
(l) Tk. 15,000 was paid as interest on money borrowed by the company which was
advanced to a Director without interest. The interest was debited to the Profit & Loss
Account.
(m) The company owns two house properties, A and B constructed in 1995. of which property
A has been let out to employees for an aggregate rent of Tk. 60,000, occupation of this
property by the employees is necessary for and subservient to the business of the
company. The other property B has been let out for Tk. 90,000 to outsiders. Thus the Profit
and Loss Account was credited with rent receipts of Tk. 1,50,000 [Note: 'Rent, Rates
and Taxes', include municipal taxes of Tk. 25,000 and Tk. 30,000 in respect of properties
A and B respectively.]
Compute company's total income giving reasons for additions and allowances, and tax liability.
XYZ Ltd.
Particulars Note Taka Taka Taka
A Total Income : 2,015,000
Net Profit as per accounts 410.000 80,000
Add a) Closing Stock Value as per account 4,500,000

: Less : Opening Stock as per account 2,700,000
1,800,000
Closing Stock if 10% fair market is considered 4,950,000

4,500,000 @ 10%
Opening Stock as above 2,700,000 2,970,000
1,980,000
(1,980,000 – 1,800,000) 1 180,000
(b)Goods Purchased 4,90,000

Less : Fair Market Value 2 4,10,000 80,000
( c) Preliminary Expenses 3 ------ -----
(d)Profit on sale of Machinery 4 200,000
(e)Bad Debt 5 ----
(f)Unclaimed Wages 6 25,000
(g)General Expenses 7 6,000
(h)Salary Expenses 8 400,000
(i)Insurance Premium 9 65,000
(j)Miscellaneous Expenses 10 15,000
(k)Advertisement Expenses 11 ----
(l)Interest 12 15,000
(m)Municipal Tax of H. P. B. 13b 30,000 1,016,000
3,031,000
Less: Property income for separate consideration 13a,b 150,000

(60.000+90,000)
2,881,000
House property — A. has already been considered in 13a ---------

clause— n. So no further effect will be required
Add: House Property — B , Note — 13(b) 37,500
Total Taxable Income 2,918,500
B. Tax Liability :
On Tk. 2,918,500 @ 30% 875,550
Tax on Capital Gains on Tk. 200,000 @ 15% 4 30,000
905,550
Notes:
1. The market price of opening / closing were valued 10% less of their cost. As a result the profit of the
company has been reduced which has now been adjusted as per calculation shown at para (a) above
2. The market value of the goods purchase considering genui neness of the transaction is adjusted and profit to the
extent reduced has been added as per calculation shown at para (b) above.
3. Preliminary expenses written off is a genuineness transaction and hence allowable expenses.
4. Calculation of Capital Profit :
Sale of Machinery Tk. 5.00 Lakhs
Cost of Machinery Tk. 3.00 Lakhs
Capital gain : Tk. 2.00 Lakhs
As the asset is transferred after expiry of 5 years for the date of acquisition, the capital gains will be taxed at the
usual rate applicable to the assessees total income including the capital gain or @ 15% whichever is lower.
Here it will be 15% on capital gain
The profit / gain in disposal of machinery will as follows :
Original Cost Tk. 3.00 Lakhs
Written Down Value on July 01, 2001 Tk. 1.00 Lakhs
Business Profit / Gain Tk. 2.00 Lakhs
5. As the auditors have certified the bad debts of Tk. 120,000 as reasonable should be
allowed.
6. As per Sec. 19(15)(c) any trading liabilities as has not been paid- within 3 years will be considered as income.
7. The company did not observe the legal formalities by serving required notice as per law. Hence the amount of
Tk. 6,000 will be disallowed.
8. The salary paid to as engineer to supervise the work of the installation of machinery will be considered as
capital expenditure and hence will be disallowed.
9. The insurance premium against loss of profit in the event of strikes is considered non -business expenditure and
hence disallowed.
10. Assumed that miscellaneous expenses paid as salaries for MD's residence is not a contractual obligation of the
company and considered personal expenses of the MD. Hence will be disallowed.
11. Advertisement expenses paid for Cinema Slides has been capitalised being deferred revenue expenses and are
distributed within 5 years is a allowable expenses.
12. Interest paid for Director advance is considered to be non -business expenses and will be disallowed.
13. (a) Assumed that house property A has been let out to employees as per contractual obligation with the company

and is considered as business expenses and the Municipal Taxes will also be considered business expenses as
included in the Rent, Rates and Taxes. So, the income added will be deducted as follows :
Rent 60,000 Will be a allowable expenses and deducted from income
Municipal Taxes 25,000 Will be a allowable expenses and hence no action as already been
85,000 included in Rent, Rates & Taxes.
13.(b) House Property B : will be dealt under the head "income from house property” u/s 24 (where issued for
commercial or residential purpose).
Rent 90,000
Less : Municipal Tax - 30,000
1/4 th repair 22,500 52,500
Income from profit 37,500
A,B & C are partners sharing profits and losses in the ratio of 2:2:1. The PE — III
particulars on income for the year ended 30 June, 2003 are as under. May —
a) House properties: June,
The firm owns a building consisting of three storeys of identical specifications 2004
two of which are used for the firm's business and one is let out at a rent of Tk.
10,000 per month. The firm has earned Tk. 30,000 by putting up a display of an
advertisement hoarding of a multinational company on the roof of the building
during the year.
b) Business in Cotton
Textiles:
The trading account for the
year was as under:
Debtor Taka Creditor Taka
Opening stock 500,000 Sales 5,400,000
Purchases 4,500,000 Closing stock 600,000
Gross profit 1,000,000
Total 6,000,000 6,000,000
The closing stock has been uniformly valued at 12.50% under-cost.

Depreciation and other expenses debited to the Profit and Loss Account amount
to Tk. 400,000 which included among other things following items:
Taka Taka
i) Repairs to the Building:
Let out portion 8,000
Portion used for business 12,000
20,00
0
ii) Municipal Taxes:
The total Municipal taxes for the year were Tk. 27000
Of which tenant paid Tk.4,000 23,000
iii) Annual contribution to Cotton Dealers Association
A trade association 2,000
iv) Contribution to Prime Minister's Relief Fund 5,000
v) Salaries to the Partners:
A Tk. 24,000
B Tk. 48,000
C Tk. 72,000 144,000
vi) Interest paid on a loan of Tk. 500,000 taken for installing Computer
accounting system in the firm's premises (The Computer and peripherals
were duly installed during the period) 75,000
vii)It is claimed that Tk. 10,000 credited in the Profit and Loss Account
should be deducted as representing receipt of capital Nature. It was stated
that the amount has been received from a Textile mill as damages for failure
to deliver goods as per Contract. .......... ,
viii)Loss on speculation transactions150,000
A had no other sources of income but B and C were also partners in another firm
with D as the third partner. The shares of B, C and D for the year ended 30 June
2003 were as under:
Partners Salary (Tk.) Interest (Tk.) Profit/(Loss) Total (Tk.)
B - - (Tk.)
(50000) (50000)
C - - (50000) (50000)
D 60,000 20,000 (50000) 30000
B has also income from a house property at London amounting to Tk. 600,000
(after deduction of 25% tax at source)
C has other personal income of Tk. 50,000.
Required:
(a) Compute tax to be paid by the firm in which A, B and C are partners and
total taxable income in the hands of those partners from all sources.
(b) State the principles governing the basis of taxability of total income of
A,B & C.
A,B & C
Income year ended 30 June, 2003
Computation of total income of firm ABC Taka Taka
1)Property income:
Rental income (12*10,000) 120,000
Municipal tax paid by the tenant 4,000
Deemed annual value 124,000
Less: 30% allowance for repairs & maintenance(124000*30%) (37,200)
Municipal tax (4,000)
Adjusted income 82,800
2)Business income -Cotton Textile

Gross profit as per trading account 1,000,000
Add: Understatement
/o of stock to 14,285
1,014,285
Less: Depreciation and other expenses charged in P& L a/c (Note (400,000)
2) 614,285
Add: Inadmissible items:
Repairs -let out portion 8,000
Salary to partners 144,000
Loss on speculative transaction 150,000
Adjusted profit 916,285
Income from other sources (Advertising hoarding) Note 1 30,000

Total income 1,029,085
Particulars Rate (%) Tax (Tk.)
On First Tk. 100,000 ( 0% Nil
On Next Tk. 200,000 10% 20,000
On Next Tk. 200,000 15% 30,000
On Next Tk. 300,000 20% 60,000
On Balance Tk. 229,085 25% 57,271
Total tax payable by the firm 167,271
Allocation of profit to partners:
Particulars A (Tk.) B(Tk.) C(Tk.) Total (Tk.)
Salary 24,000 48,000 72,000 144,000
Shareof profit(2:2:1) 354,034 354,034 177,017 885,085
Total 378,034 402,034 249,017 1,029,085
Computation of total income of firm BCD:
Particulars Tk.
Net loss allocated to partners (150,000)
Add: Inadmissible items
Salary and interest 80,000
Total income/(loss) (70,000)
Allocation to partners of BCD firms:
Particulars B (Tk.) C(Tk.) D(Tk.) Total(Tk.)
Salary &interest 80,000 80,000
Net loss(equally) (50,000) (50,000) (50,000) (150,000)
Total (50,000) (50,000) 30,000 (70,000)
Assessment of partners:
Partner A:
The entire amount is tax free income and no further tax is payable by A nor he can claim any refund.
Partner B:
Particulars Tk.
Share of profit in ABC 402,034
Share of loss in BCD (set off) (50,000)
Total income 352,034
Since the resultant total income is less than his share of profit in ABC, he does not have to pay
further tax, nor he can claim any refund for rebate on tax free income.
Partner C:
Particulars Tk.
Share of profit in ABC 249,017
Other income 50,000
Share of loss in BCD (set off) (50,000)
Since the resultant total income is equal to his share of profit in ABC, he does not have to pay
further tax, nor he can claim any refund for rebate on tax free income.
Notes:
a) Advertising hoarding receipt has been treated as income from other sources;
b) Assume tax depreciation and accounting depreciation is same.
c) Difference between opening and closing stock is Tk. 100,000 which has been
undervalued and the amount has been calculated as follows:
(100*100,000)/87.5=114,285(114,285-100,000)=14,285
d) Loss on speculative transaction is not a business expense.
e) B's income from house property arising in London has been excluded because of
Double taxation agreement between Bangladesh and U.K
(b):Principles Governing the basis of taxability of total income :

We consider guidelines as mentioned in section 43 of Para 3 of ITO 1984.
 Total income includes all income arising or deemed to be arising in the concerned income
year.
 Share of profit or loss in the firm includes any salary, interest or remuneration received;
 Rebate on average basis is allowed when total income of any partner includes share of
profit of any firm which is taxed in the hands of the firm;
 Rebate can be claimed but a refund can not be claimed;
 No further tax is payable by a partner when his total income is less than the share
profit of the firm or when he does not have income from any other sources.
OBL Ltd. is a hundred percent export based industry. Its tax holiday ended on PE — III
30- 06 -2003. For the year ended 31-12-2003 it earns a net profit of Tk. May —
25,000,000 of which first 6 months profit is Tk. 18,000,000. The profit included as June,
follows: 2004
a) A net income of Tk. 3,000,000 received as dividend from a listed
company.
b) Insurance claim on stock loss of Tk. 3,000,000 received in tax
holiday period Tk. 2,700,000.
c) Earned a capital profit on land sale at Tk. 1 crore for Tk. 50 lac which was
reinvested in factory.
d) Other income Tk. 15 lac earned during 1 half of 2003.
st
e) Deduction of tax at source on rent was not made on Tk. 2,400,000 due
to disagreement with landlord but provision for rent was made for full
amount in the accounts.
From the scrutiny of the accounts the following further particulars came up:-
a) An amount of Tk. 1,000,000 was paid in cheque to BB Ltd. in 2001 as loan;
b) The WDV of taxed assets as per last assessment was Factory building
Tk. 7,000,000,
Plant and Machinery Tk. 15,750,000, Furniture and fixtures Tk. 950,000,
Motor Vehicles Tk. 1,850,000.
c) The accounting depreciation for the year charged on a straight-line basis
@ 18% for all
assets and additions during the year.
d) Lease rentals were Tk. 1,500,000 charged in P & L while the leased
assets were Tk.
9,500,000 on 31-12-2003 at cost.
e) Tax deduction on FDR of the 5 crores matured after 1 year on 30-11-2003
was Tk. 5 lac
being interest for full year. Interest for December 2002 not accounted for in
assessment order for the assessment year 2003/04.
Taking the above information into cognizance please calculate the
following:
Total income of the company;
i) Tax payable by the company;
ii) Asset value (WDV) as per assessment for 2004-2005
assessment order/return.
OBL Ltd.- a hundred percent export based industry.

Income year ended 31-12-2003
Tk
Taxable
Exempted
Net profit as per audited Profit and Loss a/c 18,000,000 7,000,000
Dividend income (3,000,000)
Less: Capital gain on sale on land (5,000,000)
Less: Other Income (1,500,000)
6,500,000 4,000,000
Add. Inadmissible items:
Non deduction on tax on rent (Note -1) 2,400,000
Accounting Depreciation 5,535,589 5,535,589
17,035,589 11,935,589
Loss on stock(Net of claim received) 300,000 -
Tax depreciation 2,507,500 2,507,500
Total income from business or profession 14,228,089 9,428,089

Dividend income ( Note -2) - "
'
Other Income (Note-3) 1,500,000

Interest on FDR (AIT 500,000/0.10)-Grossing
up(Matured 30.11.2003) (Note 3) 5,000,000
Capital Gain 5,000,000
Total Income 14,228,089 20,928,089
Tax thereon
On Business income (Tk.9,428,089X20%)= Tk.1,885,618
On other sources (Tk. 6,500,000X20%) = Tk.1,300,000
On Capital Gain (Tk. 5,000,000X15%) = Tk. 750,000
Tax Payable Tk.3,935,618-Tk. 500000 = Tk. 3,435,618
Calculation of tax depreciation:

Factory building =(7000,000X20%)= Tk. 1400000
Plant and machinery =(15750,000X20%)= Tk. 3150,000
Furniture and fixtures =(950,000X10%)= Tk.95000
Transport vehicles= (1850000X20%)= Tk.370000
Total tax depreciation = TK. 5,015,000
Calculation of Accounting depreciation: Tk. 11,071,178
Factory Plant Furniture
Building machinery and Transport
Year Rate 20% Rate 20% Fixtures Rate 20%
Rate 10%
Tax WDV(given) 2003 7,000,000 15,750,000 950,000 1,850,000
Tax WDV (7000000/0.80) 2002 8,750,000 19,687,500 1,055,556 2,312,500
Tax WDV(8750000/0.80) 2001 10,937,500 24,609,375 1,172,840 2,890,625
Tax WDV (10937500/0.80) 2000 13,671,875 30,761,719 1,303,155 3,613,281
Cost Price (13671875/0.80) 1999 17,089,844 38,452,148 1,447,950 4,516,602

Accounting Depreciation @18%
3,076,172 6,921,387 260,631 812,988
on cost
Total accounting depreciation
11,071,178
Written down value for2004-05
5,600,000 12,600,000 855,000 1,480,000
assessment year
Note -1: In-spite of tax-holiday, any payment made by an assessee to any person without
deduction of tax as per law would be disallowed (Sec 30 aa and 46A 7c of ITO1984)
Note-2: Assumed that the dividend was paid in the 2 nd half on which dividend distribution tax was
paid u/s 16 Dand accordingly exempted from tax as per clause 22 part Bof 6th schedule.
Note-3: As provided u/s 46A, only the profits and gains u/s 28 of tax holiday company are
exempted from tax.
Assumption: The Company commenced operations from July 1999, acquired all assets in
1999 and made no addition thereafter.
Messers Orion Limited a listed public limited company with its registered office PE— III
in Dhaka, has shown net profit of Tk.837,413 in the audited accounts for the Nov-
income year ended 30 June, 2005. Dec,
You are required to compute total income and tax payable on correct retu rn 2005
u/s 82 of the ITO 1984 indicating the assessment year and after considering
the following facts:
a) Excess perquisites calculated u/s 30(e) Tk.145,000
b) Salaries and allowances of Tk.176,200 paid without complying with the
provisions of section 30(a),
c) Registration expenses and fees include Tk.215,701 found to be personal
entertainment in nature
d) Advertisement and publicity expenses include Tk. 125,000 as donation to a
local sports club.
e) Gratuity provision during the year is Tk. 677,937 but actual payment is
Tk.276.434.
f) Rent, rates and taxes claimed at Tk.368,212 out of which Tk.21, 640 paid
as rent complied with the provision of section 53A of the ITO 1984.
g) Accounting depreciation as per audited accounts is Tk. 2,979,211 and tax
depreciation as calculated with reference to previous year assessment is Tk.
3,726,422.
h) Technical fee of Tk. 210,000 paid to foreign collaborators charged in the
accounts
i) Export turnover was 10% of the total sales of the company
j) The company declared 60% dividend for the year.

Orion Limited -A listed public Comp any
Inco me Ye ar e nde d 30 June 2005
As se ss me n t ye a r 20 0 5 - 06
Note Taka Taka
Net profit as per audited Profit and Loss a/c s 837,413
Add : Items to be considered separately:
Technical Know how fee 1 210,000

Accounting depreciation-fiscal depreciation allowable 2,979,211
Gratuity provision —payment allowed 677,937 3,867,148
4,704,56
Add.Inadmissible items: 1
Excess perquisites u/s 30(e) 145,000

Salaries and allowance -for non deduction of tax at source 176,200
u/s50and u/s30(a) of ITO 1984.
Advertisement & Publicity included donation to a local sports 125,000
club
Registration fee included personal entertainment 215,701
Rent without deduction of applicable tax u/s 53A, Rule 214,640 876,541
17B,u/s30(aa) 5,581,10
2
Deduct:Allowable or deductible items:
Gratuity paid 276,434
Fiscal depreciation 3,726,422

4,042,31
Technical Know how fee allowable @2.5% of profit 1 39,456
2
Total Income 1,538,79
0
Tax thereon
Tax @ 30% reduced by 10% thereof as dividend declared more
than 20% means 27% on Tk.1,538,790 415,473
Less: Export rebate of 50% on Export turnover of 10% that is
5%(50%of 10%) of Tk.415,473 2 20,774
Tax Payable 394,699
N ote 1: Techn ic al Kno w h ow:

Allowable upto@2.5%( 5% from 1 st July 2007) of profit of Tk. 1,578,246 u/s 30(h) of ITO
1984.
Note 2: Export tax rebate:
10% of sale of manufactured goods is exports, the company enjoy the opportunity of 50% tax
rebate on export business under clause 28 of Part A of 6 th schedule of ITO 1984.
XYZ Ltd. is a publicly traded company carrying on the business of manufacture and PE— III
sale of jute products. Accounts are maintained on mercantile basis. The audited profit May-
and loss account for the year ended 31 December, 2005 disclosed a net profit of Tk. June,
2,510,000. Examination ofthe books of accounts revealed the following facts: 2006
a) A preliminary expense of Tk. 50,000 was written off to the profit and loss account.
b) One Nissan Petrol Jeep was purchased during the year for Tk. 2,500,000.
Depreciation @ 20% was charged on the cost of the vehicle.
c)Depreciation claimed at Tk. 1,200,000 including depreciation on a leasehold asset
of Tk. 1,000,000. The company claimed depreciation on leasehold assets Tk.
200,000. The lease rental for the year was Tk. 150,000 in respect of the leasehold
asset.
d) Depreciation in respect of all other assets has been claimed as per Income Tax
Law.

e)Interest on loan aggregating to Tk. 400,000 has been waived by Sonali Bank during
the year which has been credited to the profit and loss account.
f) Over provision for certain expenses as well as under provision for certain expenses
inrespect of previous year amounting to Tk. 500,000 and Tk.300,000 respectively
have been adjusted with the retained earnings brought forward from previous year.
g) Net profit includes Tk. 800,000 representing income from sale of imported
products. The company suffered AIT aggregating to Tk. 200,000 at import stage at
the time of import of jute products.
h) Entertainment expenses of Tk. 120,000 debited to the profit and loss account.
i)Technical Know how fee of Tk. 300,000 paid to foreign collaborators charged in the
accounts.
j)50% of sale of manufactured goods is exports.
You are required to compute total income and tax payable by the company for the
income year ended 31 December 2005.
XYZ Ltd.
A publicly Traded Company
Engaged in the business of Jute Manufacture & Sales
Income year ended 31 December 2005
Assessment Year 2006-07
Notes Taka Taka
Net profit as per audited Profit and Loss a/c 2,510,000
Accounting depreciation on new Nissan Petrol Jeep:20% of
1 500,000
Tk2,500,000 - for separate consideration
Entertainment expenses -for separate consideration 2 120,000
Technical know how fee 3 300,000
Profit on sale of imported Jute products -forseparate
consideration(Treated as final discharge u/s 82 (C)(2)(c) & 4 (800,000) 120,000
2,630,000
Add. Inadmissible items:
Preliminary expenses 50,000
Over(Tk.500,000)and under provision(Tk.300,000) for
certain expenses adjusted during the year 200,000
Depreciation on leased assets 200,000 450,000
3,080,000

20% fiscal depreciation on Tk.1,000,000 of a Nissan 1 200,000
PetrolJeep is allowed
Interest on loan waived by Sonali Bank 4 400,000
Technical know how fee -allowable @2.5% of profit
before such charge 72,545
Entertainment expenses 2 78,195 750,740
2,329,260
Total Income
i) Profit on imported Jute products (AIT 200,000 )/0.40
500,000
ii) As computed —above 2,329,260 2,829,555
Tax thereon
i) Profit on imported Jute products on Tk. 5 00,000 @ 40% 5 200,000
ii) On Tk. 2.329,260 X0.15 5 349,389 549,389
Less : AIT on Sale of imported Products 200,000
Tax Payable 349,389
Note1: Depreciation on Petrol Jeep:

As per 3 rd Schedule Para 11(3)(g) proviso)of ITO 1984 depreciation is calculated on

Tk.1,000,000.
Note 2: Entertainment expenses:
Entertainment expenses is allowable u/s 30(f)(i) of ITO 1984 and rule 65 of ITR 1984:
Particulars Tk.
Entertainment expense iscalculated on (Tk. 3,080,000 –Tk.200,000- Tk.400,000 - Tk.
72,545+Tk.500,000)= Tk.2,907,455
So on first Tk.1,000,000X4% 40,000
On balance tk. 1,907,455 X2% 38,195
Allowable entertainment expenses 78,195
Note 3: Technical know how:

Allowable upto @2.5% (Tk. 3,080,000- Tk.200,000- Tk.400,000 — 78,195+Tk.500,000)=
Tk.2,901,805 of profit i.e 2,810,000 before such charge (Tk.300,000) u/s 30(h) of ITO 1984.
Note 4: Interest on loan
According to the proviso to clause 11 of section 19 of ITO 1984 interest waived by bank is not
taxable .
Note 5: Applicability of tax rate:
The Company enjoy reduced tax rate @ 15% by virtue of SRO #169-L/IT/2006 of 06 July 2006.
Note 6: Export tax rebate:
Though 50% of sale of manufactured goods is exports, but the company cannot enjoy the
opportunity of 50% tax rebate under clause 28 of Part A of 6 th Schedule because the assesse
is opting for reduced tax rebate @15% by virtue of SRO #169-L/IT/2006 of 06 July 2006.
Marine Fisheries Limited, a Private Limited Company, is engaged in Deep Sea PE - Ill
st
fishing business for last few years. For the Income year ended on 31 July 2005 the Nov -
company has submitted to you a statement of accounts consisting of Trading and Dec,
Profit and Loss Account for filing income tax return, As a Manager finance, of the 2006
company you have examined the accounts which are as follows :
Marine Fisheries Limited

Trading Account
st
For the year ended 31 July 2005
Particulars Taka Particulars Taka
Cost of Diesel 59,416,425 Sales :
Crew, Captain Salaryand allowances 20,928,739 Export 94,465,822
Local 59,817,456 154,283,278
Catch Incentive & Festival Bonus 4,677,749
Carrying and Forwarding 99,254
Packing & Processing 4,204,789
Fishing Gear 2,947,474
Vessel Operational Expenses 5,601,743
Loading & Unloading Expenses 373,350
Export Expenses 7,656,229
Fee & Taxes 319,400
Insurance 7,724,583
Repairs & Maintenance Expenses 6,810,438
Gross Profit 33,523,105
154,283,278 154,283,278
Marine Fisheries Limited
Profit and Loss Account
st
For the year ended 31 July 2005
Directors Remuneration 300,000 Gross Profit 33,523,105
Staff Salary 9,344,035

Income from Dividend
646,646
Staff Bonus 1,530,965 Add : AIT 114,114 760,760
Staff Overtime 121,974
Contribution to recognized P.F 286,547
License & Renewal 672,787
Traveling Expenses 427,548
Conveyance 125,321
Entertainment 125,321
Advertisement 54,875
Telephone Expenses 494,637
Car Maintenance 311,458
Electricity Expenses 401,578
Printing & Stationery 161,587
Canteen Subsidy 115,487
Canteen Gas Expenses 45,154
Office Decoration 1,377,903
Office Rent 1,026,647
Postage & Photocopies 135,487
Paper & Periodicals 102,154
Telex & Telegram 120,248
Security Bills 71,125
Agency Commission 2,52,000
WASA 60,548
Deferred Revenue Written off 1,01,879
Bank Interest 8,65,128
Staff Welfare Expenses 4,58,796
Miscellaneous Expenses 1,48,845
Depreciation 4,681,665
Net Profit 10,362,924
34,283,865 34,283,865
(1) The company has paid VAT of Tk. 80,02241 against the payment of cost
of diesel which has been refunded for Export earning of Tk. 9,44,65,822.
(2) There was eleven taxable employees. The company has disbursed total
Tk. 35,40,000 out of Tk. 93,44,035 without complying with the provision
of section 30 (a).
(3) The Company has imported packing materials and fishing gear from
Korea. The custom authority has collected income tax of Tk. 2,40,500 from
this consignment at the time of delivery of goods.
(4) Wasa bill includes Tk. 30,000 for director’s personal residence.
(5) Excess perquisites of Tk. 360,300 paid to technical staff of the company.
(6) Crew, Captain salary and allowance include Tk. 360,300 as Income Tax of
5 Engineers engaged on contract basis paid on behalf of the Company to
Government Account.
(7) Insurance expenses charges in Trading Account include Tk. 2,18,500 found
to be director’s personal yearly premium.
(8) Miscellaneous expenses include Tk. 25,000 as donation to Local
Orphanage Center approved by NBR.
(9) Office Rent Claimed at Tk. 10,26,647 out of which rent @ Tk. 60,000 per
month paid without complying with the provision of section 53A of Income
Tax Ordinance 1984.
(10) Tk. 1,50,000 paid as picnic expenses of sister concern of the Company out
of Tk. 4,58,796 debited to staff welfare expenses.
(11) Export turnover tax rebate will be allowed for the company.
(12) Tax depreciation as calculated with reference to previous year final assessment
is Tk.33,90,000.
You are required to compute total Income, final tax liability allowing credit of tax paid at
Custom stage and tax paid on dividend income after considering the above fact
supplied by the Management.

: Marine Fisheries Limited
Computation of total income and tax thereon
st
Income year ended on 31 July 2005
Note Amount Tk. Amount Tk.
Particulars
Net profit as per profit and loss account 10,362,924
Less : Gross dividend income to be considered separately
(760,760)
Add : Refund of VAT against ex e ort sales Note - 1 8,002,241
Add : Accounting depreciation 4,681,665
Income from business 22,286,070
Add : Inadmissible Expenses :
Salary Note - 2 3,540,000
WASA bill Note - 3 30,000
Excess perquisite Note - 4 360,300
Insurance expenses Note - 5 218,500
Office rent Note - 6 720,000
Staff welfare expenses Note - 7 150,000
Entertainment expenses Note - 8 -
Misc. Expense (donation to orphanage) 25,000
5,043,800
Less : Fiscal depreciation (3,390,000)
Business income 23,939,870
Add : Income from other sources - Dividend 760,760

Computation of Tax liability
On business income of Tk. 23,939,870 @37.5% 8,977,451
On dividend income of Tk. 760,760 @ 20% 152,152

Total Tax liability 9,129,603
Less : Tax rebate on export earning Note - 9 2,748,394
Less : Tax rebate on donation to orphanage Note - 10 2,500
Less : AIT collected by customs authority 240,500
Less : AIT on Dividend Income 114,114 (3,105,508)
Tax Payable u/s 74 of ITO 1984 6,024,095
Note - 1 : Refund of VAT against export sales.

Since the rate of VAT on export is zero, relevant input VAT turned into cost unless drawn back from the Government.
Therefore, the refund of VAT has been added to income.
Note - 2 : Inadmissible Salary.
In pursuance with sec 30 (a) of ITO 1984, payment of salary without deduction of tax at source is an inadmissible
expense.
Note - 3 : Inadmissible WASA bill.
The WASA bill relating to director's personal residence is not a business expenditure and therefore
disallowed.
Note - 4 : Excess perquisites.
The perquisite in excess of the limit prescribed u/s 30(e) is an inadmissible expense and therefore
added back to fiscal income.
Note -5 : Inadmissible insurance expenses.
The personal insurance premium of the director is not a business expenditure and therefore disallowed.
Note -6 : Inadmissible office rent.
In pursuance with Sec 30 (aa) of ITO 1984, payment of rent without deduction of tax at source u/s 53A is
an inadmissible expense.
Note -7 : Staff welfare expenses.
The amount spent for the picnic of sister concern is not a business expenses of the assessee and therefore
disallowed.
Note -8 : Computation of allowable entertainment expenses u/s 30(f) of ITO 1984 read with rule 65 ofITR
1984 :
Business profit before entertainment expenses Tk. 23,914,870
st
Allowed on 1 Tk. 1,000,000 @ 4% Tk. 40,000
On the balance Tk. 22,914,870 @ 2% Tk. 458,298
Total Tk. 498,298
But restricted to actual expenditure of Tk. 125,321
th
Note — 9 : Computation of export turnover tax rebate as per clause 28 part A of the 6 Schedule :
Sales Tk. 154,283,278
Fiscal Profit Tk. 23,939,870
Fiscal profit on export sales Tk. 23,939,870/ 154,283,278 X 94,465,822
Tk. 14,658,099
Tax on the fiscal profit out of export sales 37.5% of 14,658.099= Tk. 5.496,787
Rebate 50% of Tk. 5,496,787= Tk. 2,748,394
Note — 10 In accordance with SRO # 229 of 04.07.2011, donation to an organization approved by Board is
considered as CSR expenses and against such CSR expenses, 10% rebate is allowed. [25000X10% =2,500]
1 The following adjusted accounts appeared in the records of ABC Ltd. for the year ended Nov Dec
December 31, 2016. Numbers in brackets refer to the items in Additional Information. 2010
Revenues and Gains
Tk. 000
Net sales 126,500
Interest 1,000 (1)
Gain on sale of shares . 2,500 (2)
Total 1,30,000
Costs and Expenses
Cost of goods sold 65,300
Salaries and wages 26,000 (3)
Security services 300 (4)
Audit and taxation services 500
Office rent 600
Donations 1,800 (5)
Board meeting attendance fee 300 (6)
Other expenses 3,000 (7)
Depreciation 8,000 (8)
Corporate income tax . 4,500 (9)
Total 110,300
Net profit . 19,700
Dividends paid . 9,000 (10)
Additional Information
(1) Interest revenue comprises interest on government bonds issued in
200and purchased by ABC Ltd. in 2016.
(2) Gain on sale of shares arose from the following purchase and sale of shares of
a company listedwith DSE and CSE:
Bought in 2014 cost Tk.12,00,000

Sold in 2016 proceeds of sale Tk.37,00,000
(3) Salaries and wages include inter alia salary of Finance Manager
Tk.6,00,000 (consolidated) paid in cash (not by cheque or bank transfer),
gratuity (unapproved) provision of Tk.15,00,000 and gratuity payment
of Tk.10,00,000.
(4) Security services include payments to a private security company. No
VAT was deducted at source from such payments.
(5) Donations were all paid in 2016 to ICAB, specially designated for the
purchase of library books, computers and training materials.
(6) No income tax or VAT was deducted at source from Board meeting
attendance fee paid to 10 (ten) directors.
(7) Other expenses include inter alia:
(a) Entertainment expenses of Tk.5,00,000 spent on MD‘s birthday party; and
(b) Four foreign travels of MD, each costing Tk.2,00,000. All foreign
trips were for business purposes.
(8) ABC Ltd. has always used written down value depreciation and same
depreciation rates for both accounts and tax purposes.
(9) Corporate income tax is the amount estimated before preparation of the
tax return. 60% of the estimated amount of tax has been paid as advance
tax during the year 2016.
(10) Dividend has been paid at the rate of 25%.
The company has a capital loss of Tk.10,00,000 carried forward from the assessment year
2017-2018.
ABC Ltd. is a publicly traded company.
Required:
Comp Compute the total income and the total income tax liability of ABC Ltd. while
making theabove computations, any non-compliances of the relevant provisions of the tax
laws (incometax as well as VAT) by the company are to be considered strictly in
accordance with the legal provisions for such non-compliances. If considered necessary,
you may make assumptions in thelight of the relevant tax provisions.
ABC Ltd
Computation of Total Income
Income year 2016-2017
Note Taka Taka
000 000
Income from Interest on Securities (u/s-22):
Interest on govt bond 1,000 1,000
Income from Interest from Securities 1,000

Income from business or Profession (u/s-28):
Profit before tax as per profit and loss account 19,700
Less: Non-business income included in P&L A/c for consideration at appropriate heads of income:
ii Interest income (for consideration at interest on securities) 1,000

ii Capital gain on sale of shares 2,500
(3,500
)
a Salary to finance manager 1 600
b Gratuity Provision 2 1,500
c Security service disallowed u/s-30(aa) 300
d Audit, accountancy & advisory services disallowed u/s-30(aa) 500
e Office rent disallowed u/s-30(aa) 600
f Donation to ICAB 3 1,800
g Board meeting attendance fee. 4 300
h Entertainment: This is personal expenditure not related to business as per rule -65 500
i Corporate income tax 6 4,500
j Dividend paid (disallowed u/s-30(aa) for non deduction of TDS. 9,000
19,600
Income from business or Profession (u/s-28): 35,800
Income from Capital Gain (u/s-31)

Gain on Sale of Shares 2,500
2,500
Total income 39,300

Break up of total income
Interest on Securities(u/s-22): 1,000

Income from business or Profession (u/s-28): 35,800
Income from Capital Gain(u/s-33) 2,500
Capital loss carry forward from 2014-15 (1,000)

Capital gain after setting off previous loss 1,500
Total income 38,300
Computation of tax liabilities
On total income excluding Capital Gain. (38,300-
1 1,500)=36,800X24.75% 9,108
2 On Capital gain @15% 150

Net tax
liability 9,258
or However, Minimum Tax: 0.50% on gross
receipts 130,000 650
Whichever is higher 9,258
Notes:
1 The total income & tax liability of ABC Ltd are computed in the light of the
provision of Finance Act-2017
2 Salary of finance manager TK. 600,000 disallowed fully as per sect 30(i) as it was
not paid through crossed cheque or balance transfer
3 No such provision either recognized or unrecognized is allowable expenditure so disallowed fully
4 Donation to ICAB is disallowed being unapproved institution
5 VAT deduction is applicable as VAT was not deducted at source it is disallowed U/S 30 (aa)
6 Allowable U/S 30(k) up to 1% of disclosed turnover
7 Corporate Income tax is not an expense rather than appropriation of profit so it is not an item of
P/L account . So disallowed fully.
8 Depreciation To 8,000,000(depreciation claims as per 3rd schedule so nothing to be added back.)
As the ABC Ltd is a publicly traded company and declared 25% dividend, hence tax rate would be
9 24.75%
10 As per SRO 269-2010, the tax rate on the capital gain of selling listed company‘s stock is 10%
2 ABC Ltd. is a publicly traded company carrying on the business of manufacture and sale of May Jun
jute products. Accounts are maintained on mercantile basis. The audited profit and loss 2011
account for the year ended December 31, 2016 disclosed a net profit of Tk.2,510,000.
Examination of the books of accounts revealed the following facts:
a) A preliminary expenses Tk.50,000 was written off to the profit and loss
account.
b) One vehicle was purchased during the year for Tk.2,500,000.
Depreciation @20% was charged on the cost of the vehicle.
c) Depreciation claimed at Tk.1,200,000 including depreciation on a
leasehold asset of Tk.1,000,000. The company claimed depreciation on
leasehold assets Tk.200,000. The lease rental for the year was Tk.150,000
in respect of the leasehold assets.
d) Depreciation in respect of all other assets has been claimed as per Income Tax
Law.
e) Interest on loan aggregating to Tk.400,000 has been waived by IFIC Bank
during the year which has been credited to the profit and loss account.
f) Over provision for certain expenses as well as under provision for certain
expenses in respect of previous year amounting to Tk.500,000 and
Tk.300,000 respectively have been adjusted with the retained earnings
brought forward from previous year.
g) Net profit includes Tk.800,000 representing income from sale of
imported products. The company suffered AIT aggregating to Tk.200,000
at import stage at the time of import of jute products.
h) Entertainment expenses of Tk.120,000 debited to the profit and loss account.
i) Technical knowhow fee of Tk.300,000 paid to foreign collaborators charged in
the accounts.
j) 50% of sale of manufactured goods is exports.
You are required to compute total income and tax payable by the company for the income
year ended December 31, 2016.
Answer:
ABC Ltd.
(A publicly traded company)
Assessment Year-2017-2018
Income Year-2016-2017
Income from Business or Profession: U/S 28-30

—
Amount (Tk.)
Net profit as per Accounts 2,510,000
Less: Interest waived by the bank wrongly credited to the P/L 400,000
{This is exempted as per section 19 (11)}
Less: Income from imported jute products (shall be considered U/S- 82C) 800,000
Add: Entertainment expenses (to be considered separately) 120,000
Add: Technical knowhow fee (to be considered separately) 300,000
1,730,000
Depreciation over charged on vehicle 100,000
{ As per 3rd sch. Clause 6(a)}
Depreciation charged on leasehold assets 200,000
(As it is assumed to be under operating lease and paid rental on the same)
Income before charging entertainment & technical knowhow fees 2,030,000
Less: Admissible expenses:

Entertainment (As per rule 65)-Note-2 60,600
Technical knowhow fees (As per section 30, clause -h)-Note-3 162,400
Income from manufacturing business includingexports 1,807,000

Less: 50% exempted on exports (as per 6th sch. Para-28) 903,500
Income from manufacturing business 903,500

Income from imported jute products (U/S- 82C) 727,273
(AIT 200,000/27.5%)
Calculation of Tax Payable:

Less: Income U/S 82C 727,273
Income other than 82C 903,500
Tax Payable: 903,500 X 27.5% 248,463
Workings & Necessary Notes: 01

Notes:-1
 The total income and tax liability of ABC Ltd., is computed in the light of the provisions of
Finance Act-2017 i.e. Assessment Year 2017-2018;
 Writing off preliminary expenses is allowed;
 Over provision, under provision for certain expenses and adjusted in opening retained earnings
are not relevant in this income year;
Note:-2
Calculation of Entertainment-Rule 65
On first 10 lac profit@4% Tk. 40,000
On balance profit .i.e Tk. 1,030,000@2% Tk. 20,600
Total Tk. 60,600

Note:-3
Technical Know How Fees: 8% on Tk. 2,030,000 Tk. 162,400
3 RFL Co. Ltd. owns and maintains 10 tea estates in Chittagong. It sells the tea after Nov Dec
processing in its manufacturing plans within the estates. For the financial year ending 2011
December 31, 2016 it has produced the following information:
Taka
Opening stock of tea (Valued at the net sales prices) 80,00,000
Closing stock of tea (Valued at the net sales prices) 90,00,000
Sales (30% domestic,70% export) 12,40,00,000
Sales of bamboos and other bushes 20,00,000
Sales of old shade and other trees 90,00,000
Common expenditure apportioned between agriculture and business on the basis
of workers employed are:
Agriculture Business
Taka Taka
Manufacturing expenses 7,50,00,000 1,60,00,000
Administrative expenses 50,00,000 80,00,000
Besides, selling expenses of Tk.18,60,000 have been incurred during the year.
Depreciation on plant and machinery, furniture, factory and office buildings including
banglows have been included in above manufacturing expenses of Tk.80,00,000 and
Tk.20,00,000 relate to agriculture and business respectively. The company spent
Tk.30,00,000 during the year to bring new areas under its cultivation while nothing has
been spent on replacement of bushes. It is company policy to capitalize those
expenditure. There are no other inadmissible expenses. Tax WDV of fixed assets are as
follows:
Taka Taka
Banglows and other structure 2,30,00,000 1,50,00,000
Plant and machinery 3,50,00,000 6,90,00,000
Furniture, Equipment etc. 30,00,000 60,00,000
Vehicles and Tanks 1,05,00,000 60,00,000
Tubewell 23,00,000 -----
Pucca Irrigation works 8,00,000 ----
Pucca pumping machine 30,00,000 -----
Calculate the taxable income of RFL Co. Ltd. for the relevant assessment year
assuming that it has no brought forward agriculture or business losses but has
unabsorbed depreciation of Tk.2,44,00,000 under the head agriculture.
Taka
Sales 12,40,00,000
Closing stocks 90,00,000
Opening stocks (80,00,000)
Value of produce 12,50,00,000
Apportionment between agriculture and business in the ration 60:40 (Rules 31)
Taka Taka
Sales 7,50,00,000 Taka
5,00,00,000
Sale of Bamboos etc. - 20,00,000
Sale of Shade trees etc. 90,00,000 -
Taka
8,40,00,000 5,20,00,000
80,00,000 20,00,000
9,20,00,000 5,40,00,000
Deduct: Manufacturing expenses 6,70,00,000 1,40,00,000

Administrative expenses 50,00,000 80,00,000
Development expenses 30,00,000 -
Selling expenses - 18,60,000
Depreciation (calculation below) 86,35,000 2,08,00,000
Adjusted profit 83,65,000 93,40,000
Banglows Equipment Tanks Tubewell Irrigation Pumps Total Allowances

Plant
Tk. Tk. Tk. Tk. Tk. Tk. Tk. Tk.
10% 10% 25% 10% 15% 5% 20% -
WDV SF 2,30,00,000 3,50,00,000 30,00,000 1,05,00,0 23,00,00 18,00,00 30,00,00
WDA 23,00,000 35,00,000 7,50,000 00
10,50,00 0 0 06,00,000 86,35,000
WDA 2,07,00,000 3,15,00,000 22,50,000 094,50,00 3,45,000
19,55,00 90,000
17,10,00 24,00,00
Carried Forward 0 0 0 0
Depreciation Allowances-Business
Structures Plant Furniture Vehicles Total Allowances
Tk. Tk. Tk. Tk. Tk.
20% 20% 10% 20%
WDV SF 1,50,00,000 6,90,00,000 60,00,000 1,70,00,000
WDA 30,00,000 1,38,00,000 6,00,000 34,00,000 2,08,00,000
2WDA 1,20,00,000 5,52,00,000 54,00,000 1,36,00,000
Carried Forward
Summary of assessments- Assessment year 2017-2018

Taka
Agricultural income 83,65,000
Unabsorbed depreciation carried forward 83,65 ,000
Agricultural Income 0
Unabsorbed depreciation Brought Forward 2,44,00,000
Set off (83,65,000)
Remains 1,60,35,000
Notes:
(1) Valuation of closing stock in the case of plantation companies on net realizable basis is an acceptable
method as per IAS-2 (Inventories).
(2) Bamboos and other bushes naturally grown without any agricultural effort or skill employed and the
income thereon being treated as business income.
(3) Shade and other trees in tea garden are systematically planted and nurtured for growth and as such
full agricultural skill is employed.
(4) Expenditure in respect of developing new area for future tea cultivation is fully allowable as per rule
31, though the company has capitalized this.
(5) Unabsorbed depreciation of previous year‘s agricultural loss can only be carried forward and set off
against this year‘s agricultural income
(6) Rule 31 provide the apportionment mechanism for income but not the expenditure which are generally
not separated in the tea garden between agriculture and business. However, for the sake of convenience
apportionment for these expenditure not on the basis of employees / workers has been made.
4 XYZ/ABC Bank Ltd. has shown a net profit before tax amounting to Tk.390 million for the AL May
year Ended December 31,2016 Jun 2012;
You are required to compute the tax liability of the bank for the assessment year PE-III May
2017-2018 considering the following facts: June 2005
i) Accounting depreciation charged in the accounts was Tk.14 million whereas
tax depreciation has been calculated as Tk.25 million.
ii) Inadmissible expenses have been found to be as follows:
Particulars Tk. In Million
Perquisites 4.00
Subscriptions and Donations 0.25
Printing, Advertisement etc. 1.00
Sundry Expenses 0.45
iii) Extracted from the Balance Sheet

Paid up capital 408
Statutory Reserve 130
Retained profit-Opening 42
Retained profit- Closing 148
Exchange Equalization
fund 1
iv) Classification of Loans and Advances including Bills discounted and purchased.
Unclassified 8,065
Sub-Standard 25
Doubtful 15
Bad 5
v) Unclassified Loans and Advances include staff loan of Tk.45 million.
Other expenses include entertainment expenses of Tk.4 million.
vi) Provision for bad and doubtful debts shown in the profit and loss account
includes.
Specific Provision 1
General Provision 10
vii) Other income includes dividend of Tk. 5 million received from a publicly listed
company.
XYZ/ABC Bank Ltd.

Income year ended December 31,2016
Assessment year 2017- 2018
Particulars Notes Tk. In Tk. In

Million Million
Net Profit as per Profit and Loss A/C
390.00
Separate Considerable Items:
Dividend (5.00)
Accounting depreciation -fiscal depreciation is allowable 14.00 9.00
399.00
Add: Inadmissible Items:
Excess Perquisites 4.00
Subscriptions and Donations 0.25
Printing, Advertisement etc. 1.00
Sundry Expenses 0.45
Other Expenses Entertainment (for considering as per rule-65) 4.00
Bad and Doubtful debt Provision (General plus specific) 2 11.00 20.70
419.70
Deduct: Allowable or Deductible Items:
Fiscal Depreciation 25.00
Entertainment as per Rule-65 1 4.00
Bad debt 5.00 34.00
Income from Business 385.70
Income from Other Sources

Dividend 4 5.00
Total Income 390.70
Tax thereon
Income Tax @ 42.5% on (390.70-5) = 385.70 163.92
Excess Profit Tax 3 15.03
178.95
On dividend @ 20% on Tk. 5.00 1.00
Tax Payable 179.95
Note-1: Entertainment Allowance:
On First one Million @ 4% .040

On Balance 398.7 Million @ 2% 7.974
8.014
But restricted upto actual claimTk.4 million
Note-2: Bad and Doubtful Debts:

No provision for bad and doubtful debt is allowable as per section 29 other than actual bad debt
of Tk. 5 million
Note-3: Excess Profit Tax
Capital and Reserve:
Paid up Capital 408.00
Statutory Reserve 130.00
Retained Profit - Opening 42.00
Exchange Equalization Fund 1.00
Total 581.00
50% thereof 290.50
Total Income 390.70
Excess Profit (390.70 - 290.50) 100.20
Excess Profit Tax @ 15% 15.03
Note -4 : Dividend :
Rate of tax on divided is 20%
5 Given below is the Profit & Loss A/C of Arzoo/NYZ Textiles Ltd., for the AL Nov
year ended June 30,2017 Dec 2012;
Particulars Taka Particulars Taka PE III
—
Cotton 11,417,950 Sale of Yarn 10,811,956 Nov-

Stores 1,835,648 Sale of Textile Products 10,926,425 Dec,2004
Export Subsidy / Incentive
Mills Salaries & Wages 3,831,984 received in Cash 407,687
General Expenses 29,010 Sale of Waste 121,508
Replacement of Plant & Machinery 2,039,000 Rent of Bungalows 57,902
Stamp Duty, Registration, Legal Fees etc. 250,000 Dividend 17,400
Motor Car Overhauling Expenses 15,000 Interest on PSP 15,000
Purchase of two Paintings for MD’s Office 30,000
X-Mas Gift given to the Foreign Contractor 10,000
Refreshment, Food, Drinks etc., at one
ofits Business Meetings 25,400
Expenditure incurred on Catering
andrefreshments for shareholders and
guestsat general body meeting 50,600
Donation 10,000
Rates & Insurance 40,376
Office Expenses 240,694
Directors’ Fees 9,000
Auditors Fees 30,000
Interest 211,850
Repairs to Building & Machinery 124,556
Trade Penalties, Legal Expenses &
Professional Charges 120,000
Workmen’s Welfare Expenditure 55,184
Contribution to Staff Provident Fund 75,500
Provision for Gratuity 150,000
Reserve for Meeting Contingent Liability 30,000
Loss for Discarding Ageing Machinery 205,397
Selling Agent’s Commission 201,690
Net Profit (Subject to Depreciation) 1,069,339
22,357,878 22,357,878
22,357, ,878
From the foregoing, compute the company’s taxable income from business, the total
income (computation should include necessary reasons), and tax liability for the
assessment year, 2017 – 2018 taking into account;
i) Sale of textile products includes Tk. 89,249 from export.
ii) Payment of Mills Salaries includes Tk. 75,000 for payment of tax for a foreign
technician engaged by the company;
iii) Expenses for stamp duty, registration, legal fees, etc. amounting 250,000
have been incurred in raising loans;
iv) Rates Tk. 1,800, insurance Tk. 2,500 and repairs to building Tk.7,544 in respect of
bungalows;
v) The break-up of trade penalties, legal expenses and professional charges for Tk.
120,000 is as follows:
a) Trade penalties and law expenses constitute Tk. 20,000.
b) Assesseecompany has spent Tk. 50,000 for successfully defending the
allegation of black marketing.
c) Professional charges include Tk. 20,000 paid to an Income tax
practitioner to represent the cases to the Deputy Commissioner of Taxes
and Tk. 30,000 to represent an Income tax Appeal before Appellate
Tribunal.
vi) Donation includes Tk. 5,000 contribution to Zakat Fund;
vii) The Staff Provident Fund is a recognized one;
viii) It is found that the amount of gratuity actually paid during the year was Tk.
100,000;
ix) Dividend income has been subject to dividend distribution tax;
x) The amount of depreciation allowable for assets used for the company’s
business is worked out at Tk. 551,710;
xi) It is revealed that outstanding trading liabilities amount to Tk. 1,100,000. The
date of origin of the trading liabilities are as follows:
a) Assessment year 2011 – 2012 350,000
b) Assessment year 2012 – 2013 300,000
c) Assessment year 2014 – 2015 150,000
d) Assessment year 2016 – 2017 300,000
1,100,000
ARZOO/ NYZ Textiles Ltd.,
Income year 2016 – 2017
Assessment year 2017- 2018
Computation of Taxable Income Taka Taka
Less:
Export Subsidy / Incentive for separate consideration 407,687
Rent of bungalows (income from house property) 57,902
Dividend 17,400
Interest on PSP 15,000
497,989 571,350

X-Mas Gift Given to the Foreign Contractor 10,000
Donation 5,000
Rates, insurance & repairs (1,800 + 2,500 + 7,544) 11,844
Trade penalties law expenses 20,000
Provision for Gratuity 150,000
Reserved for meeting contingent liability 30,000
Entertainment Expenses 249,000
Outstanding Liabilities not paid within 3 years 350,000
Replacement of Plant &Machinery being capital expenditure 2,039,000
2,865,544
3,436,894
Less. :Gratuity Paid: 100,000
Tax depreciation 551,710 651,710
2,785,194

Less:
Entertainment Expenses
First 1,000,000 @ 4% 40,000
Next 1,785,194 @ 2% 35,704 75,704
Business Income 2,709,490
Income from Export Incentive 407,687 / 95x5/0.15 143,047
Total Business Income 2,852,537
Total
Tax on Business income of Tk. 2,709,490 @ 15% 406,424
(SRO : 218 -11/2003 of 19.07.2003)
Tax on cash Subsidy (Final Settlement) 82C 21,457
Other Income:
Income from dividend of Tk. 17,400 tax@ 20% deducted and the tax rate is also 20% 3,480
Interest on PSP (assuming it was purchased before10/06/1999) 15,000
Less: Exemption 15,000
Income from House Property:
Rental income that is annual value 57,902
Less: Rates and insurance 4,300
Less: repairs 25% 14,475 39,127
Notes:
(i) Payment of employee's tax for Tk. 75,000 paid by the employer is allowable expenditure and such tax is exempted
from payment of tax in the hand of employee- SRO: 182-L/99 of 01, July 1999.
(ii) Expense for stamp duty, registration legal fees amounting to Tk. 250,000 is allowable expenses u/s 29 (xvii)
(iii) Professional & legal fees are allowable but fine & penalties for Tk. 20,000 are not considered.
(iv) Donation toZakat fund is an allowable expense.
(v) Replacement of plant & machinery is capital nature of expenditure.
(vi) Purchase of two paintings for MD's office is a decoration expenses is allowable expenditure u/s 29.
(vii) Since the company is paying tax at reduced rate, tax rebate for export of Tk. 89,249 could not be allowed (clause 28
Part A of 6th schedule).
(viii) Gift is an allowable expenditure if given for business purpose. However, in absence of specific indication regarding
purpose, one given to foreign contractor has been disallowed.
(ix) The trading liability not paid within 3 years of the expiration of income year is being considered as an income u/s 19 (15)
(c) of ITO 1984.
(x) The amount ofTk. 50,000 being spent for defending the allegation of black marketing is allowable expenses.
6 ABC Limited, a Bank in Bangladesh has submitted an income statement showing profit of Nov Dec
st
Tk.2,58,000 for the year ended 31 December 2016. You are required to find out the 2012
amount of-
(a) 1% of unclassified loan
(b) Admissible entertainment allowance
(c) Calculation of excess profits under section 16(C)
(d) Revised Income
On the basis of the additional information as given under:
(i) Loans and Advances
- Unclassified advances Tk. 21,00,000
- Sub-standard advances Tk. 8,50,000
- Bad and Loss Tk. 1,02,50,000
- Doubtful Debts Tk. 11,45,000
(ii) Capital Structure
- Paid-up Capital Tk. 20,00,000
- Statutory Reserve Tk. 7,50,000
- Retained Earnings Tk. 2,50,000
- Dividend Equalization Fund Tk. 2,00,000
(iii) Depreciation
- Accounting depreciation Tk. 50,000
- Tax depreciation Tk. 80,000
(iv) Perquisites and Allowances
- Excess perquisite Tk. 50,000
-Printing and Advertisement Expenses Tk. 40,000 (Capitalized)
- Entertainment Allowances Tk. 65,000
- Other Expenses on which TDS are not applied Tk. 10,000
Compute the Taxable income and tax liability of the above bank for the assessment year
2017-2018.
ABC Bank Ltd.

Computation of Income Tax Liability
Net Profit as per account 258,000

Less: income from Investment 100,000
158.000
Add: Expenses to be considered separately 50,000
( a) Accounting Depreciation 42,000
(b) Provision for Bad & Doubtful Debts 65.000
(c) Entertainment allowance 157,000
315.000
Add: Inadmissible Expenses

(i)Excess perquisites 50,000
(ii) Printing& Advertisement 40,000
(Capitalized)
(iii) Other Expenses 10,000
100,000
415,000
Less: Tax depreciation 80,000
335,000
Add: Income from investment 100,000
Less: Entertainment allowance 435,000
Revised Income 17,400
417,600
Working Notes:
(a) Loans and Advances 14,345,000
1% on unclassified Advance 143,450
b) Actual provision for Bad Debts 42,000
(c) Entertainment allowance allowable
@ 4% upto Tk. 10,00.000 and balance
@ 2% on business income Tk. 4,35,000 14.400
(d) Calculation of excess profit under section 16C
(a) Tire-1 Core capital
Paid up Capital 2,000,000
Statutory Reserve 750,000
Retained Earnings 250,000
3,000,000
(b) Tire-2 Supplementary Capital:
General Provision on unclassified loan @ 1% 21, 000
Dividend Equalization fund 200,000
221,000
Total (a+b) 3,221,000
5 0 % of Profit 1,610,500
Actual profit 417, 600
Excess profit Tax Nil
Taxable income is Tk4,17,600 and tax is @42.5% which is Tk. 1,77,480

7 XYZ Limited, a Private Limited Company, is engaged in Deep Sea fishing business
May Jun
th 2013
for last few years. For the Income year ended on 30 June 2017 the company has
submitted to you a statement of accounts consisting of Trading and Profit and Loss
Account for filing income tax return, As a Manager finance, of the company you
have examined the accounts which are as follows :
XYZ Limited
Trading Account
For the year ended June 30, 2017
Cost of Diesel 59,416,425 Sales :
Crew, Captain Salaryand
Export 94,465,822
allowances 20,928,739 Local 59,817,456 154,283,278
Catch Incentive & Festival
Bonus 4,677,749
Carrying and Forwarding 99,254
Packing & Processing 4,204,789
Fishing Gear 2,947,474
Vessel Operational
Expenses 5,601,743
Loading & Unloading
Expenses 373,350
Export Expenses 7,656,229
Fee & Taxes 319,400
Insurance 7,724,583
Repairs & Maintenance
Expenses 6,810,438
Gross Profit 33,523,105
154,283,278 154,283,278
XYZ Limited
For the year ended June 30, 2017

Directors Remuneration 300,000 Gross Profit 33,523,105
Income from
Staff Salary 9,344,035 Dividend 646,646
Staff Bonus 1,530,965 Add : AIT114,114
760,760
Staff Overtime 121,974
Contribution to recognized
P.F 286,547
License & Renewal 672,787
Traveling Expenses 427,548
Conveyance 125,321
Advertisement 54,875
Telephone Expenses 494,637
Car Maintenance 311,458
Electricity Expenses 401,578
Printing & Stationery 161,587
Canteen Subsidy 115,487
Canteen Gas Expenses 45,154
Office Decoration 1,377,903
Office Rent 1,026,647
Postage & Photocopies 135,487
Paper & Periodicals 102,154
Telex & Telegram 120,248
Security Bills 71,125
Agency Commission 2,52,000
WASA 60,548
Deferred Revenue Written off 1,01,879
Bank Interest 8,65,128
Staff Welfare Expenses 4,58,796
Miscellaneous Expenses 1,48,845
Depreciation 4,681,665
34,283,865 34,283,865
(8) The company has paid VAT of Tk. 80,02241 against the payment of cost
of diesel which has been refunded for Export earning of Tk. 9,44,65,822.
(9) There was eleven taxable employees. The company has disbursed total
Tk. 35,40,000 out of Tk. 93,44,035 without complying with the
provision of section 30 (a).
(10) The Company has imported packing materials and fishing gear from
Korea. The custom authority has collected income tax of Tk. 2,40,500
from this consignment at the time of delivery of goods.
(11) Wasa bill includes Tk. 30,000 for director’s personal residence.
(12) Excess perquisites of Tk. 360,300 paid to technical staff of the company.
(13) Crew, Captain salary and allowance include Tk. 360,300 as Income Tax of
5 Engineers engaged on contract basis paid on behalf of the Company to
Government Account.
(14) Insurance expenses charges in Trading Account include Tk. 2,18,500
found to be director’s personal yearly premium.
(8) Miscellaneous expenses include Tk. 25,000 as donation to Local
Orphanage Center approved by NBR.
(9) Office Rent Claimed at Tk. 10,26,647 out of which rent @ Tk. 60,000 per
month paid without complying with the provision of section 53A of
Income Tax Ordinance 1984.
(10) Tk. 1,50,000 paid as picnic expenses of sister concern of the Company out
of Tk. 4,58,796 debited to staff welfare expenses.
(11) Export turnover tax rebate will be allowed for the company.
(12) Tax depreciation as calculated with reference to previous year final
assessment is Tk.33,90,000.
You are required to compute total Income, final tax liability allowing credit of
tax paid at Custom stage and tax paid on dividend income after considering
the above fact supplied by the Management.
XYZ Limited
Income year ended on June 30, 2017
Particulars Note Amount Tk. Amount Tk.
Net profit as per profit and loss account 10,362,924
Less : Gross dividend income to be considered separately
(760,760)
Add : Refund of VAT against export sales Note - 1 8,002,241
Add : Accounting depreciation 4,681,665
Income from business 22,286,070
Add : Inadmissible Expenses :
Salary Note - 2 3,540,000
WASA bill Note - 3 30,000
Excess perquisite Note - 4 360,300
Insurance expenses Note - 5 218,500
Office rent Note - 6 720,000
Staff welfare expenses Note - 7 150,000
Entertainment expenses Note - 8 -
Misc. Expense (donation to orphanage) 25,000
5,043,800

Less : Fiscal depreciation (3,390,000)
Add : Income from other sources - Dividend 760,760
Computation of Tax liability
On business income of Tk. 23,939,870 @37.5% 8,977,451
On dividend income of Tk. 760,760 @ 20% 152,152
Total Tax liability 9,129,603
Less : Tax rebate on export earning Note - 9 2,748,394
Less : Tax rebate on donation to orphanage Note -10 2,500
Less : AIT collected by customs authority 240,500
Less : AIT on Dividend Income 114,114 (3,105,508)
Tax Payable u/s 74 of ITO 1984 6,024,095
Note - 1 : Refund of VAT against export sales.

Since the rate of VAT on export is zero, relevant input VAT turned into cost unless drawn back from the
Government. Therefore, the refund of VAT has been added to income.
Note - 2 : Inadmissible Salary.
In pursuance with sec 30 (a) of ITO 1984, payment of salary without deduction of tax at source is an
inadmissible expense.
Note - 3 : Inadmissible WASA bill.
The WASA bill relating to director's personal residence is not a business expenditure and therefore
disallowed.
Note - 4 : Excess perquisites.
The perquisite in excess of the limit prescribed u/s 30(e) is an inadmissible expense and therefore
added back to fiscal income.
Note -5 : Inadmissible insurance expenses.
The personal insurance premium of the director is not a business expenditure and therefore disallowed.
Note -6 : Inadmissible office rent.
In pursuance with Sec 30 (aa) of ITO 1984, payment of rent without deduction of tax at source u/s
53A is an inadmissible expense.
Note -7 : Staff welfare expenses.
The amount spent for the picnic of sister concern is not a business expenses of the assessee and therefore
disallowed.
Note -8 : Computation of allowable entertainment expenses u/s 30(f) of ITO 1984 read with rule 65
ofITR 1984 :
Business profit before entertainment expenses Tk. 23,914,870
st
Allowed on 1 Tk. 1,000,000 @ 4% Tk. 40,000
On the balance Tk. 22,914,870 @ 2% Tk. 458,298
Total Tk. 498,298
But restricted to actual expenditure of Tk. 125,321
Note — 9 : Computation of export turnover tax rebate as per clause 28 part A of the 6th Schedule :
Sales Tk. 154,283,278
Fiscal Profit Tk. 23,939,870
Fiscal profit on export sales Tk. 23,939,870/ 154,283,278 X 94,465,822
Tk. 14,658,099
Tax on the fiscal profit out of export sales 37.5% of 14,658.099= Tk. 5.496,787
Rebate 50% of Tk. 5,496,787= Tk. 2,748,394
Note — 10 In accordance with SRO # 229 of 04.07.2011, donation to an organization approved by

Board is considered as CSR expenses and against such CSR expenses, 10% rebate is allowed.
[25000X10% =2,500]

8 Nov
ABC Telecom Ltd. is a listed telecom company Enjoying Tax holiday since 1st Dec
September 2014 declared dividend 10% for the year and no dividend was paid last 2013
year. Statement of Financial position of the company as at June 30, 2017 is given
below:
Particulars 2016-2017 2015-2016
Non Currentassets
Property, Plant and Equipment (net of 1,469,055,265 1,745,945,621
accumulated depreciation)
License fees 433,333,333
466,666,667
Investment 45,000,000 -
1,947,388,598 2,212,612,288
Current Assets
Receivables 56,734,179
54,512,957
Advances, Deposits and Prepayments 12,364,972 12,543,768
69,099,151 67,056,725
Total assets 2,016,487,749 2,279,669,013
Equity and Capital
Paid up Capital 500,000,000 500,000,000
Tax Holiday Reserve 424,409,174 137,061,174
Retained Earnings 636,613,761 205,591,761
Total Equity and Capital 1,561,022,935
842,652,935
Non Current liability
Loan (net of current maturity) 102,632,982 442,632,982
Current liability
Loan current portion 340,000,000 978,390,964
Payables, accruals and provisions 12,831,832 15,992,132
Total Current liability 352,831,832 994,383,096
Total Liability 2,016,487,749 2,279,669,013
Month wise income before tax is given below: Figures in million

Month International Access Network Dividend Income
Gate way (IGW) Services (ANS)
July '16 30,250,000 11,340,000
August '16 44,190,000 14,510,000
September '16 34,820,000 15,930,000 3,950,000
October '16 47,000,000 18,100,000
November '16 48,250,000 19,360,000
December '16 44,090,000 14,100,000 3,870,000
January '17 41,020,000 12,130,000
February '17 44,890,000 14,900,000
March '17 45,670,000 15,780,000 3,800,000
April '17 49,440,000 19,550,000
May '17 41,110,000 17,230,000
June '17 40,210,000 19,320,000 3,560,000

Total 510,940,000 192,250,000 15,180,000
Other information:
1. tax deducted at source Tk. 81,236,721 which includes Tk. 1,518,000

deducted from Dividend income and the balance from IGW bill;
2. excess perquisite given by the company Tk. 3,782,925;
3. entertainment expenses Tk. 24,572,890;
4. depreciation charged Tk. 231,890,356 but as per third schedule
depreciation is BDT 312,098,563;
5. amortization of license fees Tk. 33,333,333;
6. provision for gratuity Tk. 1,000,000;
7. provision for bad debts Tk. 5,000,000;
8. business promotion expenses Tk. 1,345,308; and
9. advertisement Tk. 650,000
10. Directors‘ Remuneration Tk. 25,000,000.
11. The company has deducted tax and VAT except on Business promotion
expenses of Tk. 1,345,308, advertisement Tk. 150,000 and Directors‘
remuneration of Tk. 25,000,000. The company paid withhold tax and
VAT with penalty against directors‘ remuneration before submission of
return.
Requirements 5
1. Compute total taxable income and net tax payable.
ABC Limited
Income Year 2016-2017
Month IGW ANS Dividend Total

Income
July'16 30,250,000 11,340,000 41,590,000
August '16 44,190,000 14,510,000 58,700,000
September'16 34,820,000 15,930,000 3,950,000 54,700,000
October '16 47,000,000 18,100,000 65,100,000
November 16 48,250,000 19,360,000 67,610,000
December '16 44,090,000 14,100,000 3,870,000 62,060,000
January '17 41,020,000 12,130,000 53,150,000
February '17 44,890,000 14,900,000 59,790,000
March '17 45,670,000 15,780,000 3,800,000 65,250,000
April '17 49,440,000 19,550,000 68,990,000
May '17 41,110,000 17,230,000 58,340,000
June '17 _ 19,320,000 3,560,000 63,090,000
40,210,000
Total 510,940,000 192,2500,000 15,180,000
15,180,000
718,370,000
Less: Income of July '16& August
100,290,000
'16 being 100% tax holiday u/s-46B 74,440,000 25,850,000 -
436,500,000 166,400,000 15,180,000 618,080,000
Less: On balance 60% tax holiday 261,900,000 2 99,840,000 - 361,740.000
u/s-46B 5

Less: Dividend Income-exempted as 10,000 10,000
per 11 A of 6th schedule part A
Taxable Income 174,600,000 66,560,000 15,170,000 256,330,000

Add: Disallowances for separate
consideration -
-Depreciation as per accounts 168,492,240 63,398,116 231,890,356
-Entertainment expenses 17,854,737 6,718,153 - 24,572,890
-Provision for gratuity 726,603 273,397 - 1,000,000
-Provision for bad debts 3,633,015 1.366,985 - 5,000,000
Add: Disallowed expenses
-Excess perquisite 2,748,685 1,034,240 - 3,782,925
-Business promotion expenses 977,505 367,803 - 1,345,308
-Advertisement 108,990 41,010 - 150,000
369,141,775 139,759,704 15,170,000 524,071,479
Less: Allowable expenses separate
consideration
Depreciation as per Third Schedule 226,771,768 85,326,795 - 312,098,563

142,370,007 54,432,909 15,170,000 211,972,916
Entertainment expenses (4% on 1st (2,867,400) (1,108,658) -
1,000,000+2% on balance amount) (3,976,058)
Total Taxable Income 139,502,607 53,324,251 15,170,000 207,996,868

Income tax 79,718,721 14,664,169 3,034,000 97,416,890
Add: Additional Charge U/S 16B 21,489,311 - 21,489,311
Advance tax 79,718,721 - 1,518,000 81,236,721
Net tax payable - 36,153,480 1,516,000 37,669,480
Notes :
1. It is assumed that ABC Telecom is not a Mobile Company.
2. Tax on IGW Tk-79,718,721(Tk-81,236,721-15,18,000) as TDS u/s-82C,related with
Section-52R.
3. Expenses are allocated on the basis of revenue.
4. Tax deducted from IGW considered u/s 82c, tax rate for ANS income 27.5% and
Dividend income 20%
5. Additional tax U/S 16B shall be payable as the Companydeclared dividend less than 15%.
Accumulated profit as on June 30, 2017 342,652,935

Add: Profit for the year as per accounts 718,370,000
Total Accumulated profit 1,061,022,935
Less: Paid up Capital (500,000,000)
Less: Dividend paid (50,000,000)
Less: Tax paid U/S 74 (81,236,721)
Undistributed profit 429,786,214

Additional Tax 21,489,311
9 May Jun
X Ltd. is engaged in civil construction business. The profit and loss account of the
2014
company for theyear ended 30 June, 2017 is given below:
For the year ended 30 June 2017
(Figures in
Revenues and gains Tk.)
Receipt from Civil Construction 47,60,000
Rent of godown 80,000
Claim against loss of plant & machinery by fire from Insurance Company
(1) 2,00,000
Interest on company deposit 25,000
Dividend from Companies(Net) (2) 50,000
51,15,000
Costs and expenses
Opening Stock of building materials 40,000
Less Closing Stock of building materials (25,000)
Salary to Employees (3) 9,90,000
Incentive Bonus 3,00,000
Excess Perquisites 80,000
Purchase of building materials (4) 24,00,000
Donation (5) 90,000
Interest on Loan 3,20,000
Other administrative Expenses 2,47,000
Technical Service fees 13,000
Travelling Expenses (6) 1,40,000
Municipal Tax on godown (7) 12,000
Insurance Premium of Godown 8,000
Directors Remuneration (8) 2,53,000
Depreciation on Plant and Machinery (9) 65,000
Provision for Tax (10) 1,43,000
Total 50,76,000
Net Profit for the year 39,000
51,15,000
The following additional information are also available:-
(1) Claim was received against fire insurance taken for the plant and machinery at
book value of Tk. 4,20,000/-. The written down value was Tk. 1,85,000/-. The
plant and machinery destroyed in the fire was scrapped and disposed of at no
consideration.
(2) Dividend received Tk. 50,000/- net of Tax.
(3) Salary includes Tk. 20,000/= gratuity paid to employees during the year on
cessation of their employment. The company does not have any separate
gratuity fund.
(4) The entire building materials were purchased from a firm in which Managing
Director of the company was a partner. The fair market value of the materials
purchased was Tk. 20,00,000/-.
(5) Donation includes Tk. 50,000/= paid to Bangladesh Cricket Control
Board, Tk. 20,000/= to Zakat Fund and Tk. 20,000/= to ICAB
(6) Travelling expenses include costs incurred for Tk. 1,40,000/- against
overseas travelling by a director.
(7) Municipal Tax on godown includes other tax of Tk. 3,000/- not paid.

(8) Directors remuneration includes board meeting attendance fee of Tk. 50,000/=
on which no VAT has been deducted and deposited to the government
treasury.
(9) The rate of depreciation on plant and machinery is 15% under the Third
Schedule of Income Tax Ordinance, 1984. The tax written down value of the
plant and machinery (still in use) brought forward on 1 July 2016 was Tk.
1,60,000/=. In addition a new plant and machinery was purchased for Tk.
23,333/= during the year.
(10) Tax provision is to be made as per law, based on the Profit and Loss
Account and the additional information provided here.
(11) The company issued 1,00,000 shares of Tk. 10/ each, at a premium of Tk.
3 each during the year.
Compute the total income of X Ltd. for the assessment year 2017-2018 and Tax liability.
You answer should include explanation of your treatment of various items.
X Limited
Income Year: 2016-17
Assessment Year: 2017-2018
Computation of total taxable Income and tax thereon
Taka Taka
Income from business and professional u/s 28
Net income as per books of accounts 39,000

Less: Income to be considered other heads
- Claim on insurance premium 200,000
- Interest income or deposit 25,000
- Dividend income 50,000
- Rent of godown 80,000
(3,55,000)
Add: Expenses to be considered as per ITO. 1984
- Depreciation 65,000
- Technical service fees 13,000
- Incentive bonus 300,000
- Foreign travelling 140,000
518,000
Add : Expenses to be considered under different head

Municipal tax on godown 12,000
Insurance premium on godown 8,000
20,000
Add : Expenses disallowed as per ITO-
Excess of fair value of building materials (2,400,000-2,000,000) 400,000
Donation Note:1 65,000
Director remuneration on which VAT has not been deducted 50,000
Tax provision as per accounts 143,000
Excess perquisites 80,000 738,000
Income against insurance claim in excess of WDV as deemed income u/s 19

15,000
Income before considering depreciation expense
975,000
Depreciation as per 3rd Schedule (160,000+23,333 @15%) (27,500)
Income after considering depreciation expense
947,500
Incentive bonus 10% of disclosed profit before provision for income tax (3,900)
Foreign travel 1% of total turnover but the actual will be considered as it is
(140,000)
lower.
Technical service fee @8% of assessed profit after depreciation or actual whichever (13,000) (1,56,900)
is lower
Taxable income from business or profession 790,600
Income from House property u/s 24-
Amount value of godownrent higher of -
(a) Rent received 80,000
(b) Municipal value - 80,000
Less: Allowable deduction u/s25-
Municipal tax on godown excluding the Tk.3,000 which is other tax payable (9,000)
Insurance Premium paid on godown (8,000)
Repair and maintenance 30% of annual value (24,000) (41,000)
Income from House property 39,000
Income from other sources-
Dividend income exempted up to Tk. 10,000 as per 6th Schedule Part B. So
Grossed up taxable income (50,000/0.80) - 10,000 52,500
Interest on deposit (gross) 25,000/0.9 27,778
Total income from other sources 80,278
Total taxable income 909,878
Computation of tax liability-
Tax liability on income from business or profession @37.5% 296,475
Tax liability on income from house property @ 37.5% 14,625
Tax liability on income from other sources except dividend@ 37.5% 10,417
Tax liability on dividend 52,500 @20% 10,500
Total tax liability 332,017
Less: TDS on dividend (12,500)
TDS on interest on deposit (2,778)
Net tax liability 316,739
Notes:
1. As per SRO # 337/AIN/99 dated 17 November 1999, donation to Bangladesh Cricket Board is exempted up to
50%.
2. As per third schedule of the ITO 1984, depreciation on plant and machinery is allowed @ 20%. However. 15% is
considered in accordance with the question.
3. Payment of gratuity to employee is an allowable expenditure irrespective of having gratuity fund.
10 TWS Ltd. has been in the business of manufacturing office furniture since 2002. For Nov
the year ended December 31, 2017, its profit and loss account is as follows: Dec
Notes Tk. ‘000 Tk. ‘000 2014
Sales 4,800
Less: Cost of sales 1 2,600
Gross profit 2,200
Less: Operating expenditure:
Payroll costs 2 1,500
Directors’ remuneration 3 300
Freight and insurance 4 150
Finance charges 5 100
Donations 6 50
Utilities 7 75
Professional fees and subscriptions 8 85
Training and research 9 60
Entertainment 10 120
Foreign exchange loss 11 40
Provision for doubtful debts (trade) 12 30
2,510
( 310)
Add: Other income 13 400
Profit before taxation 90
Notes:
1. Cost of Sales Tk. ‘000
Included under cost of sales are:
Depreciation of fixed assets 300
Provision for stock obsolescence 74
Damaged stocks written off 26
2. Payroll Costs
Included under payroll costs are:
Provision for retirement benefits
80
Medical expenses of staff and family
46
Contribution to an overseas provident fund (unapproved) for an expatriate employee
16
3. Directors’ Remuneration
The directors’ remuneration comprises:
Directors’ salaries and fees 255
Leave passages20
Entertainment allowances (utilized to entertain customers and dealers)25
300
4. Freight and Insurance
Included under the above is an amount of Tk.3,000 paid to Safe Insurance Ltd.,
a company incorporated in Bangladesh, for insuring imported goods.
5. Finance Charges
Included under the above is an interest subsidy of Tk.16,000 paid by the
company in relation to loans taken by the employees from a bank.
6. Donations
The above comprise:
Cash donations to approved institutions30
Donations of 5 television sets to approved institutions 15
Advertisement in souvenirs5
50
7. Utilities
Included in the above are deposits of Tk.3,000 for water and electricity in connection
with the expatriate employee’s house.
8. Professional Fees and Subscriptions
The above comprise:
Audit and tax fees 35
Registration of trademarks20
Legal fees in obtaining a term loan 17
Legal fees on recovery of trade debts13
85
9. Training and Research
Included under the above expenses are:
Routine product testing and quality control expenses 16
Payments to an approved research and development company for the use of its
services. 33
10. Entertainment
The above comprises:
Dinners and lunches provided to suppliers 54
Meals and refreshments provided to employees during promotional campaigns 6
Salesman entertainment allowances (utilized to entertain customers and dealers)60
120
11. Foreign Exchange Loss
The above comprises:
Foreign exchange loss on settlement of trade debts 27
Foreign exchange loss on purchase of machinery13
40
12. Provision for Doubtful Debts (trade)
The above provision comprises:
Specific provision for doubtful debts 8
General provision for doubtful debts 15
Bad debts written off7
30
13. Other Income
This comprises income derived from Bangladesh as
follows:
Tax exempt dividend 154
Interest income 86
Dividend income (gross) 160
400
14. Additional Information
(i) The balances of the following provision accounts are as shown below:
December 31
2016 2015
Tk. ‘000 Tk. ‘000
Provision for stock obsolescence 180 120
Provision for retirement benefits 302 254
Provision for doubtful debts
(trade)
- Specific 32 25
- General 72 60
(ii) TWS Ltd. has unabsorbed tax losses and unabsorbed depreciation allowances
brought forward from the assessment year 2016-2017 of Tk.162,000 and
Tk.103,000 respectively. The depreciation allowances claim for the assessment
year 2017-2018 is Tk.124,000.
Required:
Compute the total income and tax liability of TWS Ltd. for the assessment
year 2017-2018.
TWS Ltd.
Assessment year: 2017-18
Accountingyear ending on 31 December 2016.
Particulars Note Taka 000 Taka 000

Net Profit / (Loss)before tax as per audited financial statements 90
Income to be considered separately under appropriate head:
Other income 400
Profit from business as per audited financial statements (310)
Items of expenditure added for later consideration:
Depreciation of fixed assets as per audited financial statements 300
Provision for stock obsolescence 1 74
Provision for retirement benefit 2 80
Director's remuneration (entertainment allowance) 3 25
Donation to approved institutions 4 45
Entertainment allowance 3 120
Provision for doubtful debts (trade) 5 23 667
Inadmissible expenses:
Contribution to unapproved overseas provident fund 6 16
Interest expense of staff loan borne by the company 7 16
Deposit for water and electricity with expatriate employee house 8 3 35

392
Admissible income/ (expenses):
Written off provision for doubtful debts 5 (4)
Written off provision for obsolescence of stock 1 (14)
Retirement benefit paid 2 (32) (50)
Income from business or profession before consideringdepreciation, 342
Entertainment allowance, unabsorbed tax loss and unabsorbed depreciation
Tax depreciation for the assessment year 2017 - 18 (124)
Profit after depreciation 218
Entertainment allowanceOn Tk. 218,000 @4% 3 (8.72)
Business income after entertainment allowance 209.28
Set off unabsorbed tax loss 9 (162)
Set off unabsorbed fiscal depreciation 10 (47.28)
Income from business or profession -

Dividend income 154 -
Exempted in full (since as per question it is tax exempt) (154)
Interest income 86
Dividend income (gross) 160
Income from other sources 246
Total taxable income 246
Income Tax Payable on Total Income Note Taka’000
Tax payable on dividend income of Tk.86,000@20% 17.20
Tax payable on other income of Tk.160,000@35% 56.00
73.20
Investment tax credit 4 (6.75)
66.45
Advance income tax paid -
Net tax payable 66.45
Notes:
1. Provision for stock obsolescence is disallowed in income tax assessment and direct
writeoffofstock is allowed as deduction. Further write off of provision for stock obsolescence
tantamount to actual write off and as such is considered as deductible expenses as determined
below:
Particulars Taka
Opening provision for stock obsolescence 120
Provision made during the year 74
Provision written off (balancing figure) (14)
Closing provision ( 14)
180
2. Provision for retirement benefit is disallowed in income tax assessment and actual payment
is allowed as deduction as determined below:
Particulars Taka
Opening provision for retirement benefit 254
Payment made(balancing figure) (32)
Closing provision for retirement benefit 302
3. Entertainment allowance is separately considered as per rule 65 of the Income Tax Rules ,1984;
4. Donation to approved institutions (30+ 15) is considered for investment tax credit as per
paragraph 22 of Part B of the Sixth Schedule of the income Tax Ordinance, 1984. 15% on Tk.
45,000 =Tk.6,750;
5. Provision for doubtful debt is disallowed in income tax assessment and direct write off of receivable
is allowed as deduction. Further written off provision for doubtful debt tantamount to actual
write off and as such is considered as allowable deduction as determined below:
Particulars Taka
Opening provision for doubtful debts (specific & general) 85
Provision written off (balancing figure) (4)
Closing provision 104
6. Contribution to unapproved overseas provident fund is disallowed as per section 30(d) of the ITO,
1984;
7. Interest expense of staff loan borne by the company is considered as non business expense;
8. Deposit for water and electricity is considered as security deposit and recoverable at the end of
tenancy;
9. Carry forwarded tax loss is adjusted before unabsorbed depreciation as per section 42(6) and 42 (7)
of the ITO. 1984;
10.Unabsorbed fiscal depreciation up to Tk.47, 280 has been adjusted this year and remaining Tk.55,720 has
been carried forwarded.
11 May
ABC Ltd., a publicly traded company incorporated and operating in Bangladesh, is Jun
70% Bangladeshi owned and is a manufacturer of refrigerators, freezers and air- 2015
conditioners under the brand name ABC which is registered as a trade mark in
Bangladesh. The company is the owner of the brand. The profit and loss account for
the year ended 31 December 2016 is as follows:
Notes Tk.‘000 Tk.‘000

Turnover 161,596
Add: Interest income (1) 308
161,904
Less: Cost of sales (2) 115,416
46,488
Less: Salaries, wages, and bonuses (3) 7,040
Employees Provident fund (4) 1,536
Donation (5) 20
Advertising (6) 7,398
Rental of premises (7) 1,858
Travelling (8) 1,500
Foreign exchange loss (9) 280
Maintenance of plant and
machinery (10) 232
Bad and doubtful debts (11) 2,038
Freight and insurance 3,044
Depreciation 1,880
Motor vehicles expenses 582
27,408
Net profit before taxation 19,080
Notes:
(1) Interest income is from a fixed deposit placed with a bank in
Bangladesh. The interest was received during the year and has been
grossed up in the accounts. Interest income includes Tk.28,000 (gross)
earned but received by ABC Ltd. after 31 December, 2016.
(2) Cost of sales is arrived at after crediting Tk.80,000 in respect of the
cost of goods manufactured by the company, which were withdrawn
from stock for use of fixed assets by the company. The normal selling
price was Tk.120,000.
(3) Salaries, wages, and bonuses include basic salary of Tk.64,000 paid to
CFO in cash for month of January 2016,pension of Tk.20,000 and
contribution to the Gratuity (unapproved) Fund.
(4) The Employees Provident Fund contributionsby the employer and
employee each are at the rate of 10% for staff and 12% for executives.
(5) Donation is in respect of contributions made to a fund-raising
campaign organized by a distributor of the ABC brand of goods.
(6) Advertising:
Included is a sum of Tk.54,000 incurred on advertising the ABC
brand of goods on the internet via a host website located in Dhaka.
The goods are of export quality standard. No income tax and VAT
were deducted from the payment, as the company was not sure about
the requirements of such deduction.
(7) Rental of premises:
Included in the rental is a sum Tk.50,000 paid in respect of the early
termination of the lease of a building which the company vacated in
September 2016. The lease was to haverun for another 5 years. The
building was no longer suitable as a showroom for the company‘s
goods due to the construction of a toll plaza.
(8) Travelling includes:
(i) Vacation airfare and hotel accommodation costing Tk.36,000 for
important overseas customers.
(ii) Reimbursement to the directors of the company of salaries of
Tk.200,000 and Employees Provident Fund contributions of
Tk.25,000 in respect of drivers employed by the directors.
(9) The foreign exchange loss is in respect of the purchase of component
parts for manufacture. The realized loss amounts to Tk.14,000 only.
(10) Maintenance of plant and machinery includes the installation cost of a
machine amounting to Tk.34,000.
(11) Bad and doubtful debts comprise: Tk.
Bad debts recovered (238,000)
Specific provision brought forward (1,902,000)
General provision brought forward (2,410,000)
Bad debts written off 240,000
Specific provision carried forward 2,750,000
General provision carried forward 3,598,000
2,038,000
The specific provision carried forward includes a sum of Tk.26,000,

being the balance of a personal loan granted to a director who has now
resigned from the Board.
(12) Depreciation allowances have been computed at Tk.1,644,000 for the
assessment year2017-18, but without taking into account the following
acquisitions:
Machine:
On 14 August 2016 the company purchased a machine at a cost of
Tk.366,000. The sum of Tk.34,000 mentioned in note (10) was
incurred on preparing the site for installation of this machine. The
machine commenced to be used for the business two weeks after
acquisition.
Motor car:
A new car costing Tk.4,400,000 was purchased on 9 July 2016 for the
general manager.
(13) Dividend has been paid at the rate of 30% (20% cash, 10% bonus) for
the year ended 31 December 2015.
(14) The company has a capital loss Tk.1,000,000 carried forward from the
assessment years as follows:
2009-10 Tk. 200,000
2010-11 Tk. 300,000
2011-12 Tk. 400,000
2012-13 Tk.100,000
Tk.1,000,000
The loss carried forward from the assessment years includes:
(i) 2009-10: Tk.100,000 depreciation allowance.
(ii) 2012-13: Tk.50,000 loss under the head ―Capital gain‖.
All other losses carried forward relate to business income.
Requirements:
a) To Compute the total income for the Income year ended 31 December 2016
Corresponding to assessment year 2017-2018.
b) To compute total tax liability for the year.
While making the above computations any non-compliance of the relevant
provisions of the tax laws (Income Tax as well as VAT) by the Company are to be
considered strictly in accordance with the legal provisions for such non compliance.
Use the current income tax provisions, ignoring the proposals given in the Finance
Bill, 2018. If considered necessary, you may make assumptions in the light of the
relevant tax provision.
ABC Ltd.
Accounting Year ended on 31 December 2016
Note Taka’000 Taka

Particulars '000
Net Profit before tax as per audited statement of accounts 19,080
Less. Income to be considered separately under appropriate head:
Interest income (308)
Net Profit from business as per audited statement of accounts 18,772
Add: Items of expenditure for separate consideration:
Depreciation as per audited financial statements 1,880.00
Foreign exchange loss 280.00
Inadmissible expenses:
Salary paid in cash 64
Donation to unapproved sector 20
Advertising expense paid without deduction of income tax and 54
Contributions
vatVatVVAT to unrecognized provident fund 4 1,536
Reimbursement of director's driver salary and provident fund
225
contribution
Installation cost of plant and machinery (being capital nature) 34
Provision for bad and doubtful debts 5 2,276
4,209
25,141
Bad debts recovered 238
Admissible income/(expenses): 25,379
Written off provision for doubtful debts (240)
Realized foreign exchange loss (14) (254)
Income from business or profession before considering depreciation,

unabsorbed business loss and unabsorbed tax depreciation loss 25,125
Tax depreciation for the Assessment Year 2017-18 6 (2,224)
Profit after depreciation 22,901
Set off unabsorbed tax depreciation loss 7 (100)
Set off unabsorbed business loss 8 (450)
Income from business or profession 22,351
Interest income 308
Total income 22,659
Income tax payable on total income @27.5% 6,231.23

Income tax deducted at source 10 (28.00)
Net tax payable L

6,203.23
Notes:
1 Taxable income and income tax payable thereon has been computed considering the provisions of the
Finance Act 2017;
2 It is assumed that no revenue is recognized for cost of goods transferred as fixed assets since there was
no gross inflow of economic benefit.
3 Pension is exempt from income tax in the hand of the recipient by paragraph 8 of the Sixth Schedule
Part A of the ITO, 1984 and hence the provision of Section 30 (d) is not applicable here. Since Gratuity
Fund is un-approved., contribution to such fund will be inadmissible. However, since the question does
not mention about amount of contribution to such Fund, no amount has been disallowed here.
4 Provident Fund
It is assumed that the provident fund is not recognized by the Commissioner of Taxes
5. Provision for bad and doubtful debts: Taka '000
Total provision brought forward (Tk. 1,902+ Tk. 2,410) 4,312

Provision written off during the year (240)
Provision made during the year (balancing figure) 2,276
Total provision carried forward (Tk. 2,750+ Tk. 3,598) 6,348
6. Tax depreciation Taka '000

Depreciation allowance computed 1,644
Normal depreciation on machinery (Tk. 366 + Tk. 80
34)x20%
Initial depreciation on machinery (Tk. 366 + Tk.34)x25% 100
*Normal depreciation on new car (Tk. 2,000)x20% 400
2,224
* As per Para 11 (6) (a) of the Third schedule of the ITO 1984, the actual cost of the motor car, not
plying for hire, shall not exceed Tk.20,00,000/. As the purchase price of the motor car exceeds the
said limit, depreciation has been calculated on deemed purchase price (i.e. twenty lakh taka).
7As per Section 42 (6) of the ITO, 1984 unabsorbed depreciation loss can be carried forward for set
off with business income for unlimited period of time;
8 Unabsorbed business loss:

Total Loss 1,000
Depreciation allowance carried forward AY 2009-10 (100)
Loss carried forward under the head "Capital Gain" (50)
Business loss not eligible for set off under Section 38 (b) of the ITO, 1984:
For the AY 2009-10 (200-100) (100)

For the AY 2012-13 (300) (400)
450
9The company did not pay cash dividend of 30% or more and hence not eligible for any income tax
rebate;
10Income tax deducted at source: Taka ‗000

Gross interest income 308
Accrued interest (28)
Realized interest income 280
Income tax deducted at source @ 10%28
12 Mr. SMART (Bangladeshi), a civil engineer, is the MD of four operational entities, popularly Nov
nd
called SMART group. His first unit is Smart Constructions Ltd. (SCL) in Dhaka, 2 one is Dec
rd
Smart Re-rolling Mills Ltd.(SRML) in Savar, the 3 unit is Smart Trading Limited(STL) in 2015
Dhaka and 4th one is a trading arm(a branch of STL) in Italy engaged in sourcing EU-origin
construction materials for Bangladeshi market including Smart construction projects. His wife,
an architect, holds 10% with him in the limited companies. All units of Smart group follow
accounting periodicity ‗July-June‘.
Key information from SCL financial statements for the period ended 30.06.2017are(amount
in Taka): Revenue Tk.500,000,000/=, Gross Income Tk.179,500,000/=. Other
incomeTk.1,500,000/=, Admin expense Tk.150,000,000/=, Financial expense
Tk.11,000,000/=, Profit before tax Tk.20,000,000/=, Equity (share capital plus accumulated
surplus) Tk.40,000,000/=.
Information gathered from SCL Financials(For consideration when computing total income)
1. Other income includes the following:
i) Two units of Excavator (original cost Tk.1,000,000/=, tax WDV Tk.700,000/=)
sold for Tk.1,200,000/=. Company bought a replacement excavator for
Tk.600,000/= on 25.06.17 under intimation to DCT. The new excavator was
purchased by a bank loan.
ii) Loss of Tk.300,000/= on sale of one unit Loader (Cost Tk.1,000,000/=,
tax WDV Tk.400,000, Sale Tk.100,000/=.
iii) Tk.1,200,000/= on sale of old vehicles (Cost Tk.900,000, tax WDV nil, fully
depreciated)
iv) Drop in market price of the shares (of a listed company) Tk.100,000/= charged.
v) A unit of used bulldozer sold for Tk.1,000,000 (Normal profit Tk.200,000/= tax
WDV in book Tk.800,000). This bulldozer was bought three years ago to replace
a similar asset which was then sold at a capital gain of Tk.300,000/= on which
capital gain tax was not paid u/s 31, 32(5)(b), being the capital gain on that sale
was less than the replacement cost of the present bulldozer.
2. Admin expense include the following:

i) Depreciation on a SUV car depreciated at 20% p.a. on its purchase price of
Tk.4,500,000/=(bought on 01.01.2017).
ii) Salary and allowances paid to Chief Engineer total Tk.7,500,000 (including
Tk.750,000/= as house rent allowance, being less than 50% of the total basic
salary paid). Salary and allowance include basic salary, housing allowance,
festival bonus and leave allowance).
iii) Overseas traveling expense Tk.4,500,000/= including Tk.700,000/= incurred on
a/c of CFO‘s trip to Rome on five-day company business accompanied by his
spouse (BoD approved this on the principle of commercial expediency). Couple
stayed with family of CFO‘s friend when in Rome.
iv) Office common service charge paid to the lessor Tk.1,500,000/= (VAT has not
been paid thereon by SCL as it doesn‘t constitute ‗office rent‘ to the lessor under
Service Code S074).
v) Guest house rent Tk.1,200,000/= (which is rented for providing accommodation
to an expatriate engineering consultant on three-year contract). Expat consultant
holds work permit with disclosed ‗basic and ‗overseas allowance‘ plus tax on
expat salary and allowances payable by company (tax assessed per work permit
disclosure and cleared).
vi) Tk.500,000/= paid as commission to MD‘s spouse for her hands in getting a
Government building project for SCL. Company maintains a policy of paying
broking commission on securing construction projects.
3. Financial expense includes interest paid to a developer company for the defaulted
installment on a/c of purchase of an office floor for the company. Purchase price is
Tk.3,000,000/=, 75% paid off, balance delayed on which an interest paid to the
developer Tk.250,000/= per agreement.
4. Further information on Smart Construction Ltd. for the year ended June 30,
2017:
i) SUV bought for MD for Tk.4,500,000/=. Section 19(27) of the Ordinance
skipped attention.
ii) SCL has significant borrowings from banks. SCL lent interest-free
nd
Tk.2,500,000/= to its sister concern(the 2 unit). Proportionate interest cost
350,000/=.
The Branch in Italy and Smart Trading Ltd. :The trading arm in Italy is a branch of
nd
STL, a PEin Italy. STL investment of Italian branch has regulatory approvals. The 2
company of Smart group (the steel re-rolling unit) was in financial strain a year ago
when the Italian arm had idle funds. Having been approved by Regulators, Mr. Smart
managed a foreign loan from the Italian arm to his re-rolling unit in Savar at 5% p.a on
which the Italian branch received an interest earnings of net Tk.4,000,000/= after
deducting tax at 20% (u/s 56(1)). Italian branch closed accounts on 30.06.2015 showing
a tax adjusted ‗trading business profit‘ of eqvt Tk.10,000,000 (tax paid in Italy taka
equivalent Tk.2,750,000/= at 27.50%). Bangladesh corporate tax rate is 35%. According
to Bangladesh-Italy DTAA, interest income may also be taxed in the Contracting State
in which it arises and according to the laws of that state, but if the recipient is the
beneficial owner of the interest income, the tax so charged shall not exceed 15% of the
gross amount of the interest. Smart Trading Limited (STL) made a net loss of
Tk.3,150,000/= in Bangladesh business for y/e 30.06.2017.
You Joined Smart Group: You are a newly-qualified ACA. You joined SMART Group
asGroup Tax Manager. Smart Construction Ltd. has a pending tax appeal case (first
Appeal). Pending the appeal decision, a new development surfaces before you followed
by a request from Appeal Commissioner for a financial grant and a souvenir advert for a
school in his village that now pops up ethical situation for you to handle. You and
Commissioner come from the same district and know each other very well.
Expansion into new Tiles Factory: Mr. Smart understands industry well and expansion
with corecompetency is his outlook. His next plan is to operate a ceramic tiles factory.
Smart Trading Ltd. (STL, the 3rd unit of Smart group) is capable to sell tiles and other
building solutions, whereas STL business of imported trading is erratic now due to Govt
fiscal slaps on imported materials. STL has built accumulated loss as on 30.06.17. Mr.
Smart is keen to utilize STL retailing capacity for the tiles factory. An in-operation tiles
factory ‗Trendy Tiles Ltd.‘ (TTL) is on offer for acquisition. Mr. Smart is in the middle
of three options – whether to merge STL with TTL or acquire TTL assets or buy TTL
shares. Before he decides, Mr. Smart wants to listen to a tax-neutral advice on the three
options hinting the (i) ability of STL to carry forward and set off its losses against the
future profit of the acquired and (ii) avoidability of capital gain tax on the transfer and
consideration under the provisions of Income Tax Ordinance 1984.
Requirements:
a) Calculate the total income and tax payable of Smart Construction Ltd. for the
income year ended 30.06.2017. Your answer should include separate computation
for Capital Gain tax. Explanation/appropriate assumptions in support of your
adjustment to the disclosed profit should be given.
rd
b) Compute tax liability of Smart Trading Ltd. (STL, the 3 unit) for the period ended
30.06.2017.Computation should clearly reflect the relief, if any, under DTAA.
c) Evaluate ethical issues and explain how you would take up the Commissioner‘s

request with your MD and how you would conclude on the matter. Your explanation
should cover appropriate threats and safeguards, if any, and your conclusion on the
matter with actions.
d) Brief three options (STL to merge with TTL, STL to acquire TTL assets,
STL to acquire TTL shares) in terms of the pros and cons under the provisions of the
Ordinance so as to address Mr. Smart‘s interests.
(a) Computation of Capital Gain and Gain Tax of Smart Construction Ltd. u/s 31:
Sales - WDV Business income Capital Gain

(i)Sale of Excavator 5,00,000 3,00,000 2,00,000
-------
(ii)Sale of Loader (3,00,000) (3,00,000)
(iii)Sale of old vehicles 12,00,000 9,00,000 3,00,000
(iv)Drop in m/v of shares (100,000) ------ ---

(v)Sale of Bulldozer 2,00,000 2,00,000 3,00,000
Total 15,00,000 11,00,000 8,00,000
Less: Capital gain on sale of excavator not to be taxed as option exercised u/s
32(5) of ITO,1984 (200,000)
6,00,000
Capital Gain Tax at 15% 90,000
Note:
(i)Sale of Excavator: Sale 12,00,000 - WDV 700,000 = Profit 5,00,000(Business income 300,000,
Capital Gain 200,000). There will be no capital gain tax on taka 200,000/= as the amount is less thanthe new
same capital asset purchased by the company, even at bank loan. So, taka 300,000/= shall beadded to the
business income u/s 28 of the company. Ref sections are: - 19(16), 32(5)(b) & 28.
(ii)Sale of Loader: Sale 1,00,000 -WDV 4,00,000=business Loss 300,000/=. This loss is
fully deductible and chargeable against revenue during the year. Ref section 29(1)(xi) read with
Para 10(c)of 3rd Sch.
(iii) Sale of old vehicles: Sale 12,00,000 - WDV nil = Total gain 12,00,000/=(Business
income 9,00,000, Capital Gain 3,00,000).
(iv) Drop in m/v of listed company shares-not to be recognized as loss due to the fact that it
was not sold. So this is not deductible.
(v) Sale of Bulldozer. This was a replacement asset three years ago when a capital gain of taka
3,00,000was not taxed u/s 31 & 32(5)(b). To compute the profit on present sale of this bulldozer, the
WDV shall be reduced by the earlier capital gain which was not taxed three years ago on the same asset
replacement. So, WDV for the purpose of computing business income u/s 19(16) of this bulldozer shall be
8, 00,000/= less 3,00,000 = 5,00,000/=. Total gain on present sale of bulldozer should therefore be:
200000+300000=500000/=(Business income 200,000+capital gain 300,000)
Computation of Total Income of Smart Constructions Limited u/s 28:

Taka Taka
Disclosed profit before tax 2,00,00,000
Less: Entire other Income (for separate consideration) 15,00,000
1,85,00,000
Add: Business income on sale of various assets (note above) 11,00,0001,96,00,000
Add: Inadmissible exp-

(i) Accounting depreciation on SUV 20% on 45,00,000 9,00,000

Less: Tax depreciation on SUV 20% on 25,00,000 5,00,000 4,00,000
(Para 11(6) of 3rd sch. Applied max ceiling as per F.A 2017)
(ii) House rent paid to Chief Engr. Taka 7,50,000/=. This is a perquisite.
Addition for excess perquisite (750000 - 450000= 3,00,000). 3,00,000
(Section 30(e),2(45). F.A. 2017 applied.)
(iii) Overseas Traveling Expenses incurred by CFO taka 700,000/= Admissible. ------
This is incurred on commercial expediency, under BoD approval. Hotel cost saved,
Moreover overseas travelling exp. Tk.45,00,000/ is within the limit of 1%
of turnover u/s 30(k). Tk.500,000,000/ x 1%=50,00,000/
(iv) Office service charge paid to Lessor taka 15,00,000/—.

(This is inadmissible u/s 30(aa) as the payment is not VAT-exempted as per 15,00,000
2nd Sch. or by any specific SRO of VAT. VAT SRO 182 of 2012 for truncated VAT rate
9% on office rent(S074.00). Office service charge paid to the same lessor
under same lease agreement should be assumed to attract same VAT as office rent.)
(v) Guest house rent taka 12,00,000/= for Expat Eng. Consultant.
Consultant's personal tax assessed and cleared only on basic pay
and overseas allowance as per BIDA permission. Therefore, the guest
house rent deduction claimed by the company is inadmissible 12,00,000
(vi) Commission paid to MD's wife in securing business
should be admissible as any other ordinary commission. -----
(Assumed tax deducted).She is 10% shareholder but not the shareholder
director of the company. So the restriction of section 30(L) would not be applicable.
(vii) Interest paid to Developer on defaulted installment payment on a/c of
office floor space. Inadmissible expenditure as no such expenditure is
allowable u/s 29. Moreover it is part of capital expenditure. 2,50,000
(viii) SUV bought for taka 45,00,000/= but section 19(27) missed compliance.
Tax on this shall be considered later at income from other sources u/s 33 (Equity
4,00,00,000/=. 10% of this 40,00,000/=. SUV price 45,00,000/=
Excess of SUV price over 10% of Equity = 5,00,000/x 50% of this 2,50,000/=
(ix) Proportionate interest for lending interest free loan to
Sister concern as per section 29(1)(xxvii) 350,000
- - - - - - - - - -
Income from business as per section 28 2,36,00,000
Computation of Tax Liability of SCL

Amount Tax Rate Tax Amount
2,36,00,00
Income from business u/s 28 35% 81,60,000
0
Income from other source u/s 33(d)
(tax on SUV purchase, Section 19(27)
50% of 10% Excess of Cost over Equity 2,50,000 35% 87,500
Capital Gain u/s 31 6,00,000 15% 90,000
Total Tax 83,37,500
b)
Branch of Smart Trading Ltd.(STL) in Italy is a tax non-resident assessee but a Permanent Establishment(PE) in
Italy. STL, being a resident assessee in Bangladesh computes its total income and tax liability world-income
basis. The Computation of tax liability of STL shall, therefore, be as follows for the income period ended
30.06.2017(Assessment Year 2017-18), amount in Bangladesh taka:
Particulars Income Tax Rate Tax Liability

Amount
Net profit (loss) before tax of STL (31,50,000
)
ADD:
Trading profit(tax adjusted)of STL Branch in Italy 1,00,00,000
27,50,000x 100
27.50
Interest income of Branch in Italy40,00,000x 100 50,00,000
(100-20)
1,18,50,000 35% 41,47,500
Gross Tax
LESS:
Tax paid at source in Bangladesh on interest income by 10,00,000
STLbranch in Italy.50,00,000x20
100
31,47,500
LESS:
Foreign tax credit on tax paid in Italy on the income of the STL 27,50,000
branchinItaly as per provision of section 144(4) read with
7thSchedule(Para-2).
Balance Tax Payable 3,97,500
Note: Branch in Italy, not being beneficial owner of the interest income, cannot take advantage of the DTAA for
lower tax rate of 15% on interest income.
(c)
I am at a fix what to do. Following circumstances are going through my mind:
(1) Causes of the requested grant and advert are social (school), not for the Commissioner.
(2) MD expects delivery from me on the appeal case that involves huge disputed tax demand.
(3) MD may not deny the request for grant weighing on gravity of the appeal case and social causes.
(4) MD may be upset if the appeal decision is not coming his way.
(5) My commitment in new job is either not less, appeal case may sound an opportunity to prove.
(6) How will MD react if appeal decision coming negative even after making the grants and advert.
(7) If we regret and appeal decision coming negative, MD might take ‗an opportunity slipped away‘.
(8) Commissioner hopes for a positive response from me as closely known and for appeal case.
(9) This may be an inducement which may influence appeal judgment of the Commissioner.
(10) Making grant and favorable appeal decision may sound buying the decision which is unlawful.
(11) Relationship with the Commissioner in future may turn lukewarm, if not sour, if I fail to meet.
(12) This is the first appeal; either party unhappy with the order shall make further appeal.
With the above in my mind. I now identify the various threats as I see in my handling the issue. Commissioner‘s
request for grant and advert for his school may be coined as a form of pressure for ‗inducement‘ to gain a
favorable appeal decision for my company, an element of intimidation threat. Commissioner's request is a
commercial pressure from outside, a sense of intimidation threat. My acquaintance with Commissioner and we
both being in same association may influence my decision to advise MD to agree, a case of familiarity threat. If
Commissioner's request is not met and appeal decision comes negative, MD may get upset this may cost my
new job, issue of self-interest threat.
I am a PAIB. obliged to comply all IESBA fundamental principles including Professional Behavior as it
imposes obligation on me to comply relevant regulations and avoid any action that may discredit my
profession. If I am seen to act ethically, demonstrating my professional obligation, my conduct may rather
be appreciated both by my MD and the Commissioner. I must work ethically above all doubts of
identified threat. In my evaluation, the threats identified are significant. I am in the middle of sensitive
issue, knowing that my MD would seek my advice when I would discuss the issue with him. My
connection for the grant decision (advising MD) and the matter between appeal decision and company
benefits are deep and significant. Nature of the issue is significant. I should not make an inducement which
may hint a wrong intent and may improperly influence the Commissioner in appeal decision. Although
school would benefit, not the Commissioner, both are associated. Smart group doesn’t have any
social giveaway policyto consider to assume as a safeguard for my advice to MD. If the
inducement results into influence to gain appeal decision for the company, it would be an unlawful act. Under
the circumstances, I would handle the situation in the following manner to uphold ethical principles:
I shall pass on Commissioner's request for grant and advert to my MD, brief him about pending appeal
decision with the Commissioner, my position as a PAIB and the ethical principles that apply to my
job. Finally, I shall advise my MD not to give in to Commissioner's request. I shall seek my MD‘s
permission to visit the Commissioner to communicate our decision to him.
I shall personally visit the Appeal Commissioner and shall also brief him about my ethical threats as
PAIB if responding to his requests at this moment. I shall tell him about the discussion me and my
MD have done on this. I shall convey him our wishes for the continued success of his social
projects including his school. Finally, I shall conclude the meeting with Commissioner after my
final words of regrets for not being able to respond to his requests under the circumstances,
prominently pushed by ethical threats.
(d)
Mr. Smart wants brief about tax law provisions with respect to imaginary options of `STL amalgamating with
―TTL‖ and`STL to acquire TTL assets‘and `STL shareholders to acquire TTL shares‘.
SR to amalgamate with TTL: An amalgamation u/s 2(2) does not involve transfer of capital assets subject
to capital gain tax and also the carry-forward of amalgamating company loss is not legally possible u/s
42(4). STL is transferor or amalgamating company, TTL is transferee or amalgamated company. Section 2(2)
provided three conditions: (i) all assets of STL shall become assets of merged TTL after merger, all
liabilities of STL shall become liabilities of merged TTL after merger, minimum 90% of the shareholders(in value)
of STL shall become shareholders of merged TTL after merger by issue from TTL. Vesting the STL assets on TTL
does not meet the definition of ‗transfer‘ in the law u/s 2(66) and, so, no capital gain tax arises u/s 31 and 32.
There is no sale of capital assets in amalgamation u/s 2(2). There is no 'price' paid for the assets vested.
Amalgamated company issues shares to shareholders of amalgamating company without any payment for
shares: the assets of amalgamating company vest in amalgamated without any payment.
There is no mutual transfer of ownership of one item for the ownership of another in an amalgamation.
However, if amalgamation scheme conditions for TTL make consideration to the shareholders of STL partly
in shares and partly in cash, the 'cash consideration' shall attract measurement of capital gain for tax u/s
31, 32. Upon the amalgamation is effected under court sanction, the transferor or amalgamating company
stands dissolved, Carry-forward of the loss of amalgamating company for set-off against profit of
amalgamated company is not possible in that a discontinued company (STL) cannot carry forward its loss
u/s 42(4).
STL to acquire TTL assets:Acquisition of assets involves tax liability on assets transfer on
Transferor / seller(TTL) and the carry-forward of the loss of the seller(TTL), if any, is not possible u/s
42(4). This is a deal of assets sale (entire TTL) to STL. Capital assets (as per agreement of assets and
consideration) transfer shall attract tax u/s 28, 31 and 32. If the assets consideration is shown lower to
avoid VAT and duties, section 19(8) may be applied for fair market value application. The right to carry
forward loss lies with the company which makes loss. So, TTL loss, if any, cannot be carried forward by
STL after TTL is bought over. Section 42(4) only allows the carry-forward facility in the case when a
company is succeeded by other by inheritance, not on ordinary asset sale.
STL to acquire TTL shares: Taking ownership by shares are two routes subscription from company
and
transfer from the shareholders. In share subscription from company, no tax incurs on allotting company on the
receipt of subscription amount. If it is transfer of shares from shareholders (say, TTL shareholders to STL
shareholders), transfer attracts ‗capital gain tax‘ on the transfer u/s 31, 32, tax being on the seller. Re
carry-forward of loss of selling company (say, TTL), if any, the buyer (say, STL) cannot carry forward
such loss u/s42(4), 38. Its is the right of the company to carry forward loss only which suffers it (here it
is TTL) and ‗continuity of same business in which the loss is incurred‘ is a condition for carry-forward
which practically ceases after TTL is bought by STL by way of share acquisition.
13 You are a Chartered Accountant and working in Y Ltd. (―Company‖) as a tax manager. May
The Jun
Company is engaged in the business of export of the goods manufactured by itself. The 2015
bank, through which export proceeds of Y Ltd. is received, deducts tax at the specified
rate from the total export proceeds in accordance with the provisions of section 53BB of
the Income TaxOrdinance (―ITO‖), 1984. The export proceeds net of income tax deducted
at source under Sec.53BB received by Y Ltd. during the income year 2016-17 came to
Tk.100,000,000. Export income of Y Ltd. falls under the scope of section 82C of the ITO,
1984. Generally, the Company does not have additional income from export as referred to
in section 82C (6) of the ITO, 1984.
In the income year 2016-17, a warehouse owned by the Company since 1/7/2016 was
leased out to another company for a term of 3 years from 1/7/2016 at a monthly rent of
Tk.100,000 with an advance rental payment of Tk.900,000 to be adjusted with monthly
rental payments over 3 years. Y Ltd. received rent for the income year 2016-2017, but no
tax was deducted at source from the rent paid by the lessee. Nor any VAT was paid on the
rent. The repair cost of Tk.15,000, municipal tax of Tk.10,000 and insurance premium of
Tk.1,000 were paid for the warehouse during the income year 2016-17.
The net profit before tax for the year as per the draft financial statements for the income
year came to Tk.3,304,000. The net profit as per income tax comes to the same amount,
assuming no penalty/liability (if any) for non-deduction of tax at source by the tenant and
for non-payment of VAT. There is a tax refundable of Tk.150,000 for the last assessment
year 2016-17. The income (including advance) from warehouse and its related expenses
were deposited/paid out in cash into/from an undisclosed bank account of Y Ltd. and have
not been included in the draft financial statements. The purchase money of Tk.50,000,000
(total accumulated undeclared income of Y Ltd. over the last 2 assessment years) for the
warehouse was also paid from the same bank account.
The management of Y Ltd. is thinking of assessment of income of the Company for the
income year 2016-2017 under section 82C of the ITO, 1984, upon considering the tax
collected at source by the bank from the export proceeds as final discharge of tax liability.
In a meeting with the management team of Y Ltd. on tax issues, you have been asked to
consider whether it is possible to ignore income from house property so that no demand
for additional income tax arises. To discuss the issue further, a meeting would be held
next week.
Requirements:
Calculate the total income tax liability and further income tax amount payable after
adjustment of any amount(s) as per income tax law. Assume that the undeclared/
undisclosed income as abovewill now be declared/disclosed.
14 Wahab& Co. Limited, a listed public limited company with its registered office in Dhaka, has Nov
shown net profit of Tk. 837,413 in the audited accounts for the income year ended June 30, Dec
2017. 2012
You are required to compute total income and tax payable on correct return u/s 82 of the ITO
1984 indicating the assessment year and after considering the following facts :
a) Excess perquisites calculated u/s 30(e) Tk. 145,000
b) Salaries and allowances of Tk. 176,000 paid without complying with the provisions of
section 30(a)
c) Registration expenses and fees include Tk. 215,701 found to be personal entertainment in
nature.
d) Advertisement and publicity expenses include Tk. 125,000 as donation to a local sports
club.
e) Gratuity provision during the year is Tk. 677,937 but actual payment is 276,434.
f) Rent, rates and taxes claimed at Tk. 368,212 out of which Tk. 214,640 paid as rent without
complying the provision of section 53A of the ITO 1984.
g) Accounting depreciation as per audited accounts is Tk. 2,979,211 and tax depreciation
ascalculated with reference to previous year assessment is Tk. 3,727,422.
h) Technical fee of Tk. 210,000 paid to foreign collaborators charged in the accounts.
i) Export turnover was 10% of the total sales of the company.
j) The company declared 60% dividend for the year.
Wahab& Co. Limited: A Listed Public Company.
Income Year ended June 30, 2017
Assessment Year 2017 - 2018
Particulars Notes Taka Taka
Net Profit as per audited Profit & loss A/C 837,413

Add: Items to be considered separately:
Technical fee 1 210,000
Accounting depreciation 2,979,211
Gratuity Provision 677,937 3,867,148
4,704,561
Add: Inadmissible Items:
Excessperquisites u/s 30(e) 145,000
Salaries and allowance – u/s 30(a) 176,200
Donation to a local sports club not allowable u/s 29 125,000
Registration fee included personal entertainment 215,701
Rent payment without TDS disallowed u/s 30(aa) 214,640 876,541
5,581,102
Gratuity Paid 276,434
Tax depreciation 3,726,422
Technical know how fee allowable @ 8% of profit 126,260 4,129,116
Tax thereon:
Tax @ 24.75% as dividend declared more than 20% of Tk. 1,451,986 359,367
Less: Export rebate of 50% on Export turnover of 10% of Tk. 359,367 17,968
Tax payable 341,399
Note-1: Technical Know how:
Allowable upto 8% of profit of Tk. 1,578,246 u/s 30(h) of ITO 1984
Note-2: Export Tax rebate:

10% of sale of manufactured goods is export so the company will enjoy 50% tax rebate on export business underpara
28 of Part A of 6th Schedule of ITO 1984.
15 Silkway Group has two companies, Silkway Toiletries Ltd.(STL), an unlisted public Nov Dec
limited company in toiletries manufacturing business and Silkway Chemicals 2017
Ltd.(subsidiary of STL with 80% equity). The subsidiary operates a factory in old
Dhaka, closed due to Environment Directorate order not to run chemical factory in city
area.
Silkway Toiletries Ltd. filed its tax return showing total revenue of taka five crore; profit
taka 5,000,000 for the year ended 30.06.2017 after debits and credits of the items
revealed from the examination of accounts of the company as follows:
DEBITS
1) Depreciation on revaluation of assets Taka100,000/=
2) COGS includes (a) taka 1,000,000 for direct materials bought from supplier on
which tds was not done u/s 52, Rule 16, (b) taka 500,000 paid to an enlisted
tailor for supply of uniforms for production floor workers on which tds was not
done.
3) Insurance premium paid to BGIC taka 250,000 on 02.02.2017 without doing tds.
4) Paid taka 200,000 to Grameen phone Ltd. for mobile phone sets without doing
tds
5) Provision for loss in subsidiary – Taka 500,000/=

6) Written off taka 50,000 representing the value of machinery missing from
physical verification.
7) Exchange loss linked to the income from foreign agent due to delay in remitting
the income.
8) Interest taka 100,000/= on overdraft to pay interest for failure to pay advance
tax.
9) Written off taka 200,000/= long due from a missing party who was advanced this
sum for raw material.
10) Commission paid taka 250,000/= to a bank for forward contract (dated 25.06.17)
to hedge each risk involving settlement of import L/C dues due after a quarter.
11) Taka 500,000/= on a/c of free samples of finished goods given to
distributors(limited 1% of turnover)
12) Trade discounts to customers taka 1,000,000/= and distributors commission paid
taka 500,000/=.
CREDITS
Dividend taka 100,000/= on investment in an approved Alternative
Investment Fund
Capital gain on sale of fixed assets taka 100,000/=
Interest earned on security deposit at bank in Kenya, taka eqvt 100,000/=.
OTHER INFORMATION
 Unabsorbed depreciation brought forward from assessment year 2016-2017
 taka two lacs.
 Return filed for the income y/e 30.06.17 on 30.09.2017; assessment
completed on 30.11.17. Company‘s assessed income in the previous income
 year was taka 6,000,000/=.
 For the reported income year, the opening stock of toiletries was valued at
taka 35 lacs and closing stock of toiletries raw materials at taka 15 lacs.
These opening stock and closing stock were wrongly overvalued and
 undervalued respectively by 5% and 10%.
 Tds done on rent payment of taka 500,000/= but did not deposit to
treasury for about six months.
 A Chinese supplier breached L/C terms to supply toiletries

machineries on order. Company received a liquidated damage for this
eqvt taka 1,500,000/= which has not been credited to P&L. This
machinery L/C was done under 50% margin (taka 75 lacs) with a
bank, funded by a separate short term loan for same amount at 10%
p.a. Company paid interest on such loan taka five lacs and charged to
revenue.
 Company acquired a delivery van under lease finance from a NBFI.

Registration was done in the name of the Company. Depreciation
charged taka 400,000/=.
 Company made exports of selected item of toiletries to Africa through

an agent in Kenya. Under permission from Bangladesh Bank,
company made an interest bearing security deposit with the agent‘s
bank in Kenya to cover product warranty in which interest earned was
taka 100,000/=(tax paid thereon in Kenya, taka eqvt 15,000/= at
15%). Customers total tds including tds by bank on exports realization
taka 700,000/=. 
 Company paid advance tax taka 500,000/= during the income year.


(b)Silkway Toiletries Ltd.(STL) and its Managing Director own Silkway Chemical Ltd.
for 80% and 20% equity respectively. In the attempt to consolidate the business in the
face of closure of the Chemical subsidiary, the shareholders of Silkway Chemical Ltd.
resolved to wind up the subsidiary voluntarily vide EGM dated 31.08.2017. STL and its
MD acquired shares of SCL four years ago at 10% premium over the par value. Factory
land was registered to the shareholders at market value. Liquidator closed his account
on 30.11.17 having paid off all liabilities as they are and disposed of all assets.
Expenses incurred during winding up process taka 100,000/= Net assets on EGM date
prior to the distribution to shareholders were as follows:
ASSETS:
Machineries net taka 500,000 (Original cost taka 4,500,000, Sold by Liquidator taka
300,000). Factory land taka 5,000,000 (market value taka 8,500,000/=). Cash and Bank
balance taka 1,500,000. Due from Silkway Toiletries Ltd. taka 1,000,000 against
chemical sale(r/m for toiletries)
LIABILITIES:
Share capital taka 5,000,000 (taka100 share). General Reserve taka 500,000. P&L App
taka 1,500,000. Payables to employees taka 500,000/=. VAT liability taka 500,000.
Requirements:
i)Compute total income and tax liability of Silkway Toiletries Ltd separately
showing computation of excess or shortfall of advance tax and explanation for
consequence.
ii)Show distribution upon liquidation, tax implication on Silkway Chemical Ltd.
and shareholders.
Silkway Toiletries Ltd.

Income y/e 30.06.2017. [AY 2017-18]
Computation of Total Income, Tax Liability and Others
Income from Business: Taka Taka
Shown Net profit
Less: Non-business income for separate consideration 5,000,000
(1)Capital gain 100,000
(2)Dividend from Alternative Investment Fund 100,000
(3)Interest from foreign bank deposit in Kenya 100,000
(300,000)
Add: Inadmissible expenses
(1)Dep. not allowable on revaluated assets 100,000
(2)Paid to enlisted contractual tailor u/s 30(aa) 500,000
(3)Paid to GP for mobile sets supply u/s 30(aa) 200,000
(4)Provision for loss is not allowable exp. u/s 29 500,000
(5)Machinery physically not found is not allowable u/s 29 50,000
(6)Commission for hedging as it is not allowable exp. u/s 29 250,000
(7)Office rent u/s 30(aa) as tds not deposited 500,000
(8)Adjustment for overvaluation of stocks:
Opening stock overvalued by 5% 166,667
Closing stock undervalued by 10% 136,364
2,403,030
Add: Compensation received from a Chinese company not credited 1,500,000

Less: Unabsorbed depreciation - carried forward for set off (200,000)
Business Income 8,403,030
Capital Gain 100,000
Income from Other Sources:
Dividend from AIF [note-11] 100,000
Interest on foreign bank deposit [note-12] 100,000
200,000
TOTAL INCOME 8,703,030
Tax calculation:
i)Tax on Business Income and interest income @35%
35% on 8,503,030 2,976,061
ii)Tax on Capital Gain (15% on 100,000) 15,000

iii)Tax on dividend 20% on 100,000 20,000
GROSS TAX LIABILITY 3,001,061
Less:
i)AIT 500,000
ii)Tds 700,000
1,200,00
total tax paid
0
1,801,06
NET TAX LIABILITY
1
Computation of simple interest for short payment of AIT:
Gross Tax 3,001,061
2,250,79
75% of tax comes at
6
1,200,00
Total AIT
0
1,050,79
Shortfall
6
43,783
10% interest on shortfall for 5 months 43,783
1,844,84
TOTAL TAX PLUS SIMPLE INT. DUE
4
Computation of Minimum Tax on gross receipts:
Gross revenue 50,000,000
Capital gain 100,000
Other source income 200,000
Gross Receipts 50,300,000
Minimum tax @ 0.60% on gross receipts 301,800
Notes:
[1]50% income rebate is applicable on export as per 6th schedule but as the export figure is not given in
the question so it is not possible to workout.
[2]Direct raw material purchase is not subject to tds and that's why not disallowed u/s 30(aa)
[3]Insurance premium paid to Insurance company is not subject to tds and that's why not disallowed
u/s 30(aa)
[4]Exchange loss is allowable business loss as per section 29, so not disallowed.
[5]Bad debt Tk.2,00,000/( dues from missing supplier)is in connection with business, so allowed.
[6]Depreciation on leaseholdvehicles is allowable as per Third Schedule as it is finance lease. The
indication is that it was registered in the name of the company.
[7]Free sample exp. is within the limit prescribed at Rule-65, so nothing is disallowed from here.
[8]Interest on overdraft is allowable expenditure as per section 29 as business expenditure
[9]Trade discountTk.10,00,000 and distribution commission Tk.5,00,000/ is allowable expenditure

assuming that source tax was deducted properly from distributorship commission.
[10]Office rent fully disallowed assuming that source tax was not deposited before assessment.
[11] Dividend from Alternative Investment Fund (AIF) is taxable @ 20%. It should be noted here
that income of the fund itself is tax-free as per 6th Schedule (Part-A) Para-54, not dividend income in the
hand of shareholder.
[12] About interest income from Kenya: As there is no DTAA between Bangladesh and Kenya so no
foreign tax credit will be allowed as per section 145 as NBR not yet prescribed any rules in this behalf
b.

Silkway Chemical Limited
Distribution of assets to Shareholders upon Liquidation
Amount in
TAKA
INFLOW:
Machinery sold 300,000
Received from Silkway Toiletries 1,000,000
Cash and Bank Balance 1,500,000
2,800,000
OUTFLOW:
Expense 100,000
VAT paid 500,000
Payable settled 500,000
1,100,000
NET cash Available for Distribution 1,700,000
Distribution to Shareholders:
Total Silkway Toiletries Ltd. MD of
STL
Ownership 80% 20%
Net Fund 1,700,000 1,360,000 340,000
Factory land 8,500,000 6,800,000 1,700,000
10,200,000 8,160,000 2,040,000
NOTE:
Machinery sold for 300,000/ against WDV 500,000/. Therefore, revenue loss taka
200,000/(3rdSch(para-10) Factory land transferred at market value of Tk. 85,00,000/= against COA
50,00,000/ = 35,00,000/ is capital gains on Silkway Chemical Limited upon distribution of assets upon
liquidation.
Total SilkwayToiletries Ltd. MD of STL
Amount of share capital in the company 5,000,000 4,000,000 1,000,000
No. of shares at taka 100 each 50,000 40,000 10,000
Cost of share to the shareholders at 10% 4,400,000 1,100,000
premium
Deemed Dividend u/s 2(26) on the distribution:
Total assets value distributed to the shareholders 10,200,000 8,160,000 2,040,000
Less: Deemed DIV upto the accumulated profits 2,000,000 1,600,000 400,000
Balance after deemed dividend 8,200,000 6,560,000 1,640,000
Less: Share investment value(COA u/s 32(2)(i) 4,400,000 1,100,000
Balance -- Capital Gain u/s 31,32 in the hands 2,160,000 540,000
S/H
SUMMARY OF DISTRIBUTION TO SHAREHOLDERS:

Distribution to the extent of DEEMED DIVIDEND 1,600,000 400,000
Balance Distribution 6,560,000 1,640,000
Of which, Capital Gain 2,160,000 540,000
TDS on Dividend distribution by Silkway Chemical
Ltd.
Rate of tds on company and individual 20% 10%
TDS amount on deemed dividend 320,000 40,000
Net dividend to shareholders 1,280,000 360,000
16 XYZ Ltd., a private company, is engaged in business segments that cover (i) mfg/trading of May June
ceramic tiles, (ii) mfg/export of leather products and (iii) international trading. Net profit of the 2017
company for the year ended 30.06.2017 is taka 50,00,000 after giving effect of the following
items as appropriate in the books:
i) License fee taka five lacs incurred for obtaining five-year franchise on 15 July 2016
ii) Paid cash Taka 50,000 to transport operator, Taka 150,000 to chemical supplier used
in tiles mfg.
iii) Rent taka five lacs received from letting out a part of its office premises.
Municipal tax in respect of the said part of the building amounting to taka
10,000 remains unpaid.
iv) Taka three lacs, being loss due to destruction of a machinery caused by a fire.
The insurance company compensated taka two lacs against the fire loss claim.
v) Taka 4 lacs and one lac being amounts waived by Janata Bank Ltd. out of principal and
arrear interest respectively in one-time settlement. Loan was obtained for working capital
need five years back.
vi) Dividend of taka 10,000 from Dell Ltd. on 1,000 equity shares of taka 10 each purchased
at taka 100 per share on 10th October, 2016. Dividend declared is 100%, the record date
being 01.12.2016. Shares were sold on 1st March 2017 at taka 80 per share. Loss of taka
20,000 has been debited to PL account.
vii) Taka 50,000 paid to vendor of Office supplies on which VAT was not deducted.
viii) Depreciation on tangible fixed assets taka one lac including taka 50,000 on assets
revaluation.
ix) Taka 50,000 compensation paid to UK supplier for cancellation of machinery import
contract from UK.
x) Provision for deferred tax taka 1,00,000.
Additional Information gathered with respect to XYZ Ltd. for accounting year ended on
30.06.2017:
a. Depreciation on tangible fixed assets for the income year(relating to units other
than trading unit) as per income tax rules taka 1.75 lac.
b. Company obtained a loan of taka two lacs from ZXY Pvt Ltd. in which it holds
30% voting rights. Accumulated profits of ZXY Pvt Ltd. on the date of receipt
of loan was taka 50,000.
c. Company exports leather products to Spain. Balance Sheet (General Reserve:
Surplus on Devaluation) shows a credit of taka 1,75,000, amount realized and
brought in the income year from a Spanish customer as surplus on a/c of the
devaluation of BDT in 2015.
d. Company suffered heavy loss in its international trading segment. It was closed
down and the fixed assets linked to this trading unit were sold out. Company
claimed unabsorbed depreciation (on a/c of trading unit assets) of taka 50,000 in
the Return of income. Its not debited to PL a/c.
e. Under a debt restructuring with Agrani bank, the company converted arrears
interest taka 3,00,000 on term loan into a new term loan with a revised
repayment schedule. Company paid taka 50,000 towards such funded interest
during the year. Entire taka 3,00,000 debited to PL account.
f. Provision for bonus for the income year ended 30.06.2016, disallowed in same
income year, paid during the year ended 30.06.2017 taka 1,00,000.
g. Assessed brought-forward losses and unabsorbed depreciation as follows:
Losses Unabsorbed
Income Year Brought Forward Depreciation
2013-14 2 lacs 1 lacs
2014-15 ---- 3 lacs
2015-16 4 lacs 1.5lacs
Total taka 6 lacs taka 5.5 lacs
h. Tannery at Hazaribag: In connection with its leather manufacturing unit, XYZ Pvt Ltd.
operates atannery at Hazaribag. Complying the court decree involving a case with the
Government, Company transferred its tannery unit to Savar in which it incurred an
expenditure approx. taka 25,00,000 for transfer of entire unit that includes sheds, machineries,
equipments, raw material and finished leather.
Company also incurred taka 5,00,000 as legal fees as a member of Tannery association to
contest the court case which it lost. These payments shall hit accounts of the current income
year.

Planned Expansion on a Retailing unit: Company‘sceramic tiles is not selling that well
through itsdealers. Management of XYZ Pvt Ltd. identified the probable causes to such slide
in business. Management considers that a watertight retailing entity with selling focus may
make a turnaround. Being tax manager of XYZ Ltd, you are tasked to bottom up a report to
management on ‗optimum capital structure‘ for a new retailing unit which maximizes the
wealth and minimizes the cost of capital. Your look out is to strike a balance among risk, cost,
control and tax consideration arriving at a most tax-efficient model. Estimated initial fund
required is taka One crore. You are aware that BSEC introduced BSEC (Alternative
Investment) Rules 2015 to open up Private Equity and Venture Capital (VC) Firm operations.
Management spoke to a VC firm who agreed to provide equity-linked debt. Available sources
are 100% equity, or a tax-efficient mixture of equity, VC Firm borrowing (interest 8%) and
bank loan (interest 10%). Expected RoI (EBIT basis) is 20%. Dividend trend in the same
sector is 15%, assume tax rate 35%.
Requirements:
a) Compute total income of XYZ Ltd. for Assessment Year 2017-18. Show reasons for
treatment
b) With respect to tannery unit transfer, give your comment with explanations on whether
company can claim deductions of taka 25,00,000 and taka 5,00,000 in the current
income year tax return.
c) Suggest as a tax planner most tax-efficient and above-the-dividend-trend alternative
for new retail entity supported by detailed computations. Work out on three given
alternatives
(A : 100% equity,
B: 40% equity+40% VC Debt+20%loan, C: 20% equity+30% VC Debt+50% loan).
Answer:
ASSESSES: XYZ Pvt. Limited
Income Year Ended on 30.06.2017. [Assessment Year: 2017-2018]
in Taka
A. Income from House property u/s 24
Annual Value from premises rental (assumed reasonable) 5,00,000
Less: [ I ] Repairs & maintenance 30% of A.V. (assumed spent) 1,50,000
[2] Municipal tax levied but not paid
[Being permissible allowance without proof of actualpayment u/s 25(e)] 10,000
(1,60,000)
Net taxable Income from HP: 3,40,000
B. Income from Business u/s 28:
Net Profit as per PL a/c 50,00,000
LESS: Income for consideration at separate head:
[1] Rental income (for consideration at HP income head) 5,00.000
[2]Interest waiver by bank (as it is not income u/s 19(11) 1,00,000
[3]Cash dividend (for consideration at other income head) 10,000
(6,10,000)
ADD: Inadmissible expenses
[1] 5 year's License fee paid for franchise 5,00,000
(Amortization will be allowed as per 3rd Schedule)
[2]Loss on destruction of machinery (29)(1)(xi) 2,00,000
(Being actual loss Tk.100,000 but claimed Tk.3,00,000)
[3] Accounting dep. (For separate consideration) 1,00,000
[4] Compensation paid to UK suppliers (for violation of contract) 50,000
[5] Provision for deferred tax (no such provision is allowable u/s-29) 1,00,000
[6]Capital expenditure for shifting tannery to Savar 25,00,000
[7]Municipal tax (for consideration at HP income head) 10,000
[8]Capital loss on sale of shares (as not related to business) 20,000
[9]Interest under debt reconstruction of Agrani Bank [note-5] 3,00,000
37,80,000
LESS: Items to be allowed:
[1] Amortization on License Fee (3rdSch, para 10A) 1,00,000
[2]Tax depreciation as per 3rd schedule 1,75,000
(2,75,000)
Income from Business 78,95,000
Less: Carried forward of business loss and depreciation loss u/s 38 11,50,000
Income from Business [after carry forward and set-off of earlier 67,45,000
year's loss]
C. Capital Gain
Share Transfer:
Proceeds from share sale 80,000
Less: Cost of acquisition (100,000)
Loss on sale of share (not to be set-off as per section 37) (20,000)
Zero
D. Income from other sources:
[I] Cash dividend income from Dell Ltd. 10,000

Less: Exempted up to Tk. 25,000 as per 6thschedule (Part-A) Pam-11 A (10,000) Zero
[2] Deemed dividend u/s 2(26)(e) for taking loan from ZXY Ltd.
50,000
(Maximum up to accumulated profit of Tk. 50,000).
Note:
[1] There is no violation of section 30(m) of ITO, 1984 for cash payment of Taka 50,000 to transport
operator and Taka 150,000 to chemical (raw material) supplier used in tiles mfg. and accordingly not disallowed
u/s 30(m).
[2] There is no violation of section 30(aa) of ITO, 1984 for non-deduction of VAT at source Tk. 50,000
paid to vendor of office supplies with effect from the assessment year 2017-18 and accordingly not
disallowed u/s 30(aa).
[3] Provision for bonus taka 1,00,000 was disallowed earlier year. This year though paid but not reflected in
this year's accounts as it is earlier year's expense. There is no provision to allow it as this year's expense
u/s 29 of ITO,1984. So no tax treatment needed this year.
[4] Company claimed unabsorbed depreciation (on a/c of trading unit assets) of taka 50,000 in the Return of
income but not debited to PL a/c. No action is required as it is not allowable as per 3rd schedule.
[5] Under a debt restructuring with Agrani bank, the company converted arrear interest taka 3,00,000 on term
loan into a new term loan with a revised repayment schedule. Company paid taka 50,000 towards such
funded interest during the year. Entire taka 3,00,000 debited to PL a/c. Nothing will be allowed further as
it was allowed in the relevant income year u/s 29 on payable basis.
[6] Legal fee against Govt. decision to move tannery to Savar is allowable expenditure assuming that the
cost of the case was borne by the tannery association as per verdict of the honorable court. So it will not
matter whether they win or lose. The expenditure is fully related to business and accordingly allowable
expenditure.

[7] No tax treatment is needed in case of loan+interest waived by Janata Bank as per 1 stproviso of
section 19(11) of IT0,1984.
[8] There is no tax implication of Tk.1,75,000 brought in the income year from a Spanish customer as per
Schedule(Part-A) para-48 assuming that it was brought through official channel.
b)
[1] Expenditure relating to shifting/relocating tannery to Savar is capital in nature. So it is not allowable
expenditure as per section 29 of ITO,1984
[2] Legal fee against Govt. decision to move tannery to Savar is allowable expenditure assuming that the
cost of the case was borne by the tannery association as per verdict of the honorable court. So it will not
matter whether they win or lose. The expenditure is related to business and accordingly allowable expenditure.
c)
PARTICULARS Alternative A Alternative B Alternative C
Taka Taka Taka
Share Capital 10,000,000 4,000,000 2,000,000
Bank Loan 2,000,000 5,000,000
VC Firm Debt 4,000,000 3,000,000
Total investment 10,000,000 10,000,000 10.000,000
Debt-Equity ratio
Return on Investment(EBIT basis) 20% 2,000,000 2.000,000 2,000,000
LESS:
Bank loan interest 10% - 200,000 500,000
VC Firm Debt 8% - 320,000 240,000
Total - 520,000 740,000
Net Income 2,000,000 1,480,000 1,260,000
Income tax 35% 700,000 518,000 441,000
Return on Equity Share Capital 1,300,000 962,000 819,000
Rate of Return on Equity (before
13% 24% 41%
dividend tax)
So, Alternative C is the most tax-beneficial Capital Structure (least tax. highest ROI).

17 AR Ltd. (petitioner# 1) and BA Ltd. (petitioner# 2), both being PLC(non-publicly traded), Nov Dec
and carrying on business as mobile phone operators, obtained court order for a ―horizontal 2016
amalgamation‖. Exhibit 1 for further details on ownership structure and other briefs on
scheme. As per approved amalgamation scheme, petitioner 2(transferor, BA Ltd.) shall be
amalgamated into petitioner# 1(transferee, AR Ltd.) to enhance scale of operations and
optimize resource utilization. Cut-off for both is Dec 31. Extracts:
AR Ltd. BA Ltd.
Comprehensive Statement of Income Comprehensive Statement of Income
For the year ended 31-12-2016 For the year ended 31-12-2016
BDT(In ‗000) BDT(In ‗000)
Revenue 51,000,000 Revenue 13,000,000
Cost of revenue (29,000,000) Depreciation (network) ( 5,000,000)
Admin expense (4,000,000) Other Network Ops cost (10,000,000)
S&D expense (6,000,000) Gross Profit/(Loss) ( 2,000,000)
Operating expense (4,000,000) Other Income, net 100,000
Profit from Ops 8,000,000 G&A expense (2,000,000)
Net finance expense (100,000) S&D expense (2,000,000)
Non-ops income 400,000 Operating profit/(loss) (5,900,000)
Profit before tax 8,300,000 Finance income 50,000
Finance expense (2,000,000)
Foreign exch gain/(loss) (300,000)
Profit/(Loss) before tax (8,150,000)
Statement of Financial position (31-12-2016) reflect BA Ltd. (in 000) R/E (taka
60,000,000), equity (taka 14,000,000).
Further Findings from the records of the income year of AR LTD.:
i) Operating expense includes taka 500,000 paid to a lawyer for services
involved in acquisition of Khulna office.
ii) Representative of two shareholding companies (AR (Pvt.) Ltd. and DNT)
visited Dhaka when the talk of merger was brewed. Company paid taka
2,500,000 to Radisson on a/c of visitors, charged to admin expense.
iii) Non-ops income includes amount after tds taka 100,000 paid to a Valuer
for valuation of assets disposed.
iv) Admin expense includes taka 150,000 interest levied for late filing of tax
return and non-payment of advance tax.
v) Net finance expense includes taka 500,000 paid as interest on a/c of a
deferred payment scheme for acquiring imported cellular equipments
which are already received and installed.
vi) Cost of revenue includes accrual taka 5,000,000 BTRC annual license fee,
tds undone, payment due by Jan/2017.
vii) Operating expense includes taka 150,000 paid to a stationery goods supplier, tds
not done.
viii)Operating expense includes taka 500,000 paid to a vendor but without
deducting/paying VAT thereon. 30(aa)
ix) Company missed to write off in the books a loss of taka 500,000/= on
capital assets sold during the income year. An amount of depreciation taka
300,000/= was charged in income year on the same capital asset sold.
Further findings from the records of the income year of BA Ltd.:

i) Finance expense includes Tk. 700,000/= interest on O/D taken to pay income tax
when in cash strain.
ii) Foreign exchange loss represents loss due to rate slump between time gap of
approved foreign loan and receipt.
iii) Company changed stock valuation method for mobile set stock. Auditor did not agree
and qualified the report quantifying the resulting missed revenue Tk. 2,500,000.
iv) Tk. 1,000,000 incurred for renovation of rented site offices in the country and
charged to S&D expense.

v) Included in G&A expense, fees Tk. 500,000 paid to auditor for valuation of fixed assets
in connection with the preparation leading to primary meeting of the merger.
vi) G&A expense includes taka 2,500,000 on a/c of transfer of overdue accumulated
contribution to RPF (both employer and employee). Company could not transfer
contribution timely for cash strain overriding the PF Rules.
vii) Other network operating expense includes taka 500,000 forfeited advance paid for
acquiring a new office floor.
viii) Taka 200,000 accrued as car rent for Car rental company reported under S&D
expense, tds not done.
ix) During income year, company disposed a capital asset for taka 2,500,000. Carrying
value and the tax WDV (at 10% rate) of the asset at disposal were taka 1,000,000
and taka 800,000 respectively. A new asset was purchased for taka 5,000,000 to
replace asset in same year. Depreciation on new asset was provided wrongly at
20%.
x) G&A expense includes taka 1,000,000 for directors traveling to Singapore on a
new business negotiation, lump sum payment of taka 1,000,000 as inducement to
hunt a prospective employee from a competitor,
xi) Fees taka 500,000 paid to a lawyer to increase authorized share capital before
merger scheme.
Requirements:
a) Calculate total income and tax payable of AR Ltd. for income year ended
31.12.2016. Explanations/assumptions/relevant sections/case ref, if any, in
support of your adjustments should begiven.
b) Calculate total income of BA LTD. for income year ended

31.12.2016. Explanations/ assumptions/relevant sections/case ref, if any, in
support of your adjustments should be given.
c) Consider relevant information above and in Exhibit 2 relating to ‗Slump Sale‘

of ―S‖ unit of BA Ltd. to MP Ltd. Ltd. before the ―Effective Date‖ of
Amalgamation. Compute capital gain and tax liabilityon ―S‖ unit sale.
Consider Exhibit 1. Write your views in the light of the I.T. Ordinance: (i)
Whether difference shall attract tax if value of shares received from AR Ltd. by
shareholders of BA Ltd. is more than the value of net assets of BA Ltd.
amalgamated with AR Ltd. (ii) Whether AR Ltd. is entitled to carry forward
losses/unabsorbed depreciation of BA Ltd. for set off against taxable profit of the
transferee after amalgamation.
EXHIBIT 1 (In connection with Question No. 1)
Court approved a scheme of amalgamation under Companies Act 1994
between AR Ltd. (Petitioner 1) and BA Ltd. (Petitioner 2). Currently, AR Ltd.
(Petitioner 1) is owned by a Singapore-based company, AR (Pvt.) Ltd. (91%)
and a Korean company, DNT (9%). BA Ltd. (Petitioner 2) is owned by AB
Singapore (Pvt.) Ltd. (98%) and Mr. X of UK (2%). Petitioner 2(transferor)
shall be merged into Petitioner 1(transferee). Pre-merger and post-merger
ownership structure are as follows:

Relevant two extracts from approved Amalgamation Scheme:
i) All Assets and liabilities of amalgamating company (Transferor) shall be
vested on amalgamated company (Transferee). As part of capital
reorganization, 1,300,000,000 Ordinary BDT 10 shares in transferee company
shall be issued to shareholders of transferor, resulting 25% holding for
transferor company‘s shareholders in transferee company‘s reorganized capital.
Assume, shareholders of transferor company with >9/10th in value of shares in
transferor company become shareholders of the amalgamated company.
Difference of net assets of transferor company and value of agreed issue in
transferee company to shareholders of the transferor company shall be
transferred to Capital Reserve/Goodwill.
ii) Transferee company shall be entitled to claim benefit of brought forward
losses or/and unabsorbed depreciation, as admissible under the provisions of
Income Tax Ordinance to the extent applicable, of the transferor company and
to set off against the taxable profit of the transferee company after official
amalgamation.
EXHIBIT 2
SIM Kitting service unit ‘S’ of BA Ltd.:
BA Ltd. (transferor) has a small warehouse SIM kitting unit ―S‖ within its
operation. Amalgamation deal agreed not to carry on such non-core operation with
the merged entity and concluded that the deal steering committee would sell ―S‖
unit and the resulting tax, if any, shall be settled by transferee company. Within
BA Ltd. Balance Sheet, assets and liabilities on a/c of ―S‖ unit are (BDT): Non-
current liability 1,500,000, Fixed Assets 4,000,000 which includes a 1,000 sft
warehouse land space bought for bdt 1,000,000 in January 2014 (revalued bdt
1,500,000 in Jan/2015), furniture & fixture net 300,000 (gross 500,000), electrical
appliance net 320,000 (gross 400,000) and balance is other fixed assets WDV.
Current assets: Inventory of SIM and kitting materials bdt 250,000, Bank balance
(150,000). Merger steering committee has done a slump sale deal (lock, stock &
barrel) with ―MP Ltd. Ltd.‖ to sell Unit ―S‖ operations of BA LTD. in April 2017
(before ―Effective Date‖ of Amalgamation). Consideration is BDT 5,000,000/=.
―S‖ unit capital assets are depreciated u/s 29(1)(viii). Committee paid a lawyer net-
of-tax fee bdt 50,000 for deal advice.

Computation of total income and tax liability
AR Ltd.
Income year ended 3 1.12.2017. A/Y: 2017-18
BDT(`000) BDT(`000)
Net profit before tax 8,300,000
AD Inadmissible expenses:
D:
i) Lawyer payment for acquisition of Khulna office -----
[Legal exp. is allowable exp. as per sec.29 of ITO, 1984]
ii) Payments to Radisson for Shareholders' reps -------
[Allowable as the exp. is not personal, not capital rather related to
business]
iii) Payment to valuer of assets disposal 100 100
[Payments linked to capital assets sold]
iv) Interest for late return filing and default in advance tax payment 150 150
[Any exp. for violation of law is not allowable exp.]
v) Interest on assets acquired under deferred scheme 500 500
[To be disallowed being capital exp.]
vi) BTRC annual license fee [Cannot be disallowed on the ground -----
that tax was notdeducted as it would be deducted at the time of
payment]
vii) Stationery purchase through supply 150 150
[To be disallowed u/s 30(aa) for non TDS]
viii) Vendor payment without VAT deduction -----
[Not to be disallowed u/s 30(aa) for non VDS wef the AY: 17-18]
ix) Depreciation of sold assets 300 300
[Depreciation not allowed in the year of disposal]
1,200
8,301,200
Note:
There is no scope to consider loss on sale of assets Tk. 500,000 due to lack of information relating
to written down value and sales price of assets already sold.
Tax calculation
Tax @ 45% (non-listed mobile phone Operator Company) = Tk.3,735,540 ('000)
Computation of total income and tax liability

BA Ltd
Income year ended 31.12.2016. A/Y: 2017-18
BDT(`000) BDT(`000)
Net profit before tax (8,150,000)
AD Inadmissible expenses:
D:
i) Interest on O/D -----
[In case of cash shortage, company can borrow money to run
business including tax payment etc. As it is business related
exp. so it is allowable. Tax is not allowable exp. but interest
on loan to pay tax is allowable exp.]
ii) Exchange loss [Bonafide and actual and as such allowable -------
as
per sec.29]
iii) Missed revenue for stock valuation method change ------
[Assumed that stock valuation method has been
changed&recognized as per BAS]
iv) Renovation of site office 1000 1,000
[To be added as it is capital exp.]
v) Valuation fee paid to auditor in connection with 500
merger
[Not connected with day to day business of the company]
vi) RPF overdue contribution payment -----
[Action of overdue payment lies under separate PF Rules,
Actual amount whenever paid is admissible]
vii) Forfeited advance for cancellation of agreement 500
[Not to be allowed as business exp. as it was incurredfor
violation of terms and conditions]
viii) Car rent payment accrued [To be allowed as business exp. -----
because tax to be deductedat the time of payment not on the
basis of accrual]
ix) Depreciation on new asset 100
[Dep. Claimed Tk.50,00,000 x 20% = 10,00,000.
Assumed that purchased price of the old machine was
Tk.20,00,000 as it was not given in the question).
So actual tax dep. to be allowed
(Tk.50,00,000 - 5,00,000 = 45,00,000 x 20% = 9,00,000).
So excess claim Tk.10,00,000 - 9,00,000 =1,00,000 to be
disallowed.
x) Inducement payment to hunt staff [Illegal exp. not 1000
allowable at legal business]
3,100
3,100
Total Income (8,153,100)
c)
Computation of Gain and Tax Liability on 'S' Unit Slump Sale to MP Ltd.
Sales proceeds 5,000,000
Less: Net worth of ‗S' unit
Floor space value (ignoring revaluation) 1,000,000
WD V of other assets:
Furniture & Fixture (gross 500,000) 300,000
Electric appliance (gross 400,000) 320,000
Other fixed assets (40,00,000-15,00,000-3,00,000-3,20,000) 1,880,000
Inventory 250,000
Bank balance (150,000)
Value of total assets 3,600,000
Less: Liabilities
Liability of ‗S' unit 1,500,000
Legal expense gross [50,000x100/90] 55,555 1,555,555 2,044,445
I think it is goodwill money not capital gain

(as because not only capital assets are sold here) which is
taxable u/s19(10) 33 as income from other sources 2,955,555
Tax @35% 1,034,444
(as because not only capital assets are sold here) which
is taxable u/s
19(10)
Courtesy: 33 as
Saiful income
Islam from other
Mozumder, sources
ShirazkhanBasak& Co. smozumder@outlook.com cell-01711-981920
(d)
Amalgamation of BA Ltd. with AR Ltd. under the approved scheme meets condition of
amalgamation as per section 2(2) of IT Ordinance. Although all assets and liabilities of BA Ltd. get
vested on the AR Ltd., such amalgamation does not meet definition of 'transfer' u/s 2(66) of the law.
There is no sale of assets in amalgamation, nor any price paid by AR Ltd. for the assets vested. So,
there will be no capital gain tax on such transfer or even if the value of the shares issued to the
shareholders of BA Ltd. is more than the net value of assets vested in the merged transferee.
AR Ltd. is not entitled to carry forward the losses and unabsorbed depreciation of BA Ltd. Such
amalgamation does not meet the conditions of Section 42(4) of the Ordinance to do carry-forward
and set-off. Upon amalgamation gets effective, BA Ltd. becomes dissolved and discontinued.
Section 42(4) allows the carry-forward facility in the case when a company is succeeded by
inheritance. Although this amalgamation scheme (court approved) describes the carry-forward
entitlement of AR Ltd. to claim benefit of the brought forward losses or/and unabsorbed
depreciation, it made subject to admissibility of the same under the provisions of IT Ordinance,
1984. Section 42(4) limits such carry-forward benefit by person, if not by inheritance.

2b Tax Computation of Individuals
S.L. Question Year
From the following particulars compute the total income and tax liability of Mr. M for the PE —
income year ending 30 June ,2003:- III
(a) Salary Income Nov-
Basic Salary-Tk.25,000 p.m Dec,
Dearness allowance -20% of basic salary 2003
Bonus -1 month's basic salary
House rent allowance-35% of basic salary
Medical allowance-Tk.500 p.m
Conveyance allowance-Tk. 1,200 p.m
Leave travel concessions (inland)-Tk. 60,000 (bills approved Tk.51,500)
Subscription to RPF -10% (Employer's contribution is the same).Interest accrued Tk. 96,000
on P.F balance calculate at 16% p.a . Provision of free lunch and tiffin at office for which
the monthly average expense of the company is Tk 1,500 .
(b)Interest on Securities:-
14% ABC Ltd debenture of the face value of 2,00,000
12% PQ Ltd debenture of the face value of Tk. 2,00,000 which was sold on 15,
June 2003 and invested the amount so received in purchasing 14% debenture of
XY Ltd at par. The sale and purchase was affected through Salvo Bank Ltd.
which charged Tk. 4,000 as commission:
8.5% National Bonds Tk. 200,000 (3 years term and maturing on 01 May 2003)
(c) Income from House Property:-
Mr. M has one residential house-one half of which is let out at a monthly rent of
Tk. 2,000 and the other half —self occupied
Following expenditures were incurred by Mr M:-
Taka
20,000
Municipal tax
60,000
Repairs and maintenance
12,000
Insurance premium
30,000
Salary of caretaker
(d)Income from Land:

Sale of paddy from land given on "Adhi" system-Tk. 1,25,000. sale proceeds from
trees of spontaneous growth in Mr. M's land Tk.20,000
(e)Income from Business:
Share of profit from a partnership firm Tk. 75,000
(f)Capital Gains:
He sold a land property. ( bought 6 years back) at Abdullahpur,Tongi and
earned therefore a capital gain of Tk. 40.00 lakhs . He then bought a flat at Dhanmondi
costing Tk. 35.00 lakhs during the year.
(g)Income from other Source:
Dividend (net) from a listed company Tk.45,000
Interest (net) on savings bank account Tk. 5,400.
During the year Mr. M made the following investment-
i) Life insurance premium(Policy Value Tk. 500,000) Tk 60,000;
ii) Investment in shares of a listed company Tk. 100,000;
iii) Donation to charitable institutions as approved by NBR Tk.30,000
Mr. M
Income Year ended 30 June 2003
Computation of Total Income Tk. Tk.
Income from salary u/s 21:
Basic salary (25,000*12) 300,000
Dearness allowance (20% of basic salary) (300,000*20%)---------------- 60,000
Bonus :1 months basic salary -------------------- 25,000

House rent allowance (35% of basic salary) (300,000*35%) = Tk. 105,000
Less: Lower of 50% of basic salary i.e Tk. 150,000
Or Tk.15,000 per month i.e Tk. 180,000
So house rent allowance Tk.(105,000-150,000)- Nil
--------------------------------------------------------------------------
Medical allowance (500*12) Tk. 6,000
Less: Actual expenditure assumed Tk. 6,000 Nil
Conveyance allowance Tk.(1,200X12)-----Tk.14,400
Less: Exempted ----------------------------------- Tk. 18 000 Nil
Leave travel concessions --------------------- Tk . 60,000
Less: Actual (Passage as per rule 33C) -- Tk. 51,500
Less: Exempted ----------------------------------- Tk. 18 000 8,500
Employer contribution to recognized provident fund•(300,000*10%)-------- 30,000
Interest accrued Tk.
96,000
Less: exempted up to 1/3 of basic salary i.e 100,000 or
9,000
(14.5% of (96,000/0.16)) i.e 87,000 (Lower one) Tk.
8 7 , 0income
Total 00 from salary 432,500
Income from interest on security: u/s 22-23 , - - -
Interest on 14% debenture of ABC Ltd.

(200,000*14%) -------------------------------------- Tk.28,000
Less: Exemption ----------------------------------- Tk. 20,000
Interest on 12% debenture of PQ Ltd. 8,000
(200,000*12%) ------------------------------------- Tk. 24,000
Less: Commission to Bank Tk. 4,000
8.5% interest on national Bond 20,000
[(200,000*8.5%)/12]x 10 14,167
Total income from interest on security 42,167
Income from House property u/s 24-25:
Rental income (Tk.2000X12) -------------- Tk. 24,000
Less: Municipal tax---------------------------- Tk. 10,000
Less: Insurance premium ------------------------- Tk. 6,000
Less: Repairs and maintenance
(24,000*25%) ------------------------------------------ Tk. 6,000
Total income from house property ........................ -- 2,000 2,000
Income from Agricultural land u/s 26-27:
Sale of paddy- ------------------------------------ --------------
Total income from agricultural land .......................... 125,000 125,000
Income from Business or Profession u/s 28-30
Share of profit from a partnership firm
75,000
Total income from Business or Profession u/s 28 -30 75,000
Income from capital gain u/s 31-32
Sold a land property ----------------------------------------------- 4,000,000
Total income from capital gain ..........................
Income from other sources u/s 33 -34 4,000,000
Sale from trees of spontaneous growth ------------------------ 20,000
Dividend income from a listed company ---- Tk. 45,000 (net)
and by grossing up it is (45000*100)/90 50,000
Interest on savings bank deposit (5400*100)/90 ----- 5,400
Total income other sources .............................. 25,400
Total taxable income 4,752,067
Calculation of Investment allowance:
a) Calculation of Actual investment:
Particulars Tk.
Employers and employees contribution to recognized provident fund 60,000
14% Debenture in XYZ Limited ---------------------------------------------- 200,000
Life insurance premium (maximum 10% of policy value) -------------------
(500,000*10%)- 50,000
Investment of a listed company------ --------------------- - 100,000
Donation to charitable institution ------------------------------------------------ 30,000
Total Actual investment 440,000
b) 20% of total income excluding employers contribution to recognized provident fund and interest
thereon= Tk.(4,752,067-39,000)*20% =Tk.942,613.4
So investment allowance shall be calculated on Actual investment Tk. 440,000

Or Tk. 250,000
Or 20% of total income excluding employer’s contribution to recognized provident fund and interest
thereon Tk. 942,613 (Lower one)
So investment allowance is Tk.250,000 and Tax credit = Tk. 250,000*15%= Tk.37,500
Calculation of tax liability:

Particulars Rate(%) Tax liability (Tk.)
On first Tk.120.000 0% 0.00
On Next Tk. 250,000 10% 25,000
On Next Tk.300,000 15% 45,000
On Next Tk. 350,000 20% 70,000
Balance Tk.3,732.067 25% 933,017
Total tax liability 1,073,017
Or consideration of capital gain separately:
Particulars Rate(%) Tax liability (Tk.)
On first Tk.120,000 0% 0.00
On Next Tk. 250,000 10% 25,000
On Next Tk.300,000 15% 45,000
On Balance Tk.82,067 20% 16,413
On Capital gain Tk. 4,000,000 15% 600,000
Total tax liability 686,413
So Tax payable according to Second Schedule Para 2 is equal to Tk. 686,413
Less: tax credit
Investment allowance Tk.37,500
Tax deducted at source Tk. 600
Tax on partnership business
(686,413/4,752,067)*75,000= Tk.10,833
Tk. 48,889
So tax liability =Tk. (686,413 - 48,933) = Tk. 637,480
Mr. Awal is a service holder. Following are the particulars of his income, investment and PE —
expenditure for the year 2004-05. Compute his income from salary, and tax payable under Ill
the following situation: May-
i) The provident f und is recognized June,
ii) T he pr ovident f und is G ovt . one 2006
iii) The provident fund is unrecognized.
a) Basic salary Tk.9,000 per month.
b) Dearness allowance @ 20% on basic salary.
c) Bonus: two bonuses @ one month basic salary for each.
d) Rent free quarter (Annual value Tk.30,000)
e) Conveyance allowance Tk. 1,200 per month
f) Medical allowance Tk.300 per month (Actual expenses Tk.2,500)
He contributes 10% of his basic pay to the provident fund. Interest on provident fund
balance for the year is Tk.2,500 @ 15% interest. He paid life insurance premium Tk. 5,000
for the year and purchased share of a company for Tk.4,000.
Mr. Awal-A service holder

Income Year 2004-05
Particulars Recognised Govt. One Unrecognised
Basic Salary 9,000 x 12 108,000 108,000 108,000
Dearness Allowance 20% of Basic Salary 21,600 21,600 21,600
Bonus 9,000 x 2 18,000 18,000 18,000
Rent Free Quarter 25% of Basic Salary or Annual 27,000 27,000 27,000
Value (Tk. 30,000) Lower one
Conveyance 1,200 x12 =14,400 exempted - - -
Allowance Upto 18,000
Medical Allowance 300 x 12 = 3,600 exempted up to 1,100 1,100 1,100
actual expense (Tk. 2,500)
Employers 108,000 x 0.1 10,800 0 10,800
Contribution to
Provident Fund 10%
Interest of PF 83 0 2,500
15% of Fund balance. Exempt
Balance
up to Lower of 1/3rd of basic salary
or 14.5%
Total Income 1,86,583 1,75,700 1,89,000
Calculation of tax
On first Tk.120,000 Tk.120,000 X 0.00 0
0 0
On Balance @10% 6,658 5,570 6,900
Tax payable 6,658 5,570 6,900
Less: 15% tax rebate (4,590) (2,970) (1,350)
on
investmentallowance
Tax liability 2,068 2,600 5,550
Note 1: Interest on Provident fund:
@ 15% on balance Tk. 2,500
Less: Exempted Tk. 2,417
Taxable Tk. 83
(Lower of 1/3 of basic salary or 14.5% as per clause 5(2) of Part B of 1 st Schedule u/s 2(52) and clause 25
of Part A of 6th Schedule u/s 44(1) of ITO 1984.)
Note 2: Calculation of Investment allowance:
Govt. Unrecognize
Recognized
Actual investment One d
Clause #1 of Part B of 6th
Life insurance premium 5,000 5,000 5,000
Schedule
Employees Clause #4 of Part B of 6th
contribution to PF Schedule 10,800 10,800 0
Employers Clause #5 of Part B of 6th
contribution to PF Schedule 10,800 0 0
Clause#8(c) of Part B of 6th
Purchase of shares 4,000 4,000 4,000
Schedule
Total actual
investment 30,600 19,800 9,000
Investment 15% of Actual investment or 20% of
allowance total income Tk.175,700 (excluding
employer's contribution to PF and
interest on ) or Tk 250,000
according to section 44(3) of ITO
1984 Lower one
Here
Actual investment 30,600 19,800 9,000

20% of Tk 175,700 35,140 35,140 35,140
According to Section 44(3) 250,000 250,000 250,000
Lower one 30,600 19,800 9,000
Investment
allowance @15% 4,590 2,970 1,350
Mr. Azgar is the General Manager of a Mill. He had the following income for the year ended PE - Ill
30 June, 2006:- Nov -
i) Basic salary Tk. 10,000 per month; Dec,
2006
ii) Two months bonus on two Eid festivals each equivalent to respective months
basic salary;
iii) He received medical allowance of Tk. 3,600 for the year and his actual expenses
were Tk. 5,000.
iv) He received conveyance allowance at Tk. 500 per month. He has been provided with
a rent free quarter for which employer deducts 7.5% of basic salary per month. The annual
value of house estimated at Tk. 25,000. He contributes 10% of his basic salary to a
recognized provident fund to which his employer also contributes the same amount.
During the year his investments were as follows:

i) Purchase of ICB Certificate and shares of a company Tk. 5,000 and Tk.
10,000 respectively;
ii) Payment of life insurance premium Tk. 5,000 for himself and Tk. 4,000 for
wife;
iii) Contribution to group insurance and Benevolent Fund Tk.150 and

Tk. 50 respectively.
Compute taxable income and tax on the same.
Mr. Azgar
Computation of Total Taxable Income Tk. Tk.
Income from salary U/S 21:
Basic Salary (10,000*12) 120,000
Festival Bonus (10,000*2) 20,000
Medical allowance ----------------- 3,600
Less: Actual expenses ------------ 5,000 -
Conveyance allowance---- (500*12) = 6,000

Less: Exempted up to = 1,8000 -
Rent free accommodation:
Annual value of the house 25,000

or 25% of basic salary (120,000*.25) 30,000
So lower one is 25,000 16,000
Less: Employer's deductionfrom basic Salary (120000*.075) 9,000
Employer contribution to recognized provident fund 12,000

Total taxable income 168,000 168,000
Calculation of Investment allowance:

1.Actual investment calculation:
Particulars Tk.
Purchase of ICB Certificate 5,000
Shares of a company 10,000
Payment of life insurance premium for himself 5,000
Payment of life insurance premium for wife; 4,000
Contribution to group insurance and Benevolent Fund (150+50) 200
Employee and Employer contribution to recognized provident fund 24,000
Total Actual investment 48,200
2 . 20% of Total income of Tk.168,000/- comes to Tk.33,600/-
Actual investment =Tk. 48,200
Highest allowable limit = Tk.250,000
Taking lowest one investment tax credit stand at (33,600 *.15) Tk. 5,040
Calculation of tax:
Particulars Tax rate (%) Tax (Tk.)

On first Tk.120,000 0% 0.00
Balance Tk. 48,000 10% 4,800
Tax payable 4,800
Less: Investment tax credit / Tax Rebate 5,040
Tax liability / (Refundable) (240)
But minimum tax should be 1,800
So tax liability 1,800
1 Mr. Rahim works as a General Manager in a company. He is 70 years of age. During the twelve Nov
months ended 30 June 2017 he received the following income: Dec
(a) Salary Income: 2010
Basic salary Tk.30,000 per month Bonus –
1 month‘s basic salary
House rent allowance –60% of basic salary
Medical allowance – Tk.2,000 per month
Conveyance allowance – Tk.1,800 per month
Subscription to RPF – 10% (Employer‘s contribution also same) Interest
accrued Tk.190,000 on PF balance calculated @ 16% p.a.
(b) Interest on Securities:
Interest on BSEC approved debenture Tk.30,000.
(c) Income from House Property:
Mr. Rahim owns one floor of a commercial building. It has been let out at a monthly
rent of Tk.20,000. The following expenditures were incurred during the year by Mr.
Rahim for the commercial floor space:
Municipal Tax Tk.24,000
Repairs and maintenance 60,000
Fire insurance premium 15,000
Salary of caretaker 30,000
The floor space remained vacant for one month during the year.
(d) Agricultural Income:

Mr. Rahim received Tk.35,000 from agricultural land by selling crops.
(e) Income from other sources:
Cash dividend (net) from a listed company Tk.54,000. Stock dividend of 100 shares (face
value per share Tk.10, but market price on the day of dividend declaration was Tk.150
and on 30 June 2017 was Tk.165).
During the year Mr. Rahim made the following investments:
(1)Life insurance premium in the name of his dependent old mother Tk.50,000 (policy value
Tk.5,00,000).
(2) Investment in shares of a listed company Tk.1,00,000.
(3) Contribution to monthly deposit pension scheme at Sonali Bank Tk.5,000 p.m.
Required:
Compute the total income and tax liability of Mr. Rahim for the Assessment year
2017-2018.
Mr.Rahim
Note Taka
Income from Salary (u/s-21):
Basic salary(30,000 *12) 360,000
Festival Bonus(One month's Basic salary) 30,000
House Rent Allowance
60% of Basic Salary (360000*60%) 216,000
Less: Exemption (Rule-33 A)
50% of Basic salary 180,000
Or TK. 15,000 per month 180,000
Whichever is lower 180,000 36,000

Medical allowance (Tk 2,000*12) 24,000
Less: Exemption(Rule-33I):
Actual expense(assumed allowance are expended) 24,000 -
Conveyance Allowance ( Tk. 1,800*12) 21,600
24,000
Less: Exemption(Rule-33C): Maximum Limit -
Employer‘s Contribution to RPF(10% of Basic) 36,000

Interest on recognized provident fund @16% 190,000
Less: Exemption @14.50% 172,188
Or 1/3 of BS (360000/3) 120,000
Whichever is lower 120,000 70,000
Income from Salary (u/s-21) 532,000

Income from securities (U/S-22)
Income from BSEC approved debentures 30,000

Income from securities 30,000
Income from house property ( U/S- 24 & 25)
Rental / Annual Value ( 20,000 *12 ) 240,000
Less: Admissible Expenditures-
Repairs & Maintenance ( 240,000 *30%) 72,000
Municipal Tax 24,000
Insurance premium 15,000
Vacancy Allowance for 1 month 20,000 131,000
Income from House property 109,000

Income from Agriculture ( U/S-26 & 27)
Sale of Crops 35,000
Less:Cost of Production @60% 21,000 14,000

Income from Other sources (u/s-33):
Dividend from listed company 54,000 *100/90
60,000
Income from Other sources (u/s-33):
60,000

Calculation of investment allowance(under Part B 6th schedule):
Investment in listed company's share
(As per SRO 60-2012) 100,000
Contribution to monthly DPS (5000 * 12) 60,000
Allowable up to Tk. 60,000
Whichever is lower
60,000
Employee and employer's contribution to RPF(10% of salary each)
(allowable as per para-5) 72,000
Actual investment
232,000
Allowable investment allowance(u/s-44):
Actual investment
232,000
20% of total income [excluding employer's contribution to RPF, interest on RPF
(excluding interest para-25, part-A 6th schedule), income u/s-82C]. So 20% on Tk 127,800
(745,000-36,000-70,000).
Maximum allowable investment

15,000,000
Allowable investment (whichever is lower)
127,800
On first Tk.
200,000 @ 0% -
On next Tk.
300,000 @ 10% 30,000
On balanceTk.
245,000 @ 15% 36,750
Total
745,000 66,750
Gross tax liability
66,750
Less: 10% Rebate on investment Tk 127800 12,780

53,970
Less: TDS 6,000

Notes:
The total income & tax liability of Mr. Rahim are computed in the light of the provision of Finance Act-
1 2017
2 Salary of caretaker can not be claimed separately as it is included in the repair maintenance allowance.
As Mr. Rahim did not maintain as books of accounts, 60% of income from agriculture is charged as
3 cost of production.
4 Sock dividend will not be considered as income as per definition of “Income”
5 As Mr. Rahim is above 65 years, his exempted limit of income is Tk. 200,000
2 Mr. Azim is a Chartered Accountant in practice. He has the following income for the year ended May
June 30, 2017: Jun
Taka 2011
a) Share of income from C.A. Firm 471,518
b) Interest Income (Gross):
i) From Leasing Company 1,247,502
ii) On Fixed Deposit (Bank) 138,214

iii) On Saving Account (Bank) 53,790
c) )Dividend Income (Gross) 11,350
d
d))Shop Rent 13,200
e
e))Directors Fee 65,000
f
f) )Income from ICAB as Examiner Fee 174,325
g
g))Income from Sundry Business 55,440
h
h))Capital Gain:
i) Profit on Sale of shares of Private Ltd. Co. 6,050,000
ii) Sale of Shop (deed value Tk.192,500, original cost Tk.27,750, Tax deducted
at source at the time of registration Tk.3,850 to be assessed u/s 82C)
iii) Profit on Sale of Shares on publicly listed company 3,430,501
He has investment of Tk.328,000 on purchase of BSP and life Insurance premium.

He has paid an amount of Tk.150,000 as advance tax.
His last slab of Tax is @25% during the assessment 2017‐2018.
Compute the total income and Tax payable by Mr. Azim.

Answer:
Mr. Azim
Income from House Property (U/S: 24-25)

Shop Rent 13,200
Less: Repair & Maintenance@ 30% 3,960 9,240
Income from Business or Profession: U/S: 28-29
Share of Income from CA Firm 471,518
Income from Sundry Business 55,440 526,958
Capital Gain: U/S: 31-32
Profit on Sale of Shares of Private limited co. 6,050,000
Sale of Shop 164,750
Profit of Sale of Shares of PLC 3,430,501 -
(Fully exempted as per SRO 269 of 2010) 6,214,750
Income from Other Sources: U/S: 33-34
Interest Income from Leasing Company 1,247,502
Interest Income on Fixed Deposit (Bank) 138,214
Income from Saving Account (Bank) 53,790
Dividend Income 11,350
Less: Exemption 10,000 1350
Director fee 65,000
Income from ICAB as Examiner Fee 174,325 1,680,181
Calculation of investment allowance(under Part B 6th schedule):

Investment in BSP and LIP 328,000
Allowable investment allowance(u/s-44):
Actual investment 328,000
30% of total income [excluding employer's contribution to RPF and 2,479,914
interest thereon (as par para-4, part-B 1st schedule),
income u/s-82C]. Hence 30% on Tk. (8,431,129-164,750)
Maximum allowable investment 15,000,000
Lower of the above 328,000

On total income including the Capital gain of Tk.6,214,750

On first @ 0% -
220,000
On next 300,000 @ 10% 30,000
On next 400,000 @ 15% 60,000
On next 300,000 @ 20% 60,000
On next 7,211,129 @ 25% 1,802,782
Total 8,431,129
Gross Tax Liability 1,952,782
On total income other than Capital gain of Tk.6,214,750
On first @ 0% -
220,000
On next 300,000 @ 10% 30,000
On next 400,000 @ 15% 60,000
On next 300,000 @ 20% 60,000
On next 996,379 @ 25% 249,095
sub-total 2,216,379
On Capital Gain 6,214,750 @ 15% 932,213
Total 8,431,129
Gross Tax Liability 1,331,308
Lower of the above two calculation is Gross Tax Liability 1,331,308
Less: Tax on Share of income from Partnership firm @ average rate 74,454
(1,331,308 / 8,431,129*471,518)
Less: 15% Rebate on investment Tk 328.000 49,200

1,207,653
Less:
TDS U/S 82 on sale of shop 3,850
TDS on Dividend @ 10% 1,135
TDS on Interest 143,951
Advance Tax paid 150,000 298,936
1. Sale of Shop:
Tax deducted at Source 3,850
Grossed up income U/S 82 C 25,667
Actual gain (192,500 - 27,750) 164,750
(Excess amount over the grossed
income U/S 82C i.e. (164,750-25,667)
139,083shall be liable to tax U/S 82C
of Sub-Section- 6)
2. It is assumed that the capital gain from sale of shop is arrived after 5 years of purchase
3. It is also assumed that gain from the sale of private limited companies shares arrived after 5 years of
purchase.
4. It is assumed that Interest on leasing company, fixed deposit and saving bank triggered for TDS 10%
i.e. Tk. 143,951
3 Mr. Aminullah is a service holder. Following are the particulars of his income, investment and May
expenditure for the year 2016-17. Compute his taxable income and tax payable under the following Jun
situations: 2012
i) The provident fund is recognized
ii) The provident fund is unrecognized
The information available are as follows:
a) Basic salary Tk.9,000 per month
b) Dearness Allowance @ 20% on Basic salary
c) Bonus- two Bonuses @ one month Basic salary
d) Rent Free Accommodation (Annual value Tk.30,000)
e) Conveyance Allowance Tk. 1,200 per month
f) Medical Allowance Tk.300 per month (Actual expenses Tk. 2,500)
He contributes 10% of his basic pay to the provident fund. Interest on provident fund balance for
the year is Tk.2,500 @ 15% interest. He paid life insurance premium Tk. 5,000 for the year and
purchased share of a company for Tk.4,000.
Mr. Aminullah
Particulars Recognised Unrecognised
Basic Salary 9,000 x 12 108,000 108,000
Dearness Allowance 20% of Basic Salary 21,600 21,600
Bonus 9,000 x 2 18,000 18,000
Rent Free Quarter 25% of Basic Salary or Annual Value 27,000 27,000
(Tk. 30,000) Lower one
Conveyance Allowance 1,200 x12 =14,400 exemptedUpto 30,000 - -
Medical Allowance 1,100 1,100
300 x 12 = 3,600 exempted upto actual
(Tk. 2,500)
Provident Fund 10% 108,000 x 10% 10,800 0
Interest of PF 15% of Fund balance. 83 0
Exempt up toLower of
1/3rdof basic salary anddearnessallowance
or 14.5%
Total Income 1,86,583 1,75,700/-
Calculation of Tax
No tax will be imposed as the total income in both cases is below taxable limit.
Note - 1:
Interest @15% on Balance 2,500
Less: Exempted 2,417
Taxable 83
(Lower of 1/3rd of basic salary and D.A or 14.5% as per clause 25of Part A of 6th Schedule.
Note 2: Employer's contribution to unrecognized P.F during the year and interest thereon is taxable at the time
of withdrawal from fund not every year and TDS on such withdrawal is also applicable at that time.
4 The following are the income of Mr. Rahmanfor the year ended June 30, 2017. Compute May
his total income and tax liability. Jun
2013
(a) Salary Income;
Basic Salary - Tk. 25,000 p.m
Bonus – 2 months basic salary
House rent allowance – 40% of basic salary
Medical allowance – Tk. 1,500 p.m
Conveyance allowance – Tk. 2,000 p.m
Concessional passage within Bangladesh – Tk. 1,50,000
Subscription to RPF – 10% (Employer’s contribution is the same).
Interest accrued Tk. 96,000 on P.F balance calculated at 16% p.a.
(b) Interest income (Gross) :

i. From Leasing Company Tk. 12,47,502
ii. On Bank Fixed Deposit Tk. 1,38,214
iii. On Bank Savings Account Tk. 53,790
(c) Income from House Property :
Mr. Rahman has one residential house-one half of which is let out at a monthly rent of
Tk.2,000 and the other half-self occupied
Following expenditures were incurred by Mr. Rahman :
Taka
Municipal tax 20,000
Repairs and maintenance 60,000
Insurance premium 12,000
Salary of caretaker 30,000
(d) Income from Land :
Sale of paddy from land given on “Adhi” system – Tk. 1,25,000. Sale proceeds from
trees of spontaneous growth in Mr. Rahman’s land Tk. 20,000
(e) Income from Business :
(f) Capital Gains :
i. Profit on sale of shares of ABC Ltd (A Private Ltd. Co.) Tk. 60,50,000
ii. Sale of Shop (Deed Value Tk. 1,92,500), Original cost Tk. 27,750 and tax
deducted at source at the time of registration Tk. 3,850 to be assessed u/s.
82C.
iii. Profit on sale of Shares of XYZ Ltd. Tk. 34,30,501 (A Publicly listed Co.)
(g) Income from other Source :
i. Dividend (gross) Tk.11,350
ii. Income from shop rent Tk. 13,200
During the year Mr. Rahman made the following investments –
i) Life insurance premium (Policy Value Tk. 500,000) Tk. 60,000
ii) Investment in shares of a listed company Tk. 100,000
iii) Donation to charitable institutions as approved by NBR Tk. 30,000
Mr. Rahman
Income Year ended 30 June 2017
Q. REF.
PARTICULARS Taka Taka
NO.
Income from Salary-u/s-21 read with rule-33
Basic Salary -25,000 p.mX12 300,000
a. Bonus-2 months basic Salary-25,000X12 50,000
a. House Rent allowance-40% of basic Salary 120,000
Less: Exempted as per Rule-33A
(Exempted-Lower of 50% of basic salary e.gTk-1.50 Lac or 0
Taka-15000 p.m.e.g Taka-180,000 per year) 180,000

Medical alloance-Tk.1500X12
18,000
Less Exempted as per Rule-33I
a.
(Assumed that actual expenditure is more than the allowance 0
18,000
received )
a. Conveyance alowance-Tk.2000X12 24,000
Less: Exempted as per Rule 33C - 24,000 0 0
a. Concessional passage within Bangladesh 150,000
Less: Exempted as per rule-33G
(Assume that the passage was given in terms of employment
150,000
inalternate year and actual expenditure is more than the amount 0
received)
a. Employer's Contribution to RPF-10% of Basic Salary 30,000

a. Interest accrued-16% p.a on P.F 96,000
Less: Exempted-14.50% (Para 5(2) of First Schedule to ITO 1984) 87,000 9,000
A. Total Income from salary= 389,000
Income from Other Sources-u/s-33-34:
b. From Leasing Company(Gross), TDS @ 10% 1,247,502
b. On the Bank Fixed Deposit(Gross),TDS @ 10% 138,214
b. On Bank savings account(Gross), TDS @ 10% 53,790
Dividend Income-Gross 11,350
g Less Exempt(6th Sch. Part A of ITO 1984) Tk. 5,000 6,350
d Sale proceeds from tree 20,000
B. Total Income from Other Sources= 1,465,856
c Income from House Property-u/s-24 & 25:
c Annual Value: Rental value 24,000
c admissible Expenses-
c Municipal Tax-50% e.g Taka- 20000/2 (10,000)
c Insurance Premium- 50% e.g. Tk. 12,000/2 (6.000)
c Repair and Maintenance-25% of taka-24000.00 (6,000) 2,000
g Shop Rent-(Tk. 13,200-30% Repair &Maintenance.Since
Commercial) 9,240
C. Total Income from House Property= 11,240
d Income from Agricultural-u/s-26 & 27:
1. Sale of Paddy-On Adhi System 125,000
D. Total Income from Agriculture= 125,000
Income from Business or profession-u/s-28 &29:
e Income from Share profit from Partnership Firm: 75,000
E. Total income from Business or profession= 75,000
Income from Capital Gain-u/s-31 & 32:
f Sale of Share of a PVT Ltd Co-ABC Co. 6,050,000
3,430,501
Sale of Share of a Public Ltd Co-XYZ Co
Less: Exempted as per SRO-269/2010 dated01.07.2010 3,430,501 -
f . Sale of Shop-Tk.(1,92,500-27,750), Capital Gain Tk-164,750
Since TDS of Tk. 3850 is treated as final discharge of tax liability 15,400
U/S 82C of ITO 1984, the income from this head is (3850X100/25)
F. Total Income from Capital Gain= 6,065,400

Total Income of Mr.Rahman(A+B+C+D+E+F) 8,131,496
Computation of Investment Taka Taka As per Section

Rebate of Mr. Rahman 44-2(b)
Employees and Employers
60,000
Contribution to RPF
Life Insurance premium-
50,000
maximum 10% of Policy
Investment in Shares of 1,00,000
Listed Company
Donation approved by NBR 30,000
Total Investment 240,000
ALLOWABLE LIMIT OF INVESTMENT:
Lower of 20% of Total Income excluding
Employers Contribution to RPF e.gTk-
(81,40,456-30,000)X20% =Tk.16,22,091.00
or Taka-1.50 Crore-Lower one.
So, Here Allowable Investment—Actual Investment 240,000
Rate 10%
Investment Tax Credit (Rebate)=240,000X10%
24,000
Computation of Tax Liability of Mr. Total Tax amount

Rahman: Income Tax Rate
On First Taka-200000 200,000 @0% Nil

.
On next Taka-300000 300,000 @10% 30,000
On next Taka-400000 400,000 @15% 60,000
On next Taka-300000 300,000 @20% 60,000
Sub-Total 1,200,000
On the balance Tk.(8,131,496- 12Lac-60.5
Lac-15,400- Section -82C) 866,096 @25% 216,524
Total 2,066,096 366,524 -
Gross up-adj.of Section-82C(Final

Settlement) 15,400 @25% 3,850
Tax on Capital Gain-Sale of Pvt. Co's Shares-

6,050,000 @15% 907,500
15%,tk-605,000,000
X. Gross Tax Liability 8,131,496 1,277,874
Tax Rebate as per 6th Schedule-

24,000
Part-B
Net tax liability 1,253,874 Avg. Tax Rate =15.42%
Less :TaxPaid/Advance Tax Taka

1. Adjustment of Tax as per 82C(Final
settlement) 3,850
2.TDS as per 53FTaka-

12,47,502@10% 124,750
3.TDS as per 53ATaka-

138,214@10% 13,821
4.TDS as per 53FTaka-

53,790@10% 5,379

5.Rebate from Share of Income of Partnership
Firm @15.42% 11,565
Y.Total Rebate and adjustment

- 159,366
Net Tax Payable U/S 74 of ITO 1984

1,094,508
5 Nov
The following are the income of Mr. Azad for the year ended June 30, 2017. Compute his total income Dec
and tax liability.
20130
a. Salary Income
Basic Salary 4,20,864
Festival Bonus 70,144
House Rent Allowance 3,75,735
Entertainment Allowance 4,173
Conveyance Allowance 35,072
Other Allowance 16,262
Employees‘ Contribution to Provident Fund 42,086
Tax Deducted from Salary 12,000
b. House Property Income
House Rent 2,97,600
City Corporation Tax 9,000
Salary of Security Guard 48,000
Salary of Sweeper 12,000
c. Income from Business 3,78,975
d. Income from partnership (A Real estate business) 5,96,400
(Tax deducted at source Tk. 65,280)
e. Income from land sale (Capital gain) (TDS Tk. 40,000) 1,60,000
f. Income from share business U/S. 32(7) 89,74,071

g. Dividend Income (Gross) 12,04,374
h. Interest from SB A/C (Gross) 966
i. Income from Fisheries Business 4,03,000
j. Income from poultry firm(investment in Govt. Bond) 2,05,000
Notes :
1. Purchase of 5 years Bangladesh SanchayaPatra 2,00,000
2. Investment in DPS 1,20,000
3. Advance tax for car registration 15,000
4. The assessee has a flat in Bashundhara R/A but was vacant
due to non-connection of Electricity and GAS.
5. Assessee‘s total wealth 12,50,90,210

Computation of total income :
Mr. Azad
Taka Taka
a. Income from Salary-u/s-21:
Basic Salary 4,20,864
Festival Bonus 70,144
House Rent Allowance 3,75,735
Less : Exemption 2,10,432 1,65,303
Entertainment-as per rule 33H 4,173
Conveyance Allowance 35,072
Less : Exemption-as per rule 33C 30,000 5,072
Other Allowance-as per rule 33J 16,262
Employees Contribution to PF 42,086
A. Total income from Salary 7,23,904
b. House property income-u/s-24-25 :
House Rent 2,97,600
Less : 25% Repair-Since residential 74,400
City Corporation Tax 9,000 83,400
B.Total Income from House Property 2,14,200
Income from business or profession-u/s-28:
c. Income from Business 3,78,975
d. Income from Partnership 5,96,400
f. Income from share business-Exempted as per SRO- 269/2010 Ni1
i. Income from Fisheries Business 4,03,000
j. Income from Poultry Firm-para-34 of 6th Schedule part-A of ITO- Nil
1984-(Exempted as the assessee has invested 10% in Govt. Bond)
B. Total Income from Business or Profession 13,78,375
Capital Gain-u/s-31:
e. Income from Capital gain-from Land Sale 1,60,000
C. Total Income from Capital Gain 1,60,000
Income from Other Sources-us/33:
g. Dividend Income 12,04,370
Less: Exempted as per para-11A of 6th Schedule part-A of ITO-1984. 10,000 11,94,370
h. Interest Income 966
D. Total Income from Other Sources 11,95,336
Total Income(A+B+C+D+E) 36,71,815
Calculation of Tax Liability :
Taxable income Tk. 36,71,815
i. On Tk. 2,20.000 0% Nil
ii. On Tk. 3,00,000 10% 30,000
iii. On Tk. 4,00,000 15% 60,000
iv. On Tk. 3,00,000 20% 60,000
v. Balance (24,61,815 — 4,03,000) = 20,48,815 25% 5,12,204
Income on Fisheries Business on Tk. 4,03,000 5% 20,150
6,82,354
Less : Investment Rebate
X. Actual Investment
PF 84,172
5 Years S. Patra 2,00,000
DPS (Actual 1,20,000 but Maximum 60,000) 60,000
3,44,172
Y.(Total Income-Employers Cont. to RPF)X30%=(3671815-42086)X.30 10,88,919
Z.Taka-1.50 Crore 150000000
Allowable Investment-Lower of X or Yor Z 344,172
Less: 15% of Actual Investment 51,626
6,30,728

Less : Tax Rebate of Partnership Firm
5,96,400 X 6,30,728
36,71,815 1,02,447
5,28,281
Add :Surcharge 15% 79,242
Total Tax Liability 6,07,523
Tax Paid
On Salary 12,000
Car Tax 15,000
Dividend Income 1,20,437
Interest Income 97
Land Sale 40,000 1,87,534
Tax to be paid u/s. 74 Tk. 4,19,989
Notes:
1.1t is assumed that disposal of Land has been done after no more than five years as per Para-2b of the second schedule:
2.1t is assumed that P.F is a RPF and employer's contribution has been erroneously typed as employee's contribution.
3. Since net wealth is more than 10 crore so Surcharge will be 15% instead of 10% as per Finance Act-2017.
6 May
Mr. A is 60 years old and employed by a private limited company. He has joined the company Jun
on 1 July, 2016. He has received the following income and benefits during the year ended 30
2014
June, 2017:
(a) Basic Salary Tk. 100,000/- per month sent to his bank directly. He had
outstanding salary for the month of June-2017 which was paid on 2 July 2017.
He had also received arrear salary of Tk. 50,000/- during the year from previous
employment.
(b) The present employer allowed house accommodation at a concessional rate. Mr.
A. paid Tk. 60,000/- only as rent during the income year 2016-2017.
(c) Additional Conveyance allowance of Tk. 50,000/- was paid to Mr. A in addition
to the conveyance allowed under Rule 33D.
(d) Entertainment allowance @ 5% of basic salary was paid to Mr. A.
(e) Free and concessional passage of Tk. 2,00,000/= for Travel in Bangladesh by Mr.
A was allowed by the employer against actual claim of expenditure of Tk.
300,000/-.
(f) Employer spent Tk. 500/- p.m. for free Tea, Coffee, and Beverage for the office
of Mr. A during working hours.
(g) Company spent Tk. 200,000/- for Mr. A. during the year against reimbursement
of utility bills of his residence..
(h) Received share of Net Profit of Tk. 200,000/- from partnership. He is entitled to
tax rebate as per tax law.
(i) Derived Net income from production of corn, maize and sugar beet for Tk. 5,000/-.
(j) Purchased wage earners bonds on 30 June, 2016 and received interest of Tk.
50,000/- in the following year on the said investment of Tk. 5,00,000/-.
(k) Taken advance of Tk. 200,000/- from a company against accumulated profit
where he was an alternate director and a shareholder.
(l) Mr. A is also a Manufacturer and Exporter of garments products. He sold export
quota at Tk. 25,000/- against export value of Tk. 500,000/-.
(m) Mr. A incurred a capital loss of Tk. 500,000/- on account of sale of shares, but
made a capital gain of Tk. 600,000/- from the sale of government securities.
(n) Rental income of Tk. 600,000/- received from a five storied building consists of
10 flats constructed during the period from 1 July, 2016 to 30 June, 2017 in an
area of Muladi, Barisal.
During the year Mr. A. has claimed the following expenditure as his investments.
(1) Purchased SanchyaPatra for Tk. 50,000/-
(2) Contributed 10% of his basic salary towards Super Annuation Fund.
(3) Deposited Tk. 75,000/- under Deposit Pension Scheme with a Financial Institution.
(4) Contributed Tk. 20,000/-to Benevolent Fund.
(5) Contributed 10% of basic salary to a recognized Provident Fund. A similar
contribution was made by the employer wherefrom he received interest of Tk.
1,800/- from the said fund @ 18%.
(6) Paid insurance premium of Tk. 20,000/- for his spouse and minor child. The
policy value is Tk. 100,000/-.
(7) Purchased one computer for Tk. 50,000/= and one laptop for Tk. 60,000/=
You are required to calculate the total income and tax liability of Mr. A for the assessment year
2017-2018. Make necessary assumptions, if required.
Mr. A
Income Year 2016-17
Computation of total income and tax liability thereon
Tk. Tk.
1 Income form Salary
Basic Salary TK. 1,00,000x11 months 1,100,000
Add: Outstanding- June 2017 100,000 1,200,000
Add: Arrear Salary 50,000
House Accommodation at concessional Rate
300,000
25% of Basic Salary
Mr. 'A' Paid Cash (60,000) 240,000
Additional Conveyance Allowance received under Rule 33E 50,000
Add: 7.5% Basic Salary as per Rule 33D 90,0000 1,40,000
Utility Bill paid by employer 200,000
Free & Concessional Passage under Rule 33G 2,00,000
Actual Expenses 3,00,000 -
Free Tea, Coffee Beverage
Employer Spent (500x 12) 6,000
Exempted 6,000 -
Entertainment allowance 5% of Basic Salary 60,000
Contribution to P. Fund clause 6 of 6th Schedule Part-B 120,000
Interest from P. F. 1,800
Actual entitlement (1 800 X 100 / 18 =10,000 x 14.50%) (1450) 350
2 Income from Partnership firm u/s 44 ( 1 & 2) 200,000
3 Net income from sale of corn 5,000
Less Exempted up to 50% as per Para 46 of the 6th Schedule Part-A 2,500 2,500
4 Interest received from wage earner's scheme during 30th June 2016-2017 50,000
5 10% contribution to benevolent fund under clause 17 of 6thSchedule Part-B
6 Advance taken from a company where he is a shareholder treated as loan taken -
from the company
7 Sale/Transfer of Garments Quota Limited to 3% of Tk. 500,000 15,000
8 Capital gain-Govt. Securities 600,000
Less: exempted u/s 32 (7) 600,000 -
Carry forward of capital loss (500,000-5,000)= 495,000 -
9 Rental income from 10 Flat of 5 stories building in the village of Muladi,
600,000
Barisal
Less: tax exempted as per clause 38 of the Sixth Schedule Part-A 600,000 -
Tax Computation on:
1st Tk. 220,000 @0% -
Next Tk. 300.000 @10% 30,000
Next Tk. 400.000 @15% 60,000
Next Tk. 300,000 @20% 60,000
Balance TK. 1,057,850 @25% 264,463
Gross tax liability 414,463
Tk.
Investment Tax credit
30% of total income 647,355
(excluding employers' contribution of Tk. 120,000)
Actual Investment 560,000
Or 15,000,000
Lower one is selected 560,000
Investment tax credit @ 15% 84,000
Calculation of tax liability
Gross tax liability 414,463
Investment tax credit (84,000)
330,463
Tax rebate on partnership income (Tk. 330,463/ Tk. 2277850)x Tk. 200,000) (29,015)
Net Tax Payable 301,447
Notes;
1. Assumed that arrear salary was not considered in previous year.
2. Investment facility on insurance premium is confined to 10% of policy value.
3. In absence of information surcharge is not considered.
4. It is assumed that Mr. A contributed to Approved Super Annuation Fund.
5.Actual Investment
Purchase of Sanchayapatra 50,000
Contribution to super Annuation fund 120,000
Deposit pension scheme up to Tk. 60,000 60,000
Contribution to Benevolent Fund 20,000
Contribution to recognized provident fund 240,000
Insurance premium paid 10,000
Purchase of Laptop 60,000
5,60,000
7 Nov
Calculate Mr. AdibAhsan’s taxable Income and tax liability for the assessment year 2017-2018 Dec
considering the following, as may be relevant: 2014
Income from Salary:
Basic salary Tk. 22,000 per month, Dearness allowance 10% of basic salary, Medical allowance Tk.
2,000p.m, Two festival bonuses each equal to one month’s basic salary and Annual performance bonus
equal to four months’ basic salary. Mr. Ahsan received free accommodation from his office which has
annual rental value of Tk. 120,000 and a full time car. Leave encashment during the year was Tk. 6,600.
He and his employer both contribute 10% of basic salary to a recognized provident fund.
Income from House Property:
Mr. Adib is the owner of a three storied house at Dhanmondi, Dhaka. He let out each floor at a monthly
rent of Tk. 10,000. Annual municipal value of the house is Tk. 300,000. Beside all the repair and
maintenance expenses, he paid municipal tax of Tk. 8,000, Insurance premium Tk. 20,000 and interest on
mortgage loan Tk. 3,000 for the house. The ground floor remained vacant for 2 months during the year.
Income from Business or Profession:
Profit from sole proprietorship business Tk. 155,000. In the previous year he incurred a loss of Tk. 40,000 in
the same business and carried forward Tk. 5,000 to set off this year. During the year he also earned profit
from partnership firm Tk. 120,000.
Dividend received Tk. 54,000 from a private limited company, Income from talk show Tk. 10,000 and
Interest received from bank savings account Tk. 2,700.
Income from FDRs in the name of his daughter and wife:
He has a daughter studying in a private university in Dhaka. She is dependent on her father. She has an
FDR amounting to Tk.10 lakhs, which is made up of her savings of pocket money, gifts she has received in
her birth days from the relatives and friends over the years and the accumulated interest on FDR. The FDR
account was opened in 2008, and the balance of Tk.10 lakhs as on 30/6/2017 includes interest of Tk.3
lakhs (net of income tax) earned during the period from 2011 to 30 June 2016 and Tk.90,000 (net of 15%
income tax) interest earned during the income year 2016-2017.
Mrs. Ahsan has an FDR of Tk.20 lakhs. This is made up of her savings from the funds allocated for
household expenditure and interest earned upto 30 June 2017. Tk.1,80,000 was credited as interest
income (net of 15% income tax) during the income year 2016-2017.
Neither Mrs. Habib nor their daughter has any other income and has any Tax Identification Number (TIN).
Payments made during the year:
He paid Tk. 40,000 and Tk. 35,000 as insurance premium for his own and his spouse. He purchased share
from secondary market amounting to Tk. 7,200. He also purchased medical books for Tk. 15,000 during
the year. He donated Tk. 30,000 to Prime Minister’s Relief Fund, Tk. 20,000 to his relative and Tk. 35,000
to Aga Khan Development Foundation.
Computation of income of Mr. AdibAhsan for the assessment year 2017-18
A. Income from salary:

Component of salary Gross Exempted Net amount Reason for the treatment
amount amount chargeable to tax
Basic salary 2,64 000 Nil 2,64,000 (20,000X12)
Dearness allowance 26,400 Nil 26,000 (10% of Tk. 2,64,000)
Medical allowance 24,000 24,000 Nil Under rule 33I medical
allowance upto 10% of Basic
salary subject to a maximum
of Tk. 60,000 is exempted.
Festival bonus 22,000 nil 22,000
Annual performance bonus 88,000 nil 88,000
Deemed income for residential 66,000 Under rule 33B25%(66,000) of
accommodation basic salary or rental
Value(1,20,000) whichever is
lower will be deemed income
Deemed income for fulltime car 13,200 5% of basicsalary under rule 33D
Leave encashment 6,600 nil 6,600
Employers contribution to 26,400 nil 26,400 10% of basic salary
provident fund
Salary Income: 5,05,600
B Income from house property:
Annual value -
(a) Rent (10,000X3X12) =Tk.360,000
Municipal Value = Tk.300,000
Under section 2(3) (a)(i) ALV will be (a) being higher at Tk.3, 60,000
Less expenditure:
(a)Repair & maintenance, considering residential use = Tk. 90,000
@25% of ALV u/s 25(1)(h)(i)
(b)Municipal tax =Tk.8,000
(c)Insurance premium =Tk. 20,000
(d)Interest on loan u/s 25(1)(g) = Tk. 3,000
( e) Vacancy allowance u/s 25( 1)(j) = Tk.20,000
Total expenditure: Tk . 1, 41,000
Net income from house property: Tk. 2, 19,000
C. Income from business:
Profit during the year: Tk.1, 55,000
Carry forwarded loss set off under section 38: Tk. 5, 000
Resultant business income: Tk. 1, 50,000
Share of profit from firm: Tk.1, 20,000
Income from business: Tk. 2, 70,000
(a) Dividend: Tk. 54,000
Less exempted under paragraph
1lAof Part A of Sixth Schedule: Tk. 20,000 Tk. 34,000
(b) Honorarium from talk show: Tk. 10,000
( c) Interest from savings account: Tk. 2,700
Total income from other sources: Tk.46, 700
Income of spouse& children: Section 43(4) of Income Tax Ordinance Prescribes certain conditions when income of
spouse or children to be included in the hand of father/husband. This includes when either or both are member of
firm or assets transferred to them none of this happened in this case. As such their income can notbe clubbed with
income of Mr. AdibAhsan. Both of them are required to obtain TIN, file their tax return and declare the interest income
in their tax return.
Total income of Mr. Ahsan =: Tk.5,05,600 + Tk.2,19,000 + Tk.2,70,000 + Tk.46.700 = Tk. 10,41,300
Investment for tax credit u/s 44(2) (b):
(a) Insurance premium (40,000 +35,000)
(under paragraph 7 of Part B of Sixth Schedule) Tk.75, 000
(b) Investment in secondary share
(under paragraph 27 of Part B of Sixth Schedule): Tk.7, 200
(c) Donation to Aga Khan Development Fund(Para21): Tk. 35,000
(d) Employer's contribution to Recognised Provident Fund(Para 5): Tk.26,400
(e) Employee's contribution to Recognised Provident Fund(Para 5): Tk. 26,400
Tk. 1, 70,000
The limit of investment for tax credit under section 44(3) is 30%
Of total income of Tk 10,41,300 = Tk 3, 12,390.
The entire investment is within permissible limit of tax credit.
Note: The following will not be entitled for tax credit under section 44(2) and Part B of Sixth Schedule:
(1) Purchase of Medical book (The assesse is not a Physician) = Tk.15,000
(2) Donation to Prime Minister's Relief Fund = Tk.30,000
(3) Donation to relative = Tk.20,000
Computation of tax:
Total income: Tk.10, 41,300
Tax on first Tk. 220,000 @0% = Nil
Balance: Tk.8,21,300
Tax on next Tk. 300,000 (a) 10% = Tk. 30,000
Balance: Tk. 5,21,300
Tax on next TK. 400,000 @15% = Tk. 60,000
Tax on balance Tk. 121,300 @20% = Tk.24, 260:
Gross tax: Tk.1, 14,260
Less: Proportionate tax on share of profit of firm,deemed as paid
[1,14,260 /10, 41,300) X120, 000] = Tk.13,167
Less: Investment tax credit @15% on Tk.1,70,000 = Tk. 25,500
Net tax payable: Tk. 1,75,593
8 Mr. A. Quader works as Manager Finance in a reputed financing company. The following are the May
details of income of Mr. A. Quaderfor the year ended June 30, 2017. Jun
(a) Income from House Property : 2016
Mr. Quader has one residential house-one half of which is let out at a monthly rent of Tk.
12,000 and the other half is self-occupied.
Following expenditures were incurred by Mr. Quader:
Municipal tax Tk.22,000; Repairs and maintenance Tk.55,000; Insurance premium Tk.16,000;
Salary of caretaker Tk.36,000
(b) Salary Income:
Basic Salary - Tk. 35,000 p.m., Bonus – 2 months basic salary, House rent allowance –
40% of basic salary, Medical allowance – Tk. 2,500 p.m., Conveyance allowance – Tk.
3,000 p.m., Concessional passage within Bangladesh – Tk. 1,30,000, Subscription to
RPF – 10%
(Employer‘s contribution is the same), Interest accrued Tk. 85,000 on P.F. balance
calculated at 16% p.a.
(c) Capital Gains :
i. Profit on sale of shares of MNC Ltd (A Private Ltd. Co.) Tk. 40,50,000
ii. Sale of Shop (Deed Value Tk. 1,82,500), Original cost Tk. 30,750 and tax deducted at
source at the time of registration Tk. 5,650 to be assessed u/s 82C.
iii. Profit on sale of Shares of ERZ Ltd. Tk. 23,30,500 (A Publicly listed Co.)
(d) Income from Land :
Sale of paddy from land given on ―Adhi‖ system – Tk. 1,12,000. Sale proceeds from trees of
spontaneous growth in Mr. Quader‘s land Tk. 12,000
(e) Income from Business :
Business Income Tk. 70,000 (after allowing current year‘s depreciation Tk. 20,000)
(f) The following sums have been brought forward from the preceding year:
(i) Unabsorbed depreciation Tk. 80,000 (ii) Business loss Tk. 50,000
(g) Interest income (Net @ 10% tax deduction at source) :
i. From Leasing Company Tk. 8,33,500
ii. On Bank Fixed Deposit Tk. 1,25,250
iii. On Bank Savings Account Tk. 55,700
(h) Income from other Source :
i. Dividend (gross) Tk.12,350
ii. Income from shop rent Tk. 2,500 per month
During the year Mr. Quader made the following investments – i) Life insurance premium
(PolicyValue Tk.500,000) Tk.65,000 ii) Investment in shares of a listed company Tk. 120,000
iii) Donation to charitable institutions as approved by NBR Tk.33,000.
Requirement:
Compute Mr. Quader‘s total income and tax liability for the assessment year 2017-18.
Name of the Assessee: Mr. A. Quader
Assessment year: 2017-2018
Computation Total Taxable income
Income from salary (u/s 21) Tk. Tk. Tk.
Basic salary (35,000 Tk. Per month) 420,000
Bonus (2 months basic) 70,000
House rent (40% of basic salary) 168,000
Less: Exempted (lower of 50% of basic salary i.e. Tk. 210,000 (168,000) -----
or Tk. 300,000 or actual HR allowance)

Medical allowance
30,000 --------
Less: Allowable up to 10% of basic salary or Tk.1,20,000
(30,000)
whichever is lower
Conveyance allowance 36,000
Less: Exempted up to 30,000 (30,000) 6,000
Concessional passage within Bangladesh 130,000
Less: Exempted as per rule 33G 130,000
(Assumed that it is as per employment contract and actually spent) -------
Employer‘s contribution to RPF (10% of basic salary) 42,000
Interest accrued on PF @16% p.a. 85,000
Less: Exempted @ 14.5% p.a. 77,031 7,969
(Para 25 of 6th Schedule, Part-A of ITO 1984)
Taxable income from salary 545,969
Income from house properties: (u/s 24,25)
Annual value (as it seems reasonable)
144,000
Less: Admissible deductions
Repair and maintenance (25% of annual value) (36,000)
Municipal tax ( 1/2 of Tk. 22,000) (11,000)
Insurance premium (1/2 of Tk. 16,000) (8,000) 89,000
Deemed income u/s 19(30): 91,000/2=45,500-36,000 9,500
Shop rent (as it seems reasonable) 30,000
Less: Repair and maintenance (9,000)
(30% of annual value) 21,000
Total income House property 119,500
Income from agriculture: (u/s 26,27)
Sale of paddy on Adhi system
112,000 1,12,000
(To be added direct as he did not cultivate)
Income from business & profession: (u/s 28,29,30)
Share of profit of partnership firm 67,000
(assumed that firm's income is below taxable so partner will
have to pay tax on this income at regular rate)
Business income 70,000
Less: Business loss b/f (50,000) 20,000
87,000
Less: Unabsorbed depreciation (from Tk.80,000) 20,000
Total income from business 67,000
Capital gain: (u/s 31,32)
Profit on sale of shares of MNC Ltd (A Private Ltd. Co.) 4,050,000
Profit on sale of shares of ERZ Ltd (Publicly listed Co.) 2,330,500
Less: Exempted fully as per SRO no:196 date 30/6/15 2,330,500 -
Actual Gain on sale of shop (1,82,500 -30750Tk.)

Income as TDS Tk. 5,650 treated as income u/s 82 (c):
(5,650Tk. X 100/15) assuming it was sold after 5 years.
37,667
Capital Gain 40,87,667

Income from other sources: (u/s 33,34)
Interest from leasing company (gross, TDS @ 10%)
926,111
Interest on Bank Fixed deposit (gross, TDS @ 10%) 140,278
Interest from Bank saving account (gross, TDS @ 10%) 61,889
Sale proceeds from trees 12,000
Dividend income (gross) assumed from listed company
12,350
Less: Exempted up to (Para 11A Part A, Sixth Schedule)
(25,000) ------
Total income from other sources 1,140,278
Computation of Investment Tax Rebate
Employee's and Employer's contribution to RPF
84,000
Life insurance premium actual Tk. 65,000 (allowed) maximum
10% of policy value Tk. 5,00,000) 50,000
Investment in shares of listed companies 120,000
Donation approved by NBR 33,000
Total Investment 287,000
Allowable limit of investment :
Lower of-
30% of total income excluding employer‘s contribution to RPF 17,97,825
and income u/s 82C Tk. (5,987,487-42,000-37,667) x 30%
Maximum limit 1,50,00,000 287,000
Tax rebate on investment (15% of Tk. 287,000) 43,050
Computation of Tax Liability Total
Tax rate Tax
income
First up to Tk. 2,50,000 250,000 0% -
Next up to Tk. 4,00,000 400,000 10% 40,000
Next up to Tk. 5,00,000 500,000 15% 75,000
Next up to Tk. 6,00,000 600,000 20% 120,000
On balance Tk.2,34,747 2,34,747 25% 58,687
Total except Profit on sale of shares of MNC Ltd. (A Private
Ltd. Co.) Tk. 4,050,000 and Adjustment for final settlement 19,84,747 2,93,687
for sale of shop Tk. 37,667
Less: Adjustment for Final settlement u/s 82C 37,667 15% 5,650
Add: Tax on Capital Gain on sale of shares of MNC Ltd.
4,050,000 15% 607,500
(A Private Ltd. Co.)
Gross tax liability 60,72,414 9,06,837
Less: Tax rebate on investment (15% of Tk. 287,000) (43,050)
8,63,787
Less: TDS
(1)From sale of land u/s 82C 5,650
(2) TDS from interest from leasing company 92,611
(3) TDS on Interest on Bank Fixed deposit 14,028
(4)TDS on Interest on Bank Savings account 6,189
Total 1,18,478

Net tax payable u/s 74 7,45,309
9 May
Captain Tausif U. Khan, a Bangladeshi young man, a successful RMG entrepreneur well-known in June
the selected EU customers network, operates following business units in Bangladesh (a,b,c being 2017
private limited companies):
a) TUK BD Ltd. (Captain held 60%, four other Bangladeshi directors 40%)
b) TUK Woven BD Ltd (Captain held 60%, four other Bangladeshi directors 40%)
c) TUK Knit BD Ltd. (Captain held 60%, four other Bangladeshi directors 40%)
d) TUK and Partners (the Firm. Captain Khan‘s share 60%, balance with three friends)
e) TUK Singapore Limited (100% held by Captain Khan). TUK UK Ltd. (100% held by Captain
Khan)
Captain Khan is the MD of the limited companies in Bangladesh and only director in companies in UK
and Singapore. TUK BD Ltd. secures export orders from EU retailers from Bangladeshi suppliers.
Captain Khan, living with his parents in Dhaka until he permanently migrated to UK with his family in
2016. As condition of migration, he set up ‗TUK UK Ltd‘ during the relevant income year in UK. He
bought an apartment in London. Captain Khan qualifies for UK tax residency in 2016-17(ending
05.04.2017). He also qualifies for tax residency for the same income year in Bangladesh (2016-17,
ending 30.06.2017). Captain Khan provided following information affecting the income year 2016-17:
i) He received total taka 30,00,000 (net of tax) tax-paid remuneration from three Bangladeshi limited
companies.
ii) Bank interest received in Bangladesh taka 99,000 net of tax 10%.
iii) Dividend received on his investment in ICB Mutual Fund taka 25,000.
iv) Remuneration receivable from TUK and Partners (the Firm) taka 2,50,000 for the income
year ended 30.06.2016. In the income year ended 30.06.2016, the firm made net loss taka
3,00,000.
v) Interest received on Resident Foreign Currency Deposit A/c (RFCD) equivalent Taka 25,000 net
of tax.
vi) Singapore company paid his salary US Dollar 120,000/=. Of this, the company remitted USD
50,000 to his London bank a/c to meet his London living and remitted USD 50,000 to his Dhaka
bank a/c to make up the shortfall of funds to buy a plot of land(Exchange rate Taka 80 to USD;
USD 1.25 to GBP; Taka 110 to GBP).
vii) He received compensation of taka 10,00,000 from a developer for cancellation of an
apartment-buy contract and his default penalty clause of taka 10,00,000 in a land-buy
agreement with a land seller has been waived to his favour.
viii) Paid Tk. 2,00,000/= interest on loan he took to buy a car and income tax Tk. 50,000 paid on fitness
renewal.
ix) He paid GBP 5,000 net income tax in UK after Singapore tax relief and USD 20,000 tax in
Singapore.
x) He sold his 9% share in TUK &Partners(Firm) for amount with a gain of taka 10,00,000/-.
He invested full amount of gain in shares in a private limited company in the same month.
Requirements:
a. Compute total income and tax liability of Captain Khan in Bangladesh for income year ended June30,
2017. Use current year (AY 2017-18) tax provisions, rates rules for this computation.
14
Computation of total income and tax liability of Captain Tausif U Khan

Income year: July 01 2016 to June 30, 2017. [Assessment Year: 2017-18
Status: RESIDENT (based on criteria of centre of vital interest).
TIN: XXXXXXXXXXXX
Income from Salaries u/s 21: BDT
Net salaries from Bangladeshi companies 30,00,000
i) Salaries from Singapore company (120,000 x 80) = 96,00,000
Less: Exempted due to remittance to BD a/c (6th Schedule, Part A, Para 48) (40,00,000) 56,00,000
ii) Remuneration receivable from Firm 2,50,000
88,50,000
Income from capital gain u/s 31:

i) Gain on sale of partnership firm share 10,00,000
Less: Exempted u/s 32(11) due to invested in equity of a new company (10,00,000) zero
Income from other source u/s 33:

i)Bank interest received [grossed up] 1,10,000
ii) Cash dividend on ICB MF 25,000 (exempted, 6th Schedule, Part A, Para 22A) ----------
iii)Bank interest received on RFCD net 25,000 [grossed up] 27,778
iv) Compensation received on contract cancellation ills [19(10)] 10,00,000
v)Cancellation of indebtedness (default penalty waived) u/s [19(11)] 10,00,000 21,37, 778
Total Income 1,09,87,778
Tax Computation:
On first taka 250,000 at 0% = 0
On next taka 4,00,000 at 10% = 40,000
On next taka 5,00,000 at 15% = 75,000
On next taka 6,00,000 at 20% = 1,20,000
On next taka 30,00,000 at 25% = 7,50,000
On next taka 62,37,778 at 30% = 18,71,333
Total Gross tax – world income basis 28, 56,333
No investment; so no investment tax rebate
Rate of average tax on Bangladesh rates = 28,56,333/1,09,87,778 = 26%
Tax on Singapore NET incomeusing BD tax rate= (56, 00,000x26%) =14,56,000
Tax paid in Singapore on Singapore salary income (USD 20,000 x 80)= 16,00,000
[Tax paid in UK cannot be taken relief against Singapore income]
Tax relief available for Captain Khan for on overseas income as per section 144(4) =14,56,000
Net Tax Payable:
Total Gross tax – world income basis =28,56,333
Less: Tax relief for overseas income =14,56,000
Less: Tax paid in Bangladesh:
i) Tax paid by BD companies on salary 6,00,000
ii) TDS on bank interest 11,000
iii) TDS on interest on RFCD 2,778
iv) AIT paid on car fitness 50,000 21,19,778
NET DUE 7,36,555
10 Your tax client Ms. NusratKabir, an architect, has family of three. Her husband, a CA, and her only Nov
son who is a second year undergraduate in USA (attained 18 in July 2017). Nusrat is on payroll of one Dec
company, ‗Engineers & Architects Ltd. (EAL). She also provides casual consultancy. She is an E-TIN 2015
holder. Gathered from the IT-10(wealth statement) for 30.06.2017, the net assets of Ms. Nusrat
attracts her to 10% surcharge on her annual tax liability with a trend of her quickly graduating to 15%.
She wants a legal exit from the increasing burden of such a high surcharge coupled with such high
taxability by re-structuring her wealth if necessary. Extracted from her wealth statement (net assets on
30.06.17 being Tk.95,000,000/=, the major assets are:
i) Six-storey building (10 flats), constructed in 2017, in her native upazilla of Rouzan,
Chittagong.
ii) Apartment in Dhanmondi (250 SQM) rented.
iii) Office floor space (120 sqm) inUttara. This was bought in 2017 with a bank loan.
iv) Industrial plot in Gazipur(two blocks–100 dec and 50 dec. Bought in 2011 @ Tk.60,000/=
per decimal).
v) Shares in public listed company(as sponsor shareholder).
vi) FDR in commercial banks (Tk.15,000,000/= including Tk.7,500,000/= in the name of her
only son).
vii) Personal cash loan (from mother). Nusrat is the only daughter of her parents.
viii) Personal loan from husband
Particulars of NusratKabir’s income during the income year ended 30.06.2017:
Income from Salary: Basic pay Tk. 2,400,000/=, Medical insurance cover with
hospitalizationamounting to Tk. 120,000/=, Company provides free accommodation(i.e. the apartment
of her husband). Nusrat made a lease agreement between her husband and her employer at a monthly
rent of 50,000/=.
Income from House Property: Rent from Dhanmondi flat tk. 400,000/=(full amount received
incash), from Rouzan residential building Tk. 300,000/= and from Uttara office space Tk. 30,000/=
monthly (rented from January 2017 to a company under a lease agreement for two years; security
deposit non-adjustible against monthly rent received Tk.250,000 on Uttara space). Amount spent on
repair/security salary etc on Dhanmondi flat Tk.125,000/=, on Uttara office space Tk. 100,000/=. She
paid Interest on bank loan(a/c Uttara office space) Tk. 200,000/=.
Income from other source: Casual consultancy income net of tax 10% u/s 52(A)(3) Tk.900,000/=.
Sold listed company shares (sponsor) Tk.1,000,000/= (cost 700,000), section 53M applied. She
received interest income Tk. 810,000 NET on FDR post tax-deduction by bank at 10%. She sold one
part of her Gazipur industrial land (50 decimal) at deed value of Tk.5,000,000/= (3% gain tax u/s 53H
applied); brokerage incurred 5% of deed value. Consultancy provided on-line to a foreign company in
which Nusratreceived through banking channel Tk. 108,000 net after tds u/s 52Q.
Other Information:
Nusrat‘s mother told her not to pay back personal loan Tk.100,000/= in writing and also she gifted
Nusrat Tk.250,000/= worth of private company shares. Nusrat bought a laptop (worth Tk.50,000/=
taka) out of the allowance made available to her by the EAL Employees Welfare Trust. She received a
10-day long company-paid training in Singapore where EAL incurred Tk.500,000/=. Nusrat sold her
old SUV car for Tk.2,500,000 (cost 4,500,000) which she bought in 2014. She bought a replacement
SUV at Tk.5,000,000/= in the income year. She remitted US Dollar of equivalent Tk.1,000,000 during
the year to her son in USA through an official student file with an AD. Interest paid Tk.300,000/= on
bank loan a/c Uttara office space during construction period of 2015-2016 (taken delivery in January
2017).Nusrat‘s employer ‗Architects & Designers Limited‘ (EAL) is the subsidiary of reputed
Engineers Ltd.(EL), a PLC. Under Regulators approval, EL introduced a Stock Option policy for the
senior employees of the group companies, conditionally. The option is exercisable at a price 75%
below the market on the date of option. EL stock option holds promise for many a reasons. At the
moment, Nusrat heard that there is a tax exposure upon her exercising the option in the same income
year. Nusrat is keen to exercise the option but perturbed as to why she should be charged totax for
merely holding the shares, before she sells those and more for that fact that EL is not her
Employer(EL is a third party to Nusrat).
Requirements:
a) Compute total income and gross tax liability of Ms. Nusrat for the
assessment year 2017-18.
b) Explain your views on whether Nusrat shall be charged to tax for her
stock option from EL and what tax effect shall attract her when she will
sell in future those shares under option.
c) Advise Nusrat on the planning tondrestructure her wealth so as not to
contain the net wealth below 2 slab that attracts her to 15% surcharge
on income tax. 10
(a)
Computation of Total Income and Tax Liability of Ms. NusratKabir for the AY 2017-18:
Income from Salaries u/s 21 Taka Taka
(1)Basic Salary 24,00,000
(2) Rent-free accommodation (Rule 33B)-25% of basicsalary 6,00,000
OrRental value of the accommodation whichever is lower -
(3)Medical cover - Actual 1,20,000/ nil
or
10% of Basic salary Tk. 2,40,000
or
1,20,000/= whichever is less
(4)Allowance from EAL employees welfare trust 50,000 30,50,000
Income from House Property u/s 24
(1) Annual Value from Dhanmondi flat 4,00,000
Less: Statutory Repairs 1/4th u/s 25(1)(h)(i) (1,00,000) 3,00,000
(2) Rent from Rouzan building nil
(exemptedas per Para 38 of 6th Schedule, part A assuming the 300,000
building was completed within 30/6/2016)
Annual Value from Uttara office space (30,000x12) 3,60,000
Less: (a) Statutory repairs 30% u/s 25(1)(h)(i) (1,08,000)
(b)Vacancy allowance [30,000x6 months] (1,80,000)
(c)Interest paid on Uttara space u/s 25(1)(g) (2,00,000)
(d)1/3rd of construction period interestu/s25(1)(gg) (1,00,000) (5,28,000)
(2,28,000)
(4) Deemed HP income from Uttara office space u/s 19(30) [1,08,000- 8,000
1,00,000]
(5) Deemed HP income from Uttara office space u/s 19(22) 2,50,000 30,000
Capital Gain u/s 31
(1) Gazipur land sale (50 dec ) (50,00,000 less 50x60,000) 20,00,000
Less: Brokerage. incurred on land sale (5% of D.V.) (2,50,000)
17,50,000
(TDS u/s 53H at 3% 150,000. Final discharge u/s 82C
(Tk. 150000x100/15)= 10,00,000
The balance Tk.17,50,000-10,00,000=7,50,000 will direct fit at
serial no 17(3) of wealth statement(IT 10B) as per NBR circular
Sale of SUV (Cost 45,00,000, Sale 25,00,000 = no gain),
Here loss Tk. 20,00,000. It is not capital loss as per section
2(15).
Only asset will be decreased by Tk. 20,00,000 at wealth
statement.
(2)Capital gain on sale of listed company shares (10,00,000- 3,00,000 13,00,000
7,00,000)
(TDS u/s 53M at 5% = Tk. 15,000/=. Final discharge u/s 82C.
Tax rate is also 5% as per SRO no 196 dated 30.6.2015)
Income from Other Sources u/s 33
( 1) From casual consultancy Net 9,00,000/=, gross up
10,00,000
using 10% TDS--
(2) FDR interest net 8,10,000, gross up using 10% TDS 9,00,000
(3) Consultancy income on-line net 108,000 gross up
1,20,000
using 10% TDS
(4) Cancellation of indebtedness(personal loan from 1,00,000
mother) u/s 19(11) 21,20,000
Note-1: Gift of Private company shares from Mother not taxable being gift.
Note-2: company expenditure on foreign training is not part of salary as it is business related expenditure of the company.
TAX CALCULATION
Computation of Gross Tax Liability on total income other than capital gain:
On first taka 3,00,000 at 0% ---

On next taka 4,00,000 at 10% 40,000
On next taka 5,00.000 at 15% 75,000
On next taka 6,00,000 at 20% 1,20,000
On next taka 30,00,000 at 25% 7,50,000
On the balance 4,00,000 at 30% 1,20,000
11,05,000
Gain tax on sale of land 10,00,000x15%= 1,50,000
Gain tax on sale of listed companies share 3,00,000x5%= 15,000
Gross tax liability: 12,70,000/
(b)
The stock option offered by Engineers Limited is 75% below the M/V. When NusratKabir exercises her option to
take the shares, no gain will arise as gain can only arise at the time of disposal. When she will have sold those
shares, the price she now pays for option shall be the cost of acquisition for the purpose of measuring capital gain
u/s 31 and 32.
That the offering company EL is not Nusrat's employer and so the benefit on option should not be termed as
taxable perquisite; an indirect relationship through the subsidiary is not enough to bring her within the meaning of
employee as defined u/s 2(28). Moreover it would not be the deemed income u/s 19(8) as because stocks and
shares are excluded from there.
(c)
The net wealth of Ms. NusratKabir as on 30.06.2017, one year ago, was taka 9,50,00,000/=. Rate of surcharge is
10% upto net wealth taka 10,00,00,000/=. It appears, her net wealth would shoot to the 15% surcharge level in
this year tax return. The restructuring of wealth may reduce her wealth level below 15% surcharge threshold
while income on those assets would move out of her file. As a result, the tax on the highest slabs of 30% tax shall
overall reduce.
If she agrees immediate restructuring recommendation can be:
(i) Obtain a separate TIN file in the name of Son. Her son attained majority in July; so it is possible to open
tax file in his name.
(ii) Transfer FDRs for taka 75,00.000/= now in the name of Son to his own tax file while Ms. Nusrat can
remain operating nominee for with full power of attorney to manage the assets of her Son.
(iii) Some other income-generating but small assets (such as gifted shares) can also be transferred (under gift)
to the Son. This will reduce Nusrat's tax outright at the highest rate of 30%.
(iv) Her free-lancer consultancy income is added to total income in gross. Subject to no-objection from her
employer, she can choose to obtain a trade license and set up a proprietorship firm to provide casual
consultancy. This firm shall open up scope to create charges against revenue that will lead to reduction of
tax liability at highest rate of 30%.

11 Mr. Samual Gomez works in Bangladesh as an officer in a Multinational Company, headquartered in Nov
the USA. His sources of income for the year ended on 30th June, 2017 were as follows: Dec
a. Income from Salary: 2016
(1) Basic Salary Tk.15,000 per month.
(2) Dearness allowance 10% of the basic salary
(3) Two bonuses equivalent to two months basic salary
(4) Medical allowance Tk.20,000 per year (actual expense for the year Tk.10,000)
(5) Entertainment allowance Tk.200 per month
(6) He has been provided with a free car both for official and personal uses.
(7) He has also been provided with a rent free quarter, municipal value of which is Tk.80,000
p.a.
(8) Travel allowance as a part of his contract Tk.100,000 p.a. from where he saved
Tk.10,000.
(9) He contributes 10% of his basic salary to a Recognized Provident Fund (RPF). His
employer also contributed the same.
(10) During the year, he received interest of Tk. 1,800 @ 12% on RPF.
(11) He has taken one month‘s basic salary as advance in the month of June to meet up some
of his financial difficulties.
b. Interest on Securities:
(1) Interest on tax-free government securities Tk.3,000.
(2) Interest on less-tax government securities Tk.2,700.
(3) Interest on approved debentures Tk.27,300. He has borrowed Tk.20,000 @ 10%
interest to purchase it. Bank also charged Tk.400 to collect the interest.
c. Income from House Properties:
He owns a two-storied house in Dhanmondi. He stays in one floor with his family and
another floor is let out for residential purpose at a rate of Tk.9,000 per month. The
municipal value of the house is Tk.200,000 per annum. During the year he spent the
following expenses for the whole house:
Repair expense Tk.2,000, Insurance expense Tk.4,000, Land development tax Tk.1,500
Sewerage and utilities expense Tk.1,000, Payment of DBH Loan installment (including
interest of Tk.500) Tk.5,000.
During the year, the house has remained vacant for two months.
d. Agricultural income:
Sale of crops Tk.5,000 and Income from barga Tk.2,000
e. Share of profit from a partnership firm Tk.10,000 (firm paid no tax thereon)
f. Income of spouse and minor child Tk.40,000
g. He won Prize Bond lottery of Tk.300,000 [tax deducted at source (TDS) @ 20% - from it]
h. During the year Mr. Gomez visited South Korea as a consultant and generated income of Tk.500,000
and he paid income tax @ 25% in South Korea. He brought Tk.250,000 to Bangladesh through bank.
From another visit to Uganda he generated income of Tk.300,000 and paid income tax there @ 20%.
Bangladesh has DTAA (Double Taxation Avoidance Agreement) with South Korea, but not with
Uganda.
i. Income from business and profession
Profit from sole-proprietorship business Tk.4,000; last year‘s loss carried forwarded Tk.1,000.
j. Income from other sources:
(1) Interest income from fixed deposit account Tk.4,500 (net of TDS @ 10%)
(2) Profit from Islami bank Tk.900 (net of TDS @ 10%)
(3) Dividend from ICB Mutual Fund Tk.31,500 (net of TDS @ 10%)
(4) Dividend from a listed company share Tk.1,800 (net of TDS @ 10%)
(5) Sale of forest timber Tk.2,000
Investment claimed by Mr. Gomez:
(1) Payment of life insurance premium Tk. 8,000 (Policy value Tk.100,000)
(2) Purchase of a listed company‘s primary share Tk.5,000
(3) Purchase of books and magazines Tk.1,000
(4) Purchase of a share of co-operative society Tk.2,000
(5) Contribution to Government Zakat Fund Tk.2,500
(6) Purchase of Furniture Tk.15,000

Requirement:
Based on the above information, calculate Mr. Samual Gomez‘s total income and tax
liability for the assessment year 2017 -18.
Mr. Samual Gomez

Heads of Income Amount Amount Amount

1. Income from Salary (Section: 21):
Basic salary (15,000 X 12) 1,80,000
Dearness allowance (1,80,000 x 10%) 18,000
Bonus (15,000 x 2) 30,000
Medical allowance
Less: Exempted - whichever is lower 20,000
- 10% of Basic salary - Tk. 18,000
- Maximum limit - Tk. 1,20,000
(18,000) 2,000
Entertainment allowance (200 X 12) 2,400 60,000
Car facility (1,80,000 x 5% or 60,000 higher)
Rent Free Accommodation: lower of:
25% of basic salary 45,000 45,000
Or, Rental value 80,000
1,00,000
Travel allowance 90,000 10,000
Less: Exempted - up to actual expense 15,000
Advance salary 18,000
Employer's contribution to RPF (10% of Tk. 180,000)
Interest from RPF 1,800 Nil
Less: exempted - up to: _1,800
1/3rd of basic and DA[180,000+18,000=1,98,000/3] = 66,000 90,000
or,Interest @14.50% [(1,800/12)* 14.5] = 2,175 whichever is lower
TOTAL
3,80,400
2. Income from interest on Securities (Sec.22):
Interest on tax free government securities 3,000
Less: Exempted – Full 3,000 Nil
Int. on less-tax Govt. securities (2,700 x 100/95) 2,842
Interest on approved debentures 27,300
Less: Allowable expenses:
Bank Charge (400)
Interest on loan (2,000) 24,900
Total 27,742
3. Income from House Property (Section: 24 ):
Particulars Rate Amount
Actual rental value (9,000 x 12) 1,08,000
On first Tk. 2,50,000 0% 0
Municipal
On next Tk. value (2,00,000 / 2)
4,00,000 110%
00 000 40,000
Annual
On rest value (whichever is higher)
Tk. 4,68,642 15% 1,08,000
70,296
Less:
Total Allowable
11,18,642 deductions u/s 25 1,10,296
+ tax on
Repair andprize bond lottery
maintenance (25%@x20% on Tk.3,00,000[82C income]
1,08,000) 27,000 60.000
Insurance (4,000 / 2) 2,000 1 70 296
Less: development
Land Investment taxtaxrebate
(1,500(51,500
/ 2) x 15%) 750 7.725
Interest on loan (500 / 2) 250 250 1,62,571
No Tax credit as firm's income was below taxable Nil
Vacancy allowance (9,000x 2) 18,000 48,000
1,62,571
Less: Double
Courtesy: taxation
Saiful Islam relief (foreign
Mozumder, tax credit as
ShirazkhanBasak& Co.per sec 144(4)
smozumder@outlook.com cell-01711-981920
Average tax rate in Bangladesh is (1,62,571/14,18,642) i.e.
11.46%.Tax relief on income from South Korea (as per DTAA)
TOTAL 60,000
Deemed income u/s 19(30)
Repair and maintenance allowed 27,000
Less: claimed [2,000+1,000=3,000/2=1,500] 1,500 25,500
4. Agricultural Income (Section: 26):
Sale of crops 5,000
Less: Allowable deductions: Production cost 60% 3,000 2,000
Income from barga 22,0002,,.,0
2,000
TOTAL 00 4,000
5. Income from Business and Profession(Sec:28):
Profit from sole-proprietorship business 4,000
Less: Carry forward & Set off of previous loss 1,000
TOTAL 3,000
Share of profit from partnership firm(below taxable) 10,000
6. Income of spouse or minor child 40,000
7. Income from other sources (Section: 33):
Interest on FDR (4,500 x 100/90) 5,000
Profit from Islami Bank (900 x 100/90) 1,000
Dividend from ICB Mutual Fund (31,500 x 100/90) 35,000
Less: Exempted — up to Tk. 25,000 25,000 10,000
Dividend of listed Public Ltd. Co. (1,800 x 100/90) 2,000
Less: exempted up to Tk.25,000 2,000 Nil
Sale of forest timber 2,000
Prize Bond Lottery[income u/s 82C] 300,000
TOTAL 3,18,000
8. Foreign Income:
Income from South Korea 5,00,000
Less: Brought to Bangladesh through official channel (exempted as per 2,50,000 2,50,000
6th schedule(part-A) Para-48 of ITO,1984).On remaining Tk.2,50,000
foreign taxcredit will be applicable as per sec.144(4).
Income from Uganda:(As there is no DTAA between 3,00 000
Bangladesh and Uganda, so no foreign tax credit will be allowed as per
section 145 as NBR not yet prescribed any rules in this behalf)
5,50,000
Calculation of Allowable Investment Allowance

Particulars Amount
Life insurance premium 8,000
Share purchase 5,000
Contribution to Govt. Zakat Fund 2,500
Contribution to RPF (18,000 x2) 36,000
Maximum limit of allowable investment:
25% (total income —income under 82C)= (1346,800 — 3,00,000) X 25% 2,79,660
Or 1,50,00,000
Whichever is lower 51,500
Thus allowable investment allowance for tax rebate would be 51,500
Calculation of Allowable Investment credit
15% on Tk. 51,500 7,725
Total 7,725
Calculation of Tax liability:
Particulars Rate Amount

On first Tk. 2,50,000 0% 0
On next Tk. 4,00,000 10% 40,000
On rest Tk. 4,68,642 15% 70,296
Total 11,18,642 1,10,296
+ tax on prize bond lottery @ 20% on Tk.3,00,000[82C income] 60,000
1,70,296
Less: Investment tax rebate (51,500 x 15%) 7,725
1,62,571
No Tax credit as firm's income was below taxable Nil
1,62,571
Less: Double taxation relief (foreign tax credit as per sec 144(4)
Average tax rate in Bangladesh is (1,62,571/14,18,642) i.e.
11.46%.Tax relief on income from South Korea (as per DTAA)
30% of 2,50,000 = Tk. 75,000 but maximum relief is at an average rate
of the country(2,50,000 X 11.46%) = Tk. 28,650 28, 650
,
1,33,921
Less: TDS[142+500+100+3,500+200+60,000] 64,442
69,479
12 Mr. PQ used to compute his income tax and prepare tax return of income on his own. While Nov
computing income tax for the assessment year 2017-2018, he was confused about the computation Dec
and presentation of the tax collected at source on transfer of inherited property and at the time of 2017
import of goods. Therefore, he appointed XYZ & Co. (―Firm‖), Chartered Accountants, for assisting
him in computation of taxable income, tax liability and preparation of return of income. You are a
Chartered Accountant and working as a tax consultant of the Firm. Mr. PQ sent you an email
furnishing the following information on transfer of inherited property:
Particulars Tk.
Tax Collected/Deducted at Source on transfer of property 10,000,000
Sale proceeds received in cash and by bank transfer 250,000,000
In addition to the above, Mr. PQ also provided you with the following information on
income andtax deducted at source relating to the assessment year 2017-2018:
Particulars Tk.
Remuneration as a member of the Board of Directors of a private 6,000,000
limited company
Interest on fixed deposits 3,000,000
Income from dividend of a publicly listed company 1,000,000
Interest on savings instruments 1,500,000
Income from a mutual fund 500,000
Income from lease of vacant land 1,200,000
Taxes were deducted at source from remuneration, interest, dividend and lease income were
as perapplicable rates
Mr. PQ imported goods of Tk.10,000,000/= during the income year 2016-2017 and tax was collected
at source amounting to Tk.500,000/= at import stage applying 5% rate. He made profit of
Tk.3,000,000/= from import business in the same period.
Net wealth of Mr. PQ was computed at Tk.30,050,000/= as of 30 June 2017 which you should
consider for computation of wealth surcharge. During the income year 2016-2017, Tk.10,000,000/=
was invested by him in acquisition of shares of companies listed on Dhaka Stock Exchange. He also
invested Tk.1,000,000/= in deposit pension scheme sponsored by a scheduled bank. He was 67 years
old on 30 June 2017 and has been submitting return of income for last 20 years.
Requirements:
Write a reply to the email of Mr. PQ along with computations of the following:
(i) Minimum tax on income from import business.
(ii) Total taxable income from all sources and total tax liabilities.
(iii) Investment Tax Credit.
(iv) Surcharge and Net Tax Payable.
Email
To: PQ
From: XYZ & Co.
Date: 20 December 2017
Re: Assistance in computation of your taxable income and tax liability for the assessment year 2017-18
Dear Mr PQ,
Thank you very much for the email dated 15 November 2017. I went through the information provided by you.
We are providing you with the draft computations, as requested, below:
Name of Assessee: PQ
Taxpayer's Identification Number :
Income Tax Computation
Sources fall under section 82C( 2) d) proviso (for which regular computation is not required):
Particulars Tax deducted/collected at Income (Tk.)
source (Tk.)
Transfer of property 10,000,000 250,000,000
Interest on savings instruments 75,000 1,500,000
10,075,000 251,500,000
Sources fall under section 82C(2)(b) (for which computation in regular manner is required):
Particulars Tax deducted/ collected at Income (Tk.)
source (Tk.)
Import Business 500,000 3,000,000
500,000 3,000,000
Regular sources of income:

Particulars Tax deducted/ Gross Taxable
collected at Income Income (Taka)
source (Tk.) (Taka)
Income from Salary
Remuneration from the private limited company 1,345,000 6,000,000 6,000,000
Sub-total: (i) 1,345,000 6,000,000 6,000,000
Other Income
Interest on fixed deposits 300,000 3400,000 3,000,000
Income from dividend of publicly listed company 100,000 1,000,000 975,000
Income from mutual fund - 500,000 475,000
Income from lease of land 60,000 1,200,000 1,200,000
Sub total: (ii) 460,000 5,700,000 5,650,000
Total: (i) + ii) 1,805,000 11,700,000 11,650,000
Tax on taxable Income from regular sources:

Slabs Taxable Income (Tk.) Rate Tax (Tk.)
First 300,000 0% -
Next 400,000 10% 40,000
Next 500,000 15% 75,000
Next 600,000 20% 120,000

Next 3,000,000 25% 750,000
Balance 6,850,000 30% 2,055,000
Total 11,650,000 3,040,000
(a) Computation of minimum tax liability for import business:

Taxable income from regular sources 11,650,000
Income from import business computed in regular manner 3,000,000
14,650,000
Tax on taxable Income from regular sources:
First 300,000 0% -
Next 400,000 10% 40,000
Next 500,000 15% 75,000
Next 600,000 20% 120,000
Next 3,000,000 25% 750,000
Balance 9,850,000 30% 2,955,000
Total 14,650,000 3,940,000
Applicable tax on sum of income from regular sources and income from import business 3,940,000
Less: Tax applicable to income from regular sources 3,040,000
Tax liability for import business computed in regular manner and applying regular tax rate 900,000
Tax collected at source at import stage 500,000
Since, regular tax liability from import business is higher than tax collected/deducted at source, so Tk. 900,000/=
will be minimum tax on income from import business
(b) Computation of total taxable income from all sources and total tax liabilities:
Taxable Income Tax Liabilities

A (Tk.) (Tk.)
Taxable income from regulars sources of income 11,650,000 3,040,000
Income from sources fall under section 82C (for which 3,000,000 900,000
computation in regular manner is required)
Income from sources fall under section 82C (for which 251,500,000 10,075,000
computation in regular manner is not required)
Total 266,150,000 14,015,000
(iii) Investment Allowance & Tax Rebate: Tk. Tk.
(a) Actual Investment made during the income year:
Shares of companies listed on Dhaka Stock Exchange 10,000,000
DPS (Maximum Tk. 60,000) 60,000 10,060,000
(b)25% of (Total Taxable Income-Income u/s 82C-Exempted 29,12,500
Income-Income
(c) Maximum subject
Limit to reduced tax rate) 15,000,000
(d) Eligible Amount for Tax Rebate: the lowest of (a), (b) and (c) 29,12,500
Investment Tax Rebate:
Tk250,000 15% 37,500
Tk500,000 12% 60,000
Tk21,62,500 10% 2,16,250
29,12,500 B 3,13,750
Total Income Tax Payable (from regular sources) C=A-B 27,26,250
Income Tax (from section 82C sources) D 10,975,000
Surcharge @ 30% E=(C+D) X 30% 41,10,375
Total Income Tax & Surcharge F=C+D+E 1,50,85,375
Tax collected /deducted at source
Tax deducted/collected from sources fall under section 82C (for which
computation in regular manner is required): 500,000

Tax deducted/collected from sources fall under section 82C (for which
10,075,000
computation in regular manner is not required):
Tax deducted/collected from regular sources 1,805,000
Total Tax deducted/collected from all sources G 12,380,000
sources Tax Payable
Balance H=F-G 4,502,450
Surcharge has been computed on the basis of information provided by you on net wealth as of 30 June 2017. We
could not compute closing net wealth for the assessment year 2017-18 due to lack of necessary information.
Should you have any queries in this regard, please feel free to contact us.
Best wishes and regards,

3 Special provisions, recovery, refund and dispute resolution in Tax law (20%)
S.L Question Year
PE — Ill
May —
What are the offences and punishments prescribed under section 164 of June, 2002
Income Tax Ordinance,1984?
Nature of defaults Penalty
Fails to deduct or collect and pay any tax a s r e q u i r e d u n d e r t h e Imprisonment for a
p r o v i s i o n s o f Chapter VII except advance payme nt of t a x o r t e r m w h i c h may extend
f a i l s t o de d u c t a n d p a y t a x o n attachment notice issued by the to one year or fine or
DCT as required under section 143(2); .
both.
Fails to produce, or cause to be produced, on or before the date Do
mentioned in any notice under Chapter VIII, or under section 8 3 ,
s u c h a c c o u n t s , d o c u m e n t s o r statements as are referred to in
such notice;
Fails to furnish, in due time, the return of income which he is Do
required to furnish under section 75, or by notice given under
section 77 or 93;
Refuses to permit inspection or to allow copies to be taken in accordance Do
with the provisions of section 114;
Fails to afford necessary facilities or to furnish the required information to Do
income tax authority exercising powers under section 115; or
Refuses to permit or in any manner obstructs the exercise of powers under Do
section 117 by an income tax authority.
PE — Ill
May —
What are the remedies available to an aggrieved assessee on receipt of an June, 2002
order under sec 120 of Income Tax Ordinance, 1984?
Remedies available to an aggrieved assessee:
The aggrieved person may go for appeal according to section 153(1A) of ITO 1984 of the said order.
Question 1 (c) Briefly describes the procedures, advantages and disadvantages of each remedy.
Answer 1(c):
Remedies Procedures, Advantages and Disadvantages
Appeal Procedures:
1) An application is to be made to the Commissioner (Appeals) within
u/s 153(1A)
45 days of the order.
2) A fee of tk.200
3) Payment of tax u/s 74.
4) Decision within 90 days of application.
Advantage:
1) The applicant gets reasonable opportunity of hearing.
2) Can submit grounds of appeal.
Disadvantage:
1) No further appeal i.e to the tribunal.
PE — Ill
Under what circumstances and by whom an assessment can be May —
reopened under section 120 of Income Tax Ordinance, 1984? June, 2002
What circumstances:
When any order passed by the Deputy Commissioner of Taxes is erroneous in so far as it is
prejudicial to the interests of the revenue.
By whom:
The Inspecting Joint Commissioner may call for from the Deputy Commissioner of Taxes and
examine the record of any proceeding under ITO 1984.
Proceedings:
The Inspecting Joint Commissioner may after giving the assessee an opportunity of being
heard, and after making or causing to be made, such inquiry as he thinks necessary, pass such order
thereon as in his view the circumstances of the case would justify, including an order enhancing
or modifying the assessment or canceling the assessment and directing a fresh assessment to
be made
PE — III
Nov— Dec,
State the penal provision of section 164 of Income Tax Ordinance, 1984. 2002
Nature of defaults Penalty
Fails to deduct or collect and pay any tax as required under the provisions of Imprisonment for a
Chapter VII except advance payment of tax or fails to deduct and pay tax on term which may
extend to one year or
attachment notice issued by the DCT as required under section143(2); with fine or both.
Fails to produce, or cause to be produced, on or before the date Do
mentioned in any notice under Chapter VIII, or under section 83, such
accounts, documents or statements as are referred to in such notice;
Fails to furnish, in due time, the return of income which he is required to furnish Do
under section 75, or by notice given under section 77 or 93;
Refuses to permit inspection or to allow copies to be taken in accordance Do
with the provisions of section 114;
Fails to afford necessary facilities or to furnish the required information to an income Do
tax authority exercising powers under section 115; or
Refuses to permit or in any manner obstructs the exercise of powers under Do
section 117 by an income tax authority.
What penalties can be imposed for:- PE — III
a) Failure to file return u/s 75; Nov— Dec,
b) Failure to pay Taxes u/s 74; 2002
c) For furnishing inaccurate particulars of income
Particulars Penalty
Failure to file return u/s 75: Penalty amounting to 10% of tax imposed on
(According to Section 124 of ITO l a s t a s s e s s e d i n c o me s u b j e c t to m i nim um
1984) o f Tk . 2 ,5 0 0 a n d a fu rth e r s u m o f Tk. 250 for
everyday of continuing default.
Failure to pay Taxes u/s 74; 25% of the tax due or 25% of the short fall as the
(According to Section 127 of ITO case may be.
1984)
For furnishing inaccurate particulars of General: Two and half times the tax sought
income to be evaded;
(According to Section 128 of ITO In case of self-assessment: 5 times the tax
1984) sought to be evaded.
PE — III
Nov— Dec,
State the provision of law for recovery of taxes through special magistrate. 2002
According to Section 142A of ITO 1984:
The DCT may forward to a Magistrate in whose territorial jurisdiction the office of the
Deputy Commissioner of Taxes is situate, or the assessee resides, or owns property or
carries on business or profession a certificate under his signature specifying the amount
of arrears due from the assessee, and the Special Magistrate shall, on receipt of such
certificate, proceed to recover from the assessee the amount specified therein as if it were
an arrear of land revenue and the Special Magistrate were a Collector of D i s t r i c t .
The DCT may, at any time, recall from the Special Magistrate a certificate forwarded to him and
upon such recall, all proceedings commenced in pursuance of the certificate shall abate.
,
Specific condition:
The recall of a certificate shall not affect any recoveries made by the Special Magistrate
before the recall
PE — III
What are the offences and punishments prescribed under section 165 of Income Tax May-June —
Ordinance. 1984? 2003

A person is guilty of an offence punishable with imprisonment for a term which may extend to three years, but shall not
be less than three months, or with fine, or with both u/s - 165, if he -
(a) make a statement in any verification, etc. in any return or any other document furnished under any provisions of
this Ordinance which is false
(b) knowingly and willfully aids, abets, assists, incites or includes another person to make or deliver a false return,
account, statement, certificate or declaration under this Ordinance, or himself knowingly and willfully makes or
delivers such false return, account, statement, certificate or declaration on behalf of another person;
(c) signs and issues any certificate mentioned in the first or second proviso to section 82 which he either knows or
believes to be false or does not believe to be true;
(d) refuses to furnish such information as may be necessary for the purpose of survey under section 115.
PE — III
Explain the provision under sections 93 and 94 of the Income Tax Ordinance, 1984 regarding May-June —
time-limit for finalisation of assessment and also reassessment in consequence of appeal. 2003
The provisions u/s 93 and 94 regarding time limit for finalisation of assessment and re-assessment is as follows : ,
(i) Notwithstanding anything contained in sub-section (1), assessment under section 93 may be made —
a) the cases falling under section 93 (3) (a) and (b), within two years from the end of the year in which notice
under the said sub-section was issued ; and
b) in the cases falling under section 93 (3) (c), within one year from the end of the year in which notice under
the said sub-section was issued.
(ii) Notwithstanding anything contained u/s 94, limiting the time within which any action may be taken or any
order or assessment may be made, order or assessment, as the case -may be, to be made on the
assessee or any other person in consequence of or to give effect to, any finding or direction contained in
an order under section 120, 121, 156, 159, 161 or 162 or, in the case of a firm, an assessment to be
made on a partner of a firm in consequence of an assessment made on the firm, shall be made within
thirty days from the date on which the order was communicated and communicate such revisal to the
assessee within thirty days next following.
What are the provisions of law relating to the assessment and collection of PE— III
tax from a deceased person? Nov- Dec,
Mr. Badrul owned a house property at Gulshan .He filed his income tax return 2003
showing income of aka 4,70,000 from that house property for the assessment
-
year 2001-2002. He died on 31-12-2001 leaving three sons. The income from
property would be taka 6, 40,000 for the assessment year 2002-2003 .How
would your complete the assessments for the year 2001-2002 and2002-
2003 on what income and on whom?
Provisions of law relating to the assessment of a deceased person:

According to section 92 of ITO 1984:
Whenever any person dies his executor, administrator or other legal representative is liable
under the law to pay out of the estate of the deceased any tax which was payable by him and
any other tax liability which might be payable in consequence of any assessment made after his
death. Liability of the legal representative is limited to the extent to which deceased's estate is
capable of meeting.
When it so happens that a person dies before the due date of filling a return of income or before
he is served with a notice for filing such return or that he dies after having furnished an incorrect
return, his legal representatives in all these circumstances will be liable to file the return of income
as well as to produce any accounts, documents or evidences which the deceased person
would have had to produce if he had not died. Legal representative shall be deemed to be an
assessee for the purpose of this ordinance, provided a notice to that effect is issued to him by
the Deputy Commissioner of Taxes.
Assessment year On what income On Whom
2001-2002 470,000 Mr. Badrul
2002-2003 640,000 Mr. Badrul's sons .
When the return of income furnished by the assessee becomes defective or PE— III
incomplete. What actions may be taken by the assessing officer in situations Nov- Dec,
rendering the return of income filed by the assessee defective or incomplete? 2003
Return of income furnished by the assessee become defective or incomplete if the assessee
does not follow the following instructions at the time of furnishing the return
According to rule 24 of ITO 1984:
Fails to disclose:
 Auditor's Certificate/audited accounts in the case of company;
 Statement of income and expenditure A/C / Manufacturing, Trading, Profit & Loss A/C
and Balance sheet in the case of other assessees;
 Depreciation chart claiming depreciation as per Income tax Law.
 Computation of income according to Income tax Law;
Statement of assets, liabilities and expenses.

This return of income shall be signed and verified by the individual assessee or person

as prescribed u/s 75 of the Income Tax Ordinance 1984.
 Documents furnished to support the declaration should be signed by the assessee or his
authorised representative.
The assessing officer takes the following actions:
 May propose the assessee to submit revised return u/s 78 of ITO 1984 before the
assessment is made;
 The assessing officer require accounts and documents u/s 79;
 May give notice u/s 80 for statement of assets and liabilities;
Outline the provisions of I.T Ordinance 1984 with regard to Advance PE — III
Payments of Tax with particular reference to:- May- Jun,
a) Those assesses who are required to make advance payments and 2004
the nature of income in respect of which such payments must be
made;
b) The basis of which advance payments should be calculated for
existing assesses and for new assesses and the due dates of
payments.
c) When and how the balance of tax is payable.
d) The penalties for non-compliance.
(a)
Advance tax shall be payable by an assessee during each financial year if the total income of the
assessee for the latest income year in respect of which he has been assessed by way of regular
assessment, or has been provisionally assessed exceeds two lakh taka. Income from
"Agricultural income" and "Capital gains" shall not included in computation of income.
A new assessee who has not been assessed to tax previously is also liable to pay advance tax if
his income during any financial year is likely to exceed two lakh taka.
(b)
According to section 65/66/67 of ITO 1984
The amount of advance tax payable by an assessee in a financial year shall be the amount
equal to the tax payable on his total income of the latest income year as assessed on regular
basis or provisionally, as the case may be, as reduced by the amount of tax required to be
deducted or collected at source. Advance tax is payable in four equal installments on
15 th September, 15 th December, 15 th March, 15 th June. If one estimates that one's income during
any financial year will be less than the last assessed income, one may submit an estimate on
income and pay the advance tax accordingly.
A new assessee who has not been assessed to tax previously shall pay advance tax on the
basis of own estimate by 15 June of the financial year.
Calculation rate
The tax shall be calculated at the rates in force in respect of the financial year for which income
applying the ruling
( c) :
If before the fifteenth day of May of the year, an assessment of the assessee is comple ted in
respect of an income year, later than that on the basis of which the tax was computed the
assessee shall pay in one installment on the specified date or in equal installments on the
specified dates, if more than one falling after the date of the said assessment, the tax computed on
the revised basis as reduced by the amount, if any, paid in accordance with the original
computation. However, the balance of tax if any shall be payable with the return.
d) According to section 69, 70 and 73 of ITO 1984

 Where, an assessee who is required to pay advance tax fails to pay any installment of
such tax, as originally computed or, as the case may be, estimated, on the due date, he
shall be deemed to be an assessee in default in respect of such installment.
 Simple interest @ 10% shall be charged where an assessee who is required to pay
advance tax, fails to pay tax in due time.
 Where, in any financial year, an assessee has paid advance tax on the basis of his own
estimate and the advance tax so paid together with the tax deducted at source, if any, is
less than seventy-five per cent. of the amount of tax payable by him as determined on
regular assessment, the assessee shall pay, in addition to the balance of tax payable by
him, simple interest at ten per cent per annum on the amount by which the tax so paid and
deducted falls short of the seventy-five per cent (75%) of the assessed tax.
Period for charging simple interest:
The period for which interest shall be payable shall be the period from the first day of July of the
year in which the advance tax was paid to the date of regular assessment in respect of the
income of that year or a period of two years from the said first day of July, whichever is shorter.
The tax assessment is often not done by DCT's in accordance with filed PE — III
returns and information submitted. This results in disputes on GP rate, May- Jun,
disallowances done by DCT on his own judgment. This leads to appeals 2004
and counter appeals. What would be your suggestion t o N B R f o r
avoidance of such situation?
The practice of arbitrary assessment particularly in case of small and medium entrepreneurs is
common in our environment. The assessees as well as assessing officers are equally involved in
this wrongdoing. Assessee are evading tax and assessing officers are taking undue advantage at
the cost of national interest. Tax practitioners and auditors are playing the role of matchmaker in
maximum cases.To resolve the issue we propose the followings for the consideration of the NBR.
*The salary and benefits of the revenue officers are not sufficient to maintain minimum standard
of life. Observance of austerity having the chance of easy inflow of fund is truly a tall order job.
Therefore, the government should come up with regular incentive scheme for all revenue
officers ensuring specific reward for achieving prefixed target.
 All corporate assesssee are taxed at even rate irrespective of size. To encourage small and
medium entrepreneurs the Government may consider reduce rate of tax for them.
 At the backdrop of the downtrend in foreign source of fund, internal resource generation
has no alternative for the economic emancipation of the country. The nation needs to
develop a tax culture and the NBR being key revenue earning agency of the country
should have intensive campaign in this regard.
 In welfare economy, tax payers are honoured by the nation in different way including
arrangement of old age allowance based on their contribution to exchequer.
Unfortunately, in our country tax payers are harassed at the time of the payment of tax and
gets nothing against the deposit of their hard earned money when out of job or at old age.
NBR should propose for the enactment of unemployment allowance and old age pension for
tax payers based on their contribution to national exchequer.
 The Government proceeded one Step forward in curbing arbitrary assessment
enacting
sec.30 A by Finance Act 2002 but no progress thereafter. Every year specific
provision
should be made targeting elimination of discretionary authority of assessing officer in
course of time.
 Self assessment is the globally tested system of less harassment and much revenue. Self
assessment system should be eased and coverage to be enlarged.
PE — III
W hich mistake/errors can be rectified under section 173 of the May- Jun,
Income Tax Ordinance,1984? What are the provisions of the law for 2005
failure to rectify the mistake/errors by the relevant authority? Who can
rectify the mistake?
Particulars Explanation
Which mistake/errors can be rectified Any error apparent from the record either of its own
under section 173 of the Income Tax motion or on the error having been brought to its
Ordinance, 1984? notice by the assessee or any other income tax
authority

What are the provisions of the law for Where any error is brought to the notice of the
failure to rectify the mistake/errors by authority concerned by the assessee and no
the relevant authority? amendment is made by such authority within the financial
year next following the date in which the error is
brought to its notice, the amendment under
that sub-section shall be deemed to have been made
Who can rectify the mistake? so
Anyasincome
to correct
tax the error. or the Appellate Tribunal
authority
Discuss the provisions of ITO 1984 regarding penalties for the following defaults: PE —
a) Failure to file return of income under section 75 III
b)Failure to pay advance under section 64. Nov-
c)Failure to deduct tax at source Dec,
d)Failure to comply with notices for producti on of accounts under section 79 2005
e)Failure to pay tax on the basis of the return of income under section 74
Nature of defaults Penalties

Failure to file return of income under According to section 124 of ITO 1984
section 75 10 % of tax imposed on last assessed income subject
to a minimum of Tk 2500 and a further sum of
Tk.250 for each day of continuing default.
Failure to pay advance tax under According to section 125 of ITO 1984
section 64. The amount by which the payment falls short of the
amount that should have been paid.
Failure to deduct tax at source According to section 57 of ITO 1984
Defaulter may be classified as assessee in default and
2% interest per month is imposable till the day of
deposit.
Failure to comply with notices Accordingfor to section 126 of ITO 1984 Sum equal
production of accounts under section to the amount of tax.
79
Failure to pay tax on the basis of the According to section 127 of ITO 1984 25% of the
return of income or if the tax paid tax due or 25% of the short fall.
is less than 80% of the tax on the
basis of the return under section 74
What penal measures can be taken in the following cases: - PE - Ill
i) Failure to subm it books of accounts required by Incom e tax Nov -
authorities; Dec,
ii) Non submission of tax return by the assessee; 2006
iii) F a i l u r e o f t h e em p l o ye r t o d e d u c t t ax a t s o urc e ;
iv) Submission of false return by the assessee
Penalty
Cases
Failure to submit books of accounts According to Section 126 of ITO 1984:
required by Income tax authorities; Sum not exceeding the amount of tax chargeable on the total income
of such person
Non submission of tax return by According to Section 124of ITO 1984:

the assessee; Penalty amounting to 10% of tax imposed on last assessed income
subject to
minimum of tk. 2,500 and a further sum of tk. 250 for everyday of
continuing default.
Failure of the employer to deduct tax According to Section 57 of ITO 1984:
at source; a)The person responsible for making such deduction shall be
deemed to be an assessee in default in respect of the tax
b)In addition to such tax, pay an amount at the rate of two percent
(2%) per month of such tax for the period commencing on the date
after the expiry of 15 days of collection of tax and ending on the date
of the actual payment of the tax.

Submission of false return by the According to Section 128 of ITO 1984;
assessee General:
Not exceeding two and half times of the amount of tax which would
have been avoided;
Self assessment:
Not exceeding 5 times of the amount of tax which would have been
avoided;
1 Explain the following: Nov

i) Penalty for concealment of income u/s 128 of ITO 1984. Dec 3
ii) Penalty for incorrect or false audit report by a chartered accountant 2014
u/s 129A of ITO 1984. 3
(i) Under the provision of section 128-
(1) the following tax authority during the course of any tax proceeding can impose penalty:
(a) Deputy Commissioner of Taxes ;
(b)Appellate Joint/Additional Commissioner of Taxes or Commissioner of Taxes (Appeals);
(c)Taxes Appellate Tribunal.
(2) Such penalty may be imposed for:
(a) concealment of particulars of income;

(b) furnish inaccurate particulars of income;
(c) understate value of an immovable property in connection with sale/transfer.
(3) The amount of penalty will be 15% of the tax avoided. If it is detected after 1 year, it will increase by
15% for each preceding assessment year.
(ii) Under the provision of section 129A-
(1) the following tax authority during the course of any tax proceeding can impose penalty:
(a) Deputy Commissioner of Taxes ;
(b)Appellate Joint/Additional Commissioner of Taxes or Commissioner of Taxes (Appeals):
(c)Taxes Appellate Tribunal.
(2) Such penalty may be imposed for:
(a) audit report is not certified by a chartered accountant that accounts are maintained according to BAS or
BFRS standard;
(b) audit report is false or incorrect.
(3) The amount of penalty will not be less than Tk. 50,000 and not more than Tk. 200,000.
2 You are a Chartered Accountant and working in Y Ltd. (―Company‖) as a tax May
manager. The Company is engaged in the business of export of the goods Jun
manufactured by itself. The bank, through which export proceeds of Y Ltd. is 2015
received, deducts tax at the specified rate from the total export proceeds in
accordance with the provisions of section 53BB of the Income Tax Ordinance
(―ITO‖), 1984. The export proceeds net of income tax deducted at source under
Sec.53BB received by Y Ltd. during the income year 2016-17 came to
Tk.100,000,000. Export income of Y Ltd. falls under the scope of section 82C of
the ITO, 1984. Generally, the Company does not have additional income from
export as referred to in section 82C (6) of the ITO, 1984.
In the income year 2016-17, a warehouse owned by the Company since 1/7/2016
was leased out to another company for a term of 3 years from 1/7/2016 at a
monthly rent of Tk.100,000 with an advance rental payment of Tk.900,000 to be
adjusted with monthly rental payments over 3 years. Y Ltd. received rent for the
income year 2016-2017, but no tax was deducted at source from the rent paid by
the lessee. Nor any VAT was paid on the rent. The repair cost of Tk.15,000,
municipal tax of Tk.10,000 and insurance premium of Tk.1,000 were paid for the
warehouse during the income year 2016-17.
The net profit before tax for the year as per the draft financial statements for the
income year came to Tk.3,304,000. The net profit as per income tax comes to the
same amount, assuming no penalty/liability (if any) for non-deduction of tax at
source by the tenant and for non-payment of VAT. There is a tax refundable of
Tk.150,000 for the last assessment year 2016-17. The income (including
advance) from warehouse and its related expenses were deposited/paid out in
cash into/from an undisclosed bank account of Y Ltd. and have not been included
in the draft financial statements. The purchase money of Tk.50,000,000 (total
accumulated undeclared income of Y Ltd. over the last 2 assessment years) for
the warehouse was also paid from the same bank account.
The management of Y Ltd. is thinking of assessment of income of the Company
for the income year 2016-2017 under section 82C of the ITO, 1984, upon
considering the tax collected at source by the bank from the export proceeds as
final discharge of tax liability. In a meeting with the management team of Y Ltd.
on tax issues, you have been asked to consider whether it is possible to ignore
income from house property so that no demand for additional income tax arises.
To discuss the issue further, a meeting would be held next week.
Requirements:
What will be the financial consequences for such non-deduction and

non-payment as Per tax laws?
4
3 You are a Deputy Commissioner of Taxes (DCT) working in the income tax May
department of Bangladesh government. While carrying out your routine jobs, you Jun
came across with the following information in respect of various assessees: 2016
(i) Mr. A submitted return of income for AY 2017-2018 under section 82BB
showing total taxable income of Tk. 1,000,000, investment of Tk. 200,000
eligible for investment allowance and tax credit of Tk. 40,000 on the said
investment.
(ii) X Ltd. submitted income tax return for the assessment year 2009-2010
within the time stipulated in section 75 of the ITO, 1984, and assessment
was completed long ago. In the assessment year 2017-2018, specific
information about concealment of particulars of income of X Ltd. has
come into your possession.
(iii)Z Ltd. is engaged in production of woven garments and 100% of its
products are exported to Europe. Return of income of Z Ltd. for the
income year 2016-2017 has been submitted. Tax collected at source from
the export proceeds of Z Ltd. was shown as final discharge of tax liability
and was converted into taxable income applying 10% tax rate.
(iv) Return of income submitted by Mr. B under Universal Self Assessment
scheme of the ITO, 1984, for the AY 2015-2016, was selected for audit
pursuant to section 82BB(3). Afterwards, proceeding under section 83
was initiated but not completed as of 30 June 2017.
Requirement:
Express your thoughts and course of action as a DCT on the aforementioned
issues referring to the specific provisions of tax laws.
(i) It appears from the information that tax rebate on admissible investment allowance
claimed by Mr. A is not correct. Correct admissible investment allowance and tax rebate
thereon will be computed in the following manner:
Name of Assessee: A
Taxpayer’s Identification Number :
Particulars Tk.
Taxable Income 1,000,000

First 25,000 0% -
Next 400,000 10% 40,000
Next 350,000 15% 52,500
Total 1,000,000 , 92,500
Tax Leviable on total taxable income A 92,500

Investment Allowance & Tax Credit: Tk.
200,000
(a) Actual Investment made during the income year:
(b) 30% of (Total Taxable Income – Employer’s Contribution to RPF) 300,000
(c) Maximum Limit 15,000,000
(d) Allowable Investment Limit for Tax Credit - the lowest of (a), (b) and (c) 200,000
Tax Credit [(d) X 15%)] B 30,000
Income Tax Payable C=A-B 62,500
The Assessee claimed tax rebate of Tk. 40,000 on admissible investment allowance, whereas he
was entitled to Tk. 30,000 as computed above. As per section 82BB(2) of the ITO, 1984, the DCT shall
make adjustment in respect of incorrect claim if the said incorrect claim is apparent from the existence of
any information in the return. The tax payable shall be determined after adjustment of the incorrect
claim of tax rebate on investment allowance. After processing the return in the aforesaid manner, the
DCT shall send demand notice along with an intimation to the assessee specifying the income so
computed, the liability to pay tax on such income, the amount of tax rebate allowed, the sum
determined to be payable by him and such other particulars within 30 days of such computation as
may be specified. Provided that no such intimation shall be sent after the expiry of a period
of 12 months from the end of the year in which the return is furnished. Moreover, no demand notice
requiring the assesse to pay more taxes shall be made unless the assessee is given an opportunity in
writing in this regard.
(ii) No proceeding under section 93 of the ITO, 1984, shall be initiated unless definite information
has come into the possession of the DCT and he has obtained the previous approval of the IJCT in
writing to do so, except in a case where a return has not been filed under section 75 or 77. A notice
under section 93 of the ITO, 1984, may be issued by the DCT in any case in which he has reason to
believe that the assessee has for any assessment year concealed the particulars of his income or furnished
inaccurate particulars thereof or omitted or failed to disclose all material facts necessary for the
assessment for such year, within 6 years from the end of the assessment year for which the
assessment is to be made.
In light of the above law, it emerges that the DCT has specific information into his possession and has
sufficient reason to believe that X Ltd. concealed the particulars of income for the AY 2009-2010. As X
Ltd. submitted return of income for the assessment year 2009-2010 within the time stipulated in section
75 of the ITO, 1984, commencement of proceeding and service of notice under section 93 will not be
valid as 6 years has already passed from the end of the assessment year 2009-2010.
(iii)As per section 53BB of the ITO, 1984, the bank, through which export proceeds of an exporter of
certain items is received shall deduct tax at the rate 0.60% of the total export proceeds at the time of
crediting the proceeds to the account of the exporter. Section 82C provides that tax deducted or
collected at source under 53BB from the amount received on account of export of certain items shall be
deemed to be the final discharge of tax liability from that source. Income from the sources referred to
in section 82C is determined on the basis of the tax deducted or collected at source and the rate relating to
the assessment year is applied.
Any income shown or assessed in excess of the amount determined in the aforementioned manner
shall be liable to tax at the rate or rates applicable for the assessment year. In the case under
discussion, Z Ltd. applied incorrect tax rate for deriving taxable income from tax collected at source
through back calculation. The SRO, which introduced presumptive tax rate of 10% for export income of
readymade garments industry, was not renewed after 30 June 2014. Hence, in the case of a private limited
company, tax will be computed for the export income earned by readymade garments industry from 01
July 2014 @ 35%. Excess amount of taxable income shall have to be determined comparing taxable
income derived by applying 35% tax rate to tax collected at source and total income shown or assessed.
(iv)As per section 82BB(3), National Board of Revenue (NBR) or any authority subordinate to NBR,
if so authorized by NBR in this behalf, may select, in the manner to be determined by NBR, returns
filed under Universal Self Assessment scheme and refer the returns so selected to the DCT for the
purpose of audit and the DCT shall thereupon proceed, if so required, to make the assessment under
section 83 or section 84, as the case may be.
Section 94 provides for limitation of time for assessment and as per the said section no order of
assessment under section 82BB (3) shall be made after the expiry of 2 years from the end of the
assessment year in which the income was first assessable. Accordingly, the assessment order shall
have to be passed under section 82BB(3) within 30 June 2018.
14 The following particulars of income of Mr. Ali Ahmed are available for the Nov
assessment year 2017-2018. Dec
Taka 2013
Income from House Property 100,000
Business Income (after allowing for current Year’s depreciation of Tk.20,000) 70,000
The following sums have been brought forward from the preceding year
Unabsorbed Depreciation 80,000
Business loss 50,000

Deputy Commissioner of Taxes is proposing to assess him on a total income of
Tk.100,000 by setting off only of the business loss of Tk.50,000 and part of the
unabsorbed depreciation of Tk.20,000 against the business income of Tk.70,000.
Is he right in his action? Explain
The DCT is not right in his action.
The assessment should be done in the following manner
Particulars Taka
Business Profit / (loss): Profit for the year 70,000
Previous business ―loss‖ — b /f (50,000)
20,000
Less : Unabsorbed depreciation (20,000)
Business profit NIL
Property income 100,000

Unabsorbed depreciation c /f (60,000)
Taxable Income 40,000
Mr. Ali Ahmed should not accept the DCT's proposal. He should submit the proposal which is in line
with law. Moreover if the DCT still remain in his decision and assessed in his (DCT’s) own view
then he (Ali Ahmed) may prefer an appeal to the appellate authority.
15 Write your arguments against the following grounds of appeal. Nov
a) Sale proceeds of a land Tk. 79,000,000 deposited in the bank account of a Dec
company. The land was in the name of the Chairman of the company but 2013
the land was not shown in the wealth statement of the Chairman’s
personal tax file. The company claimed the amount as loan from chairman
but the DCT added as income of the company and upheld by CT(A).
b) The DCT estimates Gross profit 36% of last year instead of shown GP
25% because the company failed to produce all the vouchers of raw
materials, factory overhead and added Tk. 40,500,000 with total income.
The DCT computed tax liability TK. 230,000,000 and advance tax deposited by the company Tk.
7,800,000 against income tax provision of Tk. 10,000,000. The DCT charged interest because Tk.
7,800,000 is less than 75% of the claimed tax.
(a)
The DCT and CT (A) both are not justified to add the sum because the land is in the name of the
chairman and the sales proceeds belongs to the chairman. The company received the money as loan from the
chairman through banking channel and accordingly, the company owes to the chairman for the same
amount.
(b)
The estimation of GP ratio to 36% against 25% shown by the company is unlawful. GP of a company is
largely dependent upon the purchase and sales price of the products traded by the company.
However, the DCT can disallow expenses for non-submission of supporting documents on a ground
that those are not business expenses.
(c)
The DCT is not justified to charge interest because as per section 73 (1) if an assessee paid advance tax on
the basis of his own estimate is less than 75% then the assessee shall pay 10% simple interest on the
shortfall amount but the assessee paid tax more than 75% of tax provision.

16 ABC & Co. (―Firm‖), Chartered Accountants, acts as tax consultant of XYZ Ltd. Nov Dec
(―Company‖), a private limited company incorporated in Bangladesh. The 2017
Company is engaged in the business of yarn dyeing. You are a Chartered
Accountant and working as Tax Partner of the Firm. Assessment and appeal
proceedings of the Company for the assessment year 2017-2018 are complete.
There were cross appeals before the taxes appellate tribunal for AY 2017-2018
relating to addition of current liabilities to taxable income and application of 35%
tax rate on business income from sale of fixed assets. The assessment order
analyzed the components of current liabilities that consist of working capital loan,
term loan, lease finance, trade creditors and liabilities for expenses and are
disclosed under separate notes to the audited financial statements. The sale of
fixed assets was also recorded in detail. The Deputy Commissioner of Taxes
(―DCT‖) added back taka 20,000,000/= out of current liabilities and the
Commissioner of Taxes (Appeals) reduced the same to Taka 15,000,000/=. In the
cross appeal, the Taxes Appellate Tribunal further reduced the addition under
current liabilities to Taka 5,000,000/=. Subsequently the Director General of
Inspection (Taxes) called for the file and reviewed the same where he did not find
supporting documents as regards the appealed issues. Being advised by the office
of the Director General of Inspection (Taxes), the DCT reopened the case and
issued notice under Section 93 of the ITO, 1984, on the ground that tax was
evaded by non-submission of evidences.
Requirement:
Prepare a reply to the notice of the DCT considering the grounds for reopening
the case and applicability of Section 93 of the ITO, 1984, for XYZ Ltd.
The Deputy Commissioner of Taxes
Taxes Circle ---Taxes Zone ---
Dhaka, Bangladesh
05 December 2017
Dear Sir:
Request to Cancel the Proceedings of Income Tax Cases Reopened under section 93 of
the Income Tax Ordinance, 1984, (“ITO, 1984”) for the Assessment Year 2017-2018
Assessee: XYZ Ltd.
Please refer to the subject mentioned above. As regards income tax case reopened under section 93
of the ITO , 19 84,f or the a s s e s s m e nt ye ar 20 17 - 20 18 w e w oul d li ke to offe r
follow i ng explanations/statements/documents/information:
Business Income from Sale of Fixed Assets:
The DCT recorded the detailed information on sale of assets upon examination of all the
documents and information submitted in support of the said transactions and computed
income/(loss) from sale of assets. He also confirmed that the assessee submitted information on
purchase price, sales prices, accumulated depreciation, and computation of income and minutes
of the meeting of the board of directors relating to sale of assets.
Section 93 is not applicable in the instant case as non-submission of evidences relating to sale of
assets is fabrication of information and the DCT acted on suspect, surmise and conjecture
and he is just on a fishing expedition.
Where the decisions of the appellate authorities are there and if the DCT is aggrieved by the
decisions of the appellate authorities, he had the option to file appeal to the higher appellate
authority or reference application to the High Court Division, as the case may be, in accordance
with the provisions of the ITO, 1984. Reopening of the case on the appealed grounds without

going to higher appellate authority or reference application to the High Court Division is
violation of income tax law and against the natural justice.
Current Liabilities:
The DCT examined the documents submitted in support of current liabilities of Tk. .................
disclosed under separate notes to the audited financial statements and he recorded the same
in the assessment order. Upon examination of submitted documents and information, he
added back Tk. 20,00,000/=.
Section 93 is not applicable in the instant case as the audited financial statements clearly
disclosed information on current liabilities and the assessee submitted all supporting documents
relating to current liabilities. In reopening the cases on this ground, the DCT acted on suspect,
surmise and conjecture and he is just on a fishing expedition. Non-submission of evidences
relating to heads under current liabilities as reasoning for reopening the cases is completely
vague, fallacious and distortion of information.
Where the decisions of the appellate authorities are there and if the DCT is aggrieved by the
decisions of the appellate authorities, he had the option to file appeal to the higher appellate
authority or reference application to the High Court Division, as the case may be, in accordance
with the provisions of the ITO, 1984. Reopening of the case on the appealed grounds without
going to higher appellate authority or reference application to the High Court Division is
violation of income tax law and against the natural justice.
It is notable that once the DCT examined and decided on current liabilities as mentioned
in the assessment orders along with notes, he verified all the heads under current liabilities
such as Trade Creditors, Working Capital, Accounts Payable, Liabilities for Expenses, Term
Loans, etc. The orders from the appellate authorities provided their decisions in the like
manner.
Applicability of section 93 of the ITO, 1984:
The following conditions should be studied for which any sum payable by an assessee under
the ITO, 1984, shall be deemed to have escaped payment as referred to in section 93 of the
ITO, 1984:
S1 # Conditions
i. The income or a part thereof has escaped assessment
ii. The income has been understated
iii. Excessive loss, deduction, allowance or relief in the return has been claimed
iv. The liability of tax or any other amount payable under the ITO, 1984, has been shown
or computed lower by concealment or misreporting of any income or by
concealment or misreporting of any assets, expenditure or any other particulars in a
statement submitted under section 80
v. Income chargeable to tax has been under-assessed, or income has been assessed at a
lower than due tax rate
vi. Income that is subject to tax has been made the subject of tax exemption
vii. Income has been made the subject of excessive relief, or excessive loss or depreciation
allowance or any other allowance under the ITO, 1984, has been computed
viii. A tax or an amount, payable under the ITO, 1984, has been computed or paid lower than
due amount by reason of lower base
In light of the above, we would earnestly request you to withdraw the proceedings of income
tax case reopened under section 93 of the ITO, 1984, for the sake of upholding the rule of law
and natural justice.
Yours faithfully,

19 What sort of punishments and prosecutions are provided in the Income Tax May
Ordinance, 1984 for different offences and non-compliances of obligations by a June
2014
person mentioned under Sections 164, 165 and 165A of Income Tax Ordinance
1984?
According to Section 164 of the ITO 1984 a person is guilty of an offence punishable with
imprisonment for a term which may extend to one year, or with fine, or with both, if he, without
reasonable cause,-
a) fails to deduct or collect and pay any tax as required under the provision of Chapter VII except
advance payment of tax or fails to deduct and pay tax as required under section 143 (2);
b) fails to produce, or cause to be produced, on or before the date mentioned in any notice under
Chapter VIII, or under section 83, such accounts, documents or statements as are referred to in
such notice;
c) fails to furnish, in due time, the return of income which he is required to furnish under section 75, or
by notice given under section 77 or 93;
d) refuses to furnish such information as may be necessary under section 113;
e) refuses to permit inspection or to allow copies to be taken in accordance with the provisions of
section 114;
f) fails to afford necessary facilities or to furnish the required information to an income tax authority
exercising powers under section 115;
g) fails to comply with the requirement under sub-section (1) of section 116;
h) fails to comply with the order made under sub-section (1) of section 116A;
i) refuses to permit or in any manner obstructs the exercise of powers under section 117 by an income
tax authority.
According to Section 165 of the ITO 1984 a person is guilty of an offence punishable with
imprisonment for a term which may extend to three years but shall not be less than three months, or with
fine, or with both, if he-
a) makes a statement in any verification, etc. in any return or any other document furnished under any
provisions of this Ordinance which is false;
b) knowingly and willfully aids, abets, assists, incites or induces another person to make or deliver a false
return, account, statement, certificate or declaration under this Ordinance, or himself knowingly and
willfully makes or delivers such false return, account, statement, certificate or declaration on behalf of
another person;
c) signs and issues any certificate mentioned in the first or second proviso to section 82 which he either
knows or believes to be false or does not believe to be true;
d) refuses to furnish such information as may be necessary for the purpose of survey under section 115.
According to Section 165A of the ITO 1984 a person is guilty of an offence punishable with
imprisonment for a term which may extend to three years or with fine upto taka fifty thousand or both, if he
deliberately uses or used a fake Tax-payer’s Identification Number (TIN) or a Tax-payer’s
Identification Number (TIN) of another person.
21 Nov
What penalties can be imposed for: 6
Dec
(a) Failure to the file return u/s 75:
2011
(b) Failure to pay Taxes u/s 74:
(c) For furnishing inaccurate particulars of income
Particulars Penalty

Failure to file return u/s 75: Penalty amounting to 10% of last assessed tax subject
(According to section 124 of ITO 1984) to minimum of Tk. 1,000/- and a further sum of Tk. 50 for
everyday of continuing default.
Failure to pay Taxes u/s 74 : If tax paid u/s 74 is less than 80% of the payable amount
(According to section 127 of then 25% of the short fall (maximum),If 80% is covered
ITO 1984) then no penalty.
For furnishing inaccurate particulars of 10% of the tax evasion. If the tax evasion is detected after
income (According to section 128 of ITO one year or more, then the amount of penalty will
1984) increase by additional 10% for each earlier assessment year
22 Nov Dec
Discuss the provisions of ITO 1984 regarding penalties for the following 2012
defaults :
a)Failure to file return of income under section 75
b)Failure to pay advance tax under section 64
c)Failure to deduct tax at source
d)Failure to comply with notices for production of accounts under section 79
e)Failure to pay tax on the basis of the return of income under section 74

The penal provisions are tabulated below: -
SI. Grounds of Reference Amount of Penalty Pre-conditions/
Penalty Section Comments
1. Penalty for failure to 124(1) 10% of the last assessed tax Penalty cannot be imposed
file return including or Tk.1,000/-whichever is unless the assessee has been
withholding tax higher. plus heard or has been given a
return reasonable opportunity of being
Tk. 50/- per day during which
heard.
the default continues.
2. Failure to pay 125 The amount of short fall 1) Penalty cannot be i m pos ed
advance tax (maximum) unl ess t he assessee has
been heard or has been
given a reasonable
opportunity of being heard.
2) DCT shall not impose the
penalty without the previous
approval of the IJCT
3. Penalty for non- 126 The amount of tax
compliance with subsequently assessed -Do-
notice u/s 79 (maximum)
4. Failure to pay tax u/s 127 If tax paid u/s 74 is less than
74 on the basis of 80% of the payable amount
return then 25% of the short fall
(maximum).
-Do-
If 80% is covered then no
penalty.
5. Failure to deduct/ 57 2% per month of the amount (1) The deducting authority
collect tax at source or of tax to be deducted, will also be treated as an
having deducted / collected or deposited assessee in default.
collected but fails to
deposit into national (2) Expenditure willbe disallowed
exchequer. as per section 30(a) and 30(aa)
23. May June

What are the consequences of failure to deduct TDS as per income tax Ordinance 1984? 2013
As per section 57 of I.T.O 1984 the following are the consequences of failure to deduct tax at
source:
(1) Without prejudice to any other consequences enacted under ITO 1984 to which the assesse
may be liable, be deemed to be an assessee in default in respect of the tax, and
(2) In addition to such tax, pay an amount at the rate of two percent per month of such tax for
the period commencing the day following the expiry of the time within which it is to be
paid u/s 59 and ending on the date of the actual payment of the tax.
23. Mr. Hamidur Rahman (proprietor of M/S Rahman and Co.) the assessee, PE — III
carried on business in cloth in Narayangonj; He Purchased mill cloth, got it Nov-
bleached and dyed and printed through chemicals, dyed cloths in its own factory Dec,
by engaging workers and sold the dyed cloths in the market. Beside, the 2003
assessees was also buying dyed cloths in the market, got it printed and sold it.
The assessee was also buying and selling readymade dyed and printed cloth, In
addition to that the assessee was also selling mill and handloom cloth undyed
and unprinted. For the assessment year 2002-2003, the assessee filed return
showing income of Tk. 3,08,590 from business and total turnover at Tk.
16,97,280. The G. P. worked out to 18% on sales. The DCT rejected the books
as defective and estimated the income at Tk. 18,00,000. The DCT found that
the assessee did not account for Tk. 55,530 being the value of dyes and
chemicals and that, the corresponding suppressed turnover in dyeing and dyeing
cloth would come to Tk. 11,11,920. Adding this to the disclosed turnover, the
disclosed turnover, the DCT determined the total turnover in the branch and dyeing
and printing cloth at Tk. 2.3,50,000 and relying on two comparable cases fixed the
rate of G.P at 50%. The details of the materials relied upon and the details of
comparable cases were not furnished to the assessee.
Please state whether the assessment made by the DCT is justified in law by citing
any decided case in support of your answer.
The DCT is empowered to disallow any expenses if it is not supported by acceptable evidence.
However, as provided under section 30A of ITO 1984 the DCT shall not make any disallowance or
deduction for any year from any claim made by an assessee in the trading account or profit or loss
account without specifying reason for such disallowance or deduction.
In given case the DCT has arbitrarily fixed the rate of GP at 50% against 18% shown by the
assessee. The DCT relied upon two comparable cases. Reliance of DCT upon comparable
cases is not unjustified but in such circumstances the assessee is entitled to get so much of the
information regarding the comparator enable him to understand the basis on which his income is
sought to be estimated. Since, the DCT has not provided information of the comparator of Mr Hamidur
Rahman, said arbitrarily fixed GP would not be tenable to appellate authority. There are case
laws in favour and against assessment of profit at flat rate. When no method of accounting has
been regularly employed by the assessee where his books of account are rejected, the DCT
may reasonably and judicially compute the profits by applying flat rate of certain percentage to
the admitted or estimated turnover or gross receipts or to the out lay. Feroz Shah V CIT 219 (PC).
However, where the true profits can be ascertained without much trouble by reference to the
accounts book, assessment of profit at a flat rate should not generally be made, CIT V. Achrulal
ITR 255.
As for backward calculation of the turnover of Tk. 11,11,920 on the basis of non recorded input of
Tk. 55,530 the assessee cannot overrule the addition of the DCT unless provides valid reason
for such non-inclusion.
In view of above, the assessment on the basis of arbitrarily fixed GP is not justified. Reference
case Modern Dyeing and Screen Printing Ltd, VCT (2004) xxx 11, BTD 30. However, the DCT
would require further supporting or documents and call for hearing to establish additional
turnover on the basis of unrecorded input.

4a International Taxation (20%)
S.L Question Year
PE — Ill
S t ate the purpose of and benefit arising from an agreement for avoidance of May —
d o u b l e taxation between Bangladesh and any foreign country. Is there any other June,
provision for relief in respect of foreign income? If so please explain. 2002

The Government of Bangladesh may enter into an agreement with the Government of any other country for
the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income
leviable under this Ordinance and under the correspo nding law in force in that country.
Benefits and purpose of Double taxation avoidance agreement
a. Relief from the double tax payable;
b. Determining the income accruing or arising, or deemed to be accruing or arising, to non -
residents from sources within Bangladesh;
c. Where all the operations of business or profession are not carried on within Bangladesh, determining
the income attributable to operations carried on within or outside Bangladesh, or the income
chargeable to tax in Bangladesh in the hands of non-residents, including their agencies, branches
or establishments in Bangladesh;
d. Determining the income to be attributable to any person resident in Bangladesh having any
special relationship with a non-resident;
e. Recovery of tax leviable
f. Exchange of information for the prevention of fiscal evasion
g. To attract FDI in Bangladesh.
Bangladesh generally follows UN model of Avoidance of Double Taxation Agreement, which consists 29
Articles. Instances are Scope of the convention; Taxes covered. General definitions, Permanent
establishment, Dividends, Interest, Royalties etc. .
Name of countries to which Double taxation agreement in force: Republic of Korea, Canada,
Pakistan, United Kingdom of Great Britain and Northern Ireland, Singapore, Sweden, Romania, Sri Lanka,
France, Japan, India, Malaysia, Germany, Italy, The Netherlands, Denmark, China, Belgium,
Thailand, Poland, Philippines. Norway, USA.
Relief in respect of income arising outside Bangladesh.
Any resident in Bangladesh in any year proves to the satisfaction of the Deputy Commissioner of Taxes
that, in respect of any income which has accrued or arisen to him during that year outside Bangladesh,
he has paid tax, by deduction or otherwise, in any country with which there is no reciprocal agreement for
relief or avoidance of double taxation, the Deputy Commissioner of Taxes may, deduct from the tax payable
by him under this Ordinance a sum equal to the tax calculated on such doubly taxed income at the average
rate of tax of Bangladesh or the average rate of tax of the said country, whichever is the lower.
Explanation.--The expression "average rate of tax" means the rate arrived at by dividing the amount of tax
calculated on the total income by such income.
1 What are the effects of Double Tax Avoidance Agreements (DTAA) in Bangladesh? Can an Nov
assesse get any relief in respect of his income arising from another country with whom the Dec
Government of Bangladesh does not have any DTAA? Discuss. 2010
2 What is the provision with regard to penalty for failure to keep, maintain or furnish information, May Jun
documents or records to DCT in relation to transfer price? 2013
Penalty for failure to keep, maintain or furnish information, documents or records to the Deputy Commissioner of
Taxes:-
Where any person fails to keep, maintain or furnish any information or documents or records as required by
section 107E of ITO 1984, without prejudice to the provisions of Chapter XV of ITO 1984, the Deputy
Commissioner of Taxes may impose upon such person a penalty not exceeding one percent of the value of
each international transaction entered into by such persons.
3 Name the five different methods to determine the arm‟s length price in relation to an May Jun
international transaction mentioned in Section 107C of the Income Tax Ordinance 1984. 2014
Is there any statutory requirement to furnish a report from a Chartered Accountant in
the case of international transactions? When?
Five different methods to determine the arm‟s length price in relation to an international transaction mentioned in Section 107C of
the ITO 1984 are as follows:
(i) Comparable uncontrolled price method;

(ii) resale price method;
(iii) cost plus method;
(iv) profit split method;
(v) transactional net margin method;
According to Section 107F of the ITO 1984 every person who has entered into international transaction or transactions the
aggregate of value which, as recorded in the books of account, exceeds the 3 crore during an income year shall furnish, on or
before the specified date in the form and manner as may be prescribed, a report from a Chartered Accountant.
4 XYZ Ltd., a company registered in Hong Kong, is engaged in procuring garments from Nov
different parts of the world and exporting to different retailers in Europe and USA. They Dec
want to set up an establishment in Bangladesh in order to ensure timely shipments and 2014
quality of garments exported by different factories of Bangladesh against letters of credit
issued by the company’s bank in Hong Kong.
The company undertakes that the establishment can be set up in any form as follows:
(a) Liaison Office; or
(b) Branch Office; or
(c) Subsidiary Company
They need your advice on the income tax implications in the above three cases, so that they can
take a proper decision and plan accordingly. They also need your advice on the income tax
implications for the expatriate employees as may be appointed to work for their establishments
in Bangladesh. Advise.
The income tax implications in the case of three types of establishment of a foreign company in Bangladesh are as follows:
(i) Liaison office: Setting up of a liaison office requires permission from the BangladeshInvestment Development
Authority (BIDA). As per BIDA regulation, a liaison office can perform, on behalf of its parent company (XYZ
Ltd.), the activities of inspection, quality control and liaise for exportable or other goods for that company. All its expenses
are to be met out of remittances received from XYZ Ltd. It cannot generate any income. It is also required to submit
prescribed statement to Bangladesh Bank.
It has to obtain a TIN (Tax Identification Number) from the income tax authority in Bangladesh, and submit annual
income tax return in every assessment year along with receipts and payments statement and balance sheet. Since a
liaison office will have no income, assessment is to be made by the tax office at „Nil‟ income and „Nil‟ tax.
However, in case the liaison office makes any payment to its vendors or employees without deduction of income tax
(TDS, i. e. Tax deduction at source) and deduction of VAT (VDS,i.e., VAT deduction at source) and deposit of the same to
Government Exchequer, as may be applicable under the tax laws, it may be subject to income tax @35% (current rate of income
tax in the case of a company) on such payments. In addition, it may also be liable to pay such income tax and VAT amounts not
deducted and paid.
(ii) Branch office: A branch office is required to obtain TIN from the income tax authority. It can generate its own income. So,
it has to submit annual income tax return along with its audited financial statements and necessary documents to tax office
for every assessment year. It is allowed to claim maximum 10% of profit before tax as head office expenses. Its income
accruing or arising from Bangladesh is subject to income tax. It is to be taxed@35% (current rate) on its taxable
profit, i.e. total income as is called in income tax law. Any income repatriated out of Bangladesh will be deemed as
dividend and will be subject to withholding tax @20% (applicable for dividend to parent company in Hong Kong).
(iii) Subsidiary Company: Subsidiary company (if any) of XYZ Ltd. is to be incorporated with Registrar of Joint Stock
of Companies in Bangladesh. It will be considered as a Bangladeshi company, and will be subject to income tax
like any other Bangladeshi company. So it has to obtain TIN and submit annual income tax return along with its
audited financial statements and necessary documents to tax office for every assessment year. It is to be taxed@35%
(current rate) on its taxable profit, i. e. total income as is called in income tax law. Any income to be repatriated out of
Bangladesh will be in the form of dividend and will be subject to withholding tax @20% (applicable for dividend to parent
company in Hong Kong).
Advice on income tax implications for the expatriate employees: Any expatriate employee working in Bangladesh
will require work permit from BIDA/EPZ authority. They will be subject to same provisions of the income tax law and rules,
irrespective of whether it is a liaison office or a branch office or a subsidiary company.
If he/she is a non-resident for income tax purposes in Bangladesh in any income year, he/ she will be subject to income
tax@30% (current rate) on his/ her total income (as per tax law) in the relevant income year. It he/she is a resident, the income
tax rate will be on a slab basis from 10% to 30%, as is applicable for any individual assessee.
5 Mr. XY was employed in a real estate company in Singapore up to 25 June 2016. In the income May
year 2016-2017, he is expected to stay in Bangladesh for a period of, or for periodsamountingin June
all to, minimum three hundred days. After returning to Bangladesh on 30 June 2016, Mr XY 2015
communicated with ABC & Co. (“Firm”), Chartered Accountants. You are a tax partner of the
Firm and have been requested by Mr. XY to provide him with a report on implications of tax on
the estimated income and investment options. He furnished you with the following information:
(i) Estimated income (taxable) for the assessment year 2017-2018 would be as follows:
Particulars of Income Tk.
Income from Bangladesh 5,000,000
Income from Sweden 1,000,000
Income from Russia 1,500,000
Income from Singapore 2,5000,00
Total 10,000,000
(ii) Out of the countries mentioned above, Bangladesh signed Double Taxation
AvoidanceAgreement (“DTAA”) with Sweden and Singapore. Mr. XY would pay
25% tax in Sweden as per DTAA, whereas income tax rate for a foreigner in Sweden
is 30%. He would pay 15% tax for income generated in Singapore pursuant to the
provisions of DTAA. General tax rate for a foreigner in Singapore is 35%. For the
income generated in Russia, he would pay tax at the rate of 30%.
The estimated income would be generated as interest on investments he made upon
compliance with the provisions of the Foreign Exchange Regulation Act, 1947.
However, Mr. XY is considering whether he would bring his overseas investments
into Bangladesh and purchase publicly traded shares or would keep the amount
invested abroad. A capital market analyst of Bangladesh sent him a report analyzing
that he would earn Tk. 2,000,000 as dividend income and Tk. 2,500,000 as gain from
sale of shares in the income year 2016-2017, if the overseas investments is brought
into Bangladesh and reinvested in the shares listed on the stock exchanges in
Bangladesh.
It was agreed that tax rate for the assessment year 2014-2015 will be applied for the
purpose of determining tax implications and necessary computations. Assume that
income from Bangladesh amounting to Tk. 5,000,000, as shown in the above table,
will remain same irrespective of his decision as to bringing his overseas investments
into Bangladesh. You don‟t need to consider foreign exchange gain or loss.
Requirements:
Send a report to Mr. XY addressing the following:
(i) Computation of relief from income tax by way of credit in respect of foreign tax
and net tax payable in Bangladesh.
(ii) Advise Mr. XY whether he should bring the foreign investments into Bangladesh
for making investments in the shares listed on the stock exchanges in
Bangladesh.
Mr XY
Address .......
15 June 2018
Dear Mr. XY:

(a) Computation of relief from income tax by way of credit in respect of foreign tax and net tax payable in Bangladesh.
(b) Opinion on whether foreign investments should be brought into Bangladesh and reinvested in the shares listed on
the stock exchanges in Bangladesh.
Thank you for your recent letter on the aforementioned subject. The issues raised in your communication have been
based on a few assumptions and report submitted by professional analyst of capital market inBangladesh. I have
considered the tax issues only. Our computation and opinion may be changed if there is any change in the assumptions
and projections. As requested, I provide you with the following feedback:
(a) Computation of relief from income tax by way of credit in respect of foreign tax and net tax payable in Bangladesh
Mr. XY
Computation of net tax payable in Bangladesh for the assessment year 2017-2018 applying tax rates
applicable to assessment year 2016-2017
First 220,000 0% -
Next 300,000 10% 30,000
Next 400,000 15% 60,000
Next 500,000 20% 100,000
Next 3,000,000 25% 750,000
Balance 5,580,000 30% 1,674,000
Total 10,000,000 2,614,000
Less: Double taxation relief (Notes) 1,017,100
Net Tax Payable 1,596,900
Notes:
1. Average tax rate in Bangladesh :

Computation of Tax Relief:
(2,614,000/10,000,000) X 100 26.14%

Tk. Tk.
Computation of Tax Relief:
2. Foreign tax credit in respect of income from Sweden:
There is DTAA with Sweden. Foreign tax credit would be

allowed applying the average rate of 26.14% or tax to be paid in
Sweden at the rate of 25% whichever is lower as per section (1,000,000 X 25%) 250,000
144(4) of I.T Ordinance, 1984.
3. Foreign tax credit in respect of income from Singapore:
There is DTAA with Singapore. Foreign tax credit would be

allowed applying the average rate of 26.14% or tax to be paid in
Singapore at the rate of 15% whichever is lower as per section (2,5000,000 X15%) 375,000
144(4) of I.T Ordinance, 1984.
4. Foreign tax credit in respect of income from Russia:
There is no DTAA with Russia. But foreign tax credit would also
be allowed applying the average rate of 26.14% or tax to be paid
in Russia at the rate of 30% whichever is lower as per (1,500,000 X 26.14%) 392,100
section 145 of I.T Ordinance, 1984 though NBR not yet
prescribed any rule in this behalf.
Total Foreign tax credit 1,017,100
(b) Opinion on whether foreign investments should be brought into Bangladesh and re-invested in the shares listed
on the stock exchanges in Bangladesh
Income from Overseas Investments: Option -1

Particulars Tk. Bangladesh Foreign Tax Double Income
Tax (@ (Tk.) Taxation net of tax
30%) Relief (Tk.) (Tk.)
(i) (ii) = (i) x 0.30 (iii) (iv) (v)=(i)-(ii)- (iii)+(iv)
Income from Sweden 1,000,000 300,000 250,000 250,000 700,000

Income from
Singapore 2,500,000 750,000 375,000 375,000 1,750,000
Income from Russia 1,500,000 450,000 450,000 392,100 992,100
Total 5,000,000 1,500,000 1,075,000 1,017,100 3,442,100
Income from Investments in Bangladesh: Option -2
Particulars Applicable Income Tax Income net of

Tk. Tax Rate (Tk.) Implication (Tk.) tax (Tk.)
Income from
Dividend 2,000,000 30% 600,000 1,400,000
Capital gain from
Sale of Shares 2,500,000 0% - 2,500,000
Total 4,500,000 600,000 3,900,000
Note:
On the basis of workings presented hereinabove, it is obvious that estimated income, net of tax,
frominvestments in the capital market of Bangladesh would be higher than that of abroad and we take the view
that you may bring the overseas investments into Bangladesh and make reinvestment in Bangladesh‟s
capitalmarket However, we also suggest you to consider the risk factors, economic indicators, investment climate,
company fundamentals, market trend, etc. before taking such decision.
I hope that the above computation/opinion will be helpful to take decision. If there is any further quarry you may
please contact us without any hesitation.
Yours sincerely,
6 ABC Bangladesh Ltd., a company incorporated in Bangladesh, manufactures high class motor May Jun
vehicle engines for sale both in Bangladesh and abroad. Foreign sales are made through ABC 2015
Hong Kong Pte Ltd., a company incorporated in Hong Kong and wholly owned by ABC
Bangladesh Ltd. In Hong Kong, corporate tax rate is 25% and in Bangladesh, it is 35%. ABC
Bangladesh Ltd. sells engines to ABC Hong Kong Pte Ltd. at USD 30,000 (FOB) per unit. In
Bangladesh, the same engine is sold at USD 40,000 per unit. ABC Hong Kong Pte Ltd. sells
these units at USD 60,000 per unit in their local market.
During the income year ended 31 March 2017 ABC Bangladesh Ltd. sold 10 such engines
at the above FOB price and 5 such engines at USD 31,000 C&F price per unit. The freight
was USD 1,000 per unit. 14 of the above 15 export sales took place during the last 9
months of the year.
The cost of sales and total overhead expenses (related to the above units sold) of ABC
Bangladesh Ltd. were USD 20,000 per unit in equivalentTaka. The overhead expenses (related to
the above units imported and sold) including the freight for the above FOB imports of ABC
Hong Kong Pte Ltd. were USD 10,000 per unit.
Neither of the above two companies had any other income and expense during the income year.
Requirements:
(i)Will any report from accountant be required to be furnished to the income tax authority? If
so, who can issue the report?
(ii)Draft a report to be issued in this regard. On the basis of the information given
above,determine incomefrom the above international transactions having regard to arm‟s
length price
(iii) Which method have you followed in computing the arm‟s length price as in (ii) above?
(iv) How much additional income tax will the government earn by following the above
method?
You may use exchange rate of USD 1= Tk.78.
(i) Yes, a report from a qualified accountant is required to be furnished to the income tax authority as per section
107F of The Income Tax Ordinance, 1984 as ABC Bangladesh Ltd. has entered into international transactions
amounting to [30,000x10+31,000x5=4,55,000x78=Tk.3,54,90,000] which is more than Tk.3 crore. Only a qualified
accountant, either a Chartered Accountant or a Cost and Management Accountant can issue such report. A report is
drafted as per Rule-75 as under:
Report on international transaction as per section 107F
a) The accounts and records of ABC Bangladesh Ltd. TIN … relating to the international
transactions entered into by ABC Bangladesh Ltd. during the income year ending on 31 March
2017 has been examined by me.
b) It appears from our examination of the accounts and records that proper information and
documents, as are required by the Income Tax Ordinance, 1984, have been kept.
c) The particulars required to be furnished under section 107F are given in the Annexure of this report.
d) In my opinion and to the best of my information and according to the explanations given to me, the particulars
given in the Annexure are true and correct.
Signature
Name & address:
Membership No:
Place & date
(ii) Taking into consideration the fact that the same engine is sold in Bangladesh at fair market price (here arm‟s
length price) USD 40,000 per unit, income comes at Tk.40,000- 20,000=20,000x15=3,00,000x78=Tk.2,34,00,000/
iii) Comparable uncontrolled price method is followed here to determine arm‟s length price as arranged sales price
with associated enterprise can easily be compared with the information of local sales price.
(iv) Additional income tax to be paid 10,000x15=1, 50,000x78=Tk. 1, 17, 00,000 @35%=Tk.40, 95,000
7 ABC Hong Kong Pte Ltd. has a global agreement with M&S LLC of USA which incorporates a May Jun
clause stating that in the case of any purchase by M&S from any company within the group to 2015
which ABC Hong Kong Pte Ltd. belongs, M&S will get a rebate of 5% on the purchase
pricefrom that company. Now ABC Bangladesh Ltd. intends to enter into an agreement with
M&S to sell its engine products to M&S.
Requirement:
Will any transaction between ABC Bangladesh Ltd. and M&S fall under transfer pricing?

Yes. the transaction between ABC Bangladesh Ltd. and M & S LLC of USA will fall under transfer pricing because M
& S LLC of USA is also to be treated as deemed associated enterprise as per section 107A(2)(L).
8 May Jun
Mr. Rahman owner of smart fabric which has three out let in Dhaka. He has recently opened 2013
a new out let at UK and Mr. Rahman has decided to transfer the goods from Bangladesh but
he does not know the system of computation of transfer price and keeping of information,
documents and records as per income tax Ordinance 1984. What are the methods to compute
the transfer price and what records, information and documents are to be kept as per income
tax Ordinance 1984?
In pursuance with Chapter XIA of ITO 1984, transfer price shall be determined having regard to the arm‟s
length price. As noted u/s 107C of ITO 1984, the arm‟s length price in relation to an international
transaction shall be determined by applying the most appropriate method or methods selected from the
following methods based on the nature of transaction, the availability of reliable information, functions
performed, assets employed, risks assumed or such other factors as may be prescribed, namely:-
a) Comparable uncontrolled price method;
b) Resale price method;
c) Cost plus method;
d) Profit split method;
e) Transactional net margin method;
f) Any other method when none of aforesaid method can be reasonably applied to determine the arm‟s
length price for the international transactions and such other method which yields a results consistent with
arm‟s length price,
Records. information and documents to be maintained relating to transfer price as per Section 107E of ITO
1984:-
1) Every person who has entered into an international transaction shall keep and maintain such
information, documents and records as may be prescribed.
2) Without prejudice to the provisions of sub-section (1), the Board may prescribe the period for which
the information, documents and records shall be kept and maintained.
3) The Deputy Commissioner of Taxes may, by notice in writing, require any person to furnish any
information, documents and records as prescribed under sub-section (1) within the period as may be
specified in the notice,
9 The following notes to the accounts pertaining to related party disclosures have been extracted from May
annual report of 2016 of MNC Ltd., a large FMCG manufacturing company of Bangladesh, ,where Jun
all the related parties are situated abroad except Bangladesh Prime Financing Ltd. 2016
Related party transactions during the Year
For y/e: For y/e:
30June 2017 30June 2016
Name of related parties Nature Nature of Taka Taka
Transactions
Singapore Quality FMCG Shareholder Dividend payment 10,000,000 11,000,000
Inc Trademark 100,000 100,000
Bangladesh Prime Shareholder Dividend payment 5,000,000 5,500,000
Financing Ltd.
Prime Communications Associate Purchase of IT 1,200,000 1,100,000
Solutions Ltd. service and software
Maintenance
Singapore Quality Group entity Management and 200,000 200,000
Consultancy PLC professional service
Fee
IT Support Cost 170,000 210,000
Singapore Civil PLC Group entity Engineering service 130,000 110,000
Fee

Singapore Machineries Group entity Professional service 220,000 180,000
PLC Fee
Singapore Asset Group entity Asset management 3,200,000 2,500,000
Management Ltd. service fee
Receivables/(payables) with related parties
as at 30 as at 30
June 2017 June 2016
Name of related parties Nature Nature of Taka Taka
Transactions
Singapore Quality FMCG Shareholder Accounts payable (40,000) (30,000)
Inc
Prime Communications Associate Accounts receivable - - -
Solutions Ltd. Accounts payable (260,000) (117,000)
Singapore Quality Group entity Accounts receivable 65,000 33,000
Consultancy PLC
Accounts payable (300,000) (200,000)
Singapore Civil PLC Group entity Accounts receivable 112,000 320,000

Singapore Machineries Group entity Accounts receivable - - -
PLC
Singapore Asset Group entity Accounts receivable - - -
Management Ltd.
Requirement:
Prepare the Statement of International Transactions of MNC Ltd. for the assessment year
2017-18 in accordance of Section 107EE of the Income Tax Ordinance, 1984 and Rule
75A of the Income Tax Rules 1984.
(a):
STATEMENT OF INTERNATIONAL TRANSACTIONS

(Section 107EE of the Income Tax Ordinance, 1984 and Rule 75A of the Income Tax Rules, 1984)
A. Particulars of the Assessee:
1. Name of the Assessee:
2. T IN :
3. (a) Circle: (b) Taxes Zone:
4. Assessment Year:
5. Income Year:
B. Particulars of international
transactions:PART-I
Tangible property of revenue and capital nature transaction
Expense Revenue
TPM TPM
Item (Thousand % (Thousand %
Code Code
Tk.) Tk.)
Stock in trade / raw materials - - - - - -
*Other (specify) - - - - - -
Rent, royalties and intangible property related transaction

Expense Revenue TPM
TPM
Item (Thousand % (Thousand C o d e %
Code
Tk.) Tk.)
Rent - -
- - -
-
Royalties (for the use of patents,
1,00,000 - - - - -
trademark etc.)
License of franchise fees - -
- - - -
Intangible property or rights -
- - -
(acquired or disposed of) - -
Services related transaction

Expense % Revenue
TPM TPM
Item (Thousand (Thousand %
Code Code
Tk.) Tk.)
Treasury related services - - - - - -
Management and administrative
200,000 - - - - -
services
Sales and marketing services - - - - - -
Research and development - - - - - -
Software and 1CT services 1.370,000 - - - - -
Technical and engineering services 350,000 - - - - -
Commissions - - - - - -
Logistics - - - - - -
Asset management 3,200,000 - - - - -
*Other services (specify) - - - - - -
Financial transaction
Expense Revenue
TPM TPM
Item (Thousand % (Thousand %
Code Code
Tk.) Tk.)
Interest - - - - - -
Sale of financial assets (including
factoring, securitization and - - - - - -
securities)
Lease payments - - - - - -
Securities lending (fees and
- _ _ - _
compensation payment) -
Insurance and reinsurance - - - - - -
Guarantees - - - - - -
*Other financial services (specify) - - - - - -
Any other international transaction of revenue nature not reported above:

Expense Revenue
TPM TPM %
Item (Thousand % (Thousand
Code Code
Tk.) Tk.)
Total of PART-I 5,220,000
PART-II
Interest bearing loans, advances and investments (figures in thousand taka)
Opening Closing
Item Increase Decrease
Balance balance
Amounts owed by the assessee - - - -
Amounts owed to the assessee - - - -
Interest-free loans, advances and investments (figures in thousand taka)

Opening Closing
Balance balance
Amounts owed by the assessee - - - -
Amounts owed to the assessee - - - -
Current accounts and similar items (figures in thousand taka)

Opening Closing
Balance balance
Amounts of accounts payable 739,000 170,000 - 909,000
Amounts of accounts receivable 265,000 - 191,000 74,000
I , --------------------------------------------- , Designation Chief Financial Officer of MNC Ltd., solemnly declare

that to the best of my knowledge and belief the information given in this form is correct and complete.
Place: Dhaka
Date :
Signature
(Name in Block Letters)

Designation and Seal
10 Since MNC Ltd. regularly incurs a handful number of transactions with foreign related parties for May
the purpose of its business, they want professional advice with regard to agreement with AE and June
related information and documentation. Draft a letter in reply of the request to CFO, Mr. A. 2016
Kibria seeking your advice on factors to be included in agreement with AE and
documentation to prepare to deal with the new provisions of Income Tax law relating to
foreign transactions with associated enterprises.
Date:
Mr. Mr. A. Kibria

Chief Financial Officer
MN C Ltd.
Subject: Requirements on entering agreement, pricing, information and documentation relating to foreign transactions
with associated enterprises
Dear Sir,
Please refer to our meeting on 31 May 2017 at our office when you sought our guidelines on factors to be included
in agreement with AE, information to be collected from AE and documentation to prepare to deal with the
provisions of Income Tax laws relating to foreign transactions with associated enterprises. Considering our
discussion, we are providing below necessary guidelines on aspects as stated above.
Factors to be included in the agreement with AE:
1. Description of services: Description of the exact nature of services to be rendered by the AE should
be incorporated in the agreement. Such information may be detailed in a separate appendix to the
agreement and updated annually if services are to be availed on an ongoing basis..
2. Initiation and expiry date: The effective date of agreement and the expiry date should be clearly
mentioned. In case there is any change in nature of services or price, the same can be agreed by way
of addendum to the agreement.
3. Roles and responsibilities of MNC Ltd. and AEs: The agreement should define the roles and
responsibilities of each party including but not limited to provision of services by AEs, assurance that
services meets the agreed standards, how will the services be requisitioned etc.
Information to be collected from AE:

The following information is required to be collected from AE and make it ready to deliver to the tax authority:
1. Financial statements of the AE, along with consolidate financial statement of the group.
2. Details of cost incurred by AE for rendering services
3. Details of cost allocated to MNC Ltd. along with the basis of cost allocation
4. Analysis undertaken to substantiate the arm‟s length nature of the mark up charged on services rendered.
5. Documents to substantiate those services have actually been received from AE.
Documents for tax authority:
The following documents should be maintained and presented for audit conducted by tax authority
1. Copy of the agreements entered into by MNC Ltd. with the AEs
2. Copy of the invoices
3. Documents evidencing receipt of services by MNC Ltd.
4. Documents evidencing benefits received from receipt of services from AEs
5. Documents evidencing that services rendered by AEs are not duplicative
6. Documents evidencing cost incurred by AEs for rendering of services
We expect that, our above guidelines shall suffice your queries so as to enable you to take necessary
preparation on TP issues. Thank you very much for taking us to your confidence.
10 You are an ICAB CA, Tax Partner of a firm of Chartered Accountants. Your clientele includes Good Nov
Hope Limited(GHL) which is a public company in Bangladesh. You are in the process of gathering Dec
information to prepare „Statement of international transactions‟ u/s 107EE of the Income Tax 2015
Ordinance 1984 and Rule 75A thereof to go with the Tax Return of GHL for the year ended
30.06.2017. This will be the first return of GHL with international transactions statement under TP
regulations(Chapter XIA of the Ordinance). As all Associated Enterprises(AE) may not have
international transactions for TP reporting, identifying those Associated Enterprises that have
International Transactions are critical for a correct tax Return under TP provisions and for the
statement u/s 107EE, Rule 75A. Related Party Disclosure in the audited accounts provide important
sources of transactions with TP sensitivity, if not all. Following Notes to the Accounts on „Related
Party Transactions‟ are extracted from the Annual Report of Good Hope Limited for year ended 30-
06-2017(previous year‟s figures unconsidered):
GOOD HOPE LIMITED

NOTES TO THE ACCOUNTS : Related Party Transactions on Arms‟ Length Basis(Amount in
BDT):
Associate Companies
A Ltd.(a Hong Kong registered company in HKG) is the wholly-owned subsidiary of GHL.
B Ltd.(a Bangladeshi company in Dhaka) in which Mr. AnwarulKarim(Chairman of GHL) is
aDirector
C Ltd. Branch(A Hong Kong Branch in Bangladesh) which is wholly-owned by A Ltd.
D Ltd. (Bangladesh registered/managed Indian subsidiary),Indian parent company fully
owned byA Ltd.
E Ltd.(A Bangladeshi company) wholly-owned by GHLwhich is an exclusive
„AGENCY‟ofALtd. of HKG.
Joint Venture Company

F Ltd.(An Indian-BD JV in Delhi), GHL holding 24%, in which GHL‟s Mr. AnwarulKarim sits as
Chairman.
G Ltd.(a French-BD JV, managed in BD) where GHL holds 51% and a French Company
holds49% shares.
Key Management Personnel and Relatives
KMP :Mr. AnwarulKarim, Chairman of GHL.
KMP Relative: Ms. Tania Karim, daughter of Mr. AnwarulKarim and a French, Country
ManagerofFrench LO.
(Figures in Taka)
Relativ o
Nature of Associate Joint Key es French
f Liaison TOTAL
Transactions Companies Venture Managerial KMP Office where
Companies Personnel KMP relative
(KMP) interested
Goods sold(1) 20,000,000 1,000,000 21,000,000
Fixed assets 1,000,000 500,000 1,500,000
Purchased(2) (with F Ltd)
Loan Given(3) 5,000,000 1,500,000 6,500,000
(with G Ltd)
Interest 300,000
Income(4) (with G Ltd) 1,300,000
Dividend 600,000 50,000 (with 650,000
Income(5) F Ltd)
Recovery of 1,500,000 500,000 2,000,000
Expense(6)
Royalty 250,000 250,000
Received(7)
Remuneration 5,500,000 5,500,000
Notes on the break-up of various transactions made by GHL with Associate Companies:
1) Goods Sold: A Ltd. Tk.5,000,000/=, B Ltd. Tk.2,500,000/=, C Ltd. Tk.2,500,000/=, D
Ltd.Tk.5,000,000/=, E Ltd. Tk.5,000,000/=
2) Fixed Assets Purchased :B Ltd. Tk.500,000/=, C Ltd. Tk.300,000/=, D Ltd. Tk.200,000/=.
3) Loan Given :D Ltd. Tk.3,000,000/=, E Ltd. Tk.2,000,000/=.
4) Interest Income: D Ltd. Tk.600,000/=, E Ltd. Tk.400,000/= .
5) Dividend Income: A Ltd. Tk.500,000/=, E Ltd. Tk.100,000/=.
6) Recovery of Expense :B Ltd. Tk.1,000,000/=, D Ltd. Tk.500,000/=.
7) Royalty received: A Ltd. Tk.250,000/=.
Transfer Pricing (TP) Regulations are now in spotlight in Bangladesh with first tax return
underTP regulations due this year. Over 1500 BIDA-permitted Liaison Offices in Bangladesh form
largest segment of foreign interests in numbers. Liaison Office (LO) shown in the Good Hope Ltd.
„Related Party Disclosure Note‟ above belongs to a French retailer(company). Information of this
French Liaison Office, details about how you got introduced to the Country Manager, concerns of
parent company management with respect to TP provisions applicability to LO, key transactions
with parent company, your meeting with Tania Karim, the Country Manager of LO, her personal tax
matters etc. are in EXHIBIT 1.
Requirements:
(a) List the „international transactions‟ from above-mentioned Related Party disclosure of Good
Hope Ltd. in terms of TP provisions u/s 107EE of the Income Tax Ordinance 1984
mentioning the relevant „Associated Enterprise(AE)‟, „Nature of transactions‟,
„AmountReceived‟, „Amount Paid‟ to form inputs for Statement of International
Transactions(no need to follow format of 75A).
(b) Peruse and consider Exhibit 1. Make a professional opinion for Ms. Tania
KarimcoveringTP exposure, if any, for the French parent company with the Liaison Office in
Bangladesh. Your opinion should, interalia, include if this LO is an AE u/s 107A(2) of the
Ordinance for the purpose of its own tax return filing in Bangladesh and if so what
constitutes its international transactions for y/e 30-06-17 from the information in Exhibit 1,
its probable exposure under TP regulations, your conclusive recommendation(showing
reasons) with guidelines for upcoming tax return of this LO.
(c) Ms. Tania seeks your further consultation on her personal tax issue. Please explain with
reasons if DCT‟s order is correct and what should Ms. Tania do now under the
circumstances.
EXHIBIT 1(In connection with Question 3b, 3c)

Information on French Company’s Liaison Office in Dhaka
This BIDA-permitted Liaison office (LO) in Dhaka is owned/controlled by a French RMG retailer
(private limited company). The LO is engaged in QC, inspection, liaison of French company‟s RMG
orders placed directly with suppliers in Bangladesh. Ms. Tania Karim, daughter of GHL Chairman
studied Fashion Design in Paris and accepted French nationality. Tania joined this LO as the Country
Manager with Work Permit from BIDA (effective 16.01.2017). National Board of Revenue (NBR)
conditionally allowed Liaison Office dispensation from tax liability and on meeting those conditions,
a LO shall not be assumed of having any commercial activity u/s 18(2)(a) of the Income Tax
Ordinance and, thereby, made LO a tax-exempt entity. Major conditions for tax-exempt LO, interalia,
include inward remittance from parent company to meet 100% local expenditure, it works only
onbehalf of its parent company, it engages in inspection, quality control and liaison of the parent
company export orders, it doesn’t involve in self-buying or in own name and it does not engage in
any local income activity. This LO compliesallconditions. Exports executed for French company
through the liaison of this LO during the year ended June 30, 2017 is USD 10 million. This LO
brought in from its parent company foreign currency equivalent of Tk.10,000,000/= during the year
ended June 30, 2017 through the bank to meet its local expenditure; current tax return filing due by
December 31, 2017.
You, in the capacity of Good Hope Ltd. tax adviser, were introduced to Ms. Tania by her father.
French management advised Tania to consult a tax lawyer covering the TP exposure, if any, of the
Liaison Office. It is argued that a LO operates like a conventional „buying house‟ and Bangladesh
misses tax on LO transactions as it allegedly fails to meet Comparable Uncontrolled
Price(CUP)method tests. Under Bangladesh-France DTAA, a Permanent Establishment (PE) does
not include foreign entity which maintains a fixed business place solely for the purpose of purchasing
goods or ofcollecting information for the enterprise. Tania met you on 31.07.2017.
Ms. Tania came to Bangladesh for the first time in five years and joined this Liaison Officeas a
French expat from 16-01-2017 at monthly salary of USD 7000/=(Tk.550,000/=). Tania‟s bank a/c
with HSBC Dhaka delayed. French parentcompany paid Ms. Tania initial 3.5 months salary (from
16.01.17 to 30.04.17) into her Paris bank account instead. She received salary in Dhaka for May and
June, after HSBC account is operational from May. Tania filed her own tax return for the
Assessment Year 2017-18 (accompanied by Work Permit copy and tax pay order at highest rate on
for gross two months salary – May and June). DCT took the view that the taxability arises in the
country where service is rendered and he issued AO with additional tax demand at highest rate
taking into account salaries for the entire period fromwhich BIDA Work Permit has been effective
(from 16.01.17 to 30.06.17).
(a)
Section 107A(2) defines Associated Enterprise(AE) as an enterprise(as defined) which bears defined relationship
withother enterprise. To be AE, there must be two or more enterprises. For a transaction to be „international
transaction‟mere presence of two enterprises with defined relationship is not enough. In other words,
Transactions between two resident parties are not international transactions. For a transaction to be „international
transaction‟, either or both of the AEs must be non-resident. As GHL is a resident company in Bangladesh, allAEs of
GHL for the purpose of international transactions must be non-resident.
The list of international transactions with Good Hope Limited is tabulated below (not in the format of Rule 75A)
GOOD HOPE LIMITED (GHL)
List of International Transactions
For the year ended 30.06.2017
Associated Transaction Amount Amount Paid Explanation
Enterprise Nature Received (Tk.) (Tk.)
A Ltd. Goods Sold 50,00,000 GHL holds >25% shares in A Ltd.(a

Dividend income 5,00,000 nonresident)
Royalty received 2,50,000
C Ltd. Goods Sold 25,00,000 c Ltd. is a HKG branch (non-resident in
Branch Assets bought 3,00,000 Bangladesh; owned by A Ltd.
G Ltd. Loan Given 15,00,000 G Ltd. is a non-resident in India.
AlthoughGHL holds less than 25%
share. the commonperson (Mr.
India-BD JV Interest Income 3,00,000 AnwarulKarim) sits in GHL and
G Ltd. board
(b)
Question is to provide opinion on whether French Liaison Office is an AE u/s 107A(2) and, if so, what constitutes
International transactions for its own return filing. Opinion should also identify the potential exposure of the French
Liaison Office in Bangladesh under the Transfer Pricing Regulations (Chapter XIA) of the Income TaxOrdinance
1984 with the recommendation. Answer to this question is given below in the form of a letter to the Country
Manager.
Date:
To Ms. Tania Karim
Country Manager
French Liaison Office in Dhaka
Please refer to your meeting with us on 31.07.2017 at our office when you seek our opinion on the taxation matter of
your Liaison Office under the Transfer Pricing regulations in Bangladesh. Considering our discussions and the
contents of Exhibit 2 of the question, we are providing our opinion in this regard as follows:
BACKGROUND AND UNDERSTANDING OF THE ISSUE

Liaison Office is given dispensation from tax liability under the NBR Circular no-10(2)Tax-8/96 dated 21/10/1998
on fulfillment of certain conditions and on the same count, NBR confirmed, Liaison Office shall not be assumed as
having any commercial activity u/s 18(2)(a). Your French Liaison Office reportedly complies all conditions of the
NBR circular; it files annual tax return and obtains tax clearance on zero tax demand. French company places direct
orders with Bangladeshi RMG suppliers who raise invoices direct to French company (USD 10 million exports).
Liaison Office simply involves in QC/liaison of the export orders of the parent company. Liaison Office receives
inward forex remittance through central bank approved bank account (received eqvt. Tk. 1,00,00,000/=) from French
parent company to meet its expenditure. L.O. fully complies with withholding tax and VAT responsibility. Among
others, it‟s a BIDA and Bangladesh Bank approved entity and it has no local income, nor any commercial activity
beyond those contained in the BIDA permission and, therefore, there is no regulatory breach whatsoever. The
Liaison Office is managed and controlled by parent company in France.
ANALYSIS OF THE ISSUE
Inapplicability of section 18(2)(a) for Liaison Office by NBR circular confirms that there accrues or arises directly or
indirectly no income to the Liaison Office. The inapplicability of Section 18(2)(a) and your continued complying the
given conditions for a „tax-exempt‟ status are central to emphasize. Your Liaison Office continues complying the
conditions and obtained tax clearance on zero demand in the past years. L.O. is not an independent entity; it only
works for parent company within the given conditions. There appears no scope of ALP tests in the remittance
transactions from parent company. Chapter XIA of the Ordinance for TP has not been given a pervasive mandate
over other sections of the same Ordinance.
Bangladesh & France have DTAA. Liaison Office only involves in QC, inspection and liaison of parent company
orders. In other words, it also does not constitute to be Permanent Establishment (PE). Chapter XIA for TP defines
PE separately. If conflicting, assessee is entitled to the benefit of the better one, i.e., DTAA override would prevail.
An entity, not being a resident and not being a PE, does not attract outright taxation unless specific taxable income
arises in Bangladesh. French Liaison Office does not have any specific income in Bangladesh to be taxed as a non-
resident and non-PE, besides inapplicability of section 18(2)( a).
The remittance of taka 1,00,00,000/= between Liaison Office and French parent company, two being nonresidents,
are the international transactions u/s 107A(5).
Liaison Office income tax return filing is not waived up in the NBR circular. So, on the same count, the „Statement
of International Transactions‟ u/s 107EE, which is to be accompanied by the annual Tax Return as it is not waived
up for the Liaison Office The ordinary assessment proceedings shall take place and finally the Liaison Office is
supposed to obtain tax clearance on zero demand.
OPINION ON THE ISSUE AND RECOMMENDATION
With the above-mentioned understanding, assumptions and analysis, we opine that:
French Liaison Office is an Associated Enterprise (AE) u/s 107A(2) in relation to its parent company.
Inward remittance of BDT 1,00,00,000/= constitutes international transactions between the Liaison Office and parent
company. Remittance is a transaction between two non-residents. Liaison Office annual tax return should accompany
Statement of International Transactions u/s 107EE at the format given at Rule 75A.

Although the French Liaison Office is an AE and it has international transactions with its parent company, there is
no tax exposure under TP regulations. Its status as non-resident and non-PE status and, overall, the inapplicability of
section 18(2)(a) under NBR Circular does not pose LO to tax. Continue maintaining complete compliance of the
NBR conditions, BIDA permission conditions, Central Bank permission conditions and TDS and VAT withholding
compliance consistently.
Hope, our above opinion shall be useful to yourself and to your French management. Thank you very much for your
interest in our service.
Thank you very much for your assistance,

Sd/=
(c)
Question is whether DCT‟s view of taxing Ms. Tania in Bangladesh from 16.01.17 to 30.06.17 under the head salary
which she received partly in France and partly in Bangladesh.
Ms. Tania arrived/joined Bangladesh Liaison Office of the French company on 16.01.2017. She is, therefore, non-
resident for tax purpose in the relevant income period under assessment year 2017-18, as she resides less than 182
days in Bangladesh and she came first time on 16/01/2017 in 5 years. So she will have to pay tax on Bangladesh
income only. Salary income from 16/01/2017to 30/6/2017 is taxable in Bangladesh as per section 18(1) of ITO, 1984
where it was clearly stated that in case of non-resident salary income will be taxed in Bangladesh, wherever paid, if
it is earned in Bangladesh.
So in our opinion DCT‟s action was correct. Ms. Tania should pay balance tax immediately.
11 ABC Ltd. is a Bangladeshi RMG company, having its factory in Jessore, in which XYZ Inc., a Nov Dec
UK based company has 28% shareholding and voting power. The management of these two 2017
company is going to enter into an agreement on the following transactions:
a) ABC Ltd. will sell 1,000,000 pieces of T-shirts @ $2 per T-shirt to XYZ Inc. This type
of T-shirts is generally sold to unrelated parties namely @ $3 per T-shirt.
b) ABC Ltd. will borrow $200,000 from a foreign lender based on the guarantee of XYZ
Inc. For this, ABC Ltd. will pay $10,000 as guarantee fee to XYZ Inc. To an unrelated
party for the same amount of loan, XYZ Inc. collects $7000 as guarantee fee.
c) ABC Ltd. will pay $15,000 to XYZ Inc. for getting various potential customers
details to improve its business. XYZ Inc. provides the same to same services to
unrelated parties for $10,000.
d) ABC Ltd. will procure used machineries from XYZ Inc. costing $150,000 which will be
paid in four installments.
Furthermore, in the current year, ABC Ltd. will need to write off receivable amount from XYZ
Ltd.amounting to Tk. 1,000,000.
MAT & Co, Chartered Accountants, acts as tax consultant of ABC Ltd. You are a Chartered
Accountant and currently working as Director of Transfer Pricing Department of MAT & Co.
The CFO of ABC Ltd. requested you to provide your opinion in the report form on the above
matters, which will assist ABC Ltd. to get an extensive idea on tax exposure according to
Bangladeshi Tax Law. On the basis of your report, ABC Ltd. will make their tax planning and
determine their decision. [Consider 1$= BDT 78]
Requirements:
Your report should cover the following issues:
a. Brief discussion on area of implication of TP regulations.
b. Elaboration of TP aspects on the above issues, demonstrating financial impact of tax
exposure.

The Managing Director
ABC Ltd.
18 December 2017
Dear Sir:
Report on the queries based on Transfer Pricing Provisions
Please refer to the subject mentioned above and your request providing professional opinion(s) on the various
issue(s) raised therein. As requested, we are providing below our professional opinion:
Requirement # a
Provisions relating to TP as mentioned in Chapter XIA, Section 107A to 107J of the ITO, 1984, are applicable
from the income year 2014-15. The provisions relating to TP has been summarized below:
TP refers to the pricing of international transactions between two associated enterprises. Due to the
special relationship between related parties, the transfer price may be different than the price that would
have been agreed between unrelated parties. A price between unrelated parties is known as the “arm‟s length”
price. The provisions of TP are applicable only if:
 There are two or more enterprises
 The enterprises are Associated enterprises
 The enterprises enter into an international transaction
Method of TP: There are five methods for TP:
 comparable uncontrolled price method;
 resale price method;
 cost plus method;
 profit split method;
 transactional net margin method;
A statement of international transactions is required to be submitted as per section 107EE. The DCT may require a
report singed by a Chartered Accountant or a Cost and Management Accountant. There is also penal provisions
for non-compliance regarding TP provisions.
Requirement # b
ABC Ltd., the Bangladeshi Company and XYZ Inc., the UK based company are deemed to be associated enterprises
as per section 107A(2),as XYZ Inc. holds shares carrying not less than 25% of the voting power of ABC Ltd.
As per section 107A(5), the transactions entered into between these two companies for sale of product, lending or
guarantee and provisions of services are included within the meaning of international transactions.
Accordingly, provisions of transfer pricing would be attracted and the income arising from such international
transactions have to be computed having regard to arm‟s length price. In this case from the information given, the
arm‟s length price has to be determined taking the comparable uncontrolled price method to be the most
appropriate method.
Amount by which total income of ABC Ltd. is enhanced on account of adjustment in the
Taka
value of international transactions:
a) Difference in price of T-shirt @$ 1 each for 1,000,000 pieces sold to XYZ Inc. 78,000,000
($ 1 X 1,000,000 X 78)
b) Difference for excess payment of guarantee fee to XYZ Inc. for loan borrowed 234,000
from foreign lender ( $ 3000 X 78)
c) Difference for excess payment for services to XYZ Inc. ( $ 5000 X 78) 390,000
d) Bad debt written off: it will be admissible expenditures only when proper -
supporting is presented, such as, supporting related legal action taken for recovery,
board resolution, etc. No impact under TP regulations.
Total 78,624,000
Amount of Tk. 78,624,000 will be added back to the taxable income under section 107C(5) of the ITO, 1984.

Should you have any query in this regard, feel free to contact us.
Yours faithfully,
MAT & Co.

Chartered Accountants

12 Tax heaves or Offshore Financial Centres (OFC) are financial jurisdictions outside the Nov –
regulations of one‟s own nation used by companies and individuals to lower their taxes on Dec
profits and assets. They are often small islands, such as, Cayman Island, mostly in the 2017
Caribbean. After „panama paper leaks in 2016, now hit the headlines are „Paradise Papers‟
which contain millions of documents reportedly from offshore legal and corporate service
providers. Names are up in the media in ref to Paradise papers including name of an accounting
firm which allegedly worked for dodging assessees. You, a CA, involve in cross-country tax
practice.
One of your clients, „Cell BD Ltd‟, a Bangladeshi public limited JV company, is a mobile
operator in Bangladesh. Cell BD Ltd. is owned 75% by „Cell CI Ltd.‟, a Cayman Island (tax
heaven) company which is 100% owned by Cell UK Ltd. As BTRC stopped issuing new license,
Mobile UK Ltd., which is wanting to enter Bangladesh market hammered out a strategic
investment deal with Cell UK Ltd. to take control in Cell BD Ltd. through „Cell CI Ltd‟
Pre-Transfer Structure Post-Transfer Structure
Cell UK Ltd. Mobile UK

owns 100% Ltd.
Cell CI Ltd. Mobile CI

owns 75% Ltd.
Cell BD Ltd Mobile BD

Ltd
Share capital of „Cell CI Ltd.‟ is US$1.0 million. „Mobile UK Ltd.‟ bought the entire share of
Cell CI Ltd. for US$2.0 million from Cell UK Ltd. Mobile UK Ltd. made full payment to Cell
UK Ltd. in UK for the transfer and then changed the name of Cell CI Ltd. to „Mobile CI Ltd.‟ in
Cayman Island and from Cell BD Ltd. to Mobile BD Ltd. in Bangladesh. Cell UK Ltd. made a
huge gain on the transfer which is in public through media. You have filed tax return for your
client (Cell BD Ltd.) with the audited accounts for the relevant income year which depicts
information about the ownership change and subsequent name change. Tax Dept issued a show-
cause notice to Mobile UK Ltd and to your client to explain why tax was not withheld u/s 56 on
payments made by Mobile UK Ltd. to Cell UK Ltd. in relation to the share transfer in Cell CI
Ltd. Tax department contended that the share transfer in Cell CI Ltd. derived its value from
assets in Cell BD Ltd. and thus it implicated a connection u/s 18(2). Tax Department argued, the
controlling shareholding obtained by Mobile UK Ltd. in Cell BD Ltd.(75%) has its residential
status in Bangladesh and, therefore, the capital gain arising on this share transfer outside
Bangladesh is liable to tax in Bangladesh as an „indirect transfer‟. Mobile UK Ltd. is considering
a HC writ in Bangladesh challenging department‟s demand and approached you, as tax lawyer of
their Bangladesh subsidiary, for technical tax views.
Requirements:
a. Brief your views about the legality of investment in tax heavens by Bangladesh resident
assessee having overseas operations in ref to IT Ordinance. What are the ethical
implicationsof a Professional Accountant in practice and your position if approached by
such a client.
b. Consider share transfer case of Cell CI Ltd. Write technical inputs in ref to applicable
tax provisions, treaty and case decision, if any, giving your views on the validity of tax
demand on such share transfer
a:
An OFC (Offshore Financial Centre) or tax heaven is a country or also just a part of a country that offers low
tax rates or even no taxes at all for foreign investors. Disclosure and information exchange with other countries are
limited. If Bangladeshi resident assessee, having foreign income, duly taxed in source country and disclosed
the same fully under the concept of scope of world income u/s 17 in Bangladesh and invests part of his such
taxed income in tax heaven country, it may not be termed as an illegal conduct.
As Bangladesh Foreign Exchange regulations generally prohibit transfer of fund out of Bangladesh,
investment in OFCs or tax heavens from Bangladesh shall be generally illegal. If any resident assesse uses
OFCs to hide untaxed income, it‟s an utter illegal conduct. Leaks through Panama papers and now Paradise
papers generated extreme heat globally naming corporations and individuals of high profile. These leaks
reveal that so-called tax heavens, though may not be illegal, are being used for illegal purpose. and they tend to
offer laws and measures that can be used for tax evasion.
Ethical implication for a professional accountant in practice is huge and specific when dealing with a client
having stake or intention to invest in tax heavens. As the activities involving OFCs are increasingly being proved
illegal, accountant must take special care to stay off those sensitive clients. Dealing with such clients brings
threats to major fundamental ethical principles like Integrity, confidentiality and professional behavior.
We cannot do anything that discredit our professional and contravene laws and regulations (like tax law, foreign
exchange law). Self-interest threat, familiarity threat and intimidation threats are prominent in this kind of client
relationship and strong safeguards to mitigate these threats are not much there. Therefore, I shall resign from the
service to such client if my consultations to stay legal seem to be failing.
b:
Tax Department issued notice to my assessee and its grandfather holding company to explain why tax was not
withheld u/s 56 on payments made by Mobile UK Ltd. to Cell UK Ltd. for transfer of 100% shares in Cell CI
Ltd. which holds 75% of Mobile BD Ltd. Tax Dept contended that the share transfer in Cell CI Ltd. derived
its value from assets in Cell BD Ltd. and thus it implicated a connection u/s 18(2).
In my view, tax department‟s notice stems from a misunderstanding to differentiate between „sale of company
shares‟ and „sale of company assets‟ of the company. Ownership of share of a company does not mean
ownership of assets of that company. The transfer of shares of one non-resident company (Cell UK Ltd.) to
another non-resident company (Mobile UK Ltd.) did not result in the transfer of any assets of Cell BD Ltd. in
Bangladesh. „Share sale‟ is one of the many different restructuring strategies adopted by corporate
managements. It cannot be argued that sale of shares in UK resulted in capital gain in Bangladesh which
binds Mobile UK Ltd. to deduct tax at source under Bangladesh tax law.
Section 18(2) provides for „income accruing or arising directly or indirectly through or from transfer of capital
assets in Bangladesh‟ but Cell UK Ltd. did not make any „indirect transfer‟ of any capital assets in Bangladesh. By
the transfer of Cell UK Share to Mobile UK, there has not been any transfer of the assets of Cell BD Ltd. As
18(2) does not invoke, application of section 56 does not arise at all. These sections shall not attract and,
therefore, gains arising to a foreign company from transfer of shares of a foreign holding company, which
indirectly held equity interest in an Indian operating company would not be taxable (Vodafone International
Holdings BV vs. Union of India, Supreme Court)
13 Captain Tausif U. Khan, a Bangladeshi young man, a successful RMG entrepreneur well- May
known in the selected EU customers network, operates following business units in Bangladesh June
(a,b,c being private limited companies):
2017
d) TUK and Partners (the Firm. Captain Khan‟s share 60%, balance with three friends)
e) TUK Singapore Limited (100% held by Captain Khan). TUK UK Ltd. (100% held by
Captain Khan)
Captain Khan is the MD of the limited companies in Bangladesh and only director in companies in
UK and Singapore. TUK BD Ltd. secures export orders from EU retailers from Bangladeshi
suppliers.
Captain Khan, living with his parents in Dhaka until he permanently migrated to UK with his family
in 2016. As condition of migration, he set up „TUK UK Ltd‟ during the relevant income year in UK.
He bought an apartment in London. Captain Khan qualifies for UK tax residency in 2016-17(ending
05.04.2017). He also qualifies for tax residency for the same income year in Bangladesh (2016-17,
ending 30.06.2017). Captain Khan provided following information affecting the income year 2016-
17:
i) He received total taka 30,00,000 (net of tax) tax-paid remuneration from three Bangladeshi
limited companies.

iv) Remuneration receivable from TUK and Partners (the Firm) taka 2,50,000 for the
income year ended 30.06.2016. In the income year ended 30.06.2016, the firm made
net loss taka 3,00,000.
v) Interest received on Resident Foreign Currency Deposit A/c (RFCD) equivalent Taka 25,000
net of tax.
vi) Singapore company paid his salary US Dollar 120,000/=. Of this, the company remitted
USD 50,000 to his London bank a/c to meet his London living and remitted USD 50,000 to
his Dhaka bank a/c to make up the shortfall of funds to buy a plot of land(Exchange rate
Taka 80 to USD; USD 1.25 to GBP; Taka 110 to GBP).
vii) He received compensation of taka 10,00,000 from a developer for cancellation of an
apartment-buy contract and his default penalty clause of taka 10,00,000 in a land-buy
agreement with a land seller has been waived to his favour.
viii) Paid Tk. 2,00,000/= interest on loan he took to buy a car and income tax Tk. 50,000 paid on
fitness renewal.
ix) He paid GBP 5,000 net income tax in UK after Singapore tax relief and USD 20,000 tax in
Singapore.
x) He sold his 9% share in TUK &Partners(Firm) for amount with a gain of taka
10,00,000/-. He invested full amount of gain in shares in a private limited company in
the same month.
Requirements:
Captain Khan qualifies for tax residency in UK in 2016-17 and also in Bangladesh for overlapping
income year (2016-17). How will you classify tax residential status of Captain Tausif U Khan in
Bangladesh for the purpose of filing tax return for Income year (30.06.2017) while he is tax
residentin same year in UK? How will you classifyan individualif you are unsure of „centre of
vitalinterest‟? Explain in reference to the DTAA standard fiscal domicile article.
Answer:
a)
Article 4 of DTAA provides for standard „fiscal domicile‟ criteria. A person is liable to pay tax by reason of his
domicile, residence, place of management or any other criterion of similar nature. An individual may be resident
in more than one country in the same income year. If an individual is a resident of both contracting state (say, in this
question of Bangladesh and UK), the individual shall be deemed to be a RESIDENT of the Contracting state in
which he has permanent home available to him. If he has permanent homes in both the countries, he shall be
deemed to be a RESIDENT of the country with which his personal and economic relations are closer (center of
vital interest).
As Captain Khan is tax resident of both Bangladesh and UK, he has permanent residence in both countries, his
centre of vital interest is in Bangladesh as his personal and economic including business connection is closer in
Bangladesh. In other words, he is tax resident in Bangladesh for the purpose of computing his total world income.
If an assessee‟scenter of vital interest cannot be ascertained. Hisdomicile, birth country, connection to parent and
properties, nationality etc. shall decide his tax residency for income computation.
14 XYZ Bangladesh Ltd. a 100% Chinese equity-held „A‟ category private company, operating as Nov Dec
export-oriented(deemed) security label products factory in Savar EPZ and enjoying 10-year tax 2016
holiday, have related party transactions. You are an ACA, working as deputy to the CA Firm‟s
tax partner who specializes in TP. Tax partner advised XYZ as to the appropriate methods for
pricing international transactions. He filed tax return of XYZ Bangladesh Ltd. for income year
ended 30.03.2017 together with Statement u/s 107EE of the Ordinance, Rule 75A; selected
extracts are:
Particulars of International Transactions (XYZ Bangladesh Ltd. For y/e 30.03.2017)

PART – I Tangible property of revenue and capital nature transactions
Item Expense(‘000) TPM Code % Revenue(‘000) TPM Code %
Export of F/G 150,000 TNMM 15%
Import of R/M 50,000 TNMM 10%
Import of Machineries 200,000 OTHER 75%
Service related transactions
Item Expense(‘000) TPM Code % Revenue(‘000) TPM Code %
Management Fee 10,000 TNMM 100%

PART – II
Interest free loans, advances and investments (figures in ‘000 taka)
Item Opening Balance Increase Decrease Closing Balance
Due to Assessee ---- 5,000 --- 5,000
Current accounts and similar items (figures in thousand taka)
Item Opening Balance Increase Decrease Closing Balance
Accounts Payable 35,000 50,000 -- 85,000
Accounts Receivable 65,000 50,000 115,000
Export of F/G to AE are same “label products”. The import of R/M include semi-finished label
papers of high specifications which are available only with one Chinese supplier; the AE in
question has global volume contract with Chinese Supplier. Machineries include state-of-the-art
printers from proprietary sources. Management fee is shared cost of technical team sitting in
China under a Management Service Agreement with assessee. “Due to Assessee” includes
remittance made to Paris trading office of the company to support its initial set-up cost(opened
in March 2017). This new trading office is set up to secure nominations for its label products
from EU customers who source apparel products from Bangladeshi suppliers. DCT referred the
case for y/e 30.03.2017 to TPO u/s 107D. TPO served a notice to XYZ Bangladesh Ltd. u/s
107D(2) requiring to explain:
i) Why assessee relied TNMM method and “OTHER” method for reported/selected
transactions with AEs?
ii) Why TP adjustment should not be given on management fee paid to AE in Shanghai?
iii) Why TP adjustment should not be given on interest-free remittance to AE in Paris?
iv) Why TP adjustment should not be given for interest on overdue receivable from AEs?
Long working with TP specialist tax partner brought you experience on TP advisory. NBR
formed TP cell comprising of proven high-caliber officials from department. TP regulations are
new in Bangladesh. NBR advertised for a short-term consultant (preferably CA) to seek
technical supports to the cell in these initial days. You got this one-year engagement at NBR to
work as Consultant at TP Cell, to begin from January 2018.
Requirements:
a
)(a)Your tax partner wants you to draft explanations in ref to TPO notice. Cover reasons why
“TNMM”and“OTHER” methods are used by XYZ Ltd in its reported transactions as opposed to 8
bother methods.
)(b)Draft explanation for your partner covering the reasons as to why TP adjustments should not be
given for reported management fee, interest-free remittance and overdue receivable. 6
(c)During incumbency at NBR, you will support TP team with your findings identifying potential
adjustments involving critical returns. Assume, you are tasked by TP head to provide findings on
a return filed by your ex-Tax partner. Answer your position covering ethical threats, if any, and
your possible actions.
Answer:
A TP study on XYZ Ltd was carried out, ready for submission to tax authority. At XYZ Ltd., operating margin
is taken as profit level indicator (PLI) when using TNMM method. Rule 70(1) of the IT Rules, 1984 was
taken as guidance and thus the selected methods were decided for given international transactions. TNMM
uses objective measures of profitability, called Profit Level Indicators (PLI) to evaluate whether the price of
controlled transactions is at arm‟s length and so it was taken as appropriate for finished goods sale (export),
raw material import and Management fee. At XYZ Ltd, when using Transactional net margin method
(TNMM) for determining selling price of „label products‟, PBIT margin on export sales from sale transactions
with AEs were compared with the PBIT margin on sale from export transaction with unrelated customers.
Adjustments for difference in functional analysis between transactions with AEs and unrelated parties were also
given.
Similarly, for purchase of materials from AEs, PBIT margin on cost from transactions of purchase raw
material transactions with AEs were compared with the PBIT margin on cost from transactions of purchase raw
material transactions with unrelated suppliers. As the raw materials semi-finished, of high specifications and
they are sourced from selected Chinese suppliers under the global volume contract with AEs in Shanghai, the
scope of comparability with uncontrolled transactions were less. However, as the rim is procured under global
volume contract with AE, the price of raw material received by XYZ Ltd, was already competitive.
TNMM was used for Management fee also on the ground of simplicity. When doing this, the PBIT margin-
Management fee to AE at XYZ Ltd, was compared with the PBIT margin-Management fee relationship
practiced by unrelated competitors in the same industry sector (Label Products). Such comparison revealed
the size of management fee at XYZ is lower than that practiced at uncontrolled competitors.
Application of TNMM for export sale, r/m purchase and management fee thus made the operations
simple, objective and so the prices are duly in arm‟s length. Net margin under TNMM is less affected by
transactional difference than in the case with price under CUP method. Net margin is also a better indicator
than gross margin which is used in the case of CPM and RPM. PSM better suits service industry.
Use of „OTHER‟ method was used for transactions with AEs for purchase of machineries. These are state-of-
the art machines, purchased from proprietary sources to maintain the quality of label products. As the source is
„proprietary‟ and having no other alternative, no ALP pricing methods could be applied but the price of the
supplier was taken as it is, i.e., the method falls under „OTHER‟. Section 107C (f) allows using any other
method‟ where it can be demonstrated that none of the specific five methods can be reasonably applied to
determine ALP for given international transaction. XYZ had to resort to section 107C (F) for machinery
import fromproprietary source
(b)
Rule 70(1) was duly complied when determining the ALP methods for the three items of international
transactions. Further grounds why TP adjustments should not be given on those three items:
Management Fee to AE in Shanghai, China

i) Management fee is paid to AE using TNMM method which is the most reliable measure on merit, duly being
backed by Rule 70(1) of the IT Ordinance.
ii) Management fee paid is still lower than size of the item practiced by the uncontrolled competitors in the
same industry of label products export, revealed by TNMM approach.
iii) Pricing method has been determined after a detailed TP study, submitted with tax return.
iv) The payment is well documented and the amount within the limit of section 30(h) of IT Ordinance.
v) The amount paid to AE is towards sharing of the cost of the technical team in China (head quarter), well
documented, and under a formalized agreement duly approved by BIDA. The management fee recovers
proportionate cost of AE without any savings, as revealed by TP study FAR analysis.
Remittance to AE in Paris
i) New trading office in Paris was set up to market, coordinate and secure nominations of the EU retainers for the
assessee‟s label products, which will be a direct increase of assessee‟s export.
ii) AE in Paris, being non-resident, cannot make any local borrowing there. The only option for initial set up cost
was funding from the assessee. This remittance is also approved by Bangladesh Bank.
iii) Fund remitted to start the set-up could otherwise be treated as „capital expenditure‟ whereas the remittance has been
recognized as repayable loan to AE. This means better protection to assesse.
iv) Financial support made to AE comes under the ordinary business practice of assessee‟soperations. This is a
one-off assistance and amount is not very large. Assesse‟s business is not „lending‟. Therefore, there cannot
be any interest charge on the funds remitted.
v) The decision to support AE in Paris was duly approved by the BOD for greater business cause.
Receivable from AE
i) Receivable with AE is in the ordinary course of assessee‟s business operations, not extra-ordinary.
ii) Receivable is not alone with AE, other parties also have receivable balance as per payment term. Such
receivable is unavoidable in business.
iii) The annual increase figure of receivable is for an amount which is equally off-set by the payable to AE The
net effect on assesse is well balanced.
iv) There is no term of interest charge on the receivable with the AEs when sale was done.
(c)
As NBR consultant, 1 shall be in the character of a PAIB. Working on a file of my ex-tax partner‟s client
at my incumbency at TP cell may be an issue of „conflict of interest‟ which may create threats to objectivity
and other fundamental principles, such as, integrity, confidentiality and good reputation of my profession. I
shall be subject to NBR contractual terms, policies and procedure of NBR and the Govt. Secrecy law. I shall be
exposed to „familiarity threats‟ for my long association with ex-tax partner plus a threat of „self interest‟ for
the likely slide of my image if I fail to do a just job at TP cell. The threats are significant. No safeguard seem to
be relevant. I have to a firm position. As a TP Cell consultant, I shall draw an ethical wall both in fact and
appearance under the circumstances. I shall remain objective, confidential at all times and shall not allow any
undue influence including any familiarity pressure in my mind to override my professional judgment. I shall
not allow conflict of interest but shall disclose to my TP cell boss the fact of my relationship with ex-tax
partner and the tasked file in hand. If I am still tasked to do the job, on merit, I shall bring change in my
conduct with my ex-tax partner during my incumbency at TP Cell. Major threats as mentioned could thereby
be managed well.

4b Ethical Considerations (10%)
S.L Question Year
1 What are the factors to be considered by a professional Accountant while initiating a formal conflict May June
resolution process? 2012
When initiating either a formal or informal conflict resolution process, a professional accountant should consider the
following five factors:
 Relevant facts;
 Relevant parties;
 Ethical issues involved;
 Fundamental principles related to the matter in question;
 Established internal procedures;
 Alternative courses of action.
Having considered these issues, theappropriate course of action can be determined which resolves the conflict with all
or some of the five fundamental principles. If the matter remains unresolved, the professional accountant should
consult with other appropriate persons within the organization for help in obtaining resolution.
Where a matter involves a conflict with or within, an organization, a professional accountant should also consider
consulting with those charged with governance of the organization.
It is advisable for the professional accountant to documents held or decisions taken concerning that issue.
If a significant conflict cannot be resolved, a professional accountant may wish to obtain professional advice from the
relevant professional body or legal advisors, and thereby obtain guidance on ethical and legal issues without breaching
confidentiality.
If, after exhausting all relevant possibilities, the ethical conflict remains unresolved, a professional accountant should,
where possible, remain associated with the matter creating the conflict.
The professional accountant may determine that, in the circumstances, it is appropriate to withdraw from the engagement team
or specific assignment, or to resign altogether from the engagement or the firm.
2 You have been invited by the organizers of a seminar to deliver lecture on the responsibilities of May June
a Chartered Accountant rendering professional tax services. The organizers of the seminar 2016
informed you about the average understanding level of the participants. According to the
organizers, the participants might have perception that a Chartered Accountant rendering
professional tax services is obliged to act absolutely in the interest of his/her client/employer.
Requirements:
Prepare handouts addressing the following issues for distribution at the seminar to be held
next month:
(i)Responsibilities of a practicing Chartered Accountant to the public while renderingtax advisory
services.
(ii)Guidance for a Chartered Accountant, working in the tax department of a company, on
conflict of loyalties.
(i) Responsibilities of a practicing Chartered Accountant to the public while rendering tax
advisory services
A distinguishing mark of a profession is acceptance of its responsibility to the public. Here public means clients,
credit guarantors, governments, employers, employees, investors, shareholders, the business community, and
others who rely on the objectivity and integrity of professional accountants to maintain the orderly functioning of
commerce.
This reliance imposes a public interest responsibility on the accountancy profession. The public interest is defined as
the collective well-being of the community as a whole and institutions the professional accountant serves.

Professional accountants have an important role in society, Investors, creditors, employers and other sectors of the
business community, as well as the government and the public at large rely on professional accountants for sound financial
accounting and reporting, effective financial management and competent advice on a variety of business and taxation
matters. The attitude and behavior of professional accountants in providing such services have an impact on the
economic well-being of their community and the country.
It is in the best interest of the worldwide accountancy profession to make known to users of the services provided by
professional accountants that they are executed at the highest level of performance and in accordance with ethical
requirements that strive to ensure such performance. Tax experts help to establish confidence and efficiency in the fair
application of the tax system. A professional accountant's responsibility is not exclusively to satisfy the needs
of an individual client or employer. The standards of the accountancy profession are heavily determined by the
public interest. As such, a Chartered Accountant in practice, who advises on tax matters, also bears significant
responsibilities to the public.
(ii) Guidance for a Chartered Accountant, working in the tax department of a company,
onconflict of loyalties
Employed professional accountants owe a duty of loyalty to their employer as well as to their profession and there
may be times when the two are in conflict. An employee's normal priority should be to support his or her
organization's legitimate and ethical objectives and the rules and procedures drawn up in support of them.
However, an employee cannot legitimately be required to:
(a) Break the law;

(b) Breach the rules and standards of their profession;
(c) Lie to or mislead (including misleading by keeping silent) those acting as auditors of the employer; or
(d) Put their name to or otherwise be associated with a statement which materially misrepresents the facts.
Differences in view about the correct judgment on accounting or ethical matters should normally be raised and
resolved within the employee's organization, initially with the employee's immediate superior and possibly
thereafter, where disagreement about a significant ethical issue remains, with higher levels of management or non-
executive directors.
If employed accountants cannot resolve any material issue involving a conflict between their employers and their
professional requirements they may, after exhausting all other relevant possibilities, have no other recourse but
to consider resignation. Employees should state their reasons for doing so to the employer but their duty of
confidentiality normally precludes them from communicating the issue to others (unless legally or professionally
required to do so).
3 Explain when a Chartered Accountant acts as a ‘Principal’ and when as an ‘Agent’ to his tax client. Nov Dec
Which position is riskier? 2014
Principal
An accountant acts as “principal” when he provides advice to the client as to the taxation consequences of
different courses of action. The accountant may be liable to the taxpayer in the event the advice given turns out to be
incorrect or inappropriate.
Where an accountant does not have the professional skill required to act as a "principal" in a particular case he may
still accept the engagement. However, he must ensure that the correct opinion after consultation with experienced
qualified accountant.
Acting as a “principal” is therefore considered to be a high risk activity.

Agent
An accountant acts as “agent” when he merely prepares document on behalf of a client. The client retains responsibility
for the accuracy of the document itself. The accountant is thus an agent when performing tax compliance work such as
preparing and submitting a tax return on behalf of a client. The client would be required to sign the return prior to its

submission.
The accountant takes no responsibility for any information which he passes on to the tax authorities when acting as
an “agent”. The accountant is not normally liable if any of the information proves to be incorrect.
Acting as an “agent” is therefore considered to be a low risk activity.
4 1. Prepare a briefing note as regards tax evasion, tax avoidance and professional ethics to be May June
followed by a Chartered Accountant rendering taxation services. 2015
Briefing Note for the Management Team
Subject: Tax Evasion. Tax Avoidance and Professional Ethics to be followed by a Chartered Accountant rendering
Taxation Services.
Tax Evasion:
Tax evasion is unlawful dodging in tax payments by tax payers. It is a process whereby a person illegitimately
pays less tax than the law mandates. Tax evasion often entails taxpayers deliberately misrepresenting the true state of
their affairs to the tax authorities to reduce their tax liability and includes dishonest tax reporting, such as declaring less
income, profits or gains than the amounts actually earned, overstating deductions or suppressing turnover.
Tax Avoidance:
On the other hand, tax avoidance is the process whereby a person plans his or her finances so as to apply all exemptions and
deductions provided by tax laws to reduce taxable income. Through tax avoidance, a person takes advantage of all legal
opportunities to minimize his or her tax. Tax avoidance must be distinguished from Tax Evasion, which is the
employment of unlawful methods to circumvent the payment of taxes. Tax evasion is a crime; tax avoidance is the legal
way to reduce tax burden.
Professional Ethics to be followed by a Chartered Accountant rendering Taxation Service:
A professional accountant rendering taxation service is entitled to put forward the best position in favor of his employer
provided the service is rendered with professional competence, does not in any way impair integrity and objectivity, and
is in the opinion of the professional accountant consistent with the law. Doubt may be resolved in favor of the employer
if there is reasonable support for the position. A professional accountant should not hold out to an employer the assurance
that the tax return prepared and the tax advice offered are beyond challenge. Instead, the professional accountant should
ensure that the employer are aware of the limitations attaching to tax advice and services so that they do not
misinterpret an expression of opinion as an assertion of fact. A professional accountant should not be associated with
any return or communication in which there is reason to believe that it:
1) Contains a false or misleading statement;

2) Contains statements or information furnished recklessly or without any real knowledge of whether they are true or
false; or
3) Omits or obscures information required to be submitted and such omission or obscurity wouldmislead the
revenue authorities.
5 You are a Chartered Accountant and working in Y Ltd. (“Company”) as a tax manager. The May June
Company is engaged in the business of export of the goods manufactured by itself. The bank, 2015
through which export proceeds of Y Ltd. is received, deducts tax at the specified rate from the
total export proceeds in accordance with the provisions of section 53BB of the Income Tax
Ordinance (“ITO”), 1984. The export proceeds net of income tax deducted at source under
Sec.53BB received by Y Ltd. during the income year 2016-17 came to Tk.100,000,000. Export
income of Y Ltd. falls under the scope of section 82C of the ITO, 1984. Generally, the Company
does not have additional income from export as referred to in section 82C (6) of the ITO, 1984.
In the income year 2016-17, a warehouse owned by the Company since 1/7/2016 was leased out
to another company for a term of 3 years from 1/7/2016 at a monthly rent of Tk.100,000 with an
advance rental payment of Tk.900,000 to be adjusted with monthly rental payments over 3
years. Y Ltd. received rent for the income year 2016-2017, but no tax was deducted at source
from the rent paid by the lessee. Nor any VAT was paid on the rent. The repair cost of
Tk.15,000, municipal tax of Tk.10,000 and insurance premium of Tk.1,000 were paid for the
warehouse during the income year 2016-17.
The net profit before tax for the year as per the draft financial statements for the income year
came to Tk.3,304,000. The net profit as per income tax comes to the same amount, assuming no

penalty/liability (if any) for non-deduction of tax at source by the tenant and for non-payment of
VAT. There is a tax refundable of Tk.150,000 for the last assessment year 2016-17. The income
(including advance) from warehouse and its related expenses were deposited/paid out in cash
into/from an undisclosed bank account of Y Ltd. and have not been included in the draft financial
statements. The purchase money of Tk.50,000,000 (total accumulated undeclared income of Y
Ltd. over the last 2 assessment years) for the warehouse was also paid from the same bank
account.
The management of Y Ltd. is thinking of assessment of income of the Company for the income
year 2016-2017 under section 82C of the ITO, 1984, upon considering the tax collected at
source by the bank from the export proceeds as final discharge of tax liability. In a meeting with
the management team of Y Ltd. on tax issues, you have been asked to consider whether it is
possible to ignore income from house property so that no demand for additional income tax
arises. To discuss the issue further, a meeting would be held next week.
Requirements:
(i) Enumerate the steps that you should take to deal with the unethical request from the
management, if any.
In light of the aforementioned academic discussion, I will take following steps if there is any unethical request from my
employer:
(i) I will put my tax advice on record, either in the form of a letter or in a memorandum, while providing the
requested opinions on ignoring / concealing income from house property.
(ii) I will let my employer know the consequences of error/omission/concealment of income as provided in the
income tax laws for the time being in force and will recommend that appropriate disclosure be made to the revenue
authorities.
(iii) If my employer does not accept my suggestion, I will inform them that it is not possible to act for them in
connection with the evasion of tax or pertinent return of income.
(iv) I will follow the established policies of Y Ltd. to seek a resolution of such conflict.
(v) If those policies do not resolve the ethical conflict, I will brought the problem to the notice of thenext higher
reviewing level such as the Executive Committee. Board of Directors or Shareholders. I will also seek
counseling and advice on a confidential basis with an independent advisor to obtain an understanding of
possible courses of action.
(vi) If the ethical conflict still exists, I will consider whether continued association with Y Ltd. in any capacity is
consistent with professional responsibilities and as a last resort I may have no other recourse on the tax evasion issue
than to resign and to submit an information memorandum to an appropriate representative of Y Ltd.

5a. Tax Research, Planning, Compliances (20%)
S.L Question Year
An international NGO having also an office in Bangladesh and employing PE — Ill
International, Regional and Bangladeshi personnel has approache d you Nov—
regarding salary taxation of their different status of persons in Bangladesh Dec,
concept and basis. Give a write-up to the Head of it's Bangladesh office relating 2002
to taxation of income from salary under Bangladesh concept and basis including
the routines to be followed both by the employer and the employee as applicable
to International, Regional and National appointments of its office in Bangladesh.
Country Director,
Dear Sir,
Sub:- Concept and basis salary taxation in Bangladesh
This has reference to your letter of……. ....... regarding concept and basis of salary
taxation. We are pleased to furnish the followings for your kind consideration.
(1) Salary is taxable on accrual basis for the month it is due and on a receipt basis it is paid
in advance or any arrears not included in the taxable income for any earlier year paid.
(2) It is taxed on the basis of earning and under Sec. 18 salaries shall be deemed to accrue
or arise in Bangladesh whenever paid if
(a) it is earned in Bangladesh
(b) it is paid by the Government or a local authority in Bangladesh to a citizen
of Bangladesh in the service of such Government or authority (foreign mission,
special army mission etc.)
(3) Residents and non-residents are to be taxed under this head. But non-residents are not
entitled to any allowances and exemptions. Besides non-residents are taxed at the maximum
rate i.e. 25%.
(4) Employee's income tax when paid by the employer, is not treated as part of salary,
benefit or perquisite and no tax is payable on it. In other words, there is no tax on tax (SRO No.
182-L/99-1 July, 1999).
(5) Unlike other heads of income salaries are taxed in the income year applying the tax
rates, allowances etc. of the previous assessment year, which is also the year of earning through
deduction at source. However, adjustment of tax if needed is done in the assessment year.-
(6) Maximum tax-free benefit and perquisites are Tk.1,92,000 i.e. Tk. 1,80,000 for house
rent and Tk. 12000 for traveling. However, expenditure or allowances reimbursed by the employer
would not be treated as perquisites. In respect of motorcar and maintenance expenses only a part
i.e. 7.5% of basic salary is added with salary.
(7) There is no distinction or separate tax treatment for furnished and unfurnished
accommodation provided by the employer 25% of the basic salary or rented value
whichever is less, shall be added with salary.
Since you are employing international and regional employees, you may require
higher perk for your senior executives and therefore we are furnishing further
explanation over the issue.
"
C A "
:
7 7 6 ‘ '
Under see.29(e) perquisites and benefits given to an employee by the employer exceeding
Tk.1,92,000 would be disallowed when assessing the employer. In other words, the excess
perquisites calculated case basis, are added back with the profits of the employer who may be
subject to higher rate of tax.
This is a double taxation. Firstly, the employer is taxed on the amount exceeding the limits as
shown earlier under valuation of perquisites may be at the maximum rate of 25%. Secondly, the
employer is taxed again on the amount exceeding Tk.1,92,000 per employee, may be at his
own rate of taxation at 45% what boils down on each Tk. 100 perk or benefit to the employee
the effective tax is (45+25) = Tk. 70.
Please be frank to enquire anything over the issue.
Yours sincerely,
Bangladesh Ceramics Ltd., a joint venture company with participation of PE — Ill

foreign invested capital having its manufacturing plant in Savar, is engaged in Nov—
production of ceramics wares. The Company has already been enjoying tax Dec,
holiday since November,1999. Presently the company contemplates for going for 2002
the additional line for the ceramics plant and also for the installation of one
sanitary ware plant. You are required to advise the company about the form of
the new industrial undertaking i.e. whether it is beneficial to go for a new
company with entirely different status from the existing one or to have a
different unit of the same company, citing the provisions of the laws
particularly income-tax implications. Your advice may be in the form of a
letter to the Managing Director of the Company.
Dated ........
Managing Director,
Bangladesh Ceramics Limited
Dear Sir,
Sub: Tax holiday for expansion of business
This has reference to our discussion held in your office on last. We are pleased to present the
followings for your kind perusal.
We observed that you are enjoying tax holiday since November 1999 and
contemplated to establish additional line for the ceramic plant and also for the installation of
one sanitary ware plant.
As provided u/s 46 A of the ITO 1984, profits and gains of an industrial undertaking, tourist
industry or physical infrastructure facility set up in Bangladesh between the 1 day of July, 1995
st
and the 30 day of June 2008 shall be exempt from the tax for specific period.
th
As enacted by Finance Act 2005, the benefit is not allowed to the expansion of existing unit and
restricted to specific industry. Both ceramics and sanitary ware are within the package of the
industries allowed tax holiday facility but the difficulty is in connection with the interpretation of
the word expansion'. Since you are already running ceramic business, the new line of ceramic
plant would be treated as expansion of existing unit. As for installation of sanitary ware plant,
it is completely separate product and apparently not an expansion of existing unit. However,
the perception of tax authority regarding expansion of existing undertaking differ from common
understanding and as observed in some recent cases any sort of expansion under the umbrella of an
existing company has been disown for this purpose.
In view of above, we recommend formation of new company to run both new line of ceramic
plant and sanitary ware plant to avoid unwanted controversy.
We would appreciate any query over this issue and assure prompt reply.
Thanking you,
Sincerely yours,
-----------------------------------
XYZ Ltd. A private limited company engaged in the production of textile, enjoying tax PE— III
holiday for four years with effect from 1 July 2004. For the income year ended on 30 Nov-
June 2005 the company disclosed a net profit of Tk. 2,000,000. As the tax manager of Dec,
the company you have examined the accounts of the company and noted the 2005
following:
- Salary as shown in the accounts includes an aggregate amount of Tk.
800,000 paid to taxable employees from which tax was not deducted.
- As aggregate amount of Tk.720,000 paid during the year to the following
landlords as office rent without deduction of tax:
Landlord Amount
A 120,000 (monthly rent Tk. 10,000)
B 600,000 (monthly rent Tk. 50,000)
- Capital gain on sale of fixed assets amounting to Tk. 500,000 credited to profit and
loss account;
- Sales during the year include an aggregate amount of Tk. 8,000,000
representing sale to another taxable company and the directors of XYZ Ltd
are also directors of that company. Sales were made at a price higher than the
market price.
Write a report to the Managing Director of the company explaining the tax
implication of the above matters.
To
The Managing Director
XYZ Limited
Dear Sir,
Sub: Impact of the non-compliance with the provision of Tax laws.
I am pleased to state herein under the tax implications of certain non-compliance observed at
the time of the examination of accounts for the year ended on 30th June 2005 for your kind
information
a) Consequent to the non-deduction of tax as per Sec. 50. Tk.800,000 paid to taxable

employees would be disallowed U/S 30(a) and to be added to the income. And in
pursuance with Sec. 46A(7)c the company should pay tax on Tk. 800,000 in spite of tax
holiday.
b) Office rent paid to landlord A is not subject to deduction of tax at source under Rule
17 B whereas the amount paid to landlord B attracts tax at source and due to non-
:
deduction U/S 53A would be disallowed U/S 30(aa) and to be added to the income. And
in pursuance with Sec. 46A(7) c the company should pay tax on Tk. 600,000 in spite of
tax holiday.
c) Capital gain on sale of fixed assets amounting to Tk. 500,000 credited to profit and loss
account shall also attract tax in according with Section 31/32 and 46(7)(b).
d) Sales amounting to Tk. 8,000,000 to another taxable company, at a price higher than
the market price, having common directors is an act that caused the tax holiday for the
year under review deemed to have been withdrawn.
In view of above I recommend your strong direction to the head of treasury to ensure
compliance with the provision of income tax laws.
Thanking you,
Yours sincerely
Tax Manager
4 You are a Chartered Accountant in practice and have expertise in income tax May
matters. Mr ABC (―Client‖) is your client and a director of XYZ Ltd. Jun
(―Company‖). He has provided you with the following information and requested 2016
to consider each case separately:
(a) The Client is interested to do his own tax planning for the income year
2016-2017 on the basis of following forecasted information and
considering the provisions of prevailing tax laws:
Particulars Tk.
Gross interest income from savings instruments (taxable) 300,000
Tax deduction at Source @ 5% from interest income 15,000
Income from house property (taxable) 180,000
Income from salary (taxable) 400,000
Investment eligible for tax credit 100,000
Requirements:
Provide the Client with the information about his taxable income, investment
allowance, net tax payable and suggest him whether he should invest in savings
instruments.
(b)The Client is planning to buy a residential flat of 500 square meter (sqm)
located at Gulshan along with 0.50 katha share of land from a real estate
company. The total purchase price of the flat is Tk. 5,750,000, which is sum of
land value of Tk. 2,000,000 and flat value of Tk. 3,750,000.
Requirements:
(i) Advise the Client about the amount of tax to be collected at source by
the Registering officer under section 53H of the ITO, 1984 and
rule 17II of the ITR, 1984;
(ii) Discuss the provision of tax law as regards the person from whom the
said tax is supposed to be collected.
(c) The Client provided you with the following information on income year
2016-2017:
Particulars Tk.
Taxable income from business 500,000
Taxable income from house property 600,000
Taxable income from other sources 350,000
He has also informed that income from house property was derived from a
residential flat owned by him and the amount of house rent was not deposited
in his bank account.
Requirements:
Compute the amount of penalty to be imposed under section 123 of the ITO,
1984, for non- compliance with rule 8A of the ITR, 1984.
(a):
The required information are provided below on the basis of forecasted information relating to
income year 2016-2017 applying provisions of tax laws applicable for AY 2017-2018:
Name of Assessee: Mr. A
Taxpayer's Identification Number : xxxxxxxxxxxx
Statement of Forecasted Income during the income year ended on 30 June 2017
Taxable
Tax
Particulars Income (Taka)
(Taka)
_1. Salaries: u/s 21 400,000
2. Interest on securities: u/s 22 (gross interest on savings instruments) 300,000
3. Income from house property: u/s 24 180,000
4, Total income: (1+2+3) 880,000
5. Tax leviable on total income (Note 2) 48,000
6. Tax rebate: u/s 44(2)(b) , 15,000
7. Tax payable (difference between serial no. 5 and 6) 33,000
8. Tax Payments (tax deducted from interest on savings instruments) 15,000
9. Net tax payable (difference between serial no. 8 and 9) 18,000
Note 1:
Tax deduction at source from the interest on savings instruments shall be deemed to be the final
discharge of tax liability from that particular source as per amendment made to the provisions of
section 82C through the Finance Act, 2015
Note 2:
Taxable Income excluding interest on savings instrument 580,000
Tax on Taxable Income excluding interest on savings instruments:
Slabs/Particulars Taxable Income (Tk.) Rate Tax (Tk.)
First 250000 0%
Next 330000 10% 33000
(a) Tax payable on taxable income excluding interest on savings instruments 33,000
(b) Tax @ 5% on interest on savings instruments (final tax liability) 15,000
(a+b) Total tax payable (including final settlement of tax liability) 48,000
Investment Allowance & Tax rebate:

Tk.
(a)Actual Investment made during the income year: 100,000
(b) 30% of (Total Taxable Income – Employer‘s Contribution to RPF-Income u/s 82C) 174,000
( c) Maximum Limit 15,000,000
( d) Allowable Investment limit for Tax rebate - the lowest of (a), (b) and (c) 1,00,000
Tax rebate [(d) X 15%)] 15,000
Suggestion to him whether he should invest in savings instruments.
Maximum eligible amount for getting tax rebate Tk. 1,74,000 whereas he has only allowable investment
Tk.1,00,000. That means he should invest Tk.74,000 more at savings certificate to get maximum tax
rebate facility. If he buy it within 30th June,2017 then he will get extra Tk.74,000 x 15% =11,100 tax
rebate
(b)(i):
The computation of tax to be collected at source by the registering officer responsible for registering
any document of a person has been computed below:
Deed value Amount Tax Payable
Particulars Quantity Rate Remarks
(Tk.) (Tk.) (Tk.)
0.50 4% of deed value 80,000 Whichever -
Land 2,000,000 150,000
Katha Tk. 300,000/Katha 150,000 ' is higher
500 4% of deed value 150,000 Whichever-
Flat 3,750,000 300,000
sqm Tk. 600/sqm 300,000 ' is higher
Total tax to be collected at source by the registering officer 450,000
(b)(ii):
As per section 53H of the ITO, 1984, and rule 17II of the ITR, 1984, tax on transfer of property shall
be collected from the person whose right, title or interest is sought to be transferred, assigned,
limited or extinguished thereby, at the time of registration of transfer document.
(c):
The required information is enumerated below:
Name of Assessee: Mr. A
Taxpayer’s Identification Number :xxxxxxxxxxxx
Particulars Tk.
Taxable income from business 500,000
Taxable income from house property 600,000
Taxable income from other sources 350,000

First 250,000 0% -
Next 400,000 10% 40,000
Next 500,000 15% 75,000
Next 300,000 20% 60,000
Total 1,450,000 175,000
Tax Leviable on total taxable income A 175,000
Investment Allowance & Tax rebate

(a)Actual Investment made during the income year: -
(b)30% of (Total Taxable Income –Employer‘s Contribution to RPF- income u/s 82C) 435,000
(c)Maximum Limit 15,000,000
(d)Allowable Investment Limit for Tax Credit - the lowest of (a), (b) and (c)
Tax rebate [(d) X 15%)] B -
Income Tax Payable C=A-B 175,000
Tax Payable on Income from House Property [175,000/1,450,00 X 600,000] 72,414
Penalty u/s 123 for not depositing house rent into bank account as per rule 8A of
the ITR,1984:

50% of tax payable on income from house property [50% X 72,414] = 36,207
or
Tk. 5,000
Whichever is higher 36,207
Total Tax Payable including Penalty 211,207
5 May
Mr. Shin, Chief Financial Officer (CFO) of Techno world Inc., a Singapore based Jun
IT company has appointed you as tax consultant and sought your opinion on the 2016
areas of tax planning so as to prepare an effective business plan.
Technoworld wants to expand its business in Bangladesh by providing IT based
solutions in many industries along with BPO services. It wants to set up a liaison
office. But it has been advised by Bangladesh Investment Development Authority
(BIDA) to incorporate a company in Bangladesh with 100% equity ownership to
run the business.
In the first year it has a plan of selling BDT 1Bn of IT and BDT 500 Mn of BPO
services with 10% increment in each of the following two years. If the service
charges are remitted from Bangladesh, the purchaser will deduct 20% of
withholding tax of it and 15% VAT will be borne by the service recipient.
Technoworld achieves 20% income before tax on net proceeds and has 25%
corporate tax rate in Singapore. If it incorporates a company in Bangladesh, the
services it will deliver will fall under ITES (information technology enable
services) and in accordance of business plan it will achieve 30% Income before
tax. Under double taxation avoidance agreement, Dividend from Bangladesh to
Singapore is subject to maximum 15% tax withholding.
Requirement:
Give your opinion to Technoworld elaborating the aspects of the above mentioned
options with demonstrating financial impact.
Mr. Shin,
Chief Financial Officer (CFO)
Technoworld Inc.
Subject: Opinion regarding tax planning and techniques
Dear Sir.
We refer your letter dated 15 April 2018 where you have narrated a plan of business with Bangladesh and
requested us to provide our opinion on the areas of tax planning which will enable you to prepare an
effective business plan. We are submitting the following analysis and suggestions which will curtail
the tax burden for your prospective business complying the tax legislations presently enforced in
Bangladesh.
Technoworld wants to expand its business in Bangladesh by providing IT based solutions in many
industries along with BPO services. Initially it wants to set up a liaison office. It has been advised
by Bangladesh Investment Development Authority (BIDA) to incorporate a company in Bangladesh
with 100% equity ownership to run the business. Hence, there are two options in hands, namely,
selling services from abroad where liaison office will play a coordination roles and setting a local
fully owned subsidiary of Technoworld to deliver the services to Bangladeshi customers locally.
Relevant tax regulations in Bangladesh:
(a) As per para 33 of Sixth Schedule, Part A of Income Tax Ordinance (ITO), 1984 Information
Technology Enable Services (ITES) has been exempted from income tax till 30th June, 2024.
(b) Para 33 of Sixth Schedule, Part A of ITO 1984 states the definition of ITES as under:
Information Technology Enabled Services (ITES) means-Digital Content Development and
Management, Animation (both 2D and 3D), Geographic Information Services (GIS), IT Support and
Software Maintenance Services, Web Site Services, Business Process Outsourcing, Data entry, Data
Processing, Call Centre, Graphics Design (digital service), Search Engine Optimization, Web Listing,
document conversion, imaging and archiving including digital archiving of physical records.
(c) Under Finance Act 2017, the corporate tax rate of a non-listed company is 35%.
(d) Under section 54 of ITO 1984, the tax deduction rate on payment of dividend is 20%
(e) Based on article 24 of Double Taxation Avoidance Treaty between Singapore and Bangladesh, Tax
deducted at source in Bangladesh will be eligible to take credit in Singapore to the extent of tax
computed on the same income.
(f) As per sec 56 of ITO 1984, foreign remittance on account of IT solutions and BPO related services
to a non-resident Bangladeshi is subject to deduction of tax at source @ 20% under the category of
Technical service fees or Technical knowhow fees.
(g) Under VAT Act 1991, for the import of services, service recipient will be responsible to pay
VAT and will be eligible for input VAT credit against the treasury challan of the deposit of VAT.
Analysis of tax legislations applicable for Technoworld:
Technoworld has two alternatives for doing business here in Bangladesh. It can sell services from abroad
where liaison office will play a coordination role or set a local fully owned subsidiary of Technoworld
Singapore to deliver the services to Bangladeshi customers locally.
From the perspective of tax laws, if it sells services to Bangladesh from Singapore, it will receive
the proceeds in Singapore, which will be remitted by the service recipients in Bangladesh. This
remittance will be subject to withholding tax @ 20% as per ITO, 1984 after which the net
proceeds will be remitted to Technoworld from Bangladesh. In Singapore, Technoworld will be
eligible to take the credit of tax deducted at source in Bangladesh. VAT will be borne by the
service recipient and will be eligible for input VAT credit. It will incur cost neither to
Technoworld nor to the service recipients in Bangladesh.
If Technoworld Singapore sets a local fully owned subsidiary in Bangladesh, it will be subject to
35% corporate tax rate. Moreover, in accordance with double taxation avoidance treaty between
Singapore and Bangladesh, the payment of dividend from Bangladesh is subject to 15% tax
withholding in Bangladesh which we can assume will be available for full foreign tax credit by
Technoworld in Singapore.
Outcome in Business plan after tax impacts:
Technoworld sells services to Bangladesh from Singapore

Year 1 Year 2 Year 3
Gross proceeds A 1,500,000,000 1,650,000,000 1,815,000,000
Tax deduction at source in BD @ 20% B 300,000,000 330,000,000 363,000,000
Remittance i.e. Net proceeds C=A-B 1,200,000,000 1,320,000,000 1,452,000,000
Income before tax (20% on net proceeds) D 240,000,000 264,000,000 290,000,000
Corporate tax (25%) E 60,000,000 66,000,000 72,500,000
Credit on corporate tax on business F 60,000,000 66,000,000 72,500,000
from BD under DTAA
Net profit after tax for Technoworld D-E+ F 240,000.000 264,000,000 290,000,000
Technoworld sets a fully owned subsidiary in Bangladesh

in Bangladesh Year 1 Year 2 Year 3
Gross proceeds A 1,500,000,000 1,650,000,000 1,815,000,000
Income before tax (30% on Gross B 450,000,000 495,000,000 544,500,000
proceeds) tax rate in BD (35%)
Corporate C 157,500,000 173,250,000 190,575,000
Income after tax / Gross dividend D=B-C 292,500,000 321,750,000 353,925,000
income of Technoworld
Withholding tax on dividend (15%) E 43,875,000 48,262,500 53,088,750
Net remittance of dividend to Technoworld F=D-E 248,625,000 273,487,500 300,836,250
Corporate tax of Technoworld (25%) on G= 73,125,000 80,437,500 88,481,250
dividend 25% D
Withholding tax credit on dividend H=E 43,875,000 48,262,500 53,088,750
taken by Technoworld under DTAA
Additional tax in Singapore I=G-H 29,250,000 32,175,000 35,392,500
Net profit after tax for Technoworld J=F-I 219,375,000 241,312,500 265,443,750
Suggestions:
From the above table of business plan analysis it is found that, for the first three years in
Singapore Technoworld will earn Tk. 794,000,000 if it sells services from Singapore to
Bangladesh and Tk. 726,131,250 if it sets a fully owned subsidiary in Bangladesh.
Hence, after putting the taxation impacts, considering the change in financial of Technoworld,
Singapore, you should option to provide services from abroad and take the net proceeds from
Bangladesh.
Thank you very much for taking us to your confidence. Should you require any clarification,
please do not hesitate to contact us.
Thanking you,
6 Mr. XY (―Assessee‖) submitted income tax return for the assessment year 2017- May
2018. Jun
In the return of income for the said assessment year, he disclosed inter alia 2015
purchase of a flat, registered deed value of which was Tk. 8,000,000. In the
course of making assessment, the Deputy Commissioner of Taxes (―DCT‖)
identified that the Assessee took out a home loan of Tk. 5,000,000 mortgaging
the flat; and the market value of the flat was shown by the lender at Tk.
10,000,000 in the sanction letter of loan. At the same time, an insurance company
insured the flat after assessing value thereof at Tk.8,000,000. The Assessee
purchased the flat from the first owner, not from the real estate company. The
DCT asked the Assessee to clarify the difference between registered deed value
of the flat and the market value thereof as assessed by the lender. If the Assessee
offers no explanation or the explanation offered by him is not satisfactory, the
excess amount shall be deemed to be the income of the Assessee classifiable
under the head ―Income from other sources‖. At the hearing, the DCT also
referred to the provisions of income tax laws whereby he might deem the
difference between the fair market value of an asset and price paid by the
assessee for the said asset to be income of the assessee classifiable under the
aforementioned head.
Mr. XY has requested you, being a tax partner of ABC & Co., Chartered
Accountants, to provide him with professional support.
Requirement:
Draft a letter for Mr. XY explaining the difference between registered deed value
of flat and market value thereof assessed by the lender so that Mr. XY can
successfully defend his case before DCT.
The Deputy Commissioner of Taxes
Circle-... , Taxes Zone-
Dhaka
15 June 2018
Dear Sir:
Written explanation in respect of difference between registered deed value of flat and market value
thereof assessed by the lender
Name of Assessee: Mr. ABC
TIN:…………………
Please refer to your letter no .................................... dated………………..on the subject mentioned above.
I am pleased to submit following written observation/explanation in respect of difference between
registered deed value of flat and market value thereof assessed by the lender:
A lender is mere a business entity and run by its own business policy. The lender appraises the value of a
property, against which funding is being made, following its own strategy and generally accepted norms of
funding. For example, a piece of land was purchased at the cost of Tk. 100 few years back and a lender may
estimate the present value of the property at Tk. 1,000. In doing such valuation, the lender may take
various factors into account.
Lending money and earning interest thereon is the prime business of a lender and for doing business it
may think, plan and act as per its own business strategy. For the purpose of approving loan to the
assessee and doing business with him, the lender estimated the market value of flat at Tk. 10,000,000
and granted loan of Tk. 5,000,000 which is 50% of Tk. 10,000,000. On the contrary, the insurance company
insured the flat after carrying out a willful valuation of the same at Tk. 8,000,000. It is remarkable that
the two companies of different industry, i.e. lending and insurance, have worked out the different
market value of the same property, i.e. Tk. 10,000,000 and Tk. 8,000,000 respectively.
There should not be such a difference of ocean in the market value of the same property. It evidences that
computation of market value of a property is significantly influenced by the business policy and own
methodologies of the lender and insurance company. Lender and insurance company may compute the
tax status and tax liability of a borrower, but it is the tax authority whose computation is legally acceptable
and obligatory for that borrower. Hence, there is no legal ground to accept the market value of the flat
determined by the lender and even the insurer for the purpose of imposition of tax. There is no such law
especially at section 19 of Income Tax Ordinance,1984 to impose tax on this difference
On the basis of aforementioned facts, it is clear that the valuation of a property by a lender may not
reasonably match with the registered deed value of the same. Such valuation is done by the lender for its own
business purpose and is not an authentic one in the eye of the Registration Act, 1908, the Stamp Act,
1899, and the Income Tax Ordinance, 1984. Estimation of market value of a property by a business entity
can't supersede the valuation done by the Registrar or Sub-registrar appointed by the government..
In light of the above, I would like to request you to accept my explanations.
Yours faithfully,
7 Mr. X is now negotiating with Mr. Y and Mr. Z for renting out the 1st and 2nd Nov
floors with effect from 1 January 2017 for a period of 4 years. He is also Dec
negotiating with ABC Ltd. to rent out two rooms with a kitchen and a wash 2014
room for 3 years. The rent amounts have been agreed as follows:
(i) Ground floor (as above): Tk.20,000 p.m. with an advance of 6 months to be
adjusted over a period of the last 12 months of the rental period in equal amounts.
(ii)1st floor: Tk.30,000 p.m. with an advance of 3 months to be adjusted over the
last 3 months of the rental period in equal amounts.
(iii)2nd floor: Tk.25,000 p.m. with no advance, but with a security money of
Tk.50,000 to be refunded at the time of vacating the premises on the expiry of the
rental period.
Mr. X wants all the rental payments, advances and security money to be paid in
cash. Mr. Y, Mr. Z and ABC Ltd. agree, provided it does not contradict with the
provisions of the Income Tax Ordinance 1984 and the Income Tax Rules 1984
and does not deprive them of any income tax benefit which they would have
otherwise got.
You are required to give necessary advice with regard to above in the light of
the Income Tax Ordinance 1984 and Income Tax Rules 1984.
7
The National Board of Revenue (NBR) has introduced a new rule i.e. rule-8A in order to provide guidelines
regarding the rent of any house property. As per rule 8A of the Income Tax Rules, 1984, any person having
ownership or possession of any house property receives any sum or aggregate of sums exceeding Tk.25, 000
per month in respect of any rent of such house property or its unit, is required to maintain a bank account in
any scheduled bank for the purpose of depositing rent from the house property or its unit. He is to deposit such
rent or advance received from such house property or its unit in that bank account. Such person is also
required to maintain a separate register and record the particulars of the tenant or tenants and the sum
received.
As per section 123 (2) of the Income Tax Ordinance (ITO) 1984, any person having income from house
property, failing, without reasonable cause, to maintain a bank account and separate register, as mentioned above,
shall be penalized by an amount of fifty per cent of taxes payable on house property or five thousand taka
whichever is higher.
Income received by Mr. X in the income year 2016-2017 may be analysed as below:
Analysis of rent receivable by Mr. X:
Floor Tenant‘s Monthly Advance/ Remarks

name rent Security
money
Ground floor ABC Ltd 20,000 120,000 Advance is adjustable with
monthly office rent
1st floor Mr. Y 30,000 90,000 Advance is adjustable with
monthly rent
2nd floor Mr. Z 25,000 50,000 Security money is refundable at the
time of vacation premises.
Total 75,000 2,60,000
Since the total rent of Mr. X is Tk.75,000 per month which exceeds the threshold limit i.e. Tk.25,000. Mr.
X is required to maintain a bank account in any scheduled bank to deposit the monthly rent and advance or
security money received therefrom ,even if receives part/full of the amount in cash. He is also required to
maintain a separate register containing the particulars of the rent & tenants. Otherwise penalty under section
123(2) of the Income Tax Ordinance, 1984 may be imposed on him.
Amount received by Mr. X from Mr. Z as security money not adjustable with rent payable will be deemed
as house property income of Mr. X for the income year 2016-17 under section 19(22).
However under 1st proviso of section 19(22) Mr. X may option to split the income in income year 2016-
17, 2017-18, 2018-19, 2019-20 & 2020-21 in equal instalments. Under 2nd proviso of the section Mr. X
may claim the entire amount (Tk. 50,000) as expenses to house property income the year of refund.
In the instant case , the tenure of tenancy with Mr. Z will expire on December, 2021 (4 years from
January,2017) which falls in the income year 2021-22 As such Mr. X may split the security money of
Tk. 50,000 in 5 equal instalments of Tk. 10,000 each. In addition to normal rent, he is required to show
Tk. 10,000 for each of income year 2016-17, 2017-18, 2018-19, 2019-20, 2020-21 and 2021-22 as
house property income. He will also claim refund of security money of Tk. 50,000 as expenses from house
property income in the income year 2021-22 (as it was refunded to Mr. Z in that year).
Advice to Mr. Y, Z and ABC Ltd. with regard to mode of payment
As per section 30 (n) of the Income Tax Ordinance, 1984, any payment in respect of rent of any property
otherwise by crossed cheque or bank transfer shall be disallowed against income from business or profession
on which the tenant is required to pay income tax at applicable rate. As such, I would advise Mr. Y and Z
(if they carry on business or profession in the said premises) and ABC Ltd. to pay the amount of office rent
through crossed cheque or bank transfer to get the amount so paid as allowable deduction at the time of
assessment.
As per section 53A of the ITO, 1984, tax @5% shall have to be deducted at source by the responsible
Withholding authority from any payment as office rent or advance rent/security deposit (which is not
adjustable against rent payable). ABC Ltd will be required to deduct tax @ Tk. 1,000 per month (5% of Tk.
20,000) and pay the remaining Tk 19,000 to Mr. X.
As per section 57 of the Income Tax Ordinance (1TO) 1984. the tenant would be subject to penalty for
non deduction of tax as detailed below:
 As per section 57 (1) (a) of the ITO 1984, the tenant would be deemed to be an assessee in default in
respect of the income tax deducted or collected at source;
 As per section 57 (1) (b) of the ITO 1984, the tenant would be liable to pay an amount at the rate of
two per cent per month on income tax not withheld for the period commencing on the date
following the expiry of the time within which it is to be paid under section 59 and ending on
the date of the actual payment of the tax;
 As per section 57 (2) of the ITO 1984. DCT may take necessary action for realization of tax not
withheld along with additional amount payable under section 57 (1) (b).
In addition, as per section 30 (aa) of the ITO, 1984, the amount from which income tax has not been
withheld may be disallowed by the Deputy Commissioner of Taxes (DCT) and the tenant will thus be
exposed .
Therefore. I would advise ABC Ltd. (not applicable for Mr. Y and Mr. Z as they are not deducting
authority) to deduct tax at source @5% from the rent paid and to deposit tax so deducted at source within
the stipulated time in order to avoid the consequences laid down in section 57 of the ITO, 1984 and to get
the amount so paid as allowable business expenditures.
8 Mr. X has constructed a 3-storied building with a loan of Tk.60 lakhs from
Sonali Bank Ltd. The construction was completed in November 2017. His loan Nov
account was debited by the bank with loan interest as follows: Dec
July 2015 to June 2016 Tk. 6 lakhs 2014
July 2016 to June 2017 Tk.10 lakhs
July 2017 to November 2017 Tk. 6 lakhs
You are required to advise whether Mr. X will be entitled to any deductions
for the above loan interest amounts to arrive at his total income for the
purpose of income tax. While giving your advice, consider the rental income
as in (b) below, if relevant.
As per section 25(1)(gg) of the Income Tax Ordinance, 1984, if any house property has been
constructed/reconstructed with a loan from any bank or any financial institution and there was no income
earned during the period of such construction, the interest on such loan shall for the construction period
be allowed as a charge in three equal proportionate instalments for subsequent, first three years for
which income is assessable from that property. Mr. X has constructed the building with a loan from
Sonali Bank and no income was earned up to the income year ended 30 June 2016. Mr. X is thus
allowed to get the deduction of interest payable (up to 30 June 2016) on such loan in three equal
proportionate instalments against first three subsequent years‘ income from the said house property.
Interest accrued up to 30 June 2016 can be determined as below:
Period Figure in Tk. (lakhs)

July 2015 to June 2016 6

July 2016 to June 2017 10
Total interest during this period 16
I would, therefore, advise Mr. X to claim the deduction of such interest amounting Tk.5.33 lakhs (Tk.16
lakhs/3) against annual value of the said house property for each of the income years 2016-17,2017-18
and 2018-19.
In addition Mr. X will get full deduction of the interest (of TK.6 lakh being interest) for the income year
2016-17 under section 25(1)(g)against the income earned during that period as evident from question
3(b).
In case the net result of computation of income from house property is a loss in the income year 2016-17 (or
any other year), Mr. X is entitled to set off such loss against his income, if any. assessable for that income
year (i.e., relevant assessment year) under any other head under section 37.
9 You are a Tax Advisor of ABC Ltd. Mr. Kabir, the Chief Financial Officer Nov
(CFO), of the company has sought your advice for an effective and efficient Dec
business tax planning and techniques to provide the assessee with maximum tax 2014
advantage. It has got 5(five) directors and 10(ten) salaried employees who are
individual assessees.
In response to the request of the CFO you are required to explain some effective
business tax planning techniques conducive to ABC Ltd.
(i) As an individual tax payer for its directors & employees. 5

(ii) As a business organization 5
Date:26th June 2018
Mr. Kabir
Chief Financial Officer
ABC Ltd
Subject: Opinion regarding tax planning & technique.
Dear Sir,
We are submitting the following suggestion which will lessen your tax burden complying present tax
law:
(1) Regarding personal income tax of directors & employees —

(a) Directors should draw monthly/yearly director‘s remuneration from the company which will
reduce the net profit of the company.
(b) Director‘s remuneration should have break up like basic salary, house rent allowance, bonus,
medical allowance, conveyance allowance so that their tax burden comes down due to the
exemption admissible in rule 33A,33I,33C.
(c) Directors may invest in life insurance premium, deposit pension scheme, sanchaypatra, shares
of listed company. This will enable them to get investment tax rebate @15% on investment.
However investment should be up to the limit of 30% of income or Tk. 1,50,00,000.
(d) Employee‘s salary should not be gross. Instead it should have break up like basic salary, house
rent allowance, bonus, medical allowance, conveyance allowance, rest & recreation
allowance, so that their tax burden comes down due to the exemption admissible in rule
33A,33I,33C,33G.
(e) Employee‘s provident fund is to be introduced. Recognition of which may be obtained from
concerned Commissioner of Taxes.
(f) Employees may invest in provident fund, life insurance premium, deposit pension
scheme, sanchaypatra and shares of listed company. This will enable them to get
investment tax rebate @15% on investment. However investment should be up to the limit
of 30% of income or Tk. 1,50,00,000.
(2) Regarding corporate income tax of your company —
(a) Directors should draw director‘s remuneration of the company which will reduce the net profit of
the company.
(b) Company may introduce provident fund for employees. Which should obtain recognition
from concerned Commissioner of Taxes. Contribution of company in such, being admissible expense
and will reduce its tax burden.
(c) Company should not give perquisite in excess of Tk. 350,000 in a year to any employee.
(d) Company should explore export business. Which will reduce tax burden of export business by 50
% under paragraph 28 of part A of Sixth Schedule.
(e) Company should invest in industry which is illegible for tax holiday under section 46B.
(f) Company should invest in poultry, dairy etc. which is exempt from tax.
(g) Company should strive to enjoy tax concession under SRO No 185-ain/2014 dated 01/07/2014.
(h) Company should prepare to enlist itself with Bangladesh Securities and Exchange Commission so
that it can enjoy favorable rate of tax.
(i) In case the company is engaged in a business where tax is deductible from its receipt and such tax
deducted is final discharge of tax liability under section 82C, separate accounts is to be maintained
for such business.
Tax Advisor
10 Your firm has assigned you the responsibility of tax planning for its clients, and May
has recently referred the following case to you for your advice: Jun
2014
ABC Ltd is a private limited company, expecting to generate a net profit before
tax of TK. 2 crore in the accounting year ending 30 June 2017. The company
needs to purchase a motor vehicle and a general purpose machine, costing Tk. 30
lac each, within a period of maximum another forty days. As on 12 June 2017,
ABC Ltd. has a surplus fund of Tk.30 Lac which it can now either invest in FDR
at 10% p.a. interest for one month or use in purchasing any of the above two
fixed assets. The motor vehicle can be put in use within 5 days from the date of
purchase. But the machine cannot be put in use before the third week of July
2017. The company is expected to generate at least an additional surplus fund of
Tk. 30 lac in the second week of July 2017. The company‘s paid – up share
capital is Tk. 5 crore.
What should the company do with Tk. 30 lac additional fund currently in hand,
giving due consideration to the opportunities of tax savings and additional income?
Your advice should be assumptions, if required. 4
Option-1
Interest income from FDR 15,833
Corporate income tax payable @ 37.5% (5,938)
Net Benefit 9,896
Option-2
Investment in Vehicle 3,000,000
Eligible amount for depreciation allowance 2,000,000
Eligible normal tax depreciation @ 20% 400,000
Eligible initial tax depreciation @ 25% 500,000
Total depreciation 900,000
Tax savings on depreciation @ 37.5% 337,500
Option-3
It appears that the machine will be available for use after 30 June 2017 and not recognizable in the
financial statements before 30 June 2017. ABC Ltd will not be eligible for any depreciation allowance
in this regard.
Decision:
Considering the impacts of the above options, it appears that investment in vehicle would be most
beneficial.
Regulators provisions:
As per paragraph 11 (6) (a) of the Third Schedule of the ITO 1984, income tax depreciation is allowed
on maximum value of Tk. 2,000,000 for sedan car and passenger vehicles not plying for hire.
It is assumed that the vehicle falls under this category.
11 Nov
Comment on the following two scenarios:
Dec
Scenario-1: 2014
A company wants to raise capital of Tk.20,00,000 for a project where earning
before tax shall be 30% of the capital employed. The company can raise debt
fund @12%. Suggest which of the following 3 alternatives should it option for.
(a) Tk.20,00,000 to be raised by equity capital.

(b) Tk.16,00,000 by equity and Tk.4,00,000 by loan.
(c) Tk.4,00,000 by equity capital and Tk.16,00,000 by loan.
Assume the company shall distribute the entire amount of profit as dividend
while income is subject to tax rate of 30%. Tax on dividend is 15% plus 3%
additional tax on tax amount and 10% surcharge on tax.
Scenario-2:
What will be the option, if the earning before tax is 10% of capital employed.
Analysis of scenario - 1:
[Figures are in Taka]
(a) (b) (c)
Equity share capital 20,00,000 16,00,000 4,00,000
Debt capital - 4,00,000 16,00,000
Total investment 20,00,000 20,00,000 20,00,000
Earnings before interest and tax (EBIT) 30% 6,00,000 6,00,000 6,00,000
Less: Interest on debt @ 12% - 48,000 1,92,000
Earning before tax (EBT) 6,00,000 5,52,000 4,08,000
Less: Tax @ 30% + 3% Additional tax 1,85,400 1,70,468 1,26,072
Dividend available 4,14,600 3,81,532 2,81,928
Less: Tax @15% + 3% + 10% on dividend to 60,226 55,408 40,954
be distributed
Amount available for distribution 3,54,374 3,26,124 2,40,974
Return on equity share capital 17.788% 20.382% 60.243%
Analysis of scenario - 2:
[Figures are in Taka]
(a) (b) (c)
Earning before interest and tax (EBIT) 10% 2,00,000 2,00,000 2,00,000
Less: Interest on debt @ 12% - 48,000 1,92,000
Dividend available 2,00,000 1,52,000 8,000
Tax on income @30% + 3% 61,800 46,968 2,472
Gross dividend inclusive of tax 15% + 3% Tax on 1,38,200 1,05,032 5,528

Tax + surcharge @ 10%
Less: Tax on dividend 20,075 15,257 803
Net dividend distributable 1,18,125 89,775 4,775
Return on equity share capital 5.906% 5.611 % 1.181%
Comments on two scenarios:
The above two scenarios make it clear that the existence of securities being fixed rate of return in capital structure.
It has magnifying effect from earning after tax. It also clears from the second scenario that shareholders suffer to
a great extent.
* Tax rate on profit is 30% + 3% Additional tax (applicable on tax payable). i.e. 30.90%
** Tax on dividend @ 15% + 3% Additional tax (applicable on tax payable)

+ 10% surcharge. (applicable on tax payable) i.e. 16.995%.
2014
Mrs. A is 66 years old and her total income for tax purposes for the income year
2016-2017 is estimated to be TK. 40,00,000/=. Currently she has idle fund of Tk.
18,00,000 /= lying in her bank account (current account). She reckons that on 30
June 2017 she will have the same amount of idle fund in hand, and that she will
have more idle fund in hand during the next five income years.
Now she is considering making investments as follows:-
(i) 5 -year FDRs at an interest rate of 13% p.a.; or/ and
(ii) 5- year savings certificates (Bangladesh Sanchaya Patra) with an
average interest rate of 12% p.a.
Since FDR interest rate is higher, Mrs. A wants to invest the entire amount of TK.
18,00,000/- in 5-year FDRs. In any case she is not agreeable to invest in any other
type of asset except for the above two. She has not made any investments in the
income year 2016-2017.
Where should Mrs. A invest? How will Mrs. A be benefitted if she follows your
advice? Your advice should be based on the current provisions of Income Tax
Ordinance 1984 and its Rules and the earnings potential. The compounding of
interest is done on yearly rest in both the cases. Ignore time value of money.

Investment decision can be taken considering the net proceeds to Mrs.
A. Savings
FDR Certificate
Total Matured Fund 3,316,383 3,172,215
Principal Amount 1,800,000 1,800,000
Interest Accrued 1,516,383 1,372,215
Tax payable on interest (200,346) (169,443)
Saving from investment tax credit (AY 2017-18) - 180,000
Net proceed from investment decision 1,316,037 1,382,772
Additional proceed from investment in savings certificate 66,735
Tax payable on interest

Amount Slab Rate
On first Tk. 275,000 0% - -
On next Tk. 300.000 10% 30,000 30,000
On next Tk. 400,000 15% 60,000 60,000
On next Tk. (500,000 and 20% 1,00,000

397,215) 79,443
On remaining Tk 41,383 25% 10,346
200,346 169,443
Investment Tax Credit

Investment tax credit is allowed up to
30% of total income 1,200,000
Actual Investment 1,800,000
Maximum Limit 15,000,000
Lower one is eligible for investment tax credit. So eligible amount is Tk. 1,200,000
Assumptions
1. Assumed that Mrs, A will make investment by 30 June 2017.
2. Interest income will be assessable in the assessment year corresponding to the year of maturity.

ABC Ltd. is a parent company of a group of private limited companies 2014
comprising three companies. The other two companies are DEF Ltd. and GHI
Ltd. Mr. X, FCA holds 1% shares in DEF Ltd., and is also a director of the
company. He does not hold any share in ABC Ltd. and GHI Ltd.
It has been decided that Mr. X will be employed by the Group as the group
CFO with effect from 1 July 2017 at a gross monthly salary of Tk. 1,80,000/=
per month plus 2 festival bonuses, each bonus being one month‘s full basic
salary. He will not get any other benefit. He will work for all the three
companies.
Currently Mr. X lives in an apartment at Gulshan at a rental of Tk. 50,000/= per
month. He also pays common service charges of Tk. 5,000/= per month. He
will continue to live in the same apartment. Mr. X confirms that he spends on
an average Tk. 2,000/= per month on medical expenses for himself and his
dependent family members. He is 55 years old.
You are required to advise as to how the gross monthly salary should be broken
down into basic salary and allowances so that the tax expenses are minimized to
an optimum level, considering the interests of both the employee and
employer(s). Your advice should be based on the current provisions of Income
Tax Ordinance 1984 and its Rules.
An effective salary tax planning involves providing the maximum benefits to the employees of an
organization considering the maximum allowable limit of perquisite of Tk.350,000 under Section 30 ( e) of
the Income Tax Ordinance (ITO) 1984.
From the information given in the question it appears that though Mr. x holds 1% share in DEF Ltd and
a director of the company. He is not director of any of the other companies under the group. As such, in
presence of employer-employee relationship he is eligible for exemptions allowed under Rule 33 (2)
(b) of the Income Tax Rules (ITR) 1984. It is beneficial to split his monthly salary among the three
companies. As per Section 2 (45) of the ITO 1984, festival bonus is excluded from the ambit of
perquisite and fully taxable under Rule 33J of the ITR 1984. So festival bonus is not relevant
information here.
ABC DEF GHI Total
Gross salary receivable 60,000 60,000 60,000 180,000

Festival Bonus 75,778 75,778 75,778 27,333
Break up of Gross salary 60,000 60,000 60,000 180,000
Basic Salary 37,889 37,889 37,889 113,667
House rent allowance 18,944 18,944 18,944 56,833
Conveyance allowance 1,500 1,500 1,500 4,500
Medical Allowance 1,667 1,667 1,666 5,000
Required documentation:
Each company should provide separate appointment letter to Mr. X, FCA
17 ABC Private Ltd. manufactures and sells float glass boat. Paid-up capital of the May
company is taka 1,00,00,000(10,000 shares of taka 1,000 each) held by Mr. A(60%), June
Mr. B(20%) and Mr. C(20%). Mr. A acquired 6,000 shares from B and C for taka 2017
65,00,000/= in June 2015. Key extract from Balance Sheet on 31.12.2016 are: P/up
capital 1,00,00,000, Accumulated Surplus 17,00,000, Cash at Bank 2,00,000, Cash In
Hand 3,00,000.
Mr. A holds technical expertise of float glass boat making. Boats are sold to Coast
guard, Bangladesh navy, and private theme parks. Migrated to Canada three years
ago, Mr. A cannot run business any more. Other shareholders are not capable to run
the business. They decided to wind up the company per EGM on 31-12-2016 which
appointed you a Liquidator. Company commenced winding-up based on balance
sheet of 31-12-2016. Company obtained tax clearance with no tax liability.
Liquidator‘s Receipts & Payments on 31-03-2017:
ABC Private Ltd.(Under Members Voluntary Liquidation)

Liquidators’ Receipts & Payments Account
Receipts Payments
Opening Balance(bank) 2,00,000 VAT/TDS paid 1,00,000
Opening balance (cash) 3,00,000 Payable settled 2,00,000
Receivable collected(all) 10,00,000 Office expense paid 2,00,000
Sale of boat stock(all) 25,00,000 Liquidator fee paid 3,00,000
Paid to shareholders
including TDS on cash
dividend 32,00,000
----------- ------------
40,00,000 40,00,000
In addition to the above receipts and payments, Liquidators distributed entire stock
of fixed assets to the shareholders in proportion to their shareholding at a market
value of taka 75,00,000. Considerations to shareholders have been made in
proportion to their share holding.
Fixed assets that Mr. A got upon liquidation are mostly open boat yard and
equipments. Mr. A is in talk with a buyer of those assets and agreed to an offer at
taka 62,00,000/= for his entire portion of the ABC Ltd. assets. Mr A is unsure about
the taxability of such sale deal and whether he can take out the proceeds to Canada.
Status of Mr. A is a non-resident Bangladeshi.
Requirements:
a. What is the compliance obligation of the Liquidator in ref to the relevant
section of Income Tax Ordinance 1984? Can a Liquidator be treated as
Principal Officer of the Company?
b. Compute income and tax implication of Mr. A for the considerations he 1
received upon liquidation. 0
c. Write your views in ref to the provisions of the Ordinance about (i) taxability
on the company on the distribution of assets to shareholders upon liquidation,
(ii) tax implications of the sale of assets by Mr. A he got from ABC Ltd. upon
liquidation.
Answer:
a) A Liquidator shall send notice about my appointment to the DCT of respective company circle
within 30 days of my appointment u/s 101(1). On being notified by the DCT u/s 101(3), the
Liquidator shall set aside amount equal to the amount on notice and shall not part with the assets of
the company excepting the preferential payments as per law.
As per section 2(48)(b) of 110,1984 the Liquidator may be treated as Principal Officer of the
company If the DCT served notice of his intention to treat him as Principal Officer. After all the
affairs of liquidation are vested on the Liquidator and upon getting notified by the DCT u/s 101(2),
Liquidator very much lands in the shoes of Officer or manager of the company. This binds him to
comply with TDS obligation on the payments and income, if any, during the liquidation process at his
disposal. There may still be collections of taxable income and payments of expenses subject to TDS.
Ordinary liability of the company continues on the Company under Liquidation and so on the
Liquidator. This binds the Liquidator to comply with all applicable provisions including TDS and file tax
return if any due until the end of the winding up process.
b) Tax Consequence in the hands of Mr. A on considerations from ABC Ltd.
Income year: 2016-17. Assessment Year: 2017-18
Proportion of
Total Sum TAKA
A
Money received upon liquidation 3,200,000 60% 1,920,000
Assets received upon liquidation (market value) 7,500,000 60% 4,500,000
Total Consideration of Mr. A 6,420,000
Less: Amount as deemed dividend u/s 2(26)( c) 1,700,000 60% 1,020,000
[Pro-rata of the Accumulated Surplus on 31-12-16]
Consideration to be treated as capital assets transfer upon 5,400,000
liquidation
LESS: Costu/s of32
Acquisition u/s 32(2)(d) 6,500,000
CAPITAL GAIN on consideration received - Loss (1,100,000)
FROM THE ABOVE COMPUTATION:
Capital Gain upon liquidation U/S 32 - LOSS (1,100,000)
Dividend Income upon Liquidation U/S 2(26)(c) ,(33) 1,020,000
TAX IMPLICATIONS ON Mr. A:
Dividend income taka 10,20,000/= shall be taxed u/s 33(Other Source)
Mr. A shall satisfy discharge of tax liability on dividend income with the TDS evidence from the
company. Loss under Capital Gain can be set off against income under same head in same year u/s 37
or to be carried forward u/s 40.
The claim of loss under Capital gain can be taken in the year in which affairs of the winding up are
complete.
(c)
[1] Company is not liable to capital gain tax on the distributions of assets to the shareholders upon
liquidation. Gains made by the liquidator on sale of company‘s assets with the object of proceeds
distribution to the shareholders are assessable in company. Company (Liquidator) is liable to comply
with TDS as applicable u/s 54 of the Ordinance on the distribution of dividend, if any, upon
liquidation.
[2] Mr. A got consideration of capital assets for taka 54,00,000/= net from ABC Ltd. upon liquidation
based on the market value on distribution.
This distribution of capital assets resulted into a capital loss taka 11,00,000 in the hands of Mr. A. Mr. A
entitles right to claim set off and carry forward of this loss under Capital Gain. He subsequently reached an
agreement to sell these assets to a buyer for taka 62,00,000.
Difference of market value of capital assets received from ABC Ltd. (Taka 54,00,000/=) and Sale
price (62,00,000) is taka 8,00,000 excess.
Mr. A shall be subject to assessment for this excess (gain) of taka 8,00,000/=. He was taxed on the
assets earlier based on market value.
Mr. A can set off earlier loss under Capital Gain (taka 11,00,000) against this Capital Gain of taka
8,00,000/=.As the carry-forward loss is higher than the gain, the net effect is still a carrying loss
under Capital Gain. So, no tax on gain of taka 8,00,000/=.Mr. A should file tax return, get assessed
and obtain clearance. Remittance of the tax-cleared proceeds is subject to Central Bank permission.
18 ABC & Co. (―Firm‖), Chartered Accountants, acts as tax consultant of XYZ Ltd. Nov
(―Company‖), a private limited company incorporated in Bangladesh. You are a Dec
Chartered Accountant and working as Tax Partner of the Firm. XYZ Ltd. is a 2016
subsidiary of a parent company incorporated in the UK. The Chief Financial
Officer (―CFO‖) of the Company has requested you through an email to advise the
Company on the following issues in view of the amendments made by the Finance
Act, 2016:

a) The Company imported goods of Tk.4,000,000/= and tax was collected at the
import stage at the rate of 5% during the income year ended 30 June 2017. The
annual turnover of the Company is Tk.7,500,000/= and disclosed profit in the
financial statements is Tk.800,000/=. Assume that there is no disallowances of
expenditure under section 30 of the ITO, 1984, and depreciation allowances
are claimed as per the provisions of the 3rd Schedule of the ITO, 1984. How
will minimum tax be computed?
b)What would be the delay interest if the Company submits return of income
for the assessment year 2017-2018 on 15 March 2018 upon making payment
of tax payable on the same date?
c)Mr. P is a supplier of the Company and has 12-digit TIN. He supplied
stationeries of Tk.1,800,000/= and Tk.2,000,000/= on 20 July 2017 and
01 October 2017 respectively.. Compute the amount of tax deductible at
source and payment to be made to Mr. P for the supply dated 01
October 2017.
d) In the situation stated above under (b), what would have happened
if the income of XYZ Ltd. had been exempted from tax or subject to
reduced rate of tax?
(e)The financial year of the parent company of XYZ Ltd. is closed on 31

December. Is it possible for XYZ Ltd. to follow the income year from 01
April to 31 March?
Requirement:
Prepare a report for XYZ Ltd. providing computation/opinion on the
aforementioned issues based on the relevant changes made through the
Finance Act, 2016.
The Chief Financial Officer

XYZ Ltd.
Dhaka, Bangladesh 10 December 2017
Dear Sir:
Opinion on the issues referred by the Company from the perspective of relevant changes made through the
Finance Act, 2016
I n r e s p o n s e t o yo u r e m a i l d a t e d - - - - 2 0 1 7 , w e a r e p r o v i d i n g b e l o w o u r
professional opinion on the issues referred by you:
(a) Computation of Minimum Tax: Annex-1
(b) Computation of Delay Interest: Annex-2
(c) Amount of tax deductible at source and payment to be made: Annex-3
(d) Effect on tax exemption or reduced tax rate:
Sub-section (5) has been inserted under section 44 of the ITO, 1984, through the Finance Act, 2016.
According to the newly inserted provisions, the income of a person for the relevant income year shall not be
exempted from tax or be subject to reduced rate of tax in an assessment year if the person fails to submit the
return of income, as required under section 75 of the ITO, 1984. Every return under section 75 shall be
filed, unless the date is extended, on or before the Tax Day. The last date for the submission of a return for
a person may be extended by the DCT upon the application by the person in the prescribed form. Provided
that the DCT may extend the date up to two months at his own capacity and he may extend another two
months with the approval of the IJCT.

In light of the above, the Company would not be able to enjoy any exemption from tax or reduced tax
rate if the time for submission of return of income had not been extended after expiry of Tax Day, i.e., 15
January 2018.
(e) Different Income Year:

Generally, income year is the period of 12 months commencing from 01 July of the relevant year. Bank,
insurance or financial institution or any subsidiary of foreign company may follow income year from January
to December. A proviso has been added to the definition of ―income year‖ through the Finance Act, 2016.
According to the new provision, the DCT may allow a different financial year for a company which is a
subsidiary or holding company of a parent company incorporated outside Bangladesh if such company
requires to follow a different income year for the purpose of consolidation of its accounts with the parent
company
In the case under discussion, the closing date of the parent company is 31 December and the
intended closing date of XYZ Ltd. is 31 March. The DCT may reject the application for change
of income year of XYZ Ltd. as the intended date, i.e., 31 March, would not justify that the
purpose of change of income year is to consolidate its accounts with the parent company.
Disclaimer:
If there is any contradiction between our views/opinion provided in this report and judgment of a
court of law or official publication/decision of any competent authority of the government of
Bangladesh on the subject matter, the latter shall prevail.
Should you have any further queries in this regard, please feel free to contact us.
Yours faithfully,
Partner
Annexure-1
XYZ Ltd.
ETIN:
Computation of Minimum Tax
Assessment Year 2017-2018 (income year ended on 30 June 2017)
Tk.
Minimum tax on income from business relating to import: (A)
Value of Import 4,000,000
Tax collected at source at import stage (@ 5%) 200,000
Income disclosed in the financial statements 800,000
Tax determined in regular manner (@ 35%) 280,000
In this case, minimum tax shall be 280,000
Minimum tax on gross receipts: (B)

Gross receipts 7,500,000
Minimum tax on gross receipts (@0.6%) 45,000
Minimum tax for XYZ Ltd. shall be the higher of (A) & (B) 280,000

XYZ Ltd. Annexure-2
ETIN:
Computation of Delay Interest
Assessment Year 2017-2018 (Income year ended on 30 June 2017)
Minimum tax payable as per answer to the question no. 2 (a) 280,000
Tax collected at source at import stage (g) 5%) 200,000
Difference 80,000
Tax Day for XYZ Ltd. 15 January 2018
Date of Submission of Return 15 March 2018
Delay Interest:
Monthly 2% Interest on Tk. 80,000 for 2 months 3,200
Annexure-3
XYZ Ltd,
ETIN:
Computation of Tax Deduction at Source Tk.
Base Amount:
Contract Value Nil
Bill for the supply dated 01 October 2017 2,000,000
Tk.
Total amount for supplies on 20 July 2017 and 01 October 2017 3,800,000
Hence, base amount 3,800,000
Rate of TDS applicable to base amount 4%
Amount of tax deductible at source 152,000
Tax already deducted from supply of stationeries on 20 July 2017 (@3%) 54,000
Amount of tax deductible at source from the bill dated 01 October 2017 98,000
1,902,000
Amount payable to Mr. P in connection with bill dated 01 October 2017
20 The cost of a machine owned and used by ABC Ltd. for business purposes was May
Tk.40,000,000 and its written down value was Tk.5,368,709 as on 30 June 2016. June
The machinery has been discarded on 10 June 2017. The scrap value is likely to be 2015
Tk.10,000 only. ABC Ltd. management intends to disposed of the machine in
August 2017.
Requirement:
Will ABC Ltd. get more tax relief all together for the machine in the
assessment years 2016-17 and 2017-18 if the machine is disposed of in June
2017 instead of in August 2017? Advise.
As per sub-Section 1 (xi) of Section 29 of the ITO, 1984, an obsolescence allowance is allowed in the
manner specified in paragraph 10 the Third Schedule of the ITO, 1984, where any building,
machinery or plant which has been discarded, demolished or destroyed in any income year or any
such asset has been sold, transferred by way of exchange after having been used for the purpose of
business or profession. As per paragraph 10c of the ITO, 1984, where the sales proceeds are less than
the written down value of the asset, the deficit shall be deemed to be an expenditure and deductible from
the profits and gains of business or profession of that year. The term ‘sales proceed’ has been defined in
sub-paragraph 3(f) of paragraph 11 of the Third Schedule of the ITO, 1984. As per sub-paragraph 3(f) of
paragraph 11 of the Third Schedule of the ITO, 1984, where the asset ceases to be used by the assessee for
the purpose of business or profession, sales proceed means the fair market value at the time of
such cessation. Provisions of the ITO 1984, do not delimit itself to the physical disposal of the asset
rather it also includes cessation of the assets from their effective use.
In addition, in respect of the building, machinery or plant which is wholly or partly discarded or
demolished or destroyed, the allowance can be granted only for that income year in which the building,
machinery or plant has actually been discarded or demolished or destroyed. Since this Section applies
only if the property is used in the relevant income year, where a property is discarded in one year and
sold in a subsequent year, the assessee must claim the allowance in the year in which the property is
discarded and cannot wait until the property is sold and claim the allowance in subsequent year in which
the sale takes place.
However, as per paragraph 10 (1) of the Third Schedule of the ITO, 1984, no allowance for depreciation is
allowable in the year of disposal.
Assessment Year: 2016-17 Taka Taka
Depreciation allowance (not eligible) -
Obsolescence/balancing allowance (eligible)
Written down value as at 1 July 2015 5,368,709
Scrap Value (fair value) (10,000)
Loss on disposal of assets 5,358,709
Income tax relief (5,358,709*35%) 1,875,548
Assessment Year: 2017--18

No depreciation allowance is allowable on machinery once it's sold or discarded. Similarly once loss
on disposal is allowed in the year of disposal, the assessee will not get any tax benefit in the year after
disposal. As such ABC Ltd. will not get any benefit in the Assessment Year 2017-18.
The loss on disposal of the machinery shall be considered on the point when the machinery has been
discarded. As such, if the physical disposal is done in June 2017 instead of August 2017, it will not
bring about any difference.
24 Captain Tausif U. Khan, a Bangladeshi young man, a successful RMG entrepreneur May June
well-known in the selected EU customers network, operates following business units 2017
in Bangladesh (a,b,c being private limited companies):
d) TUK and Partners (the Firm. Captain Khan‘s share 60%, balance with three friends)
e) TUK Singapore Limited (100% held by Captain Khan). TUK UK Ltd. (100% held
by Captain Khan)
Captain Khan is the MD of the limited companies in Bangladesh and only director in
companies in UK and Singapore. TUK BD Ltd. secures export orders from EU retailers
from Bangladeshi suppliers.
Captain Khan, living with his parents in Dhaka until he permanently migrated to UK with
his family in 2016. As condition of migration, he set up ‗TUK UK Ltd‘ during the relevant
income year in UK. He bought an apartment in London. Captain Khan qualifies for UK tax
residency in 2016-17(ending 05.04.2017). He also qualifies for tax residency for the same
income year in Bangladesh (2016-17, ending 30.06.2017). Captain Khan provided following
information affecting the income year 2016-17:
i) He received total taka 30,00,000 (net of tax) tax-paid remuneration from three
Bangladeshi limited companies.
iv) Remuneration receivable from TUK and Partners (the Firm) taka 2,50,000 for
the income year ended 30.06.2016. In the income year ended 30.06.2016, the
firm made net loss taka 3,00,000.
v) Interest received on Resident Foreign Currency Deposit A/c (RFCD) equivalent
Taka 25,000 net of tax.
vi) Singapore company paid his salary US Dollar 120,000/=. Of this, the company
remitted USD 50,000 to his London bank a/c to meet his London living and
remitted USD 50,000 to his Dhaka bank a/c to make up the shortfall of funds to buy
a plot of land(Exchange rate Taka 80 to USD; USD 1.25 to GBP; Taka 110 to
GBP).
vii) He received compensation of taka 10,00,000 from a developer for
cancellation of an apartment-buy contract and his default penalty clause of
taka 10,00,000 in a land-buy agreement with a land seller has been waived to
his favour.
viii) Paid Tk. 2,00,000/= interest on loan he took to buy a car and income tax Tk. 50,000 paid
on fitness renewal.
ix) He paid GBP 5,000 net income tax in UK after Singapore tax relief and USD 20,000
tax in Singapore.
x) He sold his 9% share in TUK &Partners(Firm) for amount with a gain of taka
10,00,000/-. He invested full amount of gain in shares in a private limited
company in the same month.
Captain Khan has issues for decisions which he wants to discuss with you (Exhibit 1).
Requirements:
Write an opinion letter to Captain Khan detailing the tax planning advices in the light of the
provisions of I.T. Ordinance 1984 touching all issues raised by him in the
Exhibit 1.
EXHIBIT 1
(In connection with Question No. )
1. Captain Khan wants to engage a full-time expatriate CEO (an Indian, now
working at a retailer sourcing office in UK) to oversee his Bangladesh
business. They agreed on a monthly salary of US Dollar 5000/= all-in plus tax
on company and the expatriate is free to join subject to work permit. How to
split monthly sum into pay components and when the expatriate should be
asked to join so as to have lowest tax exposure for the company in Bangladesh?
2. Captain Khan received Taka 36,00,000 tax-paid salary from his Bangladeshi
companies during the year ended 30.06.2017. He filed own tax return claiming
credit of the tax paid by the company on his salary. Assessing Officer (AO) issued
order adding taka 600,000(tax paid by company) to his personal expenditure (IT
10BB) creating tax demand on the ground of undisclosed expenditure (the tax paid
by companies). What is the validity of AO‘s action and next course?
3. Captain Khan is mulling the option of creating a website within his UK
company. Primary objective of the site is to sell space to Bangladeshi RMG
suppliers to advertise their products for EU customers on payment of agreed
rental to Captain‘s UK company. Idea appears promising. He wants to be sure
about tax exposure for his UK company in Bangladesh for earnings from
Bangladeshi customers (Bangladeshi companies will pay from permitted forex
quota).
To
Captain Tausif U Khan
In reference to your tax issues embodied in Exhibit 1 of your letter, we are pleased to inform following tax opinion:
1. As the salary tax is on the company, we understand, you want to keep the tax exposure on in-talk Indian
expatriate as low as possible. To achieve this, attention should be given to available tax-free allowances for
individual (being a resident), maximum perquisite limit binding on the company and tax-paid salary remit
ability by the expat to his home. Approx monthly salary split can be offered as:
Basic salary USD 4,500

House rent allowance USD 330
Conveyance allowance USD 40
Medical allowance USD 130
Total Monthly USD 5,000

To keep the salary tax lower, expat should be engaged officially in Bangladesh so as to enable him qualify tax
residency. For this reason, expat can be asked to join from July 2017 white formalities of his work permit can be
accomplished by the time prior to that.
2. Action of Assessing Officer is not correct. You received tax-paid salary from companies as per the
terms of your employment. The tax was paid by the companies, not by you. There is no ‗deduction of
tax‘ here in this case u/s 50. This is perquisite in the hand of the company. There is no impact of your
cash flow. That claiming credit of the tax on company‘s tax-paid salaries cannot be legally termed as
your expense. Tax amount cannot be added to your personal expenditure as it is not paid by you. Better
you can prefer an appeal for deletion of such unlawful addition
3.Orders for renting the website shall be received directly in UK. The contract for renting your
company‘s website by Bangladeshi customers is considered to be executed in UK. Business is
transacted in place where contracts are executed. We assume that you will continue to remain in UK as a
condition of your migration program and you will control and manage UK Company from being there in
UK. In that case, TUK UK Ltd. shall be a resident company, non-resident in Bangladesh. We also
assume, UK Company shall not operate any PE in Bangladesh to source and manage customers in
Bangladesh. Website rental payments shall be paid by the Bangladeshi customers in remittable foreign
currency directly to UK Company. Business is transacted in the local in which the contracts pertaining to
business transactions are concluded. Under these circumstances, TUK UK Ltd. shall have no tax
liability in Bangladesh for profits arising to UK from website earnings from BD customers.

5b. VAT
S.L Question Year

Explain the procedures of payments of VAT as provided under Rule 23 submission of PE— Ill
returns under Rule 24. May — June,
2002
According to Rule 23 of VAT rule 1991:

Procedures of payments of VAT:
 In case of supply of goods or rendering of services pay the VAT after deducting the allowable input
from the output tax or any other Government dues, by depositing the net amount in the treasury,
under the head "1/1133/0000/0311"
 The registered person shall, before the removal of any consignment of goods from the place of
manufacture or production or business, determine the payable tax on it and at the time of removal
of the goods pay the tax through necessary adjustment in account current and for this purpose,
there shall have to be sufficient balance in his account:
 Tax payable shall have to be determined by multiplying the price inclusive of tax by 3/23 and at
the end of the supply of whole day.
 Where the amount of value added tax is not shown separately in the invoice given by the supplier
of goods or the renderer of service, the amount of the value added tax payable shall be
determined multiplying by 15/115 the gross sale price, inclusive of the amount of value added
tax due or received.
According to Rule 24 of VAT rule 1991: Procedures of submission of returns:
 Every manufacturer or producer or businessman of taxable goods or renderer of taxable
service shall have to deposit in the local value add tax office two copies ofa return in Form
"Musak-19" for each tax period within (ten) working days of themonth next after the tax period:
Provided that in the case of an insurance company, for each tax period two copies of the return
shall have to be submitted to the local value added tax office within 20 (twenty) working days of
the month next after tax period.
A person who, after purchasing or manufacturing or producing goods, supplies or exports it shall
have to append to his return the following documents, namely:-
a) the original copy of account current register (where applicable);
b) bill of entry or Musak-11 relating to purchase of inputs or raw material during the
concerned tax peri od or any other docu ment relating to purchase during that period;
and
c) any other document demanded by the Commissioner.
A person who renders or supplies taxable service shall have to furnish with the return the following
documents, namely:-
a) original and second copy of the treasury Challan (where applicable) as an
evidence of payment of the payable tax:
b) bill of entry relating to the inputs or raw material purchased or Musak -11 or any other
document relating to purchase during the relevant period; and
c) any other document demanded by the Commissioner
What are the provisions with regard to refund of VAT on exports? PE— Ill
May — June,
2002
An exporter can take refund of VAT in any of the following three ways:-
a) Self maintained current Account:
VAT registered exporters whose tax liabilities on local supplies (VAT+SD) is not lesser than the drawback
claim, can adjust their refundable t axes (custom duty, supplement duty, excise duty etc.) in the
form of rebate against output tax in the current account. However, such drawbacks or rebates shall have
to be reported in the related tax return. In this case, the exporter does not need to approach DEDO and VAT
drawback would not be at all necessary. Because rebate has already been obtained through the current
account.
From commercial Bank directly:
Direct payment to the exporters bank accounts are allowed on the following 16 items of exports.
1. Processed leather (crushed and finished)
2. Jute products (carpets)
3. Urea fertilizer
4. Ceramic/melamine products
5. Espadrilles
6. Transfer paper
7. Tea chest
8. Printed calendars
9. Stainless steel cutleries
10. Cigarettes
11. News print
12. Card pin
13. Refined glycerin
14. Automatic PP container batteries
15. Tracks made of finished leather of cow, buffalo, goat and lamb
16. Men’s leather shoe (oxford type)
Drawback from DEDO
Drawback can be obtained from DEDO in those cases where any of the above two ways or services is not
applicable.
Note: Commercial exporters who purchase goods from local market and sell or export them aboard.
They act as intermediaries in the export process and do not undertake any manufacturing activities.
What records are required to be kept under section 31 of Value Added Tax, Act, PE— Ill
1991 and Under Rule 22 of Value Added Tax Rule of 1991? May —
June, 2002
Followings are the Books of Accounts u/s 31 & rule 22 that are to be maintained :
 Purchase Register: Mushak-16: Rule 22(1)
 Sales Register: Mushak-17: Rule 22(1)
 Current Account: Mushak-18: Rule 22(1)
 Challan (Invoice): Mushak-11: Rule 16(1)
 Challan (Cash Memo): Mushak-11kha: Rule 16(1)
 Statement of input & FG stock, production statement
 The accounts of production or manufacture of goods or raw materials, services, etc
Followings are the Records that are to be maintained:
 VAT Challan (invoice) for local input purchases
 Bill of entry & Invoice for imported input
 Treasury challan copy
 Copy of Dakhil-patra (Return): Mushak -19: Rule-24(1)
 Credit Note, Mushak-12 (if any)
 Debit Note, Mushak-12 kha (if any)
(a)State the circumstances that permit to obtain VAT registration centrally by a person. PE — III
(b) To whom application for VAT registration centrally is to be submitted. May-June —
(c) State the provision of law for compliance by a person registered centrally under the VAT Act,
1991.
2003
a) If any person or organisation supplies taxable goods or services or an importer of any goods and exporter of any goods or services
manages his business centrally and maintain his accounts and kept records centrally is entitled to obtain VAT registration centrally.
b) The application for VAT registration centrally is to be submitted to Board and the authorised officer of the Board will be give
registration accordingly.
c) The responsible officer of the organisation will submit VAT return and others necessary documents as per normal procedures
like others registrants. However, the person who are given registration centrally have to maintain accounts and records centrally or
otherwise registration will be cancelled.
How are the value of goods and services determined for imposition of VAT? PE — Ill
Nov- Dec,
2003
According to section 5 of the Value Added Tax Act 1991:
In case of Importation:
In case of importation of goods, the amount on which the value added tax shall be payable shall be
determined by adding the amount of import duty, supplementary duty and all other duties and taxes, (if
any), except advance income tax payable, to the assessable value determined under section 25 or 25A
of the Customs Act.
In case of goods supplied:
The price shall be the consideration receivable from buyer by the producer or business person, which will
include purchase price of materials and all expenditure incurred by the manufacturer and also
commission, charges,fees and all supplementary duty excluding VAT and profit,
If any registered person sells goods directly or through his own brand name or sales centres, distributors or
commission agents under his own brand name, the value added tax shall, in the case of the goods with
brand-name be determined on the basis of the consideration due from the purchaser to the owner of the
brand-named goods
In case of services:
Value added tax shall be imposed on the total receipts.
In case goods subject to trade discount:
Goods on which trade discount is allowed, value added tax will be charged on the value of the goods after
deduction of trade discount:
State the services and the applicable rate from which VAT has to be collected or PE — III
deducted at source at various rates as provided in VAT regulation. May — June,
2004, Nov—
Dec, 2002
According to SRO No. 193-/law/2003/389-mushak, dated, July 2003:

The followings are the services from which VAT has to be collected or deducted at source:
Services Deduction rate (%)
Construction firms 4.5
Indenting firms 15
Lease holders 15
Motor garages and workshop 4.5
Dockyards 4.5
Printing press 4.5
Advertising firms 15
Consultancy firms & Supervisory firms 4.5
Carrying contractors-Petroleum products 2.25
Carrying contractors-Others 4.5
Persons attending board meeting 15
Survey firms 15
Lessors of vehicle 4.5
Procurement providers 2.25
Audit and accounting firms 4.5
Buyers of auctioned goods 1.5
What are the particulars that are to be mentioned in the certificate by the person PE — III
collecting or deducting VAT to the person rendering services? May — June,
2004
Nov — Dec,
2002
The followings particular should be mentioned in the certificate by the person collecting
or deducting VAT from the person rendering services:
 Registration number of value added tax payer;
 Total amount paid on account of service value or commission;
 Value of value added taxable service or commission:
 Amount of value added tax collected or deducted and
 Any other particular required as per rule.
I f the person responsible to deduct VAT fails to do that, what are the PE — III
Consequences? May — June,
2004,
Nov— Dec,
2002
Any person responsible i.e Government organization, Semi-Government organization,
Autonomous organization, NGO's, Banks, Insurance companies & Limited companies to deduct VAT
fails to do that, shall be subject to pay the VAT together with 2% as interest per month on the same. If
VAT deducted at source is not deposited within two months, the person liable for the default may be
fined with an amount up to tk. 25,000.
State the Provisions of section 42 of Value Added Tax Act, 1991 regarding appeal. PE — III
May — June,

2004
Nov— Dec,
2002
According to section 42 of VAT Act 1991:

 Any value added tax officer or any person aggrieve by any decision or order given by a value
added tax officer may appeal against such order within three months of giving such decision or
order.
To the Commissioner (Appeal) Against the decision or order given by an Additional
Commissioner or any value added tax officer below that rank;
To the Appellate Tribunal Against the decision or order given by the
Commissioner, the Commissioner (Appeal) or any value added tax
officer of equivalent rank.
 If the appeal is preferred to Commissioner (Appeal), Commissioner (Appeal) may make an

enquiry about the appeal if he considers it necessary or collect information and may, after giving to
the appellant reasonable opportunity of being heard, uphold the decision or order appealed against
or amend it, or reject it or give such fresh decision or order as he deems fit.
 If the Commissioner (Appeal) is satisfied that the appellant could not prefer the appeal within the
said three months' time due to sufficient reason, he may permit the appellant to prefer an appeal
within two months next following the said period.
 If any person intends to prefer an appeal against a decision or order relating to a demand of
value added tax payable on any goods or service or to fine imposed he shall have
to p a y a t t h e t i m e o f p r e f e r r e d h i s a p p e a l .
 In the case of an appeal preferred to the Commissioner (Appeal), ten per cent of the fine
imposed or tax demanded.
 In the case of an appeal preferred to Appellate Tribunal against an order given by
Commissioner or any value added tax officer of his equivalent rank, twenty five percent of tax
demanded or fine imposed.
 If the appellate authority fails to give any decision on the appeal within twelve months from the
date of its receipt, the appeal shall be deemed to have been granted by the appellate authority.
What are the goods and services exempt from payment of VAT? PE — III
May — June,
2004
According to First Schedule of VAT Act 1991 huge number of items including livestock, frozen
meats, milk , potato, tomato and many other goods that are exempted from VAT.
)
According to Second Schedule of VAT Act 1991 huge number of items including basic services
essential to life, social welfare oriented services, culture oriented services, finance and finance related
services, transport services, personal services, and many other services that ate exempted from VAT
Board notification:
In addition the Board may by notification in the official gazette may exempt such other goods and
services as it deems fit in this respect.
Such as:
 Cottage industry by following certain conditions is exempt from VAT.
 Imports of approved educational institutions, scientific apparatus, spares and inputs;
 Farm insecticides;
 Diplomatic Missions,
 International organizations;
 Power generation.
List a summary of the various provisions relevant to Turnover Tax under the PE — III
VAT Act, 1991 and the VAT Rules, 1991. May — June,
2004

According to section 8(1) of VAT Act 1991 &para 4 of VAT Rules,1991
If the annual turnover of any supplier of taxable goods or any renderer of taxable service, is less
than taka Twenty lacs, he shall pay “turn over tax at the rate of 4% percent on the annual
turnover. The followings are the provisions that are related to Turnover Tax:
 Application for registration in Mushak-6 to Superintendent
 If satisfied, Superintendent will enlist the applicant within 7 days and issue a Certificate
 A declaration of estimated annual turnover and payment system in prescribed form “Mushak-
2KHA” to be submitted within 30 days from the date of enlistment and every succeeding year
 The superintendent, if satisfied with the declaration relating to turnover, shall approve and send a
copy to registered person within next 30 working days
 Payment can be made annually, quarterly or monthly
 Return to be filled in Mushak-4 within 15 of the following month and for one time in case of annual
th
ToT payment, 4 times and 12 times in case of quarterly and monthly respectively
 Failure to pay ToT attract penalty @ 2% per month on arrear but not exceeding Tk 5,000
 Accounts of transactions (Purchases &Sales) to be maintained in Mushak-17KA: Rule 4 (16)
 ToT registered person is not allowed to take credit of input VAT
 Consumer or service receiver (VAT registered) are also not allowed to take rebate from the
ToTchallan
 Refund of excess tax paid registered person is allowed u/s 67
 Cash memo mentioning the ToT registration number will be treated as lawful challan
What are the procedures and time for payment of Value Added Tax? PE III
—
Nov- Dec,
2004
According to Section 6 of VAT Act 1991:
In case of imported goods:
The method of payment of VAT will be the same as per the Customs Act .
In the case of supply of goods by a registered person, value added tax shall be payable
on the first occurrence of any of the following events:-
a) When goods are delivered;
b) When related delivery challan is issued;
c) When goods are used for personal purpose or transferred for the use of others
d) When payment is received either in part or in full.
In case o f r ender i n g ser v i ces v al u e added tax shal l be pay abl e o n the f i r st occurrence of
any of the following events:
a) When services are rendered;
b)When related challan is issued;
c)When payment is received either in part or in full.
What is self registration? List down the documents which will be required for PE III
—
compulsory registration. Nov- Dec,

2004
Any person exempted from registration under section 16 can apply in prescribed form and procedures
to the concerned office for self registration and as such to be treated as supplier or provider of taxable
goods or services and upon full satisfaction about the compliance of such application, the official shall
register the person and issue him a registration certificate mentioning therein his business
identification number.
Since compulsory registration is imposed by the VAT authority on a person who required to be registered
but does not applied, the question of submission of documents is not arrived. However, followed by
registration the authority may ask for the following documents for reference and record.
”
a) Application in form "Mushak-6
b) Trade licensee;
c) TIN certificate (if available)
d) IRC/ERC certificate (Where applicable)
e) List of all sale centers when applied for central registration;
f) A declaration in form Mushak-7 regarding place of production or business, plant,
machinery, fittings, goods to be produced or purchase or sale or stock of goods and its inputs.***

How does an aggrieved person get redressed under VAT Act 1991? PE III —
Nov- Dec,
2004
a)Any person aggrieved by an order U/S 9 (2) of VAT Act 1991 for adjustment of account current
by or in the return canceling the rebate (credit) taken may raise a written objection U/S 9(2a) to superior
officer against said order.
b) Any person aggrieved by any decision or order given by a VAT officer under VAT Act 1991 or
VAT Rules 1991 may appeal against such order, except against an order of seizure or sale issued
under section 56 in case of supply of goods or rendering of services or those issued under sections 82
and 98 of the Customs Act in the case of import of goods, within 3 months of giving such decision or order.
The Appeal to be placed:-
To the Commissioner (Appeal) against the decision or order issued by an Additional
Commissioner or any VAT Officer subordinate to him.
To the Customs, Excise and VAT Appellate Tribunal, against the decision or order issued by the
Commissioner, the Commissioner (Appeal) or any VAT officer of equivalent rank and status.
When Zero tax rates is imposed under the Value Added Tax Act? PE III
—
Nov- Dec,
2004
Zero rated tax shall be imposed on the following goods or services, namely:-
(a)any goods or services exported or deemed to have been exported from Bangladesh;
(b)food and other things supplied in accordance with section 24 of the Customs Act, 1969 (V of 1969)
hereinafter referred to as the Customs Act to any transport leaving Bangladesh, for consumption
outside Bangladesh:
Exception:
Zero rated tax shall not be applicable to the following goods, namely:-
(a)any goods intended to be re-imported into Bangladesh;
(b)such goods as have been presented for export in accordance with section 131 of the Customs Act
b ut not exported, within thirty days of submission of the bill of export or extended time,if any, allowed
by the Commissioner in this behalf.
What do you mean by Truncated based VAT? Discuss the procedure and PE III
—
method of payment of VAT under this system. Nov- Dec,

Or W h o a r e e n t i t l e d t o t r u n c a t e d s y s t e m o f V A T p a y m e n t ? 2004, May
— June,
2002
Truncated based VAT:
VAT is levied on truncated value under this system. Truncated value is the extent of value addition
deemed to be made by certain service providers on which standard 15% VAT is chargeable. Input tax
rebate is not allowed under truncated system.
Under truncated system VAT is paid on truncated value and effective rate is lower than the standard rate
of 15%. This VAT is collected from the consumers (who may or may not be final consumers) and the seller
cannot set off her/his input tax against his/her output tax.
Examples of services:
Examples of services:
Provider of services Value addition(%) Truncated rate (%)
Dockyard 30% 4.5%
Construction firm 30% 4.5%
Printing press 30% 4.5%
Audit and accounting firm 30% 4.5%
Medical institution 15% 2.25%
Procedure and method of payment:

VAT to be paid when
a) servicer rendered;
b) issuance of invoice;
c) receipt of part or full payment Which occurs first
What are the provisions in Rule 4 in the following cases?

. PE III
—
i)Payment; Nov- Dec,

ii)Penalty on default payment and process of appeal. 2004
According to rule 4 of Value Added Rule 1991:

Payment:
 Every supplier of taxable goods and services shall have to pay turnover tax annual turnover when it
does not exceed Tk.20 lac.
 Any person subject to turnover tax shall have to be enlisted with superintendent for payment of
turnover tax.
 A declaration stating projected turnover of the year and the manner of tax payment shall have to
be made to the superintendent.
 Any enlisted person shall have to pay turnover tax from the date of registration. The enlisted person
can pay turnover tax annually, monthly or quarterly.
 The enlisted person should submit turnover tax return with main treasury challan copy
Penalty on default payment
If the enlisted person fails to pay the turnover tax fixed by the superintendent, in the manner described in
the laws, the superintendent may impose an additional tax at the rate of 2% per month on the unpaid
amount, in addition to a fine not exceeding Tk. 5,000.
Process of appeal:
Any enlisted person aggrieved by the decision of superintendent may appeal to the commissioner
(appeal) u/s 42(1) of VAT Act 1991.
Define TOT as per section 8 of Value Added Tax Act,1991. PE III

—
Nov- Dec,
2004
According to section 8 of Value Added Tax Act 1991:

 Any producer or manufacturer or trader of taxable goods or provider of taxable services, who is
not required to be compulsory registered, shall pay turnover tax at the rate of four percent of his
annual turnover.
 The Board may, after consideration of the importance of the public interest and proper
investigation, by order published in the official Gazette, exempt any goods or service from turnover
tax, subject to such limits and conditions as may be specified in the order.
State the provision of section 17 of Value Added Tax, 1991 regarding self PE — III
registration.What are the procedures of registration under Rule 9? May- June,
2005
According to section 17 of Value Added Tax, 1991:
 Any person exempted from compulsory registration may apply for voluntary registration, as a supplier
of taxable goods or renderer of taxable service and the proper officer shall, if he is satisfied that the
application is in order in all respects, register the applicant and give him a registration certificate
mentioning therein his business identification number.
According to rule 9 of Value Added Rule 1991:
Procedure of registration -
 If the annual turnover of the supplier of taxable goods or taxable service is not less thantaka
twenty lacshe shall have to submit an application for registration in Form 'Musak-6' to a
Divisional officer or to an officer, not being below the rank of Assistant Commissioner specified
by an order by the Board in this behalf.
 If the turnover of a person in respect of the taxable goods supplied or taxable service rendered
becomes, at any time during twelve consecutive months after his being exempt from the
requirement of registration he shall within thirty days of the expiry of such period, submit an
application for registration to the Divisional Officer or an officer, not below the rank of an
Assistant Commissioner, specified by order by the Board in this behalf.
 A person who intends to start the business of supplying taxable goods or rendering taxable service
shall, before starting the business, apply to the divisional office or such officer, not below the rank
of Assistant Commissioner, as the Board may, by order, empower in this behalf, for registration, if
the annual turnover of the business is estimated to be at least taka twenty lakhs.
 Where more than one taxable nods or service are supplied or rendered or import or exports
are made from the same place of manufacture or production or rendering of service or import or
export, only one registration shall be required.

 A person required to be registered shall, along with the application for registration submitted in
Form Musak-7 a declaration containing particulars of premises, plant, capital machineries and
fittings and goods to be produced or purchased and sold or stocked and major inputs
What are the offences and penalties under section 37 and Rule 35 of VAT Act PE — III
Rules,1991 or May- June,
State the provisions of law for offences and penalty under section 37 of Value 2005, May
Added Tax Act, 1991. — June,
2002
Offences and penalties
According to Section 37 of Value Added Tax Act 1991:
The followings are the offences:
 fails to submit an application for registration under this Act, though required to submit such an
application; and
 fails to submit a return within the specified date; or
 fails to inform the value added tax officer about any change of information in relation to
registration; or
 fails to comply with the direction of any summons under section 25; or
 violates any other provision of this Act, -
Penalties:
Shall be liable to pay a fine of taka not less than ten thousand and not more than fifty-thousand.
Offences:
 fails to give a tax-invoice or gives a tax-invoice untrue in relation to material information; or
 fails to pay value added tax or, where applicable, value added tax and supplementary duty on
goods or service supplied by him though directed twice by the concerned officer, or fails to submit
the return for a tax period even after lapse of the time specified for such submission; or
 submits return untrue in relation to material information; or
 attempts to evade payable value added tax by supplying goods without recording information
regarding sales in the sales accounts register (Mushak-17) and payable value added tax in the
account current register, (Mushak-18); or
 evades or attempts to evade tax by submitting forged or false documents to a value added tax
officer: or
 Does not preserve any document which is required to be preserved under this Act or the rules; or
destroys or alters such document or mutilates any part of such document; or demonstrates it to
be false; or does not preserve the document as per requirement of this Act: or
 makes consciously a false statement or declaration: or
 obstructs or prevents from entering his business place any value added tax officer authorized
under this Act to inspect or seize any record, register or any other document relating to value
added tax: or engages himself in receiving, acquiring possession of or transacting in goods
though he knows or he has reason to believe that value added tax or, where applicabl e,
supplementary duty payable on such goods has been evaded; or
 takes a credit of input-tax through forged or fake invoice: or
 evades or attempts to evade value added tax or supplementary duty by any other means; or
 gives an invoice in which an amount of value added tax is specified, though he is not a registered
person;
Penalties:
 he shall be liable to a fine of an amount not less than equal to, and not more than 2.5 times the
amount of value added tax or, where applicable, value added tax and supplementar y duty,
payable upon the goods or service; and, if convicted for the said activity in a court of Magistrate,
he shall be liable to imprisonment for not less than three months and not more than two years, or
to a fine not less than equal to, and not more than two and half times of, the amount of value
added tax or, where applicable, value added tax and supplementary duty, or to both. For
irregularities other than evasion of revenue, he shall be liable to a fine of not less than twenty five
thousand taka and not more than three lac taka.
 If any registered service renderer fails or has failed to submit return or to pay value added
tax or, where applicable, value added tax and supplementary duty within the specified

date, then he shall be required to pay that unpaid value added tax or, where applicable, value
added tax and supplementary duty along with an additional tax at the rate of two per cent.
per month on the unpaid amount of the tax and duty.
Offences:
 fails to become registered within one month of the receipt of an order for
compulsory registration
Penalties:
 if he is a registered person, his business premises may be but under lock and key and
his registration may also be cancelled; and
 if he is a registrable person, his business premises may be but under lock and key.
According to Rule 35 of Value Added Rule 1991:
Offences and penalties:
A registered person who contravenes any provision of the rules shall be liable to a
penalty of an amount, being not less than half, and not more than two times, the amount of
value added tax or, where applicable, the value added tax and supplementary duty, and the
goods or service (where applicable) related to such contravention shall be forfeited to the
Government.
According to Section 37 of Value Added Tax Act 1991:
The followings are the offences:
application; and
registration; or
 violates any other provision of this Act, -
Prosecutions:
Shall be liable to pay a fine of taka not less than ten thousand and not more than fifty thousand.
Offences:
goods or service supplied by him though directed twice by the concerned officer, or fails to
submit the return for a tax period even after lapse of the time specified for such
submission; or
 attempts to evade payable value added tax by supplying goods without recording
information regarding sales in the sales accounts register (Mushak-17) and payable value
added tax in the account current register, (Mushak-18); or
officer; or
 Does not preserve any document which is required to be preserved under this Act or
therules; or destroys or alters such document or mutilates any part of such document; or
 demonstrates it to be false; or does not preserve the document as per requirement of this Act;
or
 makes consciously a false statement or declaration; or
 obstructs or prevents from entering his business place any value added tax officer
authorized under this Act to inspect or seize any record, register or any other document
relating to value added tax; or engages himself in receiving, acquiring possession of or
transacting in goods though he knows or he has reason to believe that value added tax or,
where applicable, supplementary duty payable on such goods has been evaded; or
 takes a credit of input-tax through forged or fake invoice; or
 evades or attemptsto evade value added tax or supplementary duty by any other means; or
 gives an invoice in which an amount of value added tax is specified, though he is not a
registered person;
Prosecutions:
amount of value added tax or, where applicable, value added tax and supplementary duty,
payable upon the goods or service; and, if convictedfor the said activity in a court of Magistrate, he
shall be liable to imprisonment for not less than three months and not more than two years, or to
a fine not less than equal to, and not more than two and half times of, the amount of value added
tax or, where applicable, value added tax and supplementary duty, or to both. For irregularities

other than evasion of revenue, he shall be liable to a fine of not less than twenty five thousand
taka and not more than three lac taka.
 If any registered service renderer fails or has failed to submit return or to pay value added tax
or, where applicable, value added tax and supplementary duty within the specified date, then he
shall be required to pay that unpaid value added tax or, where applicable, value added tax and
supplementary duty along with an additional tax at the rate of two per cent per month on the
unpaid amount of the tax and duty.
Offences:
 fails to become registered within one month of the receipt of an order for compulsory
registration
Prosecutions:
 if he is a registered person, his business premises may be but under lock and key and his
registration may also be cancelled; and
 if he is a registrable person, his business premises may be but under lock and key.
Mention the rate of VAT based on value additions fixed by NBR applicable to the PE — III
following service providers: May- June,
i) Carrying contractor 2005
ii) Advertising firm
iii) Printing press
Particulars Value addition VAT rate

Carrying contractor 30% of total receipt 4.5%
Advertising firm
a) Garments, NationalizedBank etc 100% of total receipt 15%
60% of total receipt 9%
b) O t h e r s
Printing press
a ) P ri n ti n g wi th i n p u ts 30% of total receipt 4.5%
b ) Printing charges alone 100% of total receipt 15%
Discuss the salient features of changes in VAT Act, 1991 brought about by PE — III
Finance Act, 2005. Nov- Dec,
2005
Amendment of Section (2) of VAT Act. 1991 (Act. xxii of 1991)

 For the words "Taxes office" occurring after clause "Ja" of section (2) of VAT Act. : 1991, the words
"office of the superintendent of Taxes, large tax payers unit, VAT office" shall be substituted.
 For the words - "Divisional office" occurring in clause "Ra" of section (2), the words
"Divisional office or Divisional office of the large tax payers unit" shall be substituted.
Amendment of Section 13
The government shall, by gazette notification fix the rate of refund of customs or duty in applicable
cases of certain determined materials utilised for the manufacturer of goods, for export, production or
used in exportable services or goods designated as exportables.
The words removal of goods shall be replaced by the words - "of removal goods or service provide"
and the words "removal of goods" shall be substituted by the words "removal of goods or service
provider
The wordsCustoms or Excise occurring in clause (kaa) of sub-section (1) of section 56 shall be
substituted by the words - "Customs, VAT or Excise officers".
Define the following services as per VAT Act.1991: PE — III

i) Pr o cu r e me n t p ro vi d e r; Nov- Dec,
2005
ii) Security services;
iii) Rent a car services.

Procurement provider
It means any person, organization or firm who supplies goods or services or both in exchange of value to
various government, semi- government, autonomous bodies, NGO, bank, insurance and limited
companies against quotation or tender.
Basis of valuation and vat rate:
Value addition by a procurement provider is estimated at 15% of the total bill and the truncated vale on the
whole bill is 15%*15%=2.25%
Security services:
It means any person or organization engaged in the supply of guards, workers or work forces for the
security of any movable or immovable property, building, complex, premises, office or any other
establishment on commercial basis.
Rent a car services:
It means any person, organization or firm who lets on hire any car (other than taxi cab) jeep, bus,
coaster, minibus, launch, speedboat, tractor, or any other vehicle or vessel of any other name and,
nature to government, semi-government, autonomous or any private person, organization or firm on
commercial basis and in exchange of value.
How do you maintain a VAT current register (VAT-18) as per VAT Act and PE — III
Rules 1991 Nov- Dec,
2005
Current account contains record of all VAT deposit. payable and adjustment. A registered person can
maintain computerized current account with the permission of the Board. BIN Number including name,
address and telephone number of registered person is recorded at thetop of Current Account. The
Account Current made up 10 column and has cross reference with purchase and sales book. All input tax,
rebate due to sales return, balance of previous month Current Account and all other dues and return are
taken into rebate column. All dues like output tax, cancellation of rebate due to purchase return,
penalties and all other dues are goes to payable column. Treasury deposit is shown in the column
designated thereof.
The Account Current should always be maintained with positive balance.
What are the conditions to be fulfilled in order to claim delivery of goods as deemed PE— Ill
export under Rule 31 of the VAT Rule 1991? May- June,
2006
Following are the conditions to be fulfilled in order to claim delivery of goods as deemed export
under rule 31 of the VAT rule 1991:
(1) Proceeds thereof receivable in foreign currency through official channel
(2) Refund (input VAT minus output VAT) claimable u/R 29- based on applicable Dakhil-
patra (Return) u/s 35 - Rule 24 - Mushak # 19.
(3) Otherwise i.e. when Return (u/s 35 - rule 24: Mushak # 19) submission is not
applicable, in that scenario, refund (of input-vat) to be claimed u/R 30.
(4) Evidencing documents, like Tender, acceptance thereof, work completion
guidelines/directions & receipt of FC payment officially, will need to be furnished to VAT Authority.
State the salient features of changes made by FA 2005: PE— Ill

VAT Act May- June,
2006
VAT Act:
Amendment of Section (2) of VAT Act.1991 (Act. xxii of 1991)
 For the words "Taxes office" occurring after clause "Ja" of section (2) of VAT Act. : 1991, the
words "office of the superintendent of Taxes, large tax payers unit, VAT office" shall 'be
substituted.
 For the words - "Divisional office" occurring in clause "Ra" of section (2), the words
"Divisional office or Divisional office of the large tax payers unit" shall be substituted.
The government shall, by gazette notification fix the rate of refund of customs or duty in
applicable cases of certain determined materials utilised for the manufacturer of goods, for export,
production or used in exportable services or goods designated as exportables.
The words removal of goods shall be replaced by the words - "of removal goods or service provide"
and the words "removal of goods" shall be substituted by the words "removal of goods or service
provider
The words Customs or Excise occurring in clause (kaa) of sub-section (I) of section 56 shall be substituted by the
words - "Customs. VAT or Excise officers".
How does an aggrieved person get redressed under VAT regulations? PE— Ill
May- June,
2006
a) Any person aggrieved by an order U/S 9 (2) of VAT Act 1991 for adjustment of account current by
or in the return canceling the rebate (credit) taken may raise a written objection U/S 9(2a) to superior
officer against said order.
b) Any person aggrieved by any decision or order given by a VAT officer under VAT Act 1991 or VAT
Rules 1991 may appeal against such order, except against an order of seizure or sale issued
under section 56 in case of supply of goods or rendering of service s or those issued under sections
82 and 98 of the Customs Act in the case of import of goods, within 3 months of giving such decision or
order.
The Appeal to be placed:-
To the Commissioner (Appeal) against the decision o r order issued by an Additional
Commissioner or any VAT Officer subordinate to him.
To the Customs, Excise and VAT Appellate Tribunal, against the decision or order issued by the
Commissioner, the Commissioner (Appeal) or any VAT officer of equivalent rank and status.
c)When the base value fixed by Divisional Officer under Rule 3(3) is higher than one declared
under Rule 3(1), than the registered person, within 30 working days of the order may submit a prayer
to the Commissioner to reconsider the base value and if the Commissioner fail s to give a decision
on the prayer within 15 working days from the date of the receipt of the prayer, it shall be deemed to
be accepted.
Value addition is the important principle of VAT. Please explain in the context of VAT Act, 1991? PE- Ill
Nov - Dec,
2006
Principle of Value addition:
Value Added Tax (VAT) means tax on value addition. It is charged on the value of consumption, applied at each point
of transactions of goods or services from primary production to final consumption. At every stage one has to pay as
well as collect VAT before reaching the stage of the final consumption. So, every one, except final consumer, does not
have to bear any VAT from his own account. Because whatever the person other than the final consumer has paid as
VAT at the time of purchase he will collect that amount of VAT from persons who will buy his goods or services and
also collect tax on value which is added by him before selling. The addition done by seller before selling is difference
amount between the sales price of the goods or services and raw material that is (output-input) is called value addition.
The standard rate of VAT is 15%. The distinctive feature of VAT is that unlike erstwhile sale tax, it does not have any
cascading or tax on tax effect. Under sales tax regime there was no scope to adjust sales tax paid as input tax
against output tax payable and it used to be compounded at each intermediate stage. By introduction of value addition
concept the tax base has been expanded significantly with the expansion of manufacturing and service sector in the
economy.
What do you mean by Input Tax rebate and what are the conditions to be fulfilled in order to PE- Ill
claim Input Tax rebate? Nov - Dec,
2006
Input tax rebate:
Input tax paid by a registered person on the inputs imported or purchased by him can be adjusted under section 9
and rule 19 of VAT Act 1991 and VAT Rules 1991 against output tax liability in the current account for a certain tax
period which is called input tax rebate.
Conditions to fulfill in order to claim Input Tax rebate:
a) Person willing to obtain input tax rebate must be registered and shall have to obtain rebate against
output tax liability.
b) Documents relating to input tax payment including the name, address and registration no i.e bill of
entry on Mushok-11 Challan or any other papers or records deemed to be challan must exist which
should be retained for 4 years:
c) Rebate must be obtained in the concerned tax period, however delay on reasonable ground may be
acceptable;

d) In the price declaration, proper analysis or break down of costs of concerned inputs must be made;
e) Rebate can not be obtained against challan of turnover tax.
What are the conditions required for Cottage Industry to get exemptions from VAT and PE- Ill
Supplementary duty on their products? Do you think that the criteria set are restrictive and impartial? Nov - Dec,
2006
Conditions required for Cottage industry:
SRO No. 168-Law/2003/376-Mushak has set tour criteria for cottage industry. These are:
a) it must not be a joint stock company;
b) capital investment therein on plant, machinery and equipment, shall not exceed Tk. 5lacs at any time of the year;
c) turnover of the industry shall not exceed Tk.20 lacs annually;
d) no branded goods of others are produced within the business premises.
th
Cottage industry is exempted from VAT as per SRO # 168-law/2003/376- shuk dated 12 June 2003.The
intention of such fiscal incentive is obviously to encourage and patronize cottage industries. However, to ensure level
playing field the government has imposed said criteria to qualify for the benefits. However, the maximum limits stated
in criteria (b) and (c) needs an upward adjustment in changed socio economic environment.
1 What will be the consequences of failure to deduct VAT and to pay the same tothe Nov Dec
credit of the Government in the above cases? 2010
2 Give some argument for and against Value Added Tax (VAT). May Jun 2011
Argument For VAT:
Proponents of VAT give a number of arguments as to the merits of VAT. Some of the Important Points are given
as follows:-
(i) It increases the cost of consumption, thus stimulating savings and investment.
(ii) The government gets its money earlier; it does not have to wait until after the final sale.
(iii) It is used to stimulate exports; the exporter gets 100% rebate for the tax paid.
(iv) Importers pay the VAT based on the prices of their imports. The tax is paid on goods purchased, whether
manufactured domestically or imported. Thus imported goods are not given an advantage over locally
manufactured products.
(v) It catches service companies, which historically have been exempted from sales taxes. A service company
shall charge tax to its customers in order to recover the tax paid on its purchases of supplies and equipment.
(vi) It opens up avenue for collection of more revenue for socio-economic development of a country.
(vii) Its scope is wider and resists distortion in production and consumption.
(viii) It provides a good system of rebate and refund which prevents tax on tax.
(ix) It provides a psychological advantage to the tax payers in that the tax payers pay out in installment.
Arguments Against VAT:
i.Increase of price level: When VAT imposed the price of the articles also increase.
ii.Increase of service price: When VAT imposed on the services the price increases of the services more
than the proportion.
iii.Increases of production cost of small industries: When VAT imposed on handicraft and smallindustries
their production cost increases.
iv.Burden on poor people: VAT burdens the poorest and least influential sections of society more than other
forms of tax. As the poor have lower incomes, more of their income is consumed by consumption. The
higher the prices of consumption goods, the less money that the poor can save, and the less able they are
to improve their conditions.
v.Expensive to business men: It increases the expenses of businessmen because they have to keep regroup
books and accounts for this purpose.
3 What are the duties and responsibilities of VAT assessee? May Jun 2011
A VAT assessee needs to pay tax, maintains account and document properly. To this end his duties and
responsibilities are as follows:-
i) To ascertain tax liability through current account at the time of supply of goods and deposit relevant tax to
the exchequer.
ii) To submit VAT return and to pay VAT on time;

iii. To fill up and make entry in current account, purchase and sale account and transfer the relevant items in
concerned books and documents periodically.
iv. To deposit relevant books and account to tax authority in due time.
v. To keep in safe custody all accounts and books relevant to VAT at least for 4 years.
vi. To produce relevant books and account to tax authority.
vii. To allow tax officials to enter into his business promise.
viii. To maintain invoice to ensure refund and rebate of tax.
ix. To supply invoice to purchaser at the time of supply of goods.
4 What books of accounts are required to be maintained under VAT Act and Rules? May Jun
2011
The following books and documents shall be maintained by a VAT tax payer:-
(a) Purchases Register in Form VAT-16;

(b) Sales Register in Form VAT-17;
(c) Current Account in Form VAT-18;
(d) Invoices in Form VAT-11 or 11A;
(e) Paid Treasury Challans;
(f) VAT Return in Form VAT-19; and
These books and documents shall be maintained for at least 4 years.
5 What are procedures of VAT Registration? May Jun 2011
Procedures of Registration under VAT: Sec 15
1) A supplier of taxable goods, provider of taxable services, importer, exporter of goods and service shall be
registered with the concerned VAT officer in accordance with the procedures prescribed by Rule of this
VAT Act.
2) If any person supplies taxable goods or render taxable services or carries on import-export trade from two
or more places, he shall be registered separately for each place.
3) If the concerned VAT officer is satisfied that the application for registration is in order in all respects, he
shall register the applicant and issue a registration certificate mentioning therein his Business Identification
Number (BIN);
3a) Notwithstanding anything contained in this section, validation of this certificate to be determined by the
rules and such registration certificate may be renewed in accordance with the Rules itself;
4) Upon inquiring by the concerned VAT officer, if any person is found that he is not registered but he is
required to be registered under this Act, the VAT officer shall register the person with effect from the date
wherefrom it is obligatory to him;
5) Every registered person shall be provided unified registration number.
6 What are the goods and services subject to VAT in Bangladesh? May Jun 2011
(1) Value Added Tax will be imposed and payable @ 15% on all goods imported into Bangladesh except
the goods listed in the First Schedule of this Act and on the supply of all goods not listed in above
Schedule and on all services listed in Second Schedule.
(2) Without prejudice to the above sub-section (1) Zero rate tax will be imposed on the following
goods or services;
a. Any goods or services exported or deemed to be exported from Bangladesh.
b. Food and other things supplied in transport leaving from Bangladesh for consumption outside Bangladesh
in accordance with section 24 of the Customs Act.1969 (of 1969).
Provided that this sub-section shall not be applicable to the following goods;
a. Any goods re-imported or intended as being re-imported into Bangladesh.
aa. Any goods or services or part of it supplied in exchange of foreign currencies for consumption or use in
Bangladesh which are not mentioned in clause (aa) above;
c. Such goods which have been presented for export in accordance with section 131 of the customs Act but
not exported within thirty days of the bill of export or such extended time allowed by the Commissioner for

this purpose.
7 Define Input Tax. What are the conditions to be met for claiming input tax? Or Nov Dec 2011,
What is Input Tax ? Discuss the conditions to be met for claiming input tax. May Jun 2013
Input tax is VAT paid by a tax payer on his inputs, that is, all raw materials, packing materials,services, fuel,
machinery, spare parts, and all purchased goods for sales. However, inputs do not include labour, land, buildings,
office equipment, vehicles and their construction or maintenance materials and insurance relating thereto.
Conditions to be met for claiming Input Tax
The following conditions are to be met for claiming input tax credit:
(i) The Tax payer must have been registered for the purposes of ―full‖ VAT, not turnover tax or not VAT based
on estimated value addition.
(ii) The Tax payer must have Bill of Entry for imports and VAT Invoices (VAT-11) for local purchases of
goods and services, maintained for 4 years. No credit for input tax shall be allowed against turnover tax or
VAT based on estimated value addition.
(iii) The Tax payer must declare the inputs in Price Declaration including output/ input ratio.
(iv) The Tax payer must claim the input tax within the related year. However, claim for input tax may be
allowed after the related year if there is any genuine reason.
(v) The Tax payer must process the inputs for which input tax has been claimed.
(vi) The Tax payer can claim credit against VAT only, not import duty, supplementary duty and/or income tax at
source.
However, an exporter can claim credit against import duty and/or supplementary duty under―dutyexemption
and drawback‖ (generally known as DEDO) arrangement under rule 19(4).
Input Tax:
Input tax means value added tax paid by a registered person on goods imported by him or bought from other
registered person including the advance trade VAT suffered on imported input at import stage.
The conditions for obtaining input tax rebate are the followings:
a) Persons claiming rebate must be registered for the purposes of ―full‖ VAT, not turnover tax or not
VAT based on estimated value addition.
b) All books of accounts and records as prescribed under VAT laws should be maintained and preserved at
least for 6 years from the expiry of relevant VAT period.
c) Rebate to be taken in each tax period. However, delay on reasonable ground may be accepted up to next
two consecutive tax period. The Tax payer can claim credit against VAT only, not import duty,
supplementary duty and/or income tax at source. However, an exporter can claim credit against import
duty and/or supplementary duty under the provision of Duty Exemption and Drawback (DEDO) system.
d) The Tax payer must have Bills of Entry for imported goods and VAT Invoices (VAT-11) for local
purchases of goods and services and preserve those documents for 6 years from the end of tax period.
No credit for input tax shall be allowed against turnover tax or VAT based on estimated value addition.
e) The input noted in said bill of entry and challanmust be taken insidethe place of production or services and to be
recorded in purchase account.
f) The name, address and registration number of the registered personshould be correctly mentioned in said
bill of entry and challanpatra.
g) The rebate should be taken proportionately in case of the production of both taxable and exempted product
and services.
h) The cost of input must be included in the base value of price declared for the fixation of VAT.
i) The cost of input used for the product and service must be paid through banking or electronic system when
the amount is Tk.100,000 or above.
8 Discuss the Special Treatment of Specified ―Input tax‖ and the penalty for false Nov Dec 2011
declarationfor Input Tax
Special Treatment of Specified ―Input Tax‖
The Tax payer can claim 60% of the VAT paid as claim against input tax in respect of charges for telephone,
teleprinter, fax, internet, freight forwarders, clearing & forwarding agents, WASA, insurance, audit and
accounting firms, suppliers, security services, carrying agents, letter of credit services, electricity and other related
taxable services.
Penalty for False Declaration for Input Tax
If a tax payer makes false declaration relating to credit of input tax, he may be penalized under section 37 of the
VAT Act, 1991 to the extent of at least the tax evaded and at best 2.5 times of the tax evaded; and also the credit
of the input tax shall be cancelled.
9 What are the conditions to be fulfilled in order to claim delivery of goods as deemed Nov Dec
export under Rule 31 of the VAT Rule 1991? 2012
Following are the conditions to be fulfilled in order to claim delivery of goods as deemed export under Rule 31 of the
VAT Rule 1991:
1) Proceeds thereof receivable on foreign currency through official channel;
2) Refund (input VAT minus output VAT) claimable u/R 29 - based applicable Dakhilpatra (Return) u/s 35 -
Rule 24Mushak # 19;
3) Otherwise i.e. when Return (u/s 35 - rule 24: Mushak # 19) submission is not applicable, in that scenario,
refund (of input-Vat) to be claimed u/R 30;
4) Evidencing documents, like Tender, acceptance thereof work completion guidelines/ directions of receipt of
FC payment officially, will need to be furnished to VAT Authority.
10 How do you maintain a VAT current register (VAT – 18) as per VAT Act and VAT Nov Dec
Rules, 1991? 2012
Current account contains record of all VAT deposit, payable and adjustment. A registered person can maintain
computerized current account with the permission of the Board. BIN Number including name. address and telephone
number of registered person is recorded at the top of Current Account. The Account Current is made up of 10
columns and has cross reference with purchase and sales book. All input tax, rebate due to sales return, balance of
previous month Current Account and all other dues and return are taken into rebate column. All dues like output tax
cancellation of rebate due to purchase return, penalties and all other duties go to payable column. Treasury deposit is
shown in the column designated thereof
The Account Current should always be maintained with: positive balance.
11 How are the value of goods and services determined for imposition of VAT? Or AL May Jun
State the provisions of law for determination of value under section 5 of Value 2012
Added Tax Act, 1991. PE May June
2002
According to section 5 of the Value Added Tax Act 1991:
In Case of Importation
In Case of importation of goods, the amount on which the value added tax aha II be payable shall be
determined by adding the amount of import duty, supplementary duty and all other duties and taxes, (if
any). except advance income tax payable, to the assessable value determined under section 25 or 25A of the
Customs Act.
In case of Goods Supplied
The price shall be the consideration receivable from buyer by the producer or business person, which will include
purchase price of materials and all expenditure incurred by the manufacturer and also commission, charges,
fees and all supplementary duty excluding VAT and profit.
If any registered person sells goods directly or sales centers, distributors or commission agents under his
own brand name, the value added tax shall, in the case of the goods with brand name be determined on the basis
of the consideration due from the purchaser to the owner of the brand named goods.
In case of Services:
Value added tax shall be imposed on the total receipts.
In case Goods Subject to Trade Discount
Goods on which trade discount is allowed, value added tax will be charged on the value of the goods after deduction
of trade discount.
12 When is zero tax imposed under VAT Act? What are the procedures to be adopted Nov Dec
for disposal of damaged or destroyed goods in accident under VAT Act? 2014
(i):
Sometime export and deemed export/ zero rates is imposed under the Value Added Tax Act. In that case all duties
and taxes paid on the imports or exported or deemed to be exported goods or services are reimbursed through duty draw
back scheme.
(ii):
Under rule 41 of the VAT Rules, 1991, if a registered person considers that the goods manufactured or
produced or stored for supplied, has for the reasons of being damaged or destroyed in accident or for any other
reason become non-suppliable, he shall submit to local VAT office an application form ―Mushak-27‖ In the case
of accident within 24 hours of the occurrence of the accident .For other reasons he has to inform the matter within 24
hours for disposal of such non-suppliable goods.
The Superintendent of VAT shall make a spot inspection within three days of the receipt of the application from
registered persons. The value of goods damaged or destroyed in the accident, amount of output tax to be informed to
the Divisional Office for giving his decision or disposal of damaged or destroyed goods through destruction or in any
other manner.
If the goods is considered fit for supply partially or fully at reduced value, the Superintendent, shall determine, the
value of gods in his opinion, submit the value to Divisional Officer for his approval.
13 Discuss the determination of cost for calculation of VAT. May Jun 2013
0
In pursuance with Sec. 5 of Value Added Tax (VAT) Act 1991, VAT is leviableupon value. I presume the word
cost in the question meant value and accordingly presenting hereunder the legal provisions for the determination
of value for the computation of VAT under different economic conditions:-
1) In case of imported goods, the value for the computation of VAT is ascertained by adding
the amount of import duty, supplementary duty and all other duty and taxes (if any) except the advance
income tax with the assessable value as determined under section 25 or 25 (A) of the Customs Act.
1969.
2) In case of supply of goods, the value on which VAT shall be payable, shall be the consideration
of the goods receivable by the manufacturer or producer or trader from his buyer, which shall include the
value of purchase inputs, all costs of the manufacturer or producer or of the trader and where
applicable,paid commission, charges, fee and all other duties and taxes including supplementary duty
(except VAT) and profit.
Provided that in the case of supply of any specific goods or class of goods by a trader, the Board may, by
notification in official Gazette , for the determination of the base value of VAT, fix the rate and quantum of value
addition of the goods or class of goods.
In case of contract based production of branded goods of any registered manufacturer by any other registered
producer, the Board may set the procedure of determining the value of goods by Rule.
A producer or importer may, if he intends to supply goods at uniform price printed on the body or container or
packet of the goods, shall supply the goods, subject to the prior approval of the Board and on payment of the entire
tax, in case of producer at production stage and in case of importer at the stage of supply, in accordance with the
procedure set by Rule.
If the Government through any directorate or department fixes the unit price of any product or service with a view to
keep their price stable , the VAT and Supplementary Duty at production and service delivery stage shall be payable
through back calculation from that fixed price.
(3) The Government may, by notification in the official Gazette, select the goods on which VAT shall be
imposed on the retail price. For the purpose of imposing VAT, the retail price of such goods, shall be
determined by the producer or manufacturer with the approval of concerned officer, which shall be
included all costs, commission, charges, duties and taxes .And such goods shall be sold to the general
consumers at that price. The price shall be printed on the body of the goods or on every packages, sacks or
cells distinctly, conspicuously and indelibly after putting special brand or mark on the body of the goods.
(4) In the case of rendering of service, VAT shall be imposed on the total receipts.
In respect of any specific service, the Board, may by order, determines the VAT on the basis of actual
value addition or fixing specific rate of value addition by notification in the official Gazette.
In case of providing of service by the service provider, free of cost, the Government by Gazette
notification may fix minimum VAT.
(5) In case of supply of goods by a registered or registerable trader, VAT may be imposed on the basis of total
value received or deemed to have been received as determined in any particular tax period, as determined
in accordance with the procedure set by Rules.
(6) Goods on which trade discount is allowed; in the case of such goods the amount of value added tax shall
be based on the cost of the goods after deduction of trade discount. Provided that in case where goods are
supplied at a discount the cost and the amount of the discount will be shown on the invoice and the quantity of
trade discount must be consistent with the normal business policy.
(7) If the Board, in consideration of public interest and after due investigation is satisfied that it is expedient in the
case of any taxable goods or service to fix its tariff value m order to determine Value Added Tax, or where
applicable Value Added Tax and supplementary duty the Board may by Gazette notification, fix the tariff
of such goods or services.
14 May Jun
Define the following term of VAT. 2013 5
a. Input.
b. Commercial documents.
c. Zero.
d. Truncated Value.
e. Trade Service.
a. ‗Input‘ means
 all kinds of raw materials, laboratory reagent, laboratory equipment, laboratory accessories, any
type of gases and any material used as fuel, packaging materials, services, machinery and spare
parts excepting labor, land, building, office equipment and transport.
 In case of trading, goods imported, purchased, acquired or otherwise procured in any way for
sale, exchange or to transfer in any other manner.
b. ‗Commercial documents‘ means books of accounts, files, documents or papers maintained by a person to
record his commercial transaction or to present financial status of his business, namely:-
debit voucher, credit voucher, cash memo, daily accounts of sales and purchase, cash book, journal book, bank
account and the documents related thereto, trial balance, ledger, financial statements and notes thereto, profit
and loss account, profit and loss appropriation account, bank reconciliation statement and balance sheet, audit
report including all relevant documents.
c. ‗Zero‘ rated taxable goods or services means goods or services which are exported or deemed to have
been exported or any food or any material as mentioned in sub section (2) of section 3 of VAT Act
1991, upon which value added tax or where applicable supplementary duty shall not be imposed and all
other taxes and duties paid on inputs used for manufacturing of such goods(except Advance
Income Tax and the supplementary Duty paid on such inputs used for the manufacturing and producing
exported goods, as may be specified in this behalf by the Government by the notification in the official
Gazette not to be refunded) shall be refunded.
d. ‗Truncated Value‘ Truncated or short value system is one where VAT at standard 15% charged on the
deemed or estimated value addition. Since this is based on a shortened value input tax rebate cannot be
obtained excepting on exports or deemed exports.
e. ‗Trade Services‘ VAT is payable by a distributor, agent, wholesaler and retailers on non-exempted
goods @ 4% of sales (that is 15% of value added at 26.67%) on a monthly basis within 10 days of the next
month through treasury challans. No input tax credit is allowed against such payment of VAT.
15 Writes short notes on following item relating to VAT : Nov Dec 2013 6
i) Current Account.
ii) Penalty for False declaration of input tax.
iii) Retail trade service.
i) Current Account: An account which is maintained in prescribed pro-forma Mushak 18 by a
registered person under Rules 22 of VAT Rules 1991. The accounts comprising of ten columns and
contains cross reference of purchase and sales, output tax payable, treasury deposit and input output
tax rebate. A registered person shall deposit into the treasury of and on so that the output tax could be
paid from that deposit including input tax rebate.
ii) Penalty for False declaration of input tax: If a tax payer makes false declaration relating to credit of
input tax, he may be penalized under section 37 of the VAT Act, 1991 to the extent of minimum half
and maximum equal to the amount of tax evaded.
iii) Retail trade service: In consideration of the difficulties in keeping books of accounts and to maintain
other formalities the government has introduced lump sum VAT payment system for retail trade service
providers. The VAT payable by retail trade service providers are as follows:
Serial no. Applicable in Areas Maximum annual Rate of Value Minimum Value
value addition Added Tax Added Tax payable
1 Dhaka and ChittagongCity Tk. 73,334 15% Tk. 11,000
Corporation area
2 Other city Corporation areas Tk. 53,334 15% Tk. 8,000
3 Municipal area in the district Tk.40,000 15% Tk. 6,000
town
4 Other areas of the country Tk. 20,000 15% Tk. 3,000
The retail trade service providers are allowed to maintain cash memo and accounts in own system and
submit return on monthly basis.
16 Discuss the salient features of changes in VAT Act.1991 brought by Finance Act.2011 May Jun
2012
1. Amendment of Section - 2:
In section 2, in definition of input tax, for words deducted at source, the words ―collected in advance‖
will be substitutedPost of Chief Commissioner of VAT is created.
2. Insertion of new section - 2KA:
Insertion of new section 2KA. By which priority will be given to VAT Act and Rules.
In place of the word ―Supplier‖, ―Supplier and receiver of service‖ will be substituted
4. Amendment of Section - 6 :
In section 2, in definition of input tax, for words deducted at source, the words “collected in
advance” will be substituted.
a) Substitution of sub-section (4KAKKA)
This relates to procedure of VAT payment by registered person.
b) Substitution of sub-section 4Kha
Issue of certificate by VAT collecting person to supplier.
c) Insertion of sub-section (4KAKAKA)
NBR‘s can be order issue the list of service renderers mentioning the code of service.
d) Insertion of sub-section 4 (Cha)
This provides for penal provisions for default in collection, deduction and deposit of VAT.
Turnover tax. By this amendment, the person engaged in manufacturing taxable good, or business or
service renderer shall pay 3% tax on his annual turnover against 4% of preceding years.
Sub-section (1 KAA) is deleted.
Sub-section 3 is substituted by new sub-section 3 which provides for by order issued by.
Director General, duty rebate and drawback, can direct for rebate and drawback.
8. Amendment of Section -15 (2):
Substituted by new section 15(2) which imposes new condition for being centrally registered for
operation of business from two or more places.
9. Creation of Post:
Creation of Post of Chief Commissioner VAT and Commissioner VAT vide amendment in
section 20.
In sub-section 1 in place of ―Bangladesh Rifles‖ the words ―Boarder Guard Bangladesh‖ will be
inserted,
11. Amendment of Section - 37(2):
New insertion of clause (khakhakha) by which a person can be penalized upto one and half times
of the tax payable in case of evasion of VAT by tampering in Form Mushak 16.

Amendment of Section 38 by reducing penalty from two and half time to one and half times.
13. Insertion of ADR in the time of Income tax and Customs (sections 41 KAA to 41 TA):
If any person is aggrieved at the order passed by any VAT authority or Duty and VAT Appeal
authority he can take recourse to ADR, for resolution of the disputes. Such application for ADR
is to be made before appeal authority passes his order. Details of appointment of facilitator, duty and
responsibility of aggrieved person for seeking redress before ADR, for an arrangement and other
relevant matters are to be guided by rules to be framed by NBR.
14. Amendment of Section -42- Time for disposal appeal:
In sub-section 4 in place of "nine months" "one year" will be replaced.
15. Insertion of New Section -71 GA:
By insertion the above section, the Government has created two funds, namely a) tax refund
fund and b) Reward and financial incentive fund. These two funds will be created from Boards
own account for refund of tax due and giving rewards to the officer and employees and VAT
officials who have collected tax more than the target.
16. Amendment of Section -72, sub-section - 3:
In place of two and half times, one and half times will be replaced.
17 State the provision of section 17 of Value Added Tax, 1991 regarding self registration. Nov Dec
What are theprocedures of registration under Rule 9? 2013
According to section 17 of Value Added Tax, 1991 :
Any personexempted from compulsory registration may apply for voluntary registration, as a supplier of
taxable goods or renderer of taxable service and the authorized officer shall, if he is satisfied that the
application is in order in all respects, register the applicant and give him a registration certificate
mentioning therein his business identification number.
According to rule 9 of Value Added Rule 1991
Procedure of registration -
If the annual turnover of the supplier of taxable goods ortaxable service is not less than taka eighty lacs, he
shall have to submit an application for registration in Form ‗Musak-6‘ to a Divisional officer or to an
officer, not below the rank of Assistant Commissioner specified by an order by the Board in this behalf.
If the turnover of a person in respect of the taxable goods supplied or taxable service rendered becomes, at
any time during twelve consecutive months after his being exempt from the requirement of registration he
shall within thirty days of the expiry of such period, submit an application for registration to the Divisional
Officer or an officer, not below the rank of an Assistant Commissioner, specified by order by the Board in
this behalf.
A person who intends to start the business of supplying taxable goods or rendering taxable service shall, before
starting the business, apply to the divisional office or such officer, not below the rank of assistant Commissioner, as
the Board may, by order, empower in this behalf, for registration, if the annual turnover of the business is
estimated to be at least taka eighty lakhs.
Where more than one taxable goods or service are supplied or rendered or import or exports are made from the
same place of manufacture or production or rendering of service or import or export, only one registration
shall be required.
A person required to be registered shall, along with the application for registration submitted in Form Musak-
7 a declaration containing particulars of premises, plant, capital machineries and fittings and goods to be
produced or purchased and sold or stocked and major inputs.
Any person who is involved in import or export of any goods shall submit application to the divisional in charge
or to an officer directed by board not below the rank of assistant commissioner.
18 What are the offences and penalties under section 37 (i) and Rule 35 of VAT Rules, Nov Dec
1991? 2013
The offences and penalties as provided under Section 37 (i) of Value Added Tax Act 1991 are the followings:
Serial
Description of the Offence Penalty
No.

a. Fails to submit an application for registration Minimum Taka 10,000and maximum Taka
under this Act, though it is required to submit 20,000
such an application
b. Fails to submit a return within the specified date Minimum Taka 10,000 and maximum Taka
20,000
c. Fails to inform the value added tax officer about Minimum Taka 5,000 and maximum Taka 10,000
any change of information in relation to
registration
d. Fails to comply with the direction of anysummons Minimum Taka 10,000 and maximum
issued under section 25 of VAT act 1991 Taka30,000
e. Failure to maintain required files in electronic Minimum Taka 20,000 and maximum
cash register or point of sales software or in Taka50,000
computer as per Section 37 (2) JA of VAT Act
1991
f. Violates any other provision of VAT Act 1991 Minimum Taka 10,000 and maximum
Taka30,000
The offence and penalties under Rule 35 of Value Added Tax Rule 1991
A registered person who contravenes any provision of Value Added Tax Rule 1991 shall be liable to a penalty of
an amount, being not less than half, and not more than equal, the amount of value added tax or, where applicable, the
value added tax and supplementary duty leviable upon the goods and services concerned, and the goods or service
(where applicable) related to such contravention shall be forfeited to the Government. However, in case of an offence
not involving evasion of tax, the amount of penalty shall be minimum Taka 5,000 and maximum taka 10,000.
19 May Jun
Under what circumstances may a company cancel its VAT registration? What will 2014
they do to cancel the VAT registration?
In pursuance with rule 15 of VAT Rules 1991, a Company, being registered person, can cancel
registration under the following circumstances:-
(a) being abstained from manufacture or production or sale of taxable goods or rendering of taxable
service, or import or export of any goods;
(b) taxable goods or services are declared as exempted goods or services;
(c) failing to start the business of production or manufacturing or supply of taxable goods or rendering
of services following being registered;
(d) the turnover becomes less than Tk. 80 lac in the next one year from the date of registration of a
voluntarily registered person as per section 17 of the Act;
(e) if the annual turnover of the registered person is less than Tk. 80 lac:
The Company shall apply to the VAT Circle Office in VAT Form-10 for cancellation of the registration.
20 If any VAT withholding entity makes any purchase from a person who is not May Jun
registered under the Value Added Tax Act, what will be the consequences? 2014
The consequences of purchasing from a non-registered person are the following:
If anybody makes any purchase from any establishment not registered under VAT, input tax credit will not
be allowed on the purchase. While making purchase through tender, a condition needs to be added in the
tender schedule stating that intending suppliers will have to submit copy of their VAT registration
certificate along with other documents. Without VAT registration certificate, purchase can not be made
from the supplier. However, if inadvertently or so, purchase has been made from any establishment who
is not registered under VAT, the obligation of VAT deduction at source does not end. VAT requires to
be deducted at source as per the relevant provisions,otherwise, the cost of purchase will be treated as a
disallowable expenditure under Income Tax Ordinance 1984.
21 Mention the rate of VAT based on value additions fixed by NBR applicable to the Nov Dec
following serviceproviders : 2013
i) Carrying contractor.
ii) Advertising firm.
iii) Printing press.
iv) Information Technology Enabled Services.
v) Sponsorship Services.
Vi) Human Resource Suppliers.
Vii) Building floor Cleaning and maintenance firm.
viii) Event management firm.
ix) Chartered Plane or Helicopter.
x) Other Miscellaneous Services.
Particulars Value addition VAT rate
i) Carrying contractor: 15% of total receipt 2.25%
In case of carrying of petroleum product 30% of total receipt 4.5%
In case of any other product
ii) Advertising firm 100% of total receipt 15%
iii) Printing press 100% of total receipt 15%
iv) Information
Technology Enabled Services 30% of total receipt 4.5%
v) Sponsorship Services 50% of total receipt 7.5%
vi) Human Resource Suppliers 15%
vii) Building floor Cleaning and maintenance 100% of total receipt
100% of total receipt 15%
firm _
viii) Event management firm 100% of total receipt 15%
ix) Chartered Plane or Helicopter 100% of total receipt 15%
x) Other Miscellaneous Services 100% of total receipt 15%
22 XYZ Co. Ltd. has the following invoices pending for settlement in December 2010: Nov Dec
(i) Invoice dated 1/12/2010 for supply of goods Tk.10,40,000/= (inclusive 2010
of VAT Tk.40,000).
(ii) Invoice dated 3/12/2010 from the landlord (which is a company)
on account of rent for November 2010 amounting to Tk.1,50,000
plus applicable VAT.
(iii) Invoice dated 5/12/2010 from a firm of Chartered Accountants
for Tk.1,00,000 plus applicable VAT.
(iv)Invoice dated 14/12/2010 from an advertising firm on account of
an advertisement in a newspaper for Tk.2,18,000 (inclusive of
VAT Tk.18,000).
Mr. Rahman, the CFO of the company, not sure about the required deduction of
income tax and VAT and deposit of the same to the credit of the Government. He is
also not sure about the issuance of required certificate, challan, mushak, etc. in support
of such deductions and deposits. He seeks your advice on the same.
Required:
Write a memo to the CFO addressing the above issues.
To: Mr. Rahman
From: Mr. X
Date: ……………..
CC: w, y,z
Subject: Advice on different issues related to tax and VAT.
Dear Mr. Rahman
This is in reference to your e-mail of ……… and further discussion with you regarding the various issues
related to tax and VAT. You have asked to us for our opinion regarding deduction of income tax and VAT
and issuance of required certificate, challan, mushak etc. in support of such deductions and deposits.
Our considered opinion are as follows:
We have reviewed the invoices forwarded to us and appears that the following deduction of tax and VAT
would be applicable.
Applicable Invoice
Invoice Date of Invoice VAT including Withholding TDS under Withholding Service Net
No. Invoice Amount amount VAT Tax section VAT Code Payment
i. 1-Dec-10 1,000,000 40,000 1,040,000 25,000 52 40,000 S. 037 975,000
ii. 3-Dec-10 150,000 22,500 150,000 7,500 53 A - S. 033 142,500
iii. 5-Dec-10 100,000 4,500 104,500 10,000 52 A (3) 4,500 S. 034 90,000
iv. 14-Dec-10 200,000 30,000 230,000 20,000 52 A (3) 30,000 S. 007 180,000
Total 1,450,000 97,000 1,524,500 62,500 74,500 1,387,500
The following certificates required to be issue:

Mushak-11
As per general order no. 09/Mushak/2011 dated 12 October 2011, you have to withheld VAT whether your
suppliers will provide Mushak-11 or not
Challan:
After deduction of tax and VAT you have to deposit it to the government treasury. As per Rule-13 of the
Income Tax Rules-1984, Withholding tax shall be paid to the government treasury within three weeks
from the date of such deduction or collection and as per Rule-18 Kha(1) of the VAT Rules-1991, the
withholding VAT shall be deposited to the government treasury within 15 working days from the date of
such deduction.
Certificate
As per section 58 of the Income Tax Ordinance 1984, You have to issue certificates in favor of your suppliers for
deduction of tax and as per Rule-18 kha(2) of VAT Rules-1991, you have to prepare certificates in the form Mushak-
12 Kha triplicate. Among those, one copy shall be submitted to the concerned circle within five working days from
the date of deposit, one copy shall be issued to the supplier and another one shall be documented in your premises
for 6 years.
Please be noted that the rate of VAT on house rent has reduced to 9% from 10 January 2011 and you are
responsible for payment of VAT in this case. Previously it was 15%. The rate of VAT in case of
advertising firm is 15% from 1 July 2010. So you should request to your service provider to revise the said
invoice.
Please let us know if you have any further queries.
Yours truly
Mr. X
23 XYZ Ltd. is a manufacturing company engaged in paint business in Bangladesh. It has Nov Dec
two factories – one in Tongi, Dhaka and another in Kalurghat, Chittagong. In addition, 2010
it has seven sales depots in seven districts. The supply of goods against sales advice
from the Head Office are conducted from the factories as well as depots. The goods
are supplied to the depots from the factories as per advice of the Head Office located
in Gulshan, Dhaka. All the factories and depots maintain their own accounts. The
Head Office centrally maintains the entire company‘s accounts.
Required:
Does the company require to register the Head Office only or all the ten
places of their business (including the Head Office) for VAT purposes? Discuss.
24 ABC Ltd. provides the following information about its production and sales: Nov Dec
Tk. 2010
Purchase of raw materials (including VAT Tk.3,00,000) 2,300,000
Direct Wages 2,50,000
Electricity (including VAT Tk.3,000) 63,000
Telephone (including VAT Tk.1,500) 11,500
Depreciation of machinery 30,000
Other production overheads 40,000
Other administration overheads 70,000
Selling expenses 20,000
The company sells its products by adding 25% margin on cost. A trade discount of 5%
is allowed.
Other production and administration overheads and selling expenses do not include
any VAT.
There were no opening and closing stock of raw materials.
Required:
Determine VAT payable if the rate is 15%, assuming that opening and closing stock
of finished goods were Tk.30,000 and Tk.20,000 respectively.
Particulars Amount
Purchase of raw materials 2,000,000
Direct wages 250,000
Electricity (rebate 80%) 60,600
Telephone (rebate 60%) 10,600
Depreciation of Machinery 30,000
Other production overheads 40,000
Other admin overheads 70,000
Selling expenses 20,000
Add: opening finished goods 30,000
Less: Closing finished goods (20,000)
2,491,200
Add: margin 25% on cost 622,800
3,114,000
less: discount@5% (155,700)
2,958,300
Add: VAT @ 15% 443,745
Sales price 3,402,045
VAT current Account
Input stage Tk. Output stage Tk.
VAT paid (Bank) 303300 VAT on sales 443,745
Balance 140,445
443,745 443,745
25 A manufacturer sold goods worth Tk.10 lakh to the wholesaler by including to it May Jun
VAT@15%. The wholesaler added 10% as mark up and sold the goods to the retailer 2011
by adding VAT who in turn sold the goods to the consumer by adding mark up
@15%.
Compute VAT at each stage and indicate the total VAT paid by the consumer. 10
Computation of VAT at different stage:
Input Stage Output Stage
Import/ VAT Total Value Sales Value VAT @
Payable to
Persons Purchase @15% Purchase addition 15% Rebate
Treasury
Price including including
VAT profit

Manufacturer 1,000,000 150,000 150,000
Wholesaler 1,000,000 150,000 1,150,000 100,000 1,100,000 165,000 150,000 15,000
Retailer 1,100,000 165,000 1,265,000 165,000 1,265,000 189,750 165,000 24,750
Customers 1,265,000 189,750 1,454,750 - - - -

26 Nov Dec5
Bata Shoe Co. Ltd. incurred the following transactions in September 2017: 2011 8
Raw materials aggregating to Tk.5,00,000 were purchased on September 5, 2017,
VAT on thesame paid and the VAT chalan along with the goods were received on
September 10, 2017.
Shoes delivered to customers in the month at approved price as follows:

September 08, 2017 Tk.3,00,000
September 09, 2017 Tk. 2,00,000
September 10, 2017 Tk.5,00,000
September 15, 2017 Tk.6,00,000
The following deposits were made to the Govt. Exchequer through treasury chalan:
September 07,2017 Tk. 20,000
September 12,2017 Tk.30,000
September 15,2017 Tk.70,000
Balance of deposit at September 01,2017 in VAT- 18 was Tk.50,000.
You are required to:
Enter the above transactions in VAT – 18 of the company;
Current Account
(As per Rule 22(1)
Taxpayers‘ Identification Number:
Name: Bata Shoe Co. Ltd.
Address:
Telephone:
S Date Details of Purchase or Treasury Rebate Dues Closing Remarks
L.No. Transaction SalesRegister deposit Balance
SL. No. Date
1 2 3 4 5 6 7 8 9 10
1. 01.09.2017 Opening Bl. 50,000
2. 07.09.2017 Treasury 20,000 50,000 70,000
08.09.2010
3. 08.09.2017
09.09.2010 Delivery 45,000 25,000
4. 09.09.2017
10.09.2010 Delivery 0000
30,000 (5,000)
5. 10.09.2010
10.09.2017 Purchase 75,000 70,000
12.09.2010
6. 10.09.2017 Delivery 75,000 (5,000)
7. 12.09.2017 Treasury 30,000 25,000
8. 15.09.2017 Treasury 95,000
9. 15.09.2017 Delivery 70,000 90,000 5,000
27 ABC Industries Ltd. a vehicle assembly plant has imported CKD parts and May June
components for trucks amounting to TK.2,500,000 in the month of July 2017. ABC 2012
Industries Ltd. has assembled and manufactured 4 trucks from the above imported
parts and components and then sold those 4 trucks to their dealer M/s Khaleque and
Co. @Tk.1,000,000 each. M/S Khaleque and Co. then sold 3 (three) trucks to M/s
Zakaria Transport and Co. @ Tk. 1,100,000 each.
Calculate VAT @ 15% payable at import stage and each stage of sale.

A/C ABC Industries Limited
Value VAT @ 15% thereon
TakaTaka
Import - value of CKD Parts & Components 2,500,000 Paid 375,000
Sale to Khaleque& Co.: 4 trucks 4,000,000 Realised 600,000
Net VAT Payable Depositable 225,000
A/C :Khaleque and Co.
ValueVAT @ 15% thereon
Taka Taka
Purchase from ABC Indus. Ltd. as above4,000,000 Paid 600,000
Sale to Zakaria& Co.: 3 trucks3,300,000 Realised 495,000Net VAT Balance: Adjustable against future sale
105,000
A/C: Zakaria Transport:
Value VAT @ 15% thereon
TakaTaka
Purchase from Khaleque for 3 trucks3,300,000 495,000
28 Abul& Co. Ltd. incurred the following transactions in September 2017 Nov Dec
2012 10
Raw materials aggregating to Tk. 500,000 were purchased on 5 September 2017,
VAT on the samepaid and the VAT challan along with the goods were received on
10 September 2017
8 September 2017 Tk. 300,000

9 September 2017 Tk. 200,000
10 September 2017 Tk. 500,000
15 September 2017 Tk. 600,000
The following deposits were made to the Govt.Exchequerthrough treasury challan :
7 September 2017 Tk. 20,000
12 September 2017 Tk. 30,000
15 September 2017 Tk. 70,000
Balance of deposit at 1 September 2017 in VAT – 18 was Tk. 50,000

Enter the above transactions in VAT – 18 of the company;
Write a letter to the management on the irregularities noted by you in completing the
VAT current register (VAT – 18) and implications of the same on the company.
Current Account
(As per Rules 22(1)
Taxpayers' Identification Number:
Name:
Address:
Telephone:
S.L. Date Details of Purchase or Sales Treasury Rebate Dues Closing Remarks
No. Transaction Register Deposit Balance
1 2 3 4 5 6 7 8 9 10
1. 01.09.2017 Opening BI. 50,000 50,000
2. 07.09.2017 Treasury 20,000 70,000
3. 08.09.2017 Delivery 45,000 25,000

4. 09.09.2017 Delivery 30,000 (5,000)
5. 10.09.2017 Purchase 75,000 70,000
6. 10.09.2017 Delivery 75,000 (5,000)
7. 12.09.2017 Treasury 30,000 25.000
8. 15.09.2017 Treasury 70,000 95,000
9. 15.09.2017 Delivery 90,000 5,000
We have gone through the VAT transactions of the period from 1st September to 15th September 2017, recorded
inCurrent Account and observed negative balance at two occasions which is a clear violation of Rule 22(1) Gha,
mandated. Maintenance of sufficient balance required in the Current Account, by which adjustment or payment of
payable output tax can be made by accumulating the balance with the deposited money and the rebate (credit) of input
tax. This is an offence u/s ,37(2)(NioNioNio) which attracts a monetary penalty on an amount not less than 1/2 and
more than 2 times of the amount of VAT or where applicable, VAT and Supplementary duty, payable upon, the
goods and services and if convicted in a court of Magistrate, liability to imprisonment for not less 3 months and not
more than 2 years, or to a fine not less than 1, and more than 2 times of the amount of VAT or where applicable, VAT
and Supplementary duty or both. However, for irregularities other than evasion of revenue, the amount of fine is
limited to, not less than Tk. 5,000 and not more than Tk. 300,000.
We recommend strict compliance with the provision of VAT laws to avoid punitive actions.
Pl. don‘t hesitate to enquire any question on any matter on VAT with particular attention to the issue concerned herein.
Thanking you
Yours Sincerely
29 May Jun
X Ltd. pays Tk. 60,000/= per month as office rent and Tk. 10,000/= per month as 2014
other charges (lift and security charges) to the landlord. The landlord wants that X Ltd.
should pay 12% VAT along with the above rent and charges to him, which will then
be deposited by the landlord to the government treasury? On the other hand X Ltd.
wants to deduct 9% VAT from rent and 2.25% VAT from other charges, make the
payment (net of VAT) to the landlord and deposit such deducted amounts to the
government treasury. Both of them have now come for your advice.
Advise on the basis of the current provisions of VAT Act and its Rules.
There is no provision of VAT deduction at source on house rent. VAT on house rent is paid by the tenant. X
Ltd., as tenant. has made an agreement with the landlord regarding the terms and conditions of the rent. He pays
the rent to the landlord; and he is also required to pay 9% VAT from his own fund on the agreement amount to
the government treasury. The landlord has no responsibility of paying VAT. On payment of VAT to the
government treasury, the tenant requires to submit the Treasury Challan to the local VAT Circle Office. While
calculating VAT, charges for lift and security cannot be excluded. In our VAT system of Bangladesh, the base
for calculation of VAT is total receipt. Total receipt includes the price of the service, all charges, fees, commissions.
etc. involved thereon. Total receipt remains defined under Section 2 of the VAT Act. 1991. In this case, total
receipt Tk. 70,000/-. This amount is to be paid to the landlord. On top of this amount, 9% VAT stands at Tk.
6,300/- So. as rent (including other charges) of the premises, Tk. 70,000/- needs to be paid to the landlord and Tk.
6,300/- needs to be deposited to the government treasury as VAT on house rent. Here, VAT is being paid by the
service receiver. This is not VAT deduction at source.
30 The following information has been taken from the accounting records of XYZ Ltd for May Jun
the year 2017: 2014
Raw Materials inventory, January 1 Tk. 90,000

Raw Materials inventory, December 31 Tk. 60,000
Work in process inventory, January 1 Tk.1,80,000
Work in process inventory, December 31 Tk. 1,00,000
Finished goods inventory, January 1 Tk. 2,60,000
Finished Goods inventory, December 31 Tk. 2,10,000
Purchase of Raw Materials Tk. 7,50,000
Direct labour Tk. 1,50,000
Manufacturing Overhead Tk. 6,40,000
Selling expenses Tk. 1,40,000
Administrative expenses Tk, 2,70,000
The company sells its products by adding 15% profit on cost.
Determine the amount of VAT if the rate is 15%.

XYZ Ltd.
Statement of VAT
Particulars Tk. Tk
Raw materials inventory, January 1 90,000

Add: Purchase of raw materials 750,000
Raw materials available for use 840,000
Raw materials, December 31 (60,000)
Raw materials used in production 780,000
Direct labor 150,000
Manufacturing overhead 640,000
Total manufacturing cost . 1,570,000
Work in process. January 1 180,000
Work in process. December 31 (100,000)
Cost of goods manufactured 1,650,000
Finished goods inventory, January 1 260,000
Goods available for sale 1,910,000
Finished goods inventory December 31 (210,000)
Cost of goods sold 1,700,000
Administrative expense 270,000
Selling expense 140,000
Total cost 2,110,000
Profit @15% on cost 316,500
Sales 2,426,500
Value Added Tax for the year ended 31 December

VAT on output i.e. Sales (Tk. 2,426,500 x 15%) 363,975
Vat on input i.e. Purchase (Tk. 750000 x 15%) (112,500)
251,475
Assumptions:
1. Sales price has been determined adding 15% profit on total cost.
2. As per Section 9 (1) of the VAT Act 1991, input VAT credit is to be taken in the VAT period
(currently one month) of receiving VAT Challan i.e. Mushak-11 or in two subsequent VAT periods.
As such, it can be reasonably assumed that input VAT credit on opening inventory had been taken
before the year 2017. Hence. VAT paid on current year purchase is available for credit only.
3. In absence of information, eligible input VAT credit (if any) on manufacturing overhead, sellingexpenses and
administrative expenses are not considered.
31 ABC Ltd. is a manufacturer of cosmetic items. It sells through a number of Nov Dec
distributors across Bangladesh. Currently it sells to distributors at Tk.80 per unit and 2014
fixes the MRP at Tk.100 per unit. The declared price of distributors (i.e. selling price

of distributors to retailers) is Tk.90 per unit. ABC Ltd. withholds income tax @3%
from distributors under section 53E(2) of the Income Tax Ordinance 1984. It also
collects VAT @ 15%. Similarly the distributors also collect VAT @ 15% from
retailers.
Is there any scope for ABC Ltd. to minimize collection of income tax from distributors
under the income tax law by changing the price structure, without changing the current
MRP and reducing the government revenue collection from VAT? If yes, revise the
price for distributors to a reasonable level, and make comparison of withholding tax
and VAT collection and depositat each stage under the existing and revised scenarios.
ABC Ltd. has an incentive scheme under which its products may be given free of cost
down the distribution channel to compensate (up to a reasonable level) financial loss, if
any, due to change in price. No one should incur any loss due to pricerevision.
Answer:
If ABC Ltd. does not want to change MRP, considering the market impact, the selling price to distributor may be
increased to an acceptable level. Thus the base for withholding income tax will be reduced which will
ultimately result in less withholding tax. Of course, ABC Ltd. isrequired to declare such increase in price to VAT
authority which will attract additional output VAT for ABC Ltd. with the same amount being additional input
VAT for distributors. While invoicing, such enhanced VAT will be calculated and added with the sale price
separately under the VAT head. The distributors will pay ABC Ltd. the total invoiced amount (i.e. sales price +
VAT thereon). ABC Ltd. will thus get back the amount of output VAT deposited to the Government
exchequer at the time of taking out the products from their distribution centres for delivery to the distributors.
It is assumed that all the distributors have VAT registration, and they invoice wholesalers/retailers by
adding VAT with sales price. As such, they can claim their above input VAT against the output VAT collected
from wholesalers/retailers. In this way neither ABC Ltd. nor distributors will have to bear any additional VAT due
to increased selling price of ABC Ltd. to distributors. It is important to mention here that as per section 9(1) (aa)
of the VAT Act ,1991, to ensure full input VAT credit, distributors may be required to provide revised price
declaration if the input price is increased by at least 75%. Keeping the above in mind, ABC Ltd. canminimize
collection of income tax from distributors by changing the price structure as follows (existing as well revised
scenarios are given):
Particulars Existing Revised
Price Price
(Tk.) (Tk.)
Declared price of ABC (selling price of ABC to distributors) 80 85
Declared price of distributors (selling price of distributors to 90 90
retailers)
Maximum retail price (MRP) 100 100
Withholding income tax @ 3% as per section 53 E(2) of 0.6 0.45
ITO,1984
VAT collection by ABC Ltd. From distributors* 12 12.75
VAT collection by distributors from wholesalers /retailers 13.5 13.5
VAT deposited by distributor 1.5 0.75
Total VAT deposited to the Government Exchequer 13.5 13.5
*The incremental VAT paid by distributors for increased price is adjustable against the VAT collected by distributors
from retailer/wholesalers as input VAT credit.
The increased amount of sales price to distributors as per our above suggestion may be compensated by ABC Ltd.
by providing additional incentives to distributors or by reimbursing some expenses incurred by distributors wholly and
exclusively for the purpose of business of ABC Ltd., or by reimbursing incentives provided by distributors to
wholesalers, retailers, distributors work force (if any) etc. It is important to mention that the agreements between ABC
Ltd. and distributors are properly worded to incorporate provisions for such reimbursement of business expenses paid by
distributors on account of ABC Ltd. and such reimbursable costs should be clearly identifiable to be wholly and
exclusively incurred for the purpose of business of ABC Ltd. Similarly, providing additional incentives to or
through distributors (i.e. reimbursement of incentives paid by distributors to wholesalers, retailers, etc.) should
be properly covered by the incentive schemes announced from time to time by ABC Ltd.

32 MN Ltd. imports 15 IT equipment as a commercial importer. You are aware that the Nov
import of IT equipment is exempted from VAT at import stage. The C&F agent of Dec
MN Ltd. says that import of IT equipment is subject to collection of ATV at the time 2014
of import. MN Ltd. is subject to 4% trade VAT. If the customs authority collects ATV
@4% at the import stage, can MN Ltd. take credit of ATV as input VAT paid and
adjust against the total VAT credit in the VAT Current Account and VAT Return? The
CFO of MN Ltd. is confused, and sought your advice.
Give your opinion and advice. 4

As per SRO no.242-AIN/2012/659-Mushak dated 28 June 2012, Advance Trade VAT (ATV) @4% is collectible
on goods imported by a commercial importer if those goods are not exempted from VAT at supply stage. The
commercial importer is entitled to get input VAT credit of the ATV paid at import stage after fulfilling the
following conditions
(a) Supply of goods applying output VAT rate of 15 per cent and issuing invoice in form Mushak-11;
(b) Maintain VAT Current Account and adjust ATV as input VAT credit, submit VAT return and does
not fall under the negative list activities as mentioned in section 9 of the VAT Act 1991.
MN Ltd. is thus entitled to get credit of ATV paid at import stage, should it fulfill the above conditions.
33 Sumon purchases 100 wall clocks (WC) @Tk.70 per unit and he sold all these WC to Nov
Nikhil at Tk.9,300where he earns profit of Tk.2,000. After adding value of Tk.30 per Dec
unit Nikhil sells these WC in themarket. If VAT is same on all these clocks, calculate 2014
how much VAT Sumon has to pay and at whatprice Nikhil sells these WC in the
market.
Price paid by Sumon = Tk. (100 x 70) = Tk. 7,000

Profit earned = Tk. 2,000
Total = Tk. 9,000
Selling price (including VAT) 9,300
VAT = Tk. 300
VAT (%) = (300 ÷2000) x 100 = 15%
Price paid by Nikhil = Tk. 9,300
Value added = Tk. 3,000
Total = Tk. 12 300
VAT = Tk..3 000 x (15+100) = Tk. 450
Selling price = Tk. (12,300 + 450) = Tk. 12,750
34 May
You are a VAT consultant licensed by National Board of Revenue and have been Jun
newly appointed as a VAT outsourcing service provider of a manufacturing company, 2015
AB Ltd. Immediately after your appointment, submission of VAT return for the month
of May 2018 has become due. The Chief Financial Officer (―CFO‖) of the Company
provides you with the following particulars for the period from 01 May 2018 to 31
May 2018:
Raw materials worth Tk. 500,000/= were purchased and Tk. 1,500,000/= worth of
finished goods were sold during the month of May 2018. Applicable VAT rate is 15%
in the case of procurement of raw materials and sale of finished goods. 15% VAT was
paid on procurement of spare parts worth Tk. 100,000/= in May 2018. In addition, the
amount of VAT paid on various expenditures incurred for the month of May 2018 are
as follows:
ElectricityTk. 10,000/=
Audit FeeTk. 30,000/=
Advertising Firm Tk. 15,000/=
Repair of Building Tk. 20,000/=
Import of Machineries Tk. 25,000/=
You had a discussion with the CFO of AB Ltd. and came to know that the invoices
raised by the providers/suppliers of aforesaid services/goods are compliant with the
provisions of VAT laws. However, the advertising firm did not raise an invoice in
Mushak-11 or invoice approved by the competent VAT authority. All of the
applicable VAT Registers, including Current Account, are maintained by AB Ltd.
Opening balance of the Current Account as of 01 May 2018 was Tk. 100,000/= and
during the month of May 2018, Tk. 200,000 was deposited in the government
treasury.
Requirements:
Provide the CFO of AB Ltd. with computation of the following:
(i) Output VAT
(ii) Input VAT credit
(iii) Closing balance of the Current Account as of 31 May 2018
Computation of VAT for the month of May 2018

Particulars Tk. Tk.
Opening Balance of Current Account as of 01 May 2018 100,000
Add: Treasury Deposited in the government treasury 200,000
300,000
Less: Output VAT (Tk. 1,500,000 X 15%) (225,000)
75,000
Add: Input VAT Credit:
Raw Materials (Tk. 500,000 X 15%) 75,000
Spare Parts (Tk. 100,000 X 15%) 15,000
Electricity Bill (Tk. 10.000 X 80%) 8,000
Audit Fee (Tk. 30,000 X 80%)24,000
Import of Machineries 25,000 147,000
Closing Balance of Current Account as of 31 May 2018 222,000
Note: (i) Input VAT Credit shall not be allowed for the VAT paid on expenditure for repair of Building as
per Section 9 (1) of the VAT Act. 1991.
(ii) Input VAT Credit shall not be allowed for the VAT paid on Advertisement expenditure due to want of
a valid VAT invoice (Mushak-11).
35 May
In early June 2018 XY Ltd. offered to provide some engineering consultancy services Jun
to AB Ltd. at Tk.850,000 which is the lowest bid price. Another bidder quoted 2015
Tk.1,000,000. XY Ltd. has not attained VAT registration. AB Ltd. intends to hire the
services of XY Ltd., being cheaper.
PQ Ltd., a security service provider appointed by AB Ltd. w.e.f. 1 June 2018, is

registered with VAT authority. PQ Ltd. is unwilling to issue a valid VAT invoice
(Mushak-11) and has asked the Company to deduct VAT at source from the amount
payable thereto. In this situation, AB Ltd. is not sure whether deduction of VAT at
source would be sufficient compliance with the provisions of VAT laws.
Requirement:

Advise AB Ltd. with consequences, if any, for entering into the above transactions. 8
Advise to AB Ltd.
Case#1
As per Section 19(Ka) of the Value Added Tax (VAT) Act, 1991, no person would be able to take part in any
tender if he is not registered with the VAT Authority or any work order cannot be issued in favor of him.
Moreover, as per Section 9(1) (T) of the Value Added Tax (VAT) Act, 1991, input VAT credit shall not be
allowed on any purchase if anybody makes the purchase from any person not registered with the VAT
authority.
In the given situation, XY Ltd., the lowest bidder to provide the engineering consultancy services to AB Ltd., is
not registered with the VAT authority. As per Section 37 (1) (6) of the VAT Act, 1991, the person
awarding the tender or work order may be penalized with a minimum of Tk.10,000 and a maximum of
Tk.30,000. Therefore, it is advisable to hire the consultancy services from an entity registered with the VAT
authority instead of XY Ltd. to avoid the negative consequences as mentioned above. AB Ltd. should include a
provision of mandatory submission of a copy of the VAT Registration Certificate by the intended local
suppliers in its vendor enlistment policy and ensure availability of valid Mushak-11 before receiving
commercial invoice from suppliers.
However, AB limited will not be eligible for input VAT credit on the engineering consultancy services
irrespective of availability of Mshak-11 from another bidder since as per Section 9 (1) (D) of the VAT Act
1991, input VAT credit facility is not allowed on any service related with infrastructure. In the absence of
details it is assumed that the engineering service will be taken for infrastructural development.
However, in the event AB Limited enters into the transaction with XY limited, the invoice of XY Limited
should be considered as inclusive of VAT as per Rule 23 (4) of the VAT Rules 1991. AB Limited has the
responsibility of determining the applicable withholding VAT by back calcu.lation (i.e. multiplying invoice
amount by 15/115). In this case, the VAT amount becomes Tk. 110,870 (Tk. 850,000x 15/115). AB Limited
will be required to deduct the applicable VAT at source before making payment and deposit the same to the
Government exchequer within 15 working days of deduction.
The same process will apply if AB Limited hires the service from the other bidder and the bidder does not
mention VAT amount separately in the issued Mushk-11. However, since XY Limited is unregistered, it
appears that they did not consider VAT amount at the time of submitting the offer and it is unlikely that XY
limited will allow deducting the VAT from its fee. In such case, AB Limited would be required to bear the
applicable VAT (i.e. Tk. 110,870) from its own exchequer.
As per SRO# General Order no.-03/Mushak/2014 dated 05 June 2014 issued by the National Board of
Revenue (NBR), a company has responsibility of mandatory deduction of VAT at source at the rate of 15% from
a ‗Security service provider‘ (service code SO 40) irrespective of the availability of Mushak-11. In addition, as
per Rule 18 (L) of the VAT Rules 1991, the deducted VAT shall be deposited to the Government exchequer using
the relevant Commissioner Code within 15 working days of deduction. As per Rule 19 (1 ‗K‘) of the VAT
Rules 1991, 80% input VAT credit is allowed on security service. However, as per Section 9(1) (U) of the
Value Added Tax (VAT) Act, 1991, input VAT credit shall not be allowed on any purchase without availability
of valid VAT invoice (i.e. Mushak-1 1 ). Therefore, merely the deduction of applicable amounts of VAT would
not be sufficient to avoid the negative consequence of loss of input VAT credit.
In the given situation, PQ Ltd., as appointed by AB Ltd. to provide security service, is unwilling to issue the
valid VAT invoice (i.e. Mushak-11). AB Ltd. is required to deduct applicable amount of VAT at source and
should deposit the same to the Government exchequer within due time. However, in the absence of valid
VAT invoice, AB Ltd. cannot take input VAT credit. Therefore, I would advise AB Ltd. to discuss with PQ
LTD. to provide the valid VAT invoice.
36 May
AB Ltd. is now negotiating a deal with ST Ltd. for purchasing television sets. AB Ltd. Jun
intends that ST Ltd. delivers the television sets to CD Ltd., a dealer of AB Ltd. But 2015
AB Ltd. wants that ST Ltd. issues ―Mushak-11‖ challan in favour of ST Ltd. so that
they would be able to get input tax credit on the purchase.
Requirement:
Advise AB Ltd. on the above. 5

Assumption:
In the given situation, AB Ltd. wants that ST Ltd. issues Mushak-11 Challan in favor of ST Ltd. As per the
current provision of the VAT law, a person cannot issue Mushak-11 Challan in favor of himself. Therefore, it
is assumed that the question intends to mean to issue Mushak-11 Challan in favor of AB Ltd instead of ST Ltd.
so that it can get input VAT credit.
As per Section 32 of the VAT Act 1991 read with Rule 16 of the VAT Rules 1991, any VAT registered
person has to issue Challan in form "Mushak-11" for supply of every goods and such Mushak-11 challan has to be
accompanied with the goods up to its final destination mentioned on it. Moreover, the purchaser's and seller's name,
address, registration number and destination of goods etc. have to be clearly mentioned on theMushak-11
Challan. As per Section 38 (2)(L)of the Value Added Tax (VAT) Act, 1991, the VAT able
goods shall be confiscated if such goods are removed from the business premises with Mushak-11 Challan
which does not accompany with the goods up to its destination. Moreover, as per Section 9(1)(U) of the
Value Added Tax (VAT) Act, 1991, the products purchased are required to be brought into the premises of the
registered entity in full to avail input VAT credit.
Therefore, for the given situation in the question, it is advisable to AB Ltd. to bring the televisions into its own
premises first from ST Ltd. for avoiding the risk of confiscation by the VAT authority and availing input
VAT credit. AB limited can then supply the purchased televisions to the CD Ltd. Provided that the name,
address and VAT registration number etc. of AB Ltd. and ST Ltd. have to be clearly mentioned on the
Mushak-11 Challan.
However, this suggestion may be impracticable to follow if the business premise of CD limited and ST is
adjacent or nearer and that of AB limited is far away from ST limited. In that case, once getting the products
from ST limited and then sending them back to CD may not be cost effective. AB limited in that case may
open a small branch near to CD limited with a separate VAT registration, receive the goods from ST limited and
immediately forward the same to CD limited. The branch will perform the necessary documentation work to
get input VAT credit, deposit VAT in VAT Current Account and then sell the televisions to its dealer/customer.
37 May
Worldtel Ltd. is a fixed wireless phone service providing company. It provides Jun
services byselling fixed phone sets, connection cards and stretch cards to its 2016
customers. It has its registered head office, warehouse, seven own divisional sales
centers and almost two hundred retail sales points throughout the country. The
addresses are as below:
Head Office: Nafis Tower, 4th Floor, 12 Glushan, Dhaka

Warehouse: Plot no. 32, 14 Tejgaon, Dhaka
Divisional sales center: (1) Hosna Mansion, 13 Barishal, Barishal; (2) Sami Heights,
67/A Agrabad Commercial Area, Chittagong; (3) JanataBhaban, 18 KDA Commercial
Area, Khulna; (4) Lotif Mansion, 56 Rani Bazar, RajshahiSadar, Rajshahi; (5) Hossain
Plaza, 23 R K Road, Rangpur City, Rangpur; (6) Kushum Plaza, 117 Mirer Bazar,
Moulovi Bazar, Sylhet; (7) Bilkis Tower, 155 Motijhil, Dhaka.
Worldtel Ltd. has been operating its business for last one year under one VAT
registration with service code S 012.10 (Telephone) showing the address of its head
office and depositing VAT to Government exchequer based on its sales through the
sales centers and retailers. Recently it has received a letter issued by VAT authority
stating that it has not complied with the appropriate registration of VAT and not
having separate VAT registration for its each sales points in the country. CFO of
Worldtel has appointed you to advise on the remedy to the above crisis.
Requirement:
Draft a letter to the CFO suggesting an workable solution in accordance with the
relevantprovisions of VAT law.
Date:
Worldtel Ltd.
Nafs Tower, 4th Floor,
12 Gulshan, Dhaka
Subject: . Workable solution on VAT registration

Dear Sir.
This has reference to your recent communication requesting us to advise you on a workable solution withregard to
the VAT registration of your company in the light of the letter issued by the VAT Authority.
Your company provides services by selling fixed phone sets, connection cards and scratch cards to your customers.
Currently your company have got it's a registered head office, ware house, seven own divisional sales centers
and almost two hundred retail sales points throughout the country. You have been operating your business for last
one year under one VAT registration under service code S 012.10 (Telephone) being head office as registered
address and depositing VAT to Government exchequer based on its sales through the sales centers and sales
points.
Please note that as per sec 15 (2) of VAT Act 1991, there are two different means of getting registered for VAT.
When an entity delivers service or goods from two or more than two places, it will be required to obtain VAT
registration separately for each of the places and will be required to maintain all the books and records
separately. Alternatively, if the entity delivers service or goods from two or more than two places and maintain
all the books and records centrally for all the places altogether, it can apply for central VAT registration for all
the places of delivery of goods or services.
In order to comply with the above provisions, your company is either required to obtain VAT registration for
the warehouse, seven own divisional sales centers and almost two hundred retail sales points whereseparate
hooks and records would be maintained for each of those del i ver y points or apply for
centralVAT registration declaring your ware house as a central distribution point and maintain centralized books
and records for the central delivery center. For central VAT registration, your company will be required to comply
with the conditions of central VAT registration stipulated in SRO 186 Ayn /2012/644 Mushakdated 7 June
2012. We would like to highlight a few major terms and conditions below:
a) Application for central VAT registration should be submitted in the form of Mushak-6;
b) VAT of all the issued products from central delivery center will be deposited in advance
c) VAT of a month of all the delivery centers will be paid through one VAT return maintained
centrally within 15th of the following month.
d) VAT 11 will be issued at the time of delivery of goods from the centrally registered delivery
center.
e) Statement of delivery from the central delivery center and statements of delivery from every sales
center have to be submitted to the local VAT authority within 15th of the following month.
f) The books and records will be maintained in the centrally registered delivery center in accordance
of sec 31 of VAT Act 1991 and rule 22 of VAT Rules 1991.
On the basis of what have been stated above, obtaining separate VAT registration for your warehouse, seven
sales center and almost two hundred sales point around the country may not be workable for your company as you
will have to employ people to maintain compliances for all of your registered office which is not at all cost
effective. Hence we would recommend you to apply for central VAT registration. by declaring your warehouse
as central delivery center which will ensure compliance as well as operating with the present cost structure for
VAT operations.
Should you have any query, please feel free to contact us .
Thank you.
38 May
Delta Ice cream Ltd., a VAT registered entity, incurred the following transactions in Jun
March 2018 2016
Raw materials aggregating to Tk.5,000,000 were purchased on 5 March 2018, VAT on

the same paid and the VAT challan along with the goods were received on 10 March
2016. The deliveries are as follows:
8 March 2018 Tk. 13,00,000

9 March 2018 Tk. 12,00,000
10 March 2018 Tk. 15,00,000
15 March 2018 Tk. 16,00,000
The following deposits were made to the Govt. Exchequer through treasury challan :
7 March 2018 Tk. 1,20,000

12 March 2018 Tk. 1,30,000
15 March 2018 Tk. 1,70,000
Balance of deposit at 1 March 2018 in VAT – 18 was Tk.1,50,000
Requirements:
Write a letter to the management showing how the above transactions will be
entered in VAT-18 of the company and on the irregularities (if any) noted by you in
completing the VATcurrent register (VAT – 18) and implications of the same for the
company.
Date:
Delta Ice cream Ltd.
Address
Subject: Irregularities in compliance of rules 22 of VAT rules 1991 for maintaining VAT 18.
Dear Sir,
Please find below our findings with regard to compliance of rules 22 of VAT rules 1991 in your
enterprise below:
Current Account (Rules 22 of VAT Rules 1991)
Tax payer‘s identification number
Name:
Address:
SL. Date Particulars Purchase or Treasury Rebate Dues Closing Remarks
no. Sales register Deposit Balance
1 2 3 4 5 6 7 8 9 10
1. 01.03.2018 Opening balance 150,000
2. 07.03.2018 Treasury deposit 120,000 270,000
3. Delivery 195,000 75.000
4. 08.03.2016
09.03.2018 Delivery 180,000 (105,000)
5. 10.03.2018 Purchase 750,000 645,000
6. 10.03.2018 Delivery 225.000 420,000
9. 15.03.2018 Delivery 240,000 480,000
In accordance of Rule 22(1) Gha of VAT Rules 1991, maintenance of sufficient balance in VAT current
account is required by which the adjustments or payments for output VAT can be made with the
accumulated balance of VAT deposited and VAT rebate. We have gone through the VAT transactions of
the period from 1 March to 15 March 2018 recorded in the current account and found negative balance in
one occasion which is a clear violation of above rule. under section 32(2) of VAT Act 1991, it is also an
offence which may cause a monetary penalty of an amount not less than half and more than two times of
the amount of VAT. However, for irregularities other than evasion of revenue, the amount of fine is
limited to not less than Tk. 5,000 and not more than Tk. 300,000.
We recommend strict compliance of VAT provisions by maintaining a positive balance in VAT 18.
Should you require further clarification on this, please do not hesitate to revert to us.
Thanking you.
39 As an Executive-VAT of the Delta Ice Cream Ltd., you have been provided with May
the following cases: Jun
2016
(i) An air-conditioned restaurant issued Mushak-11 to the Company wherein
amount of VAT was Tk.5,000.
(ii) Statutory audit was carried out by an audit and accounting firm which
raised an invoice in its own format adding VAT of Tk.15,000 on to the
audit fee.
(iii)The Company is in receipt of a Mushak-11 issued by an insurance
company against marine insurance policy showing VAT of Tk.10,000.
(iv) Goods were purchased for Tk.100,000 from a manufacturer who issued
Mushak-11 to the Company adding VAT of Tk.15,000 thereto.
(v) Mushak-11 was issued by a furniture show-room to the Company for
sale of furniture showing VAT of Tk.3,000.
Requirement:
Provide your opinion on deduction or collection of VAT at source and calming
InputVATrebate in the cases stated above.
(i) An air-conditioned restaurant issued Mushak-11 to the Company wherein amount of VAT
was 5,000.
As per General Order No. 03/Mushak/2014 dated 05.06.2014, the services from which VAT is required to
be deducted or collected at source do not include air-conditioned restaurant. Hence, VAT will not be required to
be deducted at source from the said restaurant.
Pursuant to section 9 (1) of the VAT Act, 1991, VAT paid on purchase of services rendered by air-
conditioned restaurant will not be eligible for claiming input VAT rebate considering it entertainment.
(ii) Statutory audit was carried out by an audit and accounting firm which raised an invoice in its own format
adding VAT of Tk. 15,000 on to the audit fee.
In accordance with General Order No. 03/Mushak/2014 dated 05.06.2014, VAT is required to be deducted or
collected at source from audit and accounting firm.
As per Rule 19 of the VAT Rules, 1991, 80% of VAT paid on procurement of services rendered by audit and
accounting firm will be eligible for claiming input VAT rebate. It is worth noting that invoice issued by an
audit and accounting firm in its own format will be treated as VAT (Mushak) invoice provided the invoice
fulfils conditions stipulated in Rule 17 of the VAT Rules, 1991
(iii) The Company is in receipt of a Mushak-11 issued by an insurance company against marine insurance policy
showing VAT of Tk. 10,000.
As per General Order No. 03/Mushak/2014 dated 05.06.2014, the services from which VAT is required to
be deducted or collected at source do not include an insurance company. Hence, VAT will not be deducted at
source from the company conducting insurance business.
In accordance with Rule 19 of the VAT Rules, 1991, claim for credit of input VAT paid on insurance premium is
allowable up to 80% of VAT so paid.
(iv) Goods were purchased for Tk. 100,000 from a manufacturer who issued Mushak-11 to the Company adding
VAT of Tk. 15,000 thereto.
VAT will not be deducted at source if goods are supplied by a manufacturer issuing Mushak-11 upon payment of
applicable VAT.
In accordance with section 9 of the VAT Act, 1991, there is no restriction on claiming credit for input VAT paid
on purchase of goods from a manufacturer.
(v) Mushak-11 was issued by a furniture show-room to the Company for sale of furniture showing VAT of
Tk. 3,000.
As per General Order No. 03/Mushak/2014 dated 05.06.2014, VAT is required to be deducted at source from
the sale of furniture by a show-room.
Pursuant to section 9 (1) of the VAT Act, 1991, VAT paid on purchase of furniture will not be eligible for
claiming input VAT rebate.
40 Three persons, as follows, are in the process of starting new business and approach Nov
you for advice under Value Added Tax Act 1991 considering the current provisions in Dec
force: 2015

i) A Chartered Accountant is obtaining ‗Certificate of Practice‘ from ICAB to
begin professional practice in accounting and auditing with an estimated
annual fee income of Tk.7,500,000/=.
ii) A retired Biman Airlines Manager in the process of setting up a Tour Operator
business. Estimated annual commission income is Tk.6,500,000/=.
iii) XYZ Ltd., a private limited company, operating from Kaptan Bazar, Dhaka,
and already a VAT-registered assesse, engaged in product distribution got a
new national distributorship agreement from a Chinese Manufacturer to
import, stock and sell mobile handset in Bangladesh. Estimated annual
turnover of XYZ Ltd. from new handset dealership is Tk.25,000,000/=.
Company plans to appoint District Distributors (DD) to sell mobile handsets
through selected retailers in major cities.
Requirements:
Please brief on the three persons shown in (i), (ii), (iii) above in connection with the
compliance under VAT law considering the provision now in force with respect to
initial compliance obligation and statutory VAT records. Examiner shall take into
account mention of Codes, prescribed VAT Forms, Records and Sections/Rules.
Three different parties shall have following compliance obligation, statutory records and reporting:
(i) Chartered Accountants Firm :
a) VAT Registration
Initial compliance obligation is VAT registration under service Code 5034 using Form VAT-6. Obtain
VAT registration certificate (VAT-8). Although it may appear that the firm will not be required to obtain
VAT registration certificate rather will be required to obtain turnover tax registration since their estimated
annual turnover is less than the threshold i.e., Tk 80 lacs, as per the SRO# 641 of 2012, the firm must
apply for the VAT registration irrespective of its annual turnover.
b)VAT payment
In most of the case the payer is responsible for deduction of VAT at source at the time of making payment
to the CA firm. The firm will be required to collect Mushak-12 (Kha) from the payer. VAT paid to the
firm must be deposited to the Government Exchequer before submission of the VAT
return.VATwithheld from the service provider should also be deposited to the government exchequer.
c) VAT return
VAT return (Mushak-19) must be filed to the respective circle within 15th day of the next month.
d) VAT record keeping
VAT-11, VAT-19, VAT-12 Kha, Treasury Challan, etc
(ii) Tour Operator:
a) TOT Registration
Since annual turnover is less than Tk 8,000,000, the retired airline manager is required to obtain
Turnover tax registration by using VAT-6 and then obtain VAT-08 for TOT registration. Service
Code will be S077
b) TOT payment
TOT is payable @ 3% on the basis of declaration made under the VAT-2. He can pay the TOT
on monthly, quarterly or annual basis.
c) TOT Return
TOT return i.e., VAT-4 is required to be submitted as the declaration made under the VAT-2
i.e., monthly, quarterly or annual basis
d) TOT record Keeping
TOT records are VAT- I 7Ka, Serial wise Sales Receipts book. TOT return (VAT-4) monthly or
quarterly. Other related documents to support information in the statutory records.
(iii) XYZ Ltd:
a) VAT Registration
XYZ is already a VAT registered person. Their type may be trader. However, we need to review
the VAT registration certificate as to whether their types also includes ―importer‖ or not. If not
then XYZ will be required to amend the VAT registration to include importer in their VAT
registration.
b) Price declaration
If the deemed value addition is 26.67%, XYZ will not be required to submit price
declaration, otherwise they will be required to submit price declaration through Mushak-1 Kha.
c) VAT payment
VAT is payable @ 15%. If the Value addition is 26.67%, XYZ will not be required to pay any
VAT at the time of selling goods to their customer since 4% ATV has already been deposited
to the Government Exchequer at the time of importation of the mobile handset.
If XYZ follows price declaration basis, they will be required to pay VAT on the value addition at
the time of selling goods to their customer @ 15% on value addition.
d) VAT return
VAT return (Mushak-19) must be filed to the respective circle within 15th day of the next month.
e)VAT record keeping
VAT records (as existing) are VAT-16, 17, 18. VAT-11 or 11Ka or 11Gha. VAT return-19. Other
related documents to support information in the statutory records.
41 XYZ Ltd., a private limited company, operating from Kaptan Bazar, Dhaka, and Nov
already a VAT-registered assesse, engaged in product distribution got a new national Dec
distributorship agreement from a Chinese Manufacturer to import, stock and sell 2015
mobile handset in Bangladesh. Estimated annual turnover of XYZ Ltd. from new
handset dealership is Tk.25,000,000/=. Company plans to appoint District Distributors
(DD) to sell mobile handsets through selected retailers in major cities.
XYZ Ltd., the company in above requires additional advice on the formulation of the
handset price at various stages using the system of ‗input VAT rebate claims‘ at each
stages of delivery chain u/s 9 of the law. Please make detailed computation of the
PRICE in each stage upto MRP(Price to Distributor, Price to Retailer and MRP)
clearly showing input-output VAT adjustment and net VAT payable amount in each
stage of National Distributor(ND) and DistrictDistributor. Your answer should also
contain a reconciliation of the ‗VAT (15%) on cost to retail‘ and summation of the
VAT at earlier stages beginning from the import.
[ASSUME: Per unit landed cost of XYZ Ltd is Tk.5,500/= including import stage
VAT(15%=650/=), AIT (5%=165/=) and Advance Trade VAT (4%=220/=). ND margin
15% onLanded cost, Trade Promotion expense, estimated damage recovery total 14.0%
on ‗value afterND margin‘; DD margin 5% and Retailer margin 15%.] 7
Following is the price formulation and the mechanism of input VAT rebate claim and net output vat payment by
XYZ Ltd at various stages (amount rounded off):
Taka VAT at Net VAT Explanation
each stage
VAT at import stage (15%) 650.00 650 650
AIT(Advance Income Tax) 165.00
ATV(Advance Trade VAT) 4% 220.00 220 220
Landed Cost per unit No VAT on
(excl. VAT+AIT+ATV) 4,465.00 VAT+AIT
National Distributor Margin(15%) 669.75
Value After ND Margin 5,134.75
Trade Promotion +Damage recovery 718.87

(14.0%)
ND Price before VAT 5,853.62
VAT at 15% at ND Stage 878.04 878.04 8.04 878.04 less
(650+220)
ND Price to District Distributor (DD) 6,731.66
DD Margin — 5% 336.58
DD Price before VAT 7,068.24
VAT at 15% at DD stage 1,060.24 1,060.24 182.20 1052.24 less
878.04
Price to Retail 8,128.47 1,060.24 VAT Sum Total
at stages.
Retailer margin — 15% 1,219.27 8128.47x3/23=
1060.24
CONSUMER PRICE PER UNIT 9,347.74
42 Nov
XYZ Ltd., a private limited company, operating from Kaptan Bazar, Dhaka, and Dec
already a VAT-registered assesse, engaged in product distribution got a new national 2015
distributorship agreement from a Chinese Manufacturer to import, stock and sell
mobile handset in Bangladesh. Estimated annual turnover of XYZ Ltd. from new
handset dealership is Tk.25,000,000/=. Company plans to appoint District Distributors
(DD) to sell mobile handsets through selected retailers in major cities.
XYZ Ltd., the company in above may soon run out of space at the present rented
premises upon addition of new set of employees for handset dealership. The company
has own bigger floor space in Uttara, Dhaka. Management is considering option of
moving from current rented space from Kaptan Bazar to own space in Uttara, two
being separate VAT divisions. Pleaseadvise Company on steps within the purview of
VAT law (mentioning Section, Rule and prescribed Form) if the company decides to
change office/store to Uttara.
Rules 12 of the VAT Rule 1991 provides for formalities as to the change of business location and situation. This
is, however, not for ownership change. Application for ‗change' of business location and nature should be done
14 days prior to the change. All pending VAT must be paid off before the application or an undertaking on stamp
paper to settle the VAT or other liabilities with the VAT law. Any work stoppage at the present location must be
informed to the respective VAT circle. Physical change of the location and transfer of the stock-in-trade
should not be done without clearance from present VAT circle. Steps to be taken are as follows:
 Application for change of location in Form VAT-9 to present VAT Circle.
[Together with the attested copies of Trade License, Lease Agreement, NID, original VAT registration
certificate, application in plain paper, copies of previous four months‘ VAT Returns.]
 VAT inspector shall visit the location to inspect stock-in-trade/other information of the XYZ Ltd.
 Information of such change and a copy of the application for change should also be filed with the
new VAT circle under newVAT division (as the change to a separate division, Uttara).
 After scrutiny and satisfaction, present VAT circle shall cause to transfer the VAT file of the assesse
to the new VAT Circle.
A new VAT registration is required to be obtained from the new transferee VAT division.
43 B Ltd. will be amalgamated with A Ltd., which has a few VAT cases pending with the Nov
VATappellate authorities. With reference to section 59 of the VAT Act, 1991, VAT Dec
authority sent a letter asking B Ltd. to make payment of VAT relating to those 2016
pending cases before starting amalgamation procedures. As a professional accountant
having expertise in VAT matters, you have been asked by the management of B Ltd.
to advise them.
Requirement:
Provide your opinion on the letter issued by the VAT authority in the case stated above. 5
VAT Act, 1991 and VAT Rules 1991 do not specifically address the issues relating to
amalgamation. Transfer of assets and liabilities by amalgamating company to the amalgamated company
is not transfer of any movable or immovable property within the control of the undertaking of a
registered person or the transfer of ownership of his undertaking as set forth in section 59 of the VAT
Act, 1991. In the amalgamation process, the shareholders of the companies desirous to be
amalgamated approve the scheme at appropriate legal forum. During the amalgamation process, one of
the companies is discontinued and the surviving company takes ownership of the assets and liabilities.
If the name of the surviving company is changed, then the change must be approved with the
respective regulatory body. In practice, clear directions are given by the appropriate legal forum with
regard to the fiscal obligations, if any, of the reporting entity.
Whereas, section 59 of the VAT Act, 1991, is made applicable for transfer of ownership wherein the
entity will remain there but only ownership is changed. Here in this case, the said shareholders
are not transferring the movable or immovable property or ownership of the undertaking, rather
assets belonging to their companies will be merged and they will remain owner thereof by holding
shares in the amalgamated company. In the amalgamation process, the companies are merged alongside the
merger of assets and liabilities owned by them. It is not the case where the transferor company will
remain as a distinct entity like a usual seller would after transfer of its assets and liabilities.
As such, we advise you to let the authority know that section 59 of the VAT Act, 1991 is not made
applicable to amalgamation scheme, unless the court so directs. For this claims, we advise you to follow
the directives given by the court.
44 As a ICAB fellow member, after working long years, you moved to own practice. Nov
VAT is your specialty. Your retainer-basis client, ―Smart Footwear Ltd.‖ involves in Dec
export and domestic sale of footwear. This is your single largest fee client. Client 2016
provided you a chamber at management floor. As proactive advisor to clients on tax
planning, you encourage client to gradually introduce process of claiming input VAT
rebate and also train them on sensitive conducts not to land in fines/penalty. Section
37 of VAT law attracts fixed fine and variable penalty for certain offences. List
includes offences of VAT evasion and offences of fixed fines. Smart Footwear use
imported bonded materials for export orders. You came across incidents that Smart
Footwear sold bonded materials in local market. This holds potential VAT action. You
discussed this with management who requested you to stay quiet as the year has
already passed by.
Requirements:
i) Write three critical suggestions for client to be careful in order not to run on
penal actions u/s 37 that may be featured as VAT evasion
ii) Consider issue of breaching bond conditions. Identify threat(s) to any
fundamental principles of professional ethics and professional threats, if
any, arising from incidents and explain why thethreat(s) arise and if you
have any safeguards to mitigate the threat(s).
5
(i) Section 37 of the VAT Act 1991 provides for offences and penalties. There are offences subject to
fixed fines and there are offences leads to charges of VAT evasion.
Threecritical suggestions I can make to Smart Footwear Ltd. to stay off charges u/s 37 are as follows:
 Selling goods (subject to VAT) without issuing VAT Invoice,
 Sales delivery without updating the same in Sales Book (VAT 17) and without recording the
payable VAT on such sale in the Current Account (VAT 18),
 Selling goods without maintaining sufficient balance in the Current Account.
(ii) Smart Footwear Ltd. need to pay zero (0) % VAT as they export their footwear. Moreover, they
enjoy bonded facility for importing raw materials to produce these exportable goods. It came to our
notice that they have sold some of these imported raw materials to local market.This is an illegal conduct
that holds potential charges to revenue evasion. An illegal conduct is always illegal regardless of its age.
Customs bond audit in future may detect this departure.
I understand that this is my single largest fee client; management keeps me in their respect and provided
me space facility. When I spoke to the management, they wanted me to stay quiet as the incident is not
current. Iam an Accountant in public practice. The incidentbrings before me threats to fundamental
principles like ‗objectivity.and independence and it exposes me intimidation threat as I might lose
my client resulting in reduced fee and increased cost for the space provided to me.
On the other hand, my engagement with Smart Footwear Ltd. is advisory. not statutory audit assignments
which mean threats are there but not significant for me. It also doesn‘t come in my obligation to disclose
the incident to revenue authority.
As my obligations to fundamental principles and to mitigate the identified threats. I shall consider
following possible safeguards:
 Putting up the incident in writing to management (Board of Directors) with my views and
the potential consequence that may result from such non-compliance,
 training department staff who are involved in the incident,
 Developing an internal control policy paper for the management to comply rules and regulations
to avoid such non-compliance.
 If the management do not take a decision in future, I may consider resignation as a consultant
45 Regent Company produces different consumer products. To produce their products Nov
they import some ingredients from China and use some local ingredients. To produce Dec
10,000 pieces(pcs) of AAA Makeup Box for November 2017 they procured and used 2016
following ingredients as per standard practice:
Ingredient A: 1,200 kgs by Tk.517,440 where VAT was Tk.65,340, AIT (advance
incometax) Tk.16,500, Customs Duties (CD) Tk.33,000 and Supplementary Duty
(SD) Tk.72,600;
Ingredient B: 600 kgs by Tk.356,345 where VAT was Tk.45,045, AIT Tk.11,000,
CD Tk.66,000 andSD Tk.14,300;
Ingredient C: 800 kgs by Tk.150,000 (VAT-exempted); and
Ingredient D: 10,050 pcs by Tk.138,000 where VAT was Tk.18,000.
Ingredients A and B were imported items and Ingredients C and D were locally
procured from wholesale market.
Standard Gas bill for such quantity of products was Tk.120,000 and Electricity bill
was Tk.55,000 excluding VAT.
Per Unit costs were: Labor cost Tk.80, factory overhead Tk.90. Standard marketing
overhead cost in total was Tk.50,000 and bank interest Tk.45,000 for November 2017.
Company profit markup policy is 30% after charging all costs.
Company produced and sold 1,000 pcs AAA Makeup Box in November 2017.
As a Manager (Costing & VAT) of the company you are required to submit Form
VAT-1 for Product AAA and Form VAT-19 for the month of November 2017.
Requirements:
(i) Find out per unit AAA Makeup Box cost for Form VAT-1 and selling price.
5
(ii) Determine the amount of input VAT that will be allowed as rebate in Form
VAT-19 and net VAT payable for November 2017.
2

(i) Regent Company
Computation of Sales price of AAA makeup Box
Cost VAT Paid
Particulars Excluding (Rebate able)
VAT
Ingredient A 4,35,600 65,340
Ingredient B 3,00,000 45,045
Ingredient C 1,50,000 0
Ingredient D 1,20,000 18,000
Gas bill (Rebate= 15% of costx80%) 1,20,000 14,400
Electricity bill (Rebate= 15% of costx80%) 55,000 6,600
Material Cost 11,80,900 1,49,385
Per unit Material Cost 11,80,900/10,000 118.09

Labor Cost 80.00
Overhead 90.00
Marketing overhead 50,000/10,000 5.00
Bank Interest 45,000/10,000 4.50
Per unit Product Cost 297.59
Profit 30% 89.28
Price before VAT 386.87
VAT 15% 58.03
444.90
(ii)
Output VAT (Tk. 58.03 x 10,000) 580,300
Input 149,385
VAT payable 430,915
As such cost per unit AAA make up box will be Tk. 297.59. After adding Tk. 89.28 as profit the VAT
assessable value will be Tk. 386.87. So the selling price to the customer will be Tk. 444.90
Input VAT for the month of November 2017 may come to Tk. 149,385 and regent will be required to
deposit Tk. 430,915 to the Government exchequer. The same will be reported in the VAT-19.
Assumptions made:
VAT on Gas and Electricity is 15%
Regent‘ name is there in the B/E and the goods entered into the factory within November 2017
There will be no input VAT in connection with the marketing overhead.
46 You are a professional practitioner where VAT practice makes an impression. You May
are supposed to peruse new VAT law and stay tuned to the on-going talks in media Jun
and meetings between NBR and Trade Bodies involving Govt‘s determination to 2017
introduce new VAT Act 2012 from July 01, 2017.
Requirements:
Specify five salient changes supposed to be coming up in new VAT law from July
2017 5
Answer:
The new VAT law, which was passed by the Parliament in 2012, is expected to be effective from
July 2017. Major changes over the existing law are as follows:
i) Universal VAT Rate: There will be a universal VAT rate which may be 15% or lower.
Presently there are many VAT rates (15%, truncated base, rates based on tariff value etc.)
ii) Threshold for registration and no Package VAT: Annual turnover of 30 lacs is expected to
be fixed for goods and services to have no VAT and thereby no VAT registration. That is,
annual turnover below 30 lacs shall attract no VAT, Annual Turnover tax threshold is
expected to be raised from taka 80. There will be no package VAT under the new law.
iii) No Price Declaration: Price declaration for goods is expected to cease.
iv) Deduction of VAT at source: Except for private limited companies, VAT deduction will not
be applicable.
v) Input VAT Rebate: 100% input VAT rebate can be taken by assesse.
47 Your client, Trims Ltd. involves in exports and local trading. Balance Sheet of Trims May
Ltd. as at 30.06.2018 shows a ‗VAT Current Account‘ debit balance taka 50,000. Jun
VAT-18 stands agreed with Balance Sheet of the company. Formatted columns of VAT 2017
Account Current (Form VAT 18):
Sl,Date, Description, Purchase/Sales book ref., Treasury Deposit, VAT
receivable, VAT payable, Balance, Remarks.
Transactions in July 2018:
VAT deposit taka 50,000 on July 01.

Sales (local) taka 200,000 excluding VAT on July 05.
Sales(exports) to A category factory in Savar EPZ taka 500,000/=
Sold goods returned worth taka 50,000 on July 15.
Purchase goods taka 100,000 excluding VAT July 20. Purchase return
50,000 excluding VAT same date.
Sales goods taka 450,000 excl VAT July 25. Treasury deposit same day
50,000.
Goods sold taka 50,000 July 28 but customer withheld VAT taka 7500
when paying to Trims Ltd. Trims Ltd. delivered goods Tk 100,000 to a
Singapore-bound ship at Chittagong Port on July 29.
Requirements:
5
Using the data in above, draw a VAT Current Account (VAT 18) for Trims Ltd. for the
month of July, 2018.
1
0

Answer:
Trims Limited: VAT CURRENT ACCOUNT (Form VAT - 18), Rule 22(1) VAT
Registration No ......................
SL Date Description Purchase/ Sale Treasury VAT VAT Balance
ref Dep Receivable Payable
1 01.07.18 Opening balance 50,000
2 01.07.18 Treasury deposit Challan 50,000 100,000
3 05.07.18 Sales(local) S,B 30,000 70,000
4 11.07.18 Sales(exports. zero VAT) S.B - 70,000
5 15.07.18 Sales return DN 7,500 77,500 ,
6 20.07.18 Purchase P.B 15,000 92 , 5 0 0
7 20.07.18 Purchase return CN 7,500 85,000
8 25.07.18 Sales S.B 67,500 17,500
9 25.07.18 Treasury deposit Challan 50,000 67,500
10 28.07.18 Sales VAT Challan 7,500 60,000
11 29.07.18 Sale to Outer Ship(zero VAT) S.B 0 60,000
TOTAL FOR THE MONTH 100,000 22,500 112,500 60,000
Closing Balance of VAT Current Account at the end of July 2018 is Taka 60,000 Debit. Trims Ltd.
May claim VAT of Tk. 7,500 as treasury deposit after obtaining the treasury challan in support of the
VATDEDUCTION AT SOURCE FROM ITS CUSTOMER. However, as per the general order, VAT
should not be deducted at source from a supplier who also manufactures the same. As such they
should negotiate the same with the customers.
48 Trims Ltd. needs to pay honorarium to the members of its tender evaluate committee. May
But they are not sure as to whether VAT needs to be deducted at source. June
Requirements: 2017
Advise if Trims Ltd. is required to deduct VAT at source while paying such
honorarium 6
Answer:
As per SRO, VAT deduction at source is applicable on remuneration of board members. The person involved in
the tender evaluation committee renders personalized services which is exempt from VAT as per the 2nd schedule
of VAT Act,I991. As such VAT is not deductible from remuneration as per VAT Act,1991
49 As an ICAB member, you are a VAT adviser to many large companies. You know May
about Panama papers leaks news story which put selected names of Bangladeshi under June
spotlight. One of your VAT clients name was seen in that list, truth of the report 2017
unconfirmed. Although there are legitimate ways of using tax havens, most of what
has been going on is about hiding true owners, the origin of the money and avoiding
tax thereon. VAT evasion is one of the crude tools of money launderers. You are in
the center stage of a sensitive practice.
Requirements:
Evaluate any professional and ethical issues for yourself and your firm arising from the
news story about Panama paper leaks. Set out the actions that you and your firm should
take.
5
Answer:
Panama paper leaks story is all about sheltering of assets secretly at offshore tax heavens. Offshore tax shelters
may be legal, but the ethicality of using them to eliminate taxes is highly irregular. One my client name is on
alleged list of names. I shall maintain that client be requested to fully investigate the alleged story to confirm its
truth. I see no connection of myself and my firm with such alleged leak story naming my client. However I
find this as an alert signal for me and my firm to reposition the way of client dealing. I see that two major
fundamental ethical principles ‗Professional behavior‘ and ‗confidentiality‘ are likely to be impaired at
allegation like panama paper leaks. ‗Familiarity threats‘ and ‗self-interest threat‘ are likely to crop up in such
circumstances as the leak story got in wider media. The news story obliges me to review my and my firm‘s
conduct at clients to examine if our conduct does discredit the profession. I have also examined if the leak
story pops up any threats to our compliance to these principles. I am a Professional Accountant in Public
practice. As I am not connected whatsoever with the story linking a VAT client, I do not see any significant
threat that may impair those fundamental principles.
As action steps, I shall (i) meet client management and discuss with him the leak story linking his name and for
further investigation, (ii) advise client to engage a lawyer to deal with the alleged story, (iii) request client in
writing to arrange training for the key staff on money laundering and cross-border transactions, (iv) request
client in writing to introduce a Code of Conduct for the employees. If the allegation is found true, I would elect
to distance from the service of this client. I shall review my Firm‘s Code of Conduct to make that current with
time, shall schedule training for the Firm‘s staff on money laundering and code of conduct. Public interest must
be upheld by us as ICAB member. Accountants must not forsake ethical responsibilities when working for
wealthy clients. We must not let lose privilege of our self-regulation.
50 You are a VAT adviser to PQ Ltd. (―Company‖). A taxable service provider is Nov
unwilling to issue a valid VAT invoice (Mushak-11) and has asked the Company to Dec
deduct VAT at source from the amount payable thereto. The Chief Financial Officer 2017
(―CFO‖) of the Company has requested you to discuss the issue in more detail at the
next meeting.
Requirements:
Prepare a note for discussion at the meeting with the CFO of the Company, addressing
Theconsequence of entering into a transaction with a registered person who/which does
not issue avalid VAT invoice (Mushak-11). 5
Notes for discussion at the meeting with the CFO of PQ Ltd.
Consequence of entering into a transaction with a registered person who does not issue a valid
VAT invoice (Mushak-11)
According to Section 37 (2) of the VAT Act, 1991, the following activities, inter alia, will be treated
as offence, if any person:
 fails to issue a VAT invoice or renders a fallacious VAT invoice from the perspective of material
information;
 receives goods or services without VAT invoice despite the recipient is a VAT registered
person;
 engages himself in receiving or acquiring possession of goods or entering into transactions
though he knows or he has reason to believe that VAT or, where applicable, VAT and SD
payable on such goods has been evaded; or
 evades or attempts to evade VAT or SD by any other means;
 does or abates in doing anything specified in clauses from (ka) to (tha) of Section 37 (2) of
the VAT Act, 1991.
In the event that the aforementioned offences result in evasion of VAT, the said person shall be liable to a
monetary penalty which shall be not less than 50% and not more than 100% of the amount of VAT so
evaded. For the offences set forth in Section 37 (2) of the VAT Act, 1991, which are considered as
irregularities other than evasion of revenue, the said person shall be liable to a monetary penalty of
not less than Tk. 20,000/= and not more than Tk. 50,000/=.
Section 37 (6) of the VAT Act, 1991, provides that any person who is convicted in the Court of Special
Judge for the offences set forth in Section 37 (2) of the VAT Act, 1991, shall be liable to
imprisonment for a term which shall be not less than 3 months and not more than 2 years or a
pecuniary penalty which shall be not less than 50% and not more than 100% of the amount of VAT
payable or both.
In accordance with Rule 35 of the VAT Rules, 1991, any registered person who contravenes any
provision of the VAT rules shall be liable to a pecuniary penalty which shall be not less than 50% and not
more than 100% of the amount of VAT payable on relevant supply of goods or rendering of services
and the said goods or services (where applicable) related to such contravention shall be confiscated in
favor of the government.
Furthermore, VAT authority may impose a penalty of not more than Tk. 10,000/= and not less than Tk.
5,000/= under Rule 35 of the VAT Rules, 1991, for violation of the VAT Rules, 1991, if the infringement
does not result in evasion of VAT.
In light of the above, it is obvious that there is no scope in VAT laws to do transaction with a person
who/which does not provide a valid VAT invoice (Mushak-11). Deduction of VAT at source will not
discharge the service recipient from the obligation to enter into transaction with a VAT compliant
counterpart.
51 Electric bike is a bicycle powered by lightweight lithium-ion battery which has gained Nov
popularity in many countries. A motor cycle importer imported 100 pieces of electric Dec
bicycle to try first time in Bangladesh market. Cost per piece including VAT at import 2017
point 100 US dollar. He incurred 15% import VAT. The importer incurred C&F
charges taka 50,000 to clear the consignment. He sold 90 units to wholesaler at 10%
profit. Wholesaler incurred indirect fixed overhead of taka 15,000 in a tax period in
which he sold 90 units of electric bike.
As a pricing policy, he aims to recover the fixed overhead from margin charged to
retail. Wholesale margin is 10% on his sale to retailer. Retailer sold his entire stock of
90 units in one tax period. He engaged a technician at monthly salary of taka 5,000/=
(direct cost) to service the new electric bike. Retailer‘s direct cost including technician
salary amount to taka 50,000/=. Retailer margin is 15%. Exchange rate Taka 80 to a US
dollar.
The wholesaler maintains full statutory VAT records and operates on full VAT
system. Wholesaler has 10 units unsold stock of electric bike purchase. In one later
evening, his shop got fire fully damaging (consider nothing recoverable) the entire
stock of electric bike. Wholesaler approached you for legal advice what to do under
the circumstances.
Wholesaler‘s indirect fixed overhead taka 15,000/= include estd taka 2000/= insurance
cover (including 15% VAT), taka 3000/= for electricity (including VAT 5%) and taka
10000/= (including VAT 15%) paid to part timer CA application level student to
provide bookkeeping support. This wholesaler can take rebate of input VAT in the
product cost but he is unsure if he can claim rebate of VAT he paid on the indirect
expenses of taka 15,000/=.
Requirements:
i. Compute VAT to be borne by consumer for the stock of electric bike
actually sold by retailer.
10
ii. Can wholesaler claim rebate of the input VAT included in damaged
stock? Describe procedure in ref to the applicable provisions of the VAT
law to deal with electric bike stock is damaged by fire.
(i): Check Amount (Taka)
Importer Stage - Computation of VAT
Price including VAT 100x80x100 800,000.00

[VAT on import included in the price] 104,347.83 104,347.83
Price Excluding VAT - 100 units 695,652.17
ADD: C&F Charges 50,000.00
[promotional cost 1000 tk per unit is not product cost]
Total cost excluding VAT - 100 units 745,652.17
ADD: Margin 10% 74,565.217
Value Addition 124,565.22
820,217.39
VAT on Value Addition 18,684.78

VAT on import 104,347.83 15% 123,032.61 Output
VAT
Price to Wholesale including VAT 943,250.00
Wholesaler Stage - Computation of VAT
Cost of purchase -- 100 units 943,250.00
Less: Input VAT for 100 units(Cost)*(3/23) 123,032.61 123,032.61
Net cost of goods available(100 pcs) 820,217.39
Total cost for 100 units excluding input VAT 820,217.39
ADD: Margin at 10% on 90 units 73,819.57
Selling price excluding VAT -- 90 units 812,015.22
[Total value addition at wholesaler]
VAT on value addition --

Input VAT -- prop on 90 units 110,729.35 14%
14% 110,729.35
110,729.35
Output Output
VAT
PRICE TO RETAILER 922,744.57
Retailer Stage - Computation of VAT

Cost of purchase - 90 units 922,744.57
Less: Input VAT for 90 units (Cost)*(3/23) 120,357.99 120,357.99
Net cost of goods available (90 pcs) 802,386.58
ADD: Direct cost for 90 units 50,000.00
ADD: Margin at 15% 127,857.99

Selling price excluding VAT of 90units 980,244.57
Total value addition at Retailer 177,857.99
VAT on Value Addition 26,678.70
Input VAT -- 15%
120,357.99 14% 147,036.68
110,729.35 Output Output
VAT
PRICE TO CONSUMER 1,127,281.25
Consumer cost per unit 12,525
Importer Wholesaler Retailer Consumer

100 90 90 90
Output VAT 123,032.61 110,729.35 147,036.68
Less: Input VAT 110,729.35 120,357.99
NET VAT 123,032.61 - 26,678.70
NET VAT for 90 units 110,729.35 - 26,678.70 137,408.05
Total VAT amount consumers pay for 90 units 137,408.05

Consumer Price per unit 12,525
VAT in consumer price per unit 1,633.74
90
Total amount of VAT for 90 units sale 147,036.68
(b)(ii):
VAT Rule 41 applies to deal with the manner how to dispose damaged goods in possession of the
assessee. The assessee should do police station record of the fire incident. The procedures under VAT
law are as follows:
 Wholesaler shall apply to local VAT circle using the Form VAT-27 within 24 hours of the
incident of fire duly detailing the damages resulted from the fire.
 He will coordinate with local VAT circle to visit the shop premises within three days to assess the
probable output VAT connected with the damaged stock and, at the same time, the VAT
officer shall forward the application to Division Office for approval with his
recommendation as to how to dispose the damaged stock.
 Division office shall make his decision within 30 days on how to dispose the damaged goods.
He will order for cancelling the input rebate on the purchase of the damaged stock and make
the adjustment of the same in the assessee‘s current account and in the next period monthly
return.
 Wholesaler shall act according to the order of Division Office.
Sunshine Ltd. submitted a price declaration to the VAT authority on 1 July ,2005 PE— Ill
showing the price for levy of VAT at Tk. 50 per unit of VATable goods. On 20 July, May-
2005 the VAT authority approved the price per unit at Tk. 80 rejecting the price June,
declared by the company without giving any opportunity of hearing to the company. 2006
As the Chief Accountant of the company, you are asked by the company management
to take necessary steps to protest the actions of the VAT authority. What are the legal
steps you would take and explain the grounds in support of your action plan?
Necessary legal steps to protest the 'arbitrary" actions of VAT authority:
(i) As the "price declaration" (Mushak #1) was made on 01 July 2005, the approval therefor was
supposed to be issued within 15 (fifteen) days i.e. by 15 July 2005 but as it was done on 20
July 2005; hence, the declared "price" is "deemed to have been approved".
(ii) Also, an application should be preferred before the Commissioner of VAT within 30 (thirty)
working days of receipt of such "arbitrary" &out of time" Price approval.
(iii) The VAT Commissioner will need to dispose of such application, giving an opportunity of being
heard, within 15 (fifteen) days of such application.
Otherwise, it shall be deemed to have been disposed of favouring the Assessee.
You have been appointed as a Finance Manager in a new manufacturing company PE— Ill
which will start commercial production of VATable goods very soon. You are May-
required to submit a report to the Managing Director mentioning the formalities to June,
be followed, documents and records to be maintained and submitted to VAT 2006
authorities for due compliance with the VAT Law.
Formalities to be followed, documents and records to be maintained and submitted to VAT
authorities for due compliance with the VAT Law.
a. Formalities to be followed- to begin with: As a Manufacturer. the company needs to apply &
obtain VAT registration [u/s 15-Rule 9- Form: Mushak # 6, 7 & 8), if annualturnover is
expected to be at least Tk20 lacs, before the start of business.
Will require to be registered under Turnover Tax (ToT)[u/s 8-Rule-Mushak # 2kha,4, 6, 7,
8, ] if the annual turnover is less than Tk.20 lacs and/orcompulsory VATregistration (u/s 15/4)
is not required u/s 8(4): SRO # 138-L/2006/466 - Mushak of 08 June 2006.
If such Manufacturer is to be involved in Imports and/or Exports, itwill need to apply &obtain
"Import Registration Certificate (IRC) and/or Export Registration Certificate" (ERC) respectively
forthwith before applying for VAT or ToT registration.
Separate VAT registration may be necessary for each separate place(s) [like factory] of business
(location) but one VAT registration should be adequate in one place for different types of
activities.
b. Procedures to be followed: for:
(i) VAT Registration:
 Application to divisional office in prescribed form in Mushak-6
 Following documents to be enclosed:
a ) Tra de License
b) TIN Certificate
c) IRC/ERC Certificate
d) Land documents/Tenancy agreement
e ) A declaration in form Mushak-7 containing map of place, description of machinery, plant,
catalogue of plant, fittings, product name, unit, raw materials name and quantity required for
production of one unit of finished goods
f) Photo of proprietor/chairman/MD or authorized signatory
g) Ban k st at em en t
h) Details of subsidiary (if any)
 If individual in charge were satisfied with the application, then he would issue a Registration
Certificate within 2 days from the date of receipt in prescribed form Mushak-8.
(ii) TOT Registration:
 If annual turnover is below 20 lacs

 Application for registration in Mushak-6 to Superintendent
 If satisfied, Superintendent will enlist the applicant within 7 days and issue a Certificate
 A declaration of estimated annual turnover and payment system in prescribed form
"Mushak-2KHA" to be submitted within 30 days from the date of enlistment and every
succeeding year
 The superintendent, if satisfied with the declaration relating to turnover, shall approve and
send a copy to registered person within next 30 working days
 Applicable rate of turnover tax is 4%
 Payment can be made annually, quarterly or monthly
 Return to be filled in Mushak-4 within 15 of the following month and for one time in case of
th
annual TOT payment, 4 times and 12 times in case of quarterly and monthly respectively
 Failure to pay TOT attract penalty @ 2% per month on arrear but not exceeding Tk 5,000
 Accounts of transactions (Purchases & Sales) to be maintained in Mushak-17KA: Rule 4 (16)
 TOT registered person is not allowed to take credit of input VAT
 Consumer or service receiver (VAT registered) are also not allowed to take rebate from
the TOT challan
 Refund of excess tax paid registered person is allowed u/s 67
 Cash memo mentioning the TOT registration number will be treated as lawful challan
(iii) If Central Registration: Other than Manufacturing location:
A provision for the registration of Head/Corporate Office centrally for supplying of goods (except
manufacturing stage), rendering of services or import or export where
 Business is controlled centrally from Head/Corporate Office
 Maintenance of the books of Accounts and records at Head/Corporate Office
For Central Registration, application to be made before the Member of VAT, NBR and if satisfied.then
NBR may award the Central Registration facility to the applicant by special or general order: Proviso under
sub-section (2) of section 15.
c Documents & records to be maintained Documents & records to be submitted to the VAT
. authority
(i) Price
) declaration for product: (i) Mushak, # 1 or 1ka-tariff value, to the
Connected documents & records-including Divisional in-charge of VAT before supply
generally required books of account- u/s of any vatable manufactured goods
5/7 (3rd Schedule) -Rule 3
(ii) VAT/SD Payments: records — u/s 6/7- (ii) Mushak # 19 (Dakhilpatra) within 10 (ten)
Rule 23/24 - Mushak # 11 or 11ka & 18 working days
— Dakilpatra (Return): u/s 35/36: Rule
24/25.
(iii) Books of account & records: u/s (iii) Submission of documents or records to
31/32 — rules 16, 17, 17ka, 18, 22 VAT authority on demand-u/s 34
Books of Accounts u/s 31 & rule 22 Records

 Purchase Register: Mushak-16: Rule  VAT Challan (invoice) for local
22(1) input purchases
 Sales Register: Mushak-17: Rule 22(1)  Bill of entry & Invoice for imported
 Current Account: Mushak-18: Rule input
22(1)  Treasury challan copy
 Challan (Invoice): Mushak-11: Rule  Copy of Dakhil-patra (Return):
16(1) Mushak19: Rule-24(1)
 Challan (Cash Memo): Mushak-11kha: Rule  Credit Note, MuShak-12 (if any)
16(1)  Debit Note, Mushak-12 kha (if any)
 Statement of input & FG stock,
production statement
 The accounts of production or
manufacture of goods or raw materials,
services, etc

Excellent Shoe Co. Ltd. incurred the following transactions in September 2005: PE— III
 Raw materials aggregating to Tk. 500,000 were purchased on 5 Nov-
September,2005,VAT on the same paid and the VAT challan along with Dec
the goods were received on10 September,2005. 2005
Shoes delivered to customers in the month at approved price as follows:
8 September 2005 Tk.
9 September 2005 300,000
Tk.
10 September 2005 200,000
Tk.
15 September 2005 500,000
Tk.
600,000
The following deposits were made to the Govt. Exchequer through treasury challan:
7 September 2005 Tk.20,0
12 September 2005 00
Tk.
15 September 2005 30,000
Tk.
Balance of deposit at 1 September 2005 in VAT-18
70,000 was Tk. 50,000.
-Enter the above transactions in VAT-18 of the company;
- Write a letter to the management on the irregularities noted by you in completing
the VAT current register (VAT-18) and implications of the same on the company.
Current Account
(As per Rule 22(1)
Taxpayers' Identification
Number: Name: Excellent Shoe
Co. Ltd Address:
Telephone:
SI.No Date Details of Purchase or Treasury Rebate Dues -
Closing Remarks
Transaction Sales deposit Balance
Register
SI.No Date
1 2 3 4 5 6 7 8 9 10
1 01.09.2005 Opening Bl. 50,000 50,000
2 07.09.2005 Treasury 20,000 70,000
3 08.09.2005 Delivery , 45,000 25,000
4 09.09.2005 Delivery 30,000 -5,000
5 10.09.2005 Purchase 75,000 70,000
6 10.09.2005 Delivery 75,000 -5,000
7 12.09.2005 Treasury 30,000 25,000
8 15.09.2005 Treasury 70,000 95,000
9 15.09.2005 Delivery 90,000 5,000
Managing Director,
Excellent Shoe Co. Ltd.
Dear Sir,
Sub: Review of VAT Current Account
We have gone through the VAT transactions of the period from 1st September to 15th September 2005,
recorded in Current Account and observed negative balance at two occasions which is a clear violation of
Rule 22(1) Gha, mandated maintenance of sufficient balance required in the Current Account, by which
adjustment or payment of payable output tax can be made by accumulating the balance with the
deposited money and the rebate (credit) of input tax. This is an offence U/S 37 (2) (NioNioNio) which
attracts a monetary penalty of an amount not less than 1 /2 and more than 2 times of , the amount of
VAT or, where applicable, VAT and Supplementary duty, payable upon the goods and services and
if convicted in a court of Magistrate, liability to imprisonment for not less 3 months and not more than 2
years, or to a fine not less than 1/2 and more than 2 times of , the amount of VAT or, where applicable, VAT
and Supplementary duty or both. However, for irregularities other than evasion of revenue, the amount
of fine is limited to not Iessthan Tk 5,000 and not more than Tk. 300,000.
We recommend strict compliance with the provision of VAT laws to avoid punitive actions.
Pl. don't hesitate to enquire any question on any matter on VAT with particular attention to the issue
concerned herein.
Thanking you,
Yours sincerely,
Mr. K.T. Hossain has recently started a Plastic Chair Manufacturing Company in PE III
—
Dhaka under Super Quality Plastic Product.While marketing his products his goods Nov-
are seized by VAT Inspector for non-maintaining of books records and payments of Dec,
VAT. He does not know the system of recording under existing law of VAT and 2004
request you to give him an advice on the following:-
What books and records are required by him as per existing system and what are
provision with regard to offences and prosecution under VAT Act 1991?
Mr.K.T.Hossain
Proprietor
Dear Sir,
This has reference to your letter No ………..of ………………………We are pleased
to furnish the Followings suggestions for your consideration.
In pursuance with sec. 31 read with rule 22 your firm require the followings Books of Accounts:
 Purchase Register: Mushak-16: Rule 22(1)
 Sales Register: Mushak-17: Rule 22(1)
 Current Account: Mushak-18: Rule 22(1)
 Challan (Invoice): Mushak-11: Rule 16(1)
 Challan (Cash Memo): Mushak-11 kha: Rule
16(1)
 Statement of input & FG stock, production
statement
 The accounts of production or manufacture of goods or raw materials, services, etc
Followings are the Records that are to be maintained:
 VAT Challan (invoice) for local input purchases
 Bill of entry & Invoice for imported input
 Treasury challan copy
 Copy of Dakhil-patra (Return): Mushak -19: Rule-24(1)
 Credit Note, Mushak-12 (if any)
 Debit Note, Mushak-12 kha (if any)
According to Section 37 of Value Added Tax Act 1991: The followings are the offences:
application; and
registration; or
 violates any other provision of this Act. -
Prosecutions:
Shall be liable to pay a fine of taka not less than ten thousand and not more than fifty thousand.
Offences:
goods or service supplied by him though directed twice by the concerned officer, or fails to
submit the return for a tax period even after lapse of the time specified for such
submission; or
 attempts to evade payable value added tax by supplying goods without recording
information regarding sales in the sales accounts register (Mushak-17) and payable value added
tax in the account current register, (Mushak-18); or
officer; or
 Does not preserve any document which is required to be preserved under this Act or the rules;
or destroys or alters such document or mutilates any part of such document; or demonstrates it
to be false: or does not preserve the document as per requirement of this Act: or
 makes consciously a false statement or declaration; or
 obstructs or prevents from entering his business place any value added tax officer
authorized under this Act to inspect or seize any record, register or any other document relating
to value added tax; or
 engages himself in receiving, acquiring possession of or
 transacting in good though he knows or he has reason to believe that value added tax or, where
applicable, supplementary duty payable on such goods has been evaded; or
 takes a credit of input-tax through forged or fake invoice: or
 evades or attempts to evade value added tax or supplementary duty by any other means; or
 gives an invoice in which an amount of value added tax is specified, though he is not a registered
person:
Prosecutions:
amount of value added tax or, where applicable, value added tax and supplementary duty,
payable upon the goods or service; and, if convicted for the said activity in a court of Magistrate, he
shall be liable to imprisonment for not less than three months and not more than two years, or to
a fine not less than equal to, and not more than two and half times of, the amount of value
added tax or, where applicable, value added tax and supplementary duty, or to both. For
irregularities other than evasion of revenue, he shall be liable to a fine of not less than twenty
five thousand taka and not more than three lac taka.
 If any registered service renderer fails or has failed to submit return or to pay value added tax
or, where applicable, value added tax and supplementary duty within the specified date, then he
shall be required to pay that unpaid value added tax or, where applicable, value added tax and
supplementary duty along with an additional tax at the rate of two per cent per month on the
unpaid amount of the tax and duty.
Offences:
 fails to become registered within one month of the receipt of an order for compulsory
registration
Prosecutions:
 if he is a registered person, his business premises may be put under lock and key and registration
may also be cancelled; and
 if he is a registerable person, his business premises may be but under lock and key.
According to Rule 35 of Value Added Rule 1991:
Offences and prosecutions:
A registered person who contravenes any provision of the rules shall be liable to a penalty of an
amount, being not less then half, and not more then two times, the amount of value added tax or,
where applicable, the value added tax and supplementary duty, and the goods or service (where
applicable) related to such contravention shall be forfeited to the Government.
We are ready to furnish any clarification as and when required by you.
Thanking you
----------
Rahman Industries Ltd. a vehicle assembly plant has imported CKD parts and PE— Ill
companies for trucks amounting to Taka 2,500,000 in the month of July 2003. Nov-
RahmanIndustries Ltd. has assembled and manufactured 4 trucks from the above Dec,
imported parts and components and then sold those 4 trucks to their dealer M/s 2003
Karim and Co. @ Tk. 1,000,000 each. M/s Karim and Co. then sold 3 (three) trucks to
M/s Chowdhury Transport and Co. @ Tk. 1,100,000 each.
Calculate VAT @ 15% payable at import stage and each stage of sale.
A/C: Rahman Industries Limited:

ValueVAT @ 15% thereon
Taka Taka
Import- value of C&D parts & components 25,00,000 Paid: 3,75,000
Sale to Karim& Co: 4 Trucks: each Tk 10,00,00040,00,000 Realised 6,00,000
Net VAT payable balance: / depositable balance: Tk 2,25,000
A/C: Karim& Co:

Value VAT @ 15%thereon
Taka Taka
Purchase from Rahman Ind. Ltd- as above 40,00,000 Paid:6,00,000
Sale to Chowdhury transport: 3 Trucks at Tk11lacs each 33,00,000 Realised 4 ,95,000
Net VAT balance: adjustable against future sale Tk1,05,000
A/C: Chowdhury Transport- as above: Value 33,00,000

: VAT 4,95,000
For 3 Trucks Tk37,95,000

5c-1 Other Taxes (Gift Tax)
S.L Question Year
1 Describe gifts which are not chargeable to gift tax under section 4 of the Gift Tax PE-III May —
Act, 1990 or June,
What gifts are not chargeable to Gift Tax under Gift Act, 1990? 2002,2003,2005
Or ,2006
State the gifts that are exempted from gift tax under the Gift Tax Act, 1990.
& Nov— Dec,
Or Give some examples of gifts exempt from gift tax. 2002, 2003
Or Mention the gift, which are exempted. Or
Mention the gifts which are exempted from Gift Tax.
According to Section 4 of Gift tax Act, 1990

The followings are the gifts that are exempt from gift tax:
 Gift of a property situated outside Bangladesh;
 Gift made to the Government or any local authority;
 To the following funds or institutions for charitable purposes:
i) any university established under the law in force in Bangladesh or any educational institutions including
polytechnic institute, recognized by the education board or recognized or run by the Government:
ii) any hospital recognized or run by the Government or any local authority or any hospital aidedby the
Govt. or any local authority;
iii) any flood or disaster management fund established or approved by the Government:
iv) Such institutions or funds for religious or charitable purpose not being a private religious institutions or
funds which does not ensure for the benefit of the public, as are established in Bangladesh and approved
by the Government for such purposes or to any institutions established for religious or charitable
purposes and registered under any law for the time being in force, up to 20% of total income determined
for the concerned year or Tk. 100,000 whichever is less;
 To dependent relative up to Tk. 20,000 on the occasion of his/her marriage;
 By way of payment of policy on insurance or annuity for any person (other than wife) dependent
upon him for support and maintenance up to Tk. 20,000;
 Under a will;
 Under contemplation of death;
 To sons, daughter, father, mother, his/her spouse, own brothers and sisters.
General exemption
Gift tax shall not be charged under this Act in respect of gifts made by any person during any financial
year, subject to a maximum of Tk. 20,000 in the value.
The Government may by notification exempt any class of gift or any class of person from gift tax.
The provisions of this Act shall not apply to gifts made by - Section -20
i. A body corporate established or constituted by or under any law.
ii. Any institution or fund, income whereof is exempt from income tax under Paragraph 1 and 2 of
Part A of the Sixth Schedule of the Income Tax Ordinance, 1984.
2 Who is liable to file return of gift tax and when? Or PE-III May
What are the provisions under the Gift Tax Act regarding submission of return? — June, 2002,
Nov-Dec2005
According to section 7 of Gift Tax Act 1990:
Return of gifts:
a) Every person who has made any taxable gifts during a financial year shall, before the 15th day of
September of the corresponding assessment year, furnish to the Deputy Commissioner of Taxes a return
in the prescribed form and verified in the prescribed manner.
b) If the DCT is of opinion that the gifts made by a person during any financial year is liable to gift tax
then he may serve a notice upon such person requiring him to furnish within such as may be specified in
the notice a return in the prescribed form and verified in prescribed manner.
3 To whom the gift tax return is to be filed? PE-III May

— June, 2002
Return to be furnished to Deputy Commissioner of Taxes. If the DCT is of opinion that the gifts made by a
person during any financial year is liable to gift tax then he may serve a notice upon such person requiring
him to furnish within such time as may be specified in the notice a return in the prescribed form verified

in prescribed manner.
4 How are the value of gift determined under section 5 and rule 6 of the Gift Tax PE-III May
Act /Rules, 1990? Or — June, 2002,
How is the value of gifts to be determined u/s 5 and Rule 6 of Gift Tax Act and 2006 &Nov—
Rule, 1990. Or Dec, 2002
Explain how gifts are valued. Explain how escaped gifts are valued and taxed
The value of any property other than cash transferred by way of gift shall be estimated to be the price, which
in the opinion of the Deputy Commissioner of Tax would fetch if sold in the open market in the date on
which the gift was made.
Where the value of any property cannot be estimated because it is not salable in the open market, the
value shall be determined in the prescribed [Rule #6] manner.
According to Rule 6 of Gift tax Rule, 1990
Insurance policy:
The amount of money that would be received by encashment of gifted insurance policy would be the
price of the said policy.
Shares of Private limited company or firm:
The value share shall have to be determined in the proportion of asset of the concerned company or
firm in the year in which shares were gifted.
5 What are the essential features of a gift? PE — III
Or Nov— Dec, 2002, 2003
What is Gift Tax? Or What do you mean by gift tax? May June 2006
Gift Tax:
According to Section 2(d) of Gift tax Act, 1990
Gift means the transfer, by one person to another, of any existing movable or immovable property
made voluntarily and without any consideration on money or money's worth. So it thus may be noted that
transfer of property can attract gift tax liability, if the following conditions are satisfies
(a) the transfer must be voluntarily;
(b) the transfer must be an existing property and
(c) the transfer must be without or with inadequate consideration in money or money's worth.
6 What are the remedies available to an assessee aggrieved with the order of the PE — III
DCT under the Gift Act, 1990? Or Nov— Dec,
State the time limits under the Gift tax Act, 1990 for:- 2002, 2003
i) Filling of appeals;
ii) Rectification of errors;

Any person aggrieved by the order of the DCT can appeal to the authority as prescribed in the Income Tax
Ordinance and if aggrieved by the decision of that appellate authority then he can appeal for revision and
reference to the authority as prescribed by the Income tax ordinance 1984.
Time limit for filing an appeal:
Particulars Time limits
Any person aggrieved by the order of the DCT or Tax Recovery
officer can appeal to the authority as prescribed in the Income
Tax Ordinance.
First appeal: within 45 days of the receipt of the concerned
order;
Filling of appeals (According to
To whom: Appellate additional/Joint Commissioner of Taxes
Section
12 of Gift tax Act, 1990) Second appeal: Within 45 days of the receipt of the
concerned order of first appeal
, —
To whom: Taxes Appellate Tribunal

Reference: Within 90 days from the date of receipt of the order of
Appellate Tribunal.
To whom: High court division.

In case of any omission or wrong statement that was
furnished with return then at any time before the
assessment is made;
In case of mistakes at any time within 2 years from the

date of any order passed by the Deputy Commissioner of
Rectification of errors Taxes and any Appellate Authority;
( Section 9 and 15)
7 How under the Gift Tax Act, 1990 the following gifts are valued:- PE-III Nov
i) Li fe i n su ran ce pol i cy; — Dec, 2005
ii) Interest in partnership firm
iii) S h ares in privat e compan y.
Particulars Valuation procedure

Life insurance policy The amount of money that would have been recei v ed b y e ncas hm en t
of the g if ted insurance policy
Interest in partnership The value of shares shall have to bedetermined in the proportion of
asset of the concerned firm in the year in which share was gifted.
Shares in a private The value of shares shall have tobedetermined in the proportion of
company. asset of the concerned private limited company in the year in which
.
.
-
share was gifted.
-
-
8 What are the provisions under the Gift Tax Act regarding payment of tax? PE-III Nov
— Dec, 2005
According to section 8 of Gift Tax Act 1990
Payment of tax:
a) Every person who is required to furnish a return shall pay on or before the date on which he
furnished such return, the amount of tax payable on the basis of the return.
b) Failure to pay the tax without reasonable cause then he shall be deemed to be an assessee in
default.
9 Compute taxable gifts and the amount of gift tax payable for the assessme nt year 2002-2003 PE-III May
from the following information. MR. Ali Ahmed has made the following gifts during the year ended on
30-06-2002: — June, 2003
i. Gift made to his son-in-law a house in Dhaka valued at Tk. 15,00,000 with the condition
that he will get return of Tk. 50,000 every year up to five years from his son-in-law.
ii. Mr. Ali Ahmed opened a bank account on 1-7-2001 jointly with his son for Tk. 2,00,000 out
of his own money. An amount of Tk. 1,25,000 was withdrawn on 1-1-2002 from the above
bank account for the marriage ceremony of his son.
iii. Cash gifts to niece on the occasion of her marriage Tk. 60,000.
iv. He transferred an amount of Tk. 50,000 from his bank account in U.K. to his daughter's
account.
v. Gift to widowed daughter in the expectation of death Tk. 1,00,000.
vi. Cash donation to brother-in-law on the occasion of his marriage Tk. 35,000.
vii. Charity to a local mosque Tk. 25,000.
viii. Gift of Tk. 1,00,000 was made for the business of his eldest son.
Mr. Ali Ahmed

A. Computation of Taxable Gift :
(i) Income from Gift made to his Son-in-Law (Note - 01) 50,000
(ii) Opening of Bank Account (Note - 02) ---- -----
(iii) C as h G if t t o n i ec e 60,000
Less : Exemption (Note - 03) 20,000 40,000
(iv) Transfer of Tk. 50,000/- to daughter (Note - 04) ----

(v) Gift t o W id ow ed d au ght er 100,000
Less : Exemption (Note - 05) 100,000 -----

(vi) C ash d on at ion t o Br oth er - in – L aw 35,000
Less : Exemption (Note -06) 20,000 15,000
(vii) Ch ar it y t o a loc al M osq u e (N ot e - 07) 25, 000

(viii)G i f t t o S o n 100,000
Less : Exemption (Note -08) 100,000
130,000
Less : General Exemption (Note - 09) 20,000
110,000
B. Amount of Gift Tax :
Up-to Tk. 500,000/- = NIL
Notes :
1. It is assumed that the gift made to his Son-in-Law is made under a will and hence return as per will is considered
as taxable gift.
2. Opening of Bank Account with son has no relation with gift.
3. It is assumed that his niece is dependent to him and hence Tk. 20,000 is deductable exemption.
4. Transfer of Tk. 50,000 to daughter account has no relation with gift.
5. Gift to widowed daughter is a allowable exemption.
6. It is assumed that his Brother-in Law is his dependent relative and hence Tk. 20,000 is deduction exemption.
7. Local Mosque is a private religious institution and not approved by Government and hence is a taxable gift.
8. Gift to Son irrespective any particular purpose is exempted from gift tax.
9. General exemption is Tk. 20,000.
10 Mr. A made the following gifts during the Income year 2005-2006:- PE-III Nov-
i.Gift to Mrs. A on her birthday Tk. 50,000. Dec 2006
ii.Gift to a relative not dependent on him Tk. 30,000.
iii.Gift to Chittagong Medical College Tk. 20,000.
iv.Gift to his brother made in contemplation of death Tk. 35,000
v.Gift to his son-in-law a house property at Canada valued at Tk. 200,000 including furniture worth
Tk. 40,000.
vi.He transferred an amount of Tk. 60,000 from his Bank Account in U.K to his daughters
account.
vii.Payment to the widow of one of his employee Tk. 35,000 who died in an accident.
Investigation disclosed that he had waived off his claim against his brother for Tk. 20,000 who
took it as loan. He also transferred a piece of land to his brother's wife at Tk. 60,000 market
value of which estimated at Tk. 150,000.
Compute gift tax to be paid by Mr. A.
Items/gifts Ref. of Gift Exempted Subject to

Tax Act .... (Tk.) GT (Tk.)
Gift to Mrs. A on her birthday Tk. 50,000. Sec.4(1)(h) 50,000
Gift to a relative not dependent on him Tk.30,000. Sec. 4(I) (d) 30,000
Gift to Chittagong Medical College Tk. 20,000. Sec.4(1)(c)(ii) 20,000
Gift to his brother made in contemplation of death Tk. 35,000 Sec.4(1)(g)(h) 35,000
Gift to his son-in-law a house property at Canada valued at Sec.4(1)(a) 200,000
Tk.200,000including furniture worth Tk. 40,000.
He transferred an amount of Tk. 60,000 from his Bank Sec.4(1)(a) 60,000
Account in U.K to his daughters account.
Payment to the widow of one of his employee Tk. 35,000 who Sec. 4(I)(g) 35,000
died in an accident.
He also transferred a piece of land to his brother's wife 150,000
at Tk. 60,000 market value of which estimated at Tk. 150,000.
180,000
Less : General Exemption Sec. 4(2) 20,000
Total taxable gift 160,000
Gift tax liability @ 5% on 160,000 8,000
 It is assumed that the fair market value on his / her marriage of the land is Tk. 150,000/-
 General exemption limit of Tk. 20,000

5c-2 Other Taxes (Customs Act)
S.L Question Year
1 As per provision of the Customs Act, 1969, explain the following terms: PE-III May —
(a) Imp or t M an if e s t.
(b ) E x p o r t M a ni f e s t. June, 2003
(c ) B i l l o f E x p o r t .
(d ) B i l l o f E n t r y .
(e ) S p e cial B onde d W are house .
(f ) What is the present maximum and the minimum rate of import duty in Bangladesh?
a) 'Import manifest' means an import manifest delivered under sections 43 and 44, and includes electronically transmitted
import manifest in such cases and in such manner containing such particulars as the Board may specify. Generally it
includes the name of vessels of imported goods, number of sailors, details of the imported goods etc.
b) 'Export manifest' means an export manifest delivered under sections 53, and includes electronically transmitted export
manifest in such cases and in such manner containing such particulars as the Board may specify. Generally it includes
the name of vessels of exported goods, number of sailors, details of the exported goods etc.
c) 'Bill of export' means a bill of export delivered under section 131, and includes an electronically transmitted bill of export in
such cases and in such manner containing such particulars as the Board may specify. Generally it includes the details of
the exported goods.
d) 'Bill of entry' means a bill of entry delivered under section 79, and includes, an electronically transmitted bill of entry in
such cases and in such manner containing such particulars as the Board may specify. Generally it includes the details of
the imported goods.
e) "Special bonded warehouse" means a private warehouse licensed under section 13 and which is a hundred percent export
oriented industry to be determined as such by the Board for the purpose of exemption from the provision of sub-section (2) of
section 91;"
f) The present maximum and minimum rate of import duty in Bangladesh are as follows
i) Maximum : 32.5% ad. Val.
ii) minimum : 7.5% ad. Val.
2 What are the changes and the conditions that have been made and imposed in the Finance Act, 2002 for PE-III May —
the import of reconditioned or old vehicles?
June, 2003
The following are the changes and conditions, which were made and imposed by the Finance Act 2002 for the import of re-conditioned or old
vehicle
a) Import duty has been reduced from 32.5% to 30% ad. Val.
b) Letter of credit (L/C) margin structure has been charged. Previously it was 15% or to be fixed by parties on mutual negotiation. But
the same has increased to 50% for the vehicle upto 1649 cc and 100% for the vehicle above 1649 cc.
c) Previously the goods could be kept in port yard for indefinite period on importation but the same has been restricted to
90 days or otherwise the same will disposed of through auction sale.
3 Briefly describes the preshipment inspection scheme of the imported goods. PE-III Nov —
Dec, 2003
U/s 25: PSI Agencies and assessment on the basis of PSI-A's certificate: CRF.
The Government may, by notification in the official gazette —
 appoint pre-shipment inspection agencies and audit agencies, and
 determine the scope and manner of certification, and also the scope and manner of audit, and any matter
related to such certification and audit.
The Government may declare the quality, quantity, price, description and customs classification of any
goods for verification and certification
U/s 25B: Mandatory PSI
Mandatory PSI u/s 25B of the Customs Act (# 4) 1969: Importers to have their importable goods
inspected by a PSI Agency before or at the time of shipment of those goods on board of a Vessel, Air-
craft, Surface-transport or any other conveyance like Animal: other than those specifically
exempted/dispensed with by SRO # 173-L-2005/2079-CKS
U/s 25C: PSI Charge:
Not exceeding 1% of the value of goods
4 What are the goods that are exempted from compulsory pre-shipment PE-III Nov —
inspection? Dec, 2003
The following goods are exempted from compulsory pre-shipment inspection vide SRO
No.173/Law/2005/2079/Cus date 9 June,2005 in suppression of SRO No. 138-AIN/2002/1957 date 6'
th h
June, 2002
 Goods excepting computer, computer peripherals, computer CD & accessories full exempted
from customs duty in the First Schedule to the Customs Act, 1969(IV of 1969) under the H.S.
Code against which zero customs duty have been shown;
 Goods which are exempted from customs duty by the Government from time to time;
 Goods imported by a Government. semi-government, sector corporation or autonomous
organization:
 Perishable goods enlisted as determined by the Board in the gazette notification;
 Goods imported as relief materials;
 Goods imported by a diplomat or under the coverage of diplomatic facility as per Vienna convention
1961;
 Machinery and equipment imported for the rehabilitation of deaf , dumb, blind and physically
and mentally handicapped persons;
 Defense stores as described in the NBR memo No. 9(41) dated 10th April , 1981;
 Goods imported under Non-trust Baggage rules;
 Goods imported under post parcel and imported as commercial samples;
 Reimported goods exported for repair or warranty or replacement;
 Goods imported for Trade fair approved by the Government.
 Life saving drugs and medical equipment not exceeding (C&F value) US$100.
5 How is the value of imported and exported goods determined u/s 25 of the PE-III Nov —
Customs Act,1969? Dec, 2003
According to section 25 of the Customs Act, 1969, values of imported and exported goods are determined
by the following ways:
a) The value of any imported or exported goods be deemed to be the price at which such or
like goods are ordinarily sold, for delivery at the time and place of importation or exportation,
as the case may be, in the course of international trade, where the seller and the buyer have
no interest in the business of each other and the price is the sole consideration for the sale or
offer for sale.
b) The Government may, by notification in the official Gazette , fix for the purpose of levying
customs duties, tariff values or minimum values for any goods imported or exported as
chargeable with customs duty ad valorem;
c) The rate of exchange for computation of the value of any imported goods shall be the average
rate of exchange prevailing during the month preceding the month during which the bill of entry
is delivered under section 79 or electronically transmitted to the Customs computed system and as
fixed by the Board or such officer as the Board may authorize in this behalf prior to the
beginning of the month.
6 Write notes on: PE — III

Regulatory Duty, Anti-dumping Duty, Duty Drawback. May — June,
2004
Regulatory Duty: “Regulatory Duty" means the duty which the Government may, by notification in
the official Gazette levy, subject to such conditions, limitations or restrictions as it may deem fit to
impose, a regulatory duty on all or any of the goods specified in the First Schedule at the rate not
exceeding the highest rate of Custom duty specified in the said schedule.
Anti-dumping Duty: Where any goods are exported from any country or territory (hereinafter in
this Section referred to as the exporting country or territory) to Bangladesh at less than the normal value,
then, upon the importation of such goods into Bangladesh, the Government may, by notification in the
official Gazette impose an anti-dumping duty not exceeding the margin of dumping in relation to such
goods. "Margin of dumping" in relation to any goods means the difference between its export price and its
normal price.
Duty Drawback: When any goods capable of being easily identified, which have been imported into
Bangladesh and upon which customs-duties have been paid on importation are exported to any place
outside Bangladesh or as provisions or stores for use on board a conveyance proceeding to a foreign
territory [such duties. not exceeding seven-eight thereof) shall be repaid as drawback
7 What do you understand by PE-III May

a) IDSC; June 2005,2006
b) PSI fee?
c)HS Code
d) Bonded warehouse
a) IDSC
IDSC means Infrastructure Development Sur-charge (IDSC) was leviable @ 4% mostly on imported
merchandise. IDSC was withdrawn by Finance Ordinance 2007.
b) PSI Fee
PSI means Pre-Shipment Inspection. PSI companies carry out this inspection. In pursuance with Sec.
25 A of Customs Act 1969, the Government may appoint pre-shipment inspection and audit agencies to
verify and certify the quality, quantity, price, description and customs classification of any imported
goods. PSI service charge is currently 1% of the value of imported goods.
c)H S c o d e
Harmonized System Code used in Customs /VAT scenario globally
d)Bonded w arehouse
Under section 13 of Customs Act 1969 the Commissioner of Customs (Bond) or any other
Commissioner of Customs authorised by the Board may, license private warehouses wherein dutiable
goods imported by or on behalf of the licensee, or any other imported goods in respect of which facilities for
deposit in a public warehouse are not available, may be deposited. Bonded warehouse enjoys exemption
u/s 91(2) of Customs Act 1969.
8 State the following relating to Customs regulations: PE-III May

a)Value for imposition of duty June 2005
b)Tiers of duty-which are those
c) HS Code
a) Value for imposition of duty::

According to section 25 of the Customs Act, 1969, values of imported and exported goods are determined
by the following ways:
i. The value of any imported or exported goods be deemed to be the price at which such or like
goods are ordinarily sold, for delivery at the time and place of importation or exportation, as the
case may be, in the course of international trade, where the seller and the buyer have no interest
in the business of each other and the price is the sole consideration for the sale or offer for sale.
ii. The Government may, by notification in the official Gazette , fix for the purpose of levying customs
duties, tariff values or minimum values for any goods imported or exported as chargeable with
customs duty ad valorem;
iii. The rate of exchange for computation of the value of any imported goods shall be the average
rate of exchange prevailing during the month preceding the month during which the bill of entry
is delivered under section 79 or electronically transmitted to the Customs computed system and
as fixed by the Board or such officer as the Board may authorize in this behalf prior to the
beginning of the month.
b) Tiers of duty
Tier Rate
1 0
2 10
3 15
4 25
c) HS code
9 State the provision of the Custom Act,1969 with regard to the following: PE-III Nov-Dec
a) Mandatory Preshipment Inspection; 2005
b) When no drawback allowed;
c) Provisional assessment of duty
d) Register of bonds.
(a) Mandatory Pre-shipment Inspection:
Mandatory PSI was provided u/s 25B of the Customs Act (# 4) 1969: Importers to have their importable
goods inspected by a PSI Agency before or at the time of shipment of those goods on board of a
Vessel, Air-craft, Surface-transport or any other conveyance like Animal; other than those specifically
exempted/dispensed with by SRO # 173-L-2005/2079- CKS

(b) When no drawback allowed:
U/s 39 of the Customs Act (# 4) 1969: No drawback (of duty) is allowed:
i.upon goods which are required to be included in export manifest and are not so included, or
ii.when the claim is for drawback amounting, in respect of any single shipment, to less than hundred
taka, or
iii.unless the claim for drawback has been made and established at the time of export [or within six
months from the date of export].
(c) Provisional assessment of duty:

U/s 81 of the Customs Act (# 4) of 1969: In a case, where technical tests or further enquiry and/or
documents are required, a customs officer, not below the rank of Assistant Commissioner, may order
for such "Provisional" assessment of goods and the Importer/Exporter pays the duty or taxes
accordingly including security money or bank guarantee. The (final) assessment of which to be done,
within 150 (one hundred fifty) working days or within such period as the NBR may allow.
(d)Register of bonds:
U/s 114 of the Customs Act (# 4) of 1969: A register of all bonds of warehoused goods on which
customs duty is leviable and enter removal of goods there from u/s 113 and obtain discharge of such
bond when goods are fully cleared for consumption, export or otherwise and entire duty paid for.
10 State the salient features of changes made by FA 2005: PE-III May

Customs Act; June 2006
Customs Act
i. Amendment of section 7. of the Customs Act 1969 (Act-IV of 1969)
In section 7 (of the Customs Act. 1969) the words "Narcotics and liquor" shall be replaced by
"central intelligence cell of the National Board of Revenue, Civil Aviation Authority of
Bangladesh. Chittagong Port authority.Mongla Port Authority.Registrar of Joint Stock
Companies.Department of Narcotics Control".
ii. Amendment of Section 30
In the clause (b) of Section 30, the words "on which the goods are actually removed from
the ware house shall be replaced by the words-"a bill of entry was presented under section 79
and the bill of entry number was allocated thereto.
iii. Amendment of Section 79(2)
The words "forty-five" days and within "thirty days" occurring in sub-section (2) of Section
79 shall be substituted by It"' words "thirty" and within "twenty-one days".
iv. Amendment of Section 81
In the subsection (2) of section 81 for the words “one hundred and fifty" the words one
hundred twenty shall be inserted.
v. Amendment of Section 82
In the subsection (1) of section 82
 The words thirty and twenty one shall be substituted for the words "forty five and
thirty"
 The words or "customs —inland containers depot" shall take place after the words
"land customs station"
11 Discuss the provision of Custom Act, 1969 with regard to the following:- PE-III Nov Dec
a) Provisional assessment of duty; 2006
b) Failure to submit mandatory PSI certificate to the custom authority:
c) Wrong declaration of imported consignment.
(a)Provisional assessment of duty:

U/s 81 of the Customs Act 1969: In a case, where technical tests or further enquiry and/or documents are required, a
customs officer, not below the rank of Assistant Commissioner, may order for such "Provisional" assessment of goods and
the Importer/Exporter pays the duty or taxes accordingly including security money or bank guarantee. The (final)
assessment of which to be done, within 150 (one hundred fifty) working days or within such period as the NBR may allow.
(b) Failure to submit mandatory PSI certificate to the custom authority
Such person shall be liable to pay Pre-shipment Inspection service charge at the rate as determined by the
government by the notification published in the official Gazette and a penalty not exceeding the value of the goods, but not
less than ten percent of the value of the goods.
(c )Wrong declaration of imported consignment:
Such person shall be liable to a penalty not exceeding fifty thousand Taka or three times the value of the goods in
respect of which such offence is committed, whichever be higher and such goods shall also be liable to confiscation; and
upon conviction by a Magistrate such person shall further be liable to rigorous imprisonment for a term not exceeding five
years or to a fine not exceeding taka fifty thousand or to both.
12 What do you understand by PSI, H.S.Code and Bonded Warehouse? PE-III Nov Dec
Discuss its importance in the context of import and back to back export 2006
business.
PSI
PSI means Pre-Shipment Inspection. PSI companies carry out this inspection. In pursuance with Sec. 25 A of
Customs Act 1969, the government may appoint pre-shipment inspection and audit agencies to verify and certify the
quality, quantity. price, description and customs classification of any imported goods. PSI service charge is currently 1%
of the value of imported goods.
HS code
Bonded warehouse
Under section 13 of Customs Act 1969 the Commissioner of Customs (Bond) or any other Commissioner of Customs
authorised by the Board may, license private warehouses wherein dutiable goods imported by or on behalf of the licensee,
or any other imported goods in respect of which facilities for deposit in a public warehouse are not available, may be
deposited. Bonded warehouse enjoys exemption u/s 91(2) of Customs Act 1969.
Importance in the context of import and back-to-back export business.
The export deal that contains a term to export a product manufactured by the input supplied by the buyer is generally
known as back-to-back export business. Bonded warehouse facilitates the back-to-back export business avoiding
overlapping of formalities and unrealistic stress on working capital.
13 Sun Moon Company has imported one consignment from Korea. Goods are lying Chittagong Port for PE-
clearance. Assessed value of the imported goods isTk. 5 lacs. Under H.S Code of this goods. The duty III
and tax structure is as follows:-
Nov
Dec
Custom duty 5%
2006
Supplementary duty 20%
VAT 0%
ATV 1.5%
Please complete the total custom duty and other taxes of this particular consignment.
Value of Custom Supplementary VAT @ ATV @1.5%

imported duty @ duty@20% 0%(Tk.) (Tk.)
goods (Tk.) 5% (Tk.) (Tk.)
On Tk. On Tk. On On
500,000 525,000 Tk.630,000 Tk.693,000@1.5% = Tk. 10,395
500,000
@5%= @20%= @ 0%= (Including 10% Value addition
Tk.25,000 105,000 Tk.0 i.e Tk.630,000*.10)= Tk.63,000)

5c-1 Other Taxes (Travel Tax)
S.L Question Year
1 What changes have been brought about by the Finance Act, 2002 and thereafter in the imposition PE-III May —
and collection of Foreign Travel Tax?
June, 2003
The following are the changes made by Finance Act 2002 in respect of section 12 of Act. XXIII of 1980 relating to the Foreign Travel Tax :
(ka)Sub — section (1),
“
(a) In clause (a), the words eighteen hundred taka" is replaced by the words "two thousand and five hundred
taka".
(b) In clause (b) the words "six hundred taka" is replaced by the words "eight hundred taka."
(c) In clause ( c) the words "thirteen hundred taka" is replaced by the words "one thousand and eight hundred
taka."
(kha) In sub-section (1A) the words "two hundred and fifty taka" is replaced by the word "five hundred taka"
The following are the procedures to be followed for imposition and collection of Foreign Travel Tax.
(1)Mode of Levy -
(i)Travel by Air-Foreign Travel Tax is payable on all foreign air travel by all Bangladesh nationals holding
Bangladesh Passports at the rate of -
(a) For travel to any country of the continents of North America, South Tk. 2,500
America, Europe, Africa, Australia and New Zealand and any country of the Far East
(b) For SAARC Countries Tk. 800
(c) For any other country Tk. 1,800
(ii)Travel by land and sea — Foreign Travel Tax payable on all foreign travels by land or sea by
Bangladesh nationals holding Bangladesh Passports at the rate of five hundred taka per traveler by
land and six hundred taka per traveler by sea.
All on and off line airlines will collect foreign travel tax through air tickets in respect of foreign travel by air.
The Government may by notification make any exemption or reduction in rate in respect of foreign travel tax in favour of any
class of traveler for such period or periods it may decide.
(2) The Collection Foreign Travel Tax will be made through any of the designated branch of the Sonali Bank or
Janata Bank as the case may be.
2 Mention the amount of travel tax payable on foreign air travels by Bangladeshi PE-III May
nationals holding Bangladeshi passports. June 2005
The amount of travel tax payable on foreign air travels by Bangladeshi nationals holding Bangladeshi
passports.
According to SRO 209/Law/Travel Tax/2005 dated 06 July 2005-
Foreign Travel Tax is payable on all foreign air travel by all Bangladeshi nationals holding Bangladeshi
Passports at the rate of —
SI no. Mode of travel Amount (Tk.)
(a) For travel to any country of the continents of North America, Tk 2,500
South America, Europe, Africa, Australia and New Zealand and
any country of the Far East.
(b) For SAARC countries Tk 800
(c) For any other country Tk 2,000
3 What are the consequences of failure to deposit the collected travel tax to the PE-III May
Government Treasury within the scheduled time? June 2005,2006
Or What are the consequences for failure to deposit travel tax collected under
section 3(5) of the Travel Tax Act, 2003 within the prescribed time?
Consequences of failure to deposit the collected travel tax to the Government Treasury within the
scheduled time
1) Interest @ 2% per month payable for delayed deposits shall be realized from the persons
who have the responsibility of collecting travel tax.
2) May forfeit the bank account of the concerned person or association for the default.
3) May take steps through the Civil Aviation authority prevent the flying of the Aircraft of the
concerned airlines from the soil of Bangladesh.
4) May take steps for prevention of repatriation of any money of the concerned Airlines out of
Bangladesh.
5) May take any necessary measures/modes of recovery similar to the ones available under the
provisions of section 143 of the IT Ordinance 1984
4 State the salient features of changes made by FA 2005: PE-III May

Travel Tax Regulations June 2006
Travel tax regulations:
 The travel tax authority for realization of travel tax shall include the commissioner of Taxes and
Inspecting Joint Commissioner of Taxes appointed under clause (19) & (36) of section 2 of the I.T
Ordinance,1984.
 The word interest shall be replaced by the word "penalty" —Amendment of section 3 of Act 5 of
2003.
 The persons or associations aggrieved by the order subsection (6) may file petition before the
NBR for review or reconsideration within 30 days of the receipt of the order;
 The NBR shall dispose of the petition filed under subsection(7) by the aggrieved persons or
associations within 60 days of the receipt of the petition and on this matter the decision of Board
shall be final.

5c-1 Other Taxes (Stamp Act)
S.L Question Year
1 Mention the applicable amount/rates of stamp duty on the following PE-III May —
instruments with exceptions, if any: June, 2005
a) Articles of Association of a company
b) Memorandum of Association of a company
c) Transfer of shares in a company
Applicable amount/rates of stamp duty:

According to Stamp Act
Particulars Amount (Tk)/

Rates
Articles of Where the nominal share capital does not exceed ten lakh taka 1,500/=
Association
Where the nominal share capital does not exceeds ten lakh 4,000/=
taka but not exceeding three core taka
Where the nominal share capital exceeds three core taka 10,000/=
Notformedforprofitandregisteredu/s 26 of the Companies Act, 1000/=
1994
Memorandum of Accompanied by Articles of association u/s 17 of the Companies 5000/=
Association Act 1994
If not accompanied where the nominal share capital does not 1000/=
exceed one lakh taka
If not accompanied where the nominal share capital exceeds one 1500/=
lakh taka
Memorandum of any association not formed for profit andregistered No fee
under Section 26 of the Companies Act, 1994
Transfer of Shares in a On transfer of non-listed shares 1.5% of

company consideration or
value of the transfer
Transfer through (listed shares) (Form # 117) No fee
2 What do you understand by: PE-III May —
Stamp duty chargeable on transfer of shares June, 2006
a) Stamp duty chargeable on transfer of shares

(i) No fee for transfer (Form # 117) of listed shares
(ii) O n tr a nsf er of n o n- lis t e d s h ar es : @ 1 . 5 % of t h e Va l u e of C o nsi d er a ti o n

5c-5 Other Taxes (Supplementary Duty)
S.L Question Year
1 What do you mean by Supplementary Duty (SD)? How is the value determined for the imposition of SD? PE-III May —
Briefly describe schedule-3 and relevant ruling SROs pertaining to SD.
June, 2003
Supplementary duty (SD) will be imposed under the Value Added Tax Act 1991.
The duty will be imposed at varying rates on luxury goods imported into Bangladesh, non-essential and socially undesirable goods
produced and supplied in Bangladesh and similar services rendered in Bangladesh.
In order to impose supplementary duty the cost of the goods or services will be taken as :
a) That value upon which import duty is imposed under section 25 or 25A of the Customs Act in order to impose import duty on
imported goods.
b) The price charged to the buyer by the producer or manufacturer of goods produced or manufactured in Bangladesh or by the
supplier in the case of goods otherwise supplied in which Value Added Tax or supplementary duty is not included. In the case
of goods on which Value Added Tax is imposed on the basis of retail price, where goods the retail price of which is stated in section
5 (3) of this Act, are subject to supplementary duty, the supplementary duty will be considered as included in the retail price of those
goods.
c) The total amount received for providing services in Bangladesh in which Value Added Tax or supplementary duty will not be
included.
The goods and services liable for supplementary duty and the rates have been mentioned in the Third Sched ule of the value Added
Tax Act 1991 as amended upto30th June 2003.
The relevant SRO in this respect is 167-Ain/2003/375/VAT Dated 16.06.2003.
2 Biki (Bangladesh) Co. Ltd. engaged in trading business of consumable goods. In the PE-III
income year ended 31 December, 2004 the company produced the following goods May
for commercial purpose: June
Date Description Import Purchase from local
,2005
market
July 2004 Goodsimported at C&Fprice USD 500,000
Goods purchased Tk.2000,000
October2004 Goods imported atC&Fprice USD 400,000
Goods purchased Tk. 3000,000
Assuming import duty @20%, supplementary duty @25% was paid at import point
.VAT and advance income tax was also suffered at applicable rates at import stage.
Custom's assessed value for goods imported in July,2004 and October,2004 was
USD 550,000 and USD 440,000 respectively.
All the imported goods were sold to one special customer. The customer did not
deduct any income tax at the time of making payments to Biki (Bangladesh) Co. Ltd.
Goods purchased locally were sold to five customers -A, B, C, D and E as follows:
Date Sales to customer Total (Tk.)

A (Tk.) B(Tk.) _ C(Tk.) D(Tk.) E(Tk.)
10 July 2004 200,000 150,000 300,000 80,000 400,000 1,130,000
24 October 2004 400,000 500,000 300,000 700,000 500,000 2,400,000
28 November 500,000 300,000 400,000 400,000 400,000 2,000,000
2004
(Exchange rate to be used USD 1=TK. 60)
From the above you are required to-
i) Calculate advance income tax, supplementary duty and VAT suffered by
Biki(Bangladesh) Co. Ltd. at import point.
ii) Calculate advance income tax deducted at source by each customer
Compute income and tax liability of Biki (Bangladesh) Co. Ltd. under section 82c of the
Income Tax Ordinance,1984 corporate tax rate may be considered as 37.50%.

(i) Calculation of advance income tax, supplementary duty and VAT suffered by Biki(Bangladesh) Co. Ltd. at
import point.
Date Value Value Custom Custom Import AIT SD VAT
of C&F C&F assessed assesse duty (TK.)'00 (Tk.)'000 (Tk.)'000
Import (USD)' (Tk.)'000 (USD)'000 d @20% 0 @3% 25% @15%
000 (Tk.)'00 (Tk.)'000
July2004 500 30,000 550 0
33,000 6,600 990 9,900 7,425
October 400 24,000 440 26,400 5,280 792 7,920 5,940
2004
Total 900 54,000 990 59,400 11,880 1,782 17,820 13,365
Notes:
1)Import duty calculated on Custom Assessed Value;
2)AIT calculated on Custom Assessed Value;
3)SD calculated on the sum result of Custom Assessed Value and Import duty;
4)VAT calculated on the sum result of Custom Assessed Value and Import duty and Supplementary duty.
Answer 3 (ii) Calculation of advance income taxes deducted at source.
The customers will deduct tax as advance tax (according to section 52 of ITO 1984 and rule 1 6)
by applying following rates:
SL No. Amount of payments (Tk.) Rate of
deduction
1. Where the payment does not exceed taka 100,000 (one la kh) Nil
2. Where the payment exceeds taka 100,000 (one lakh but does 1%
notexceed taka 5,00,000 (five lakh)
3. Where the payment exceeds taka 5,00,000(five lakh) but does 2.5%
notexceed taka 15,00,000 (fifteen lakh)
4. Where the payment exceeds taka 1500,000 (fifteen lakh) but doesnot 3.5%
exceed taka 25,00,000 (twenty five lakh)
5. Where the payment exceeds taka 25,00,000 (twenty five lakh) 4%
Date Sales to customer

A (Tk.) B(Tk.) C(Tk.) D(Tk.) E(Tk.)
_.-
Total>(Tk.)
t'
10 July 2004 200,000 150,000 300,000 80,000 400,000 1,130,000

24 October 2004 400,000 500,000 300,000 700,000 500,000 2,400,000
28November 2004 500,000 300,000 400,000 400,000 400,000 2,900,000
Total 1,100,000 950,000 1,000,000 1,180,000 1,300,000 5,530,000
TDS @ 2.5% 27,500 23,750 25,000 29,500 32,500 138,250
Answer 3 (iii) Calculation of Total income and tax

liability: Total income:
Goods sold to Tax deducted at source Applicable tax Total Income (TK.) u/s 82(c)
customers
Imported goods (Tk.)
1,782,000 rate
37.5% 4,752,000(Note 1)
Local purchased goods 138,250 37.5% 368,760 (Note 2)
Note 1. Calculation: (1,782,000*100)/37.5%

Note 2.Calculation : (138,250*100)/37.5%
Tax Liability
As all the sales (both locally purchased goods and imported goods) are subject to final discharge of
tax liability u/s 82C(2)(a,c) &(4) and advance tax is also deducted by customers u/s 52 &53 and Rule 16 &
17(A) the tax liability is TK. 1,920,250 (1,782,000+138,250).

Tax- Other Maths
S.L Question Year
Mr. Bilgrami is an importer of milk food. An amount of Tk. 75,580 has been PE — Ill
deducted from him at source at import stage as advance income tax in December May — June,
2000. He also has been has got a retail hardware shop from which he earned a net 2002
profit of Tk.275,000 in the financial year ended on 30 June, 2001. You are
required to calculate the following of Mr. Bilgrami for
assessment year 2001, 2002:-
i) Total Income
ii) Taxes payable.
Mr. Bilgrami
Income year ended 30 June 2001
Computation of total income and tax payable Tax payable
Income
For net profit from retail hardware
On first tk.120,000 tax rate is 0% , 120,000 Nil
155,000 15,500
On balance tk.155,000 tax rate is 10%
For import of milk food from which advance tax was

deducted:
On first 95,000 tax rate is 10% 95,000 9,500
On next tk.300,000 tax rate is 15% 300,000 45.000
On next tk.105,400 tax rate is 20% 105,400 21,080
Total income and tax payable ............................. 775,400 91,080
Less: Final discharge as per section 82C 1
75,580
Tax liability ............ 15,500
Note:
1. Income from import of milk food is determined by back calculation. Here the calculation
has been carried out to find out the income that attracted the TDS of Tk.75,580.
2. R at e o f has been consi dered for the assessment year-2006-2007.
A Ltd. bought a machine for Tk.50 lakhs on 10 July, 2000 to be used in its PE-III May
expansion unit in Tongi, Gazipur. The investment qualified for both accelerated June 2005
depreciation under Third Schedule and investment allowance under section
29,ITO 1984. It sold the machine on 15 January 2003 for Tk.20 lakhs. A Ltd's
year ends on 30 June.
Calculate depreciation and other relevant admissible allowance for
the concerned years.
Calculation of depreciation and other relevant admissible allowance:

According to clause 7 of 3rd Schedule of ITO 1984:
Accelerated depreciation allowance is allowed in the case of any machinery or plant (other than office
appliances and road transport vehicles) which, not having been previously used in Bangladesh, has
been or is used in an industrial undertaking includes an expansion unit set up in Bangladesh between
the first day of July, 1977 and the thirtieth day of June, 2008 (both days inclusive)
Here A Ltd. bought machinery on 10 July 2000 at Tk.5,000,000.
a)Calculation of accelerated depreciation allowance:
Assessment Year Amount (Tk.)
2001-2002 100% of 5,000,000=5,000,000
..----
b) Investment allowance under section 29(x)(a)(Omitted by FA 2004)

In the case of any machinery or plant which is entitled to accelerated depreciation under
paragraph 7 of the Third Schedule, an investment allowance, for the year in which the
undertaking starts commercial production, at the rate of 25 percent of the amoun t invested by the
assessee.
So A Ltd is entitled to get investment allowance:
Assessment Year Amount (Tk.)
2001-2002 25% of 5,000,000=1,250,000
c) A Ltd sold the machine for Tk.2000,000 on 15 January 2003
Written Down Value (WDV)= Nil
Sale proceeds =Tk. 2,000,000
So Business income which is taxable u/s 28(1)(e)= Tk 2,000,000
1 State with reasons whether the following expenses are fully or partly admissible as Nov Dec
deduction while computing income from business or profession: 2014
(i) Stock-in trade was lost in fire, amounting to Tk. 12,000 and was debited to P/L
Account.
(ii) Interest paid to bank Tk. 15,000 in connection with overdraft obtained for
paying dividend.
(iii) Overseas travelling expenses Tk. 50,000. The amount of disclosed turnover
and disclosed net profit is Tk. 40,00,000 and Tk. 20,00,000 respectively.
(iv) Royalty paid Tk. 2,00,000. The amount of disclosed turnover and disclosed
net profit is Tk.40,00,000 and Tk. 20,00,000 respectively.
(v) Penalty paid for violating income tax law Tk. 25,000.
(i) Stock in trade lost in fire amounting toTk.12,000 charged in Profit & Loss Account will be an admissible
expense.
(ii) Dividend is paid from post net profit. As such bank interest Tk. 15,000 paid in connection with
overdraft for payment of dividend will not be an admissible business expense.
(iii) Under section 30(k) admissible overseas travelling expense is 1% of turnover. 1% ofTk. 40,00,000
comes to Tk.40,000. As such the claim of Tk. 50,000 is Tk. 10,000(50,000 - 40,000) more than the
admissible limit. The excess claim of Tk. 10,000 will be added to net profit of Tk. 20,00,000.
(iv) Under section 30(h) admissible royalty expense is 10% of net profit. 10% of Tk. 20, 00,000 comes to
Tk.2,00,000. As such the claim of Tk. 2,00,000 is within that limit and such is admissible in full.
(v) Penalty for violating income tax law of Tk. 25,000 will not be an admissible expense because any
infringement of law will not be an admissible expense.
2 Mr. Ahmed, a director of Prime Bank Ltd., transfers by way of gift 1,000 shares of Nov Dec
Tk.100 each to his friend Mr. Karim on 10 November 2017. The SEC accorded its 2010
consent to such transfer on 8 November 2017. The opening and closing prices of the
Prime Bank shares on 7 November, 9 November and 10 November 2017 were Tk.850
and Tk.870, Tk.860 and Tk.840, and Tk.880 and Tk.865 per share respectively in both
CSE and DSE. No Prime Bank shares were traded in DSE on 8 November 2017. The
opening and closing prices of the Prime Bank shares traded in CSE on 8 November
2017 were Tk.862 and Tk.855 respectively.
Required:
Calculate the income tax liability, if any, in the above case. 2
Here Mr. Ahmed is a director of Prime Bank Limited. So the transfers by way of gift 1,000 shares will be subject to tax
deducted at source under section 53 M of the Income Tax Ordinance 1984.
According to section 53 M of 1984, SEC will collect tax at the rate of five percent on the difference between transfer
value and cost of acquisition of the securities. or mutual fund units.
Now the question, how SEC will determine the transfer value.
According to 53 M of ITO 1984, ‘transfer value’ of a security or a mutual fund units shall be deemed to be the closing
price of securities or mutual fund units prevailing on the day consent according by the Securities and Exchange
Commission or the Stock Exchange, as the case may be, or where such securities or mutual fund units were not traded
on the day such consent was accorded, the closing price of the day when such securities or mutual fund units were last
traded.

If we assume that Mr. Rahim open his BO account with the option of trading in the Dhaka Stock Exchange then
closing price would be the closing price of DSE.
No prime bank share was traded on the day of consent accorded by DSE .
So the closing price will be the closing price of 9 November i.e tk. 840
So tax would be (840-100)*5% = 37
If we assume that Mr. Rahim open his BO account with the option of trading in both the Dhaka Stock Exchange
&Chittagong Stock Exchange or only in CSE then closing price would be the closing price of CSE since no prime
bank shares was traded in DSE on the day of consent accorded by SEC.
So the closing price will be the closing price of CSE on 8 November i.e Tk. 855.
So tax would be (855-100)*5%= 37.75

3 B Ltd. computed its advance tax payable for income year 2016-2017 based on latest AL Nov Dec
assessed income of Tk. 500,000 for the income year 2013-2014. Assessment for the 2013;
income year 2014-2015 was completed on 15 April 2017 at a loss of Tk. 600,000. PE— III
Calculate the amount of advance tax to be paid by B Ltd. in each quarter for the Nov- Dec,
assessment year 2017-2018. 2005
Calculation of the amount of advance tax :

Here the latest assessed income is Tk. 500,000 for the income year 2013-2014.
Amount of Tax = Tk. 500,000 X 37.5% = Tk. 187,500.
Payable in 4 Quarterly installments
Date of installments Installment due (Tk.) Paid(Tk.)
15th September 2017 46,875 46,875
th
15 December 2017 46,875 46,875
th
15 March 2018 46,875 46,875
15th June 2018 46,875
According to section 66 of ITO 1984 the last installment is not required to be paid because the assessment
for the income year 2014-2015 was completed on 15 April 2017 at a loss of Tk. 600,000.
If before the fifteenth day of May of the year, an assessment of the assessee is completed in respect of an
income year, later than that on the basis of which the tax was computed the assessee shall pay in one
installment on the specified date or in equal installments on the specified dates, if more than one falling
after the date of the said assessment, the tax computed on the revised basis as reduced by the amount, if
any, paid in accordance with the original computation.
4 The books of ABC Ltd. revealed the following information: May June
Assessment year Income / (Loss) from Income / (Loss) from Income / (Loss) from 2011
Garment Business Textile Business Jute Business
2014 – 2015 500,000 200,000 (1,000,000)
2015 – 2016 800,000 600,000 200,000
2016 – 2017 900,000 (1,200,000) 50,000
2017 – 2018 700,000 200,000 100,000
Find out the year wise Business (Loss) /income/ total income and discuss how those would
be carried forward and set off.

Answer:
ABC Ltd
Assessment Particulars Tk.
Year
2014-2015 Income from Garments Business 500,000
Income from Textile Business 200,000
Loss from Jute Business
(1,000,000)
Net Income/(Loss) from Jute business (300,000)
Loss from Jute business shall be carried forward to set off against the income
from Jute Business

Income other than Jute business 1,400,000
Income from Jute Business 200,000
Loss from Jute Business brought forwardedfrom 2014-15 to set off
(300,000)
Loss from Jute business shall be carried forward (100,000)
2016-2017 Incomefrom Garments Business 900,000

Income from Textile Business (1,200,000)
Income from Jute Business 50,000
Loss from Textile business shall be Carried forwarded and set off against 2,50,000
the income from Textile Business

Income from Jute business 100,000
Loss brought forward from 2015-16 (100,000)
Income/(Loss) from business other than Textile business 700,000
Loss brought forward from 2016-17 (250,000)
Loss from textile business shall becarried forward and set off against theIncome (50,000)
from Textile Business
5 Calculate the total income of Mr. Azad from the following if he is i) a Resident and May June
ii) a non‐ Resident for income year 2016‐2017. 2011
Bangladeshi Income:
Salary income Tk. 89,000
Interest on 10% less tax commercial securities Tk. 1,20,000
Income from partnership Firm Tk. 20,000
Agricultural income Tk. 50,000
Foreign Income:
Income from business in Singapore Tk. 50,000
Income from Partnership Firm in Pakistan Tk. 60,000
Answer:
Mr. Azad
I) When he is a Resident
Head of Income TK TK
Bangladeshi Income:
Salary Income 89,000
Interest on 10% Less tax commercial Securities 120,000
Income from Partnership firm 20,000
Agricultural Income 50,000 279,000
Foreign Income:
Income from Business in Singapore 50,000
Income from Partnership firm in Pakistan 60,000 110,000
Total Income as a resident 389,000
ii) When he is a non Resident:

Bangladeshi Income
Salary Income 89,000
Interest on 10% Less tax commercial Securities 120,000
Income from Partnership firm 20,000
Agricultural Income 50,000 279,000
Total Income as a non-resident 279,000

6 On 30th June 2017 Mr. Alam has the following investments: May June
i) Tk.80,000, 10% Company Debenture 2011
ii) Tk.50,000, 8% Treasury Bond, tax free
iii) Tk.25,000, 12% Port Trust Debenture
iv) Tk.40,000 12% Commercial Securities
v) Income from Government Securities Tk.30,000 @8% interest.
On 1st January 2017 Mr. Alam sold Tk.40,000, 10% Company Debenture with which he
purchased 12% Commercial Securities. He also took a loan of Tk.20,000 from a Bank to
purchase commercial securities at the rate of 10% interest. The bank commission for the
purchase and sale of securities amounted to Tk.100. He also paid Tk.200 as bank charge for
collecting interest.
Calculate income from securities of Mr. Alam.

Answer:
Mr. Alam
Computation of Income from Interest on Securities
Head of Income TK. TK.
ii) Interest on treasury bond, tax free 4,000
Less: Exemption Full 4,000 -
iii) Interest of Port trust debenture 3,000
Less: Admissible expenses: Bank Commission & Charges: 41 2959
300/22,200*3000
iv) Interest from Commercial Securities 4,800
Less: Admissible expenses: Bank Commission &Charges 65
300/22,200*4800
Less: Interest on loan ( 20,000 * 10%) 2,000 2735
v) Income from Govt Securities 2,400
Less: Admissible expenses: Bank. Commission & Charges 32 2368
300/22,200*2400
Income from interest on Securities 8,062
Notes: 1
Total interest of Investment collected by Bank

Company debenture 8,000
Int. on tax free treasury bond 4,000
int. on port trust debenture 3,000

Int. from approved commercial securities 4,800
Income from Govt. Securities 2,400
22,200
Notes: 2
1. Commission and Bank Charges are distributed on only to the taxable Debenture and Securities in
proportion of the income. However, bank charges and commission on the interest of treasury bond which
is tax free not charged in above calculation.
2. Since 10% Company Debenture sold on January 2017, no interest there on is considered as income.
7 A factory building was constructed in the year 2014 having a total cost of Tk.2,00,000. It was May June
insured for Tk.2,10,000. In the month of January 2015 it was destroyed by fire. The scrap was 2011
sold at Tk.10,000. Till the year 2017‐2018 assessment year, depreciation of the building was
charged at Tk.60,000. Under the following conditions find out balancing depreciation:
i) if 100% insured amount could be recovered from insurance company.

ii) if 75% of insured amount could be recovered from insurance company.
iii) if 50% of insured amount could be recovered from insurance company.
Cost value of the factory building - 200,000
Depreciation 60,000
Written down value (WDV) 140,000
Scrap was sold 10,000
Insured amount210,000
i) If 100% insured amount could be recovered from insurance company i.e 210,000
Less: WDV 140,000
Total Gain 70,000
Capital Gain (210,000 - 200,000) 10,000
Business Gain 60,000
ii) If 75% insured amount could be recovered from insurance company i.e 157,500
Less: WDV 140,000
Total Gain 17,500
Capital Gain (157,500-200,000) nil
Business Gain 17,500
iii) If 50% insured amount could be recovered from insurance company i.e 105,000
Less: WDV 140,000
Total Gain / (Loss) (35,000)
Capital Gain (105,000 -200,000) nil
Business Gain / (Loss) (35,000)
8 Nov Dec
Mr. X an employee of a limited company, received the following salaries and allowances 2011
during the income year ended 30 June, 2017.
Taka
1. Basic Salary 4,20,000
2. House Rent allowances 2,00,000
3. Festival Bonus equal to two months basic salary 70,000
4. Leave encashment Salary 35,000
5. Conveyance allowance 24,000
6. Contribution to Recognized Provident fund @ 8% 33,600
7. Servant Wages 24,000
8. Children education allowance 60,000
9. Leave fare assistance 50,000
10. Banglow utilities 25,000
Compute excess perquisite u/s 30 (e) for the assessment year 2017-2018.
Mr.X
Employee of a Limited Co.
Calculation of perquisites u/s. 30(e)
Perquisites Taka
1. House Rent allowances 2,00,000
2. Conveyance allowance 24,000
3. Servant Wages 24,000
4. Children education allowance 60,000
5. Banglow utilities 25,000
3,33,000
Allowable perquisites 2,50,000
Excess perquisites 0
9 The following particulars of income of Mr. Ali Ahmed are available for the assessment year AL May
2011-2012. June
2012 /
Income from House Property 100,000 Nov
Business Income (after allowing for current Year’s depreciation of the Tk.20,000) Dec
2013;
70,000 PE-III
The following sums have been brought forward from the preceding year Nov
Unabsorbed Depreciation 80,000
Dec
Business loss 50,000
2004
Deputy Commissioner of Taxes is proposing to assess him on a total income of Tk.100,000 by
setting off only of the business loss of Tk.50,000 and part of the unabsorbed depreciation of
Tk.20,000 against the business income of Tk.70,000. Is he right in his action? Explain?
Yes the DCT is right in his action.
Because business loss cannot be set off against House Property income as per provision of section 37 of I.T.O.
1984
Alternative Answer:
The DCT is not right in his action.
The assessment should be done in the following manner
Particulars Taka
Business Profit/(loss): profit for the year 70,000
Previous business "loss" - b/f (50,000)
20,000
Less: Unabsorbed depreciation (20,000)
Business profit Nil
Property income 100,000
Unabsorbed depreciation c/f: (60,000)
Taxable income 40,000
Mr. Ali Ahmed should not accept the DCT's proposal. He should submit the proposal which is in line with
law. Moreover if the DCT still remain in his decision and assessed in his (DCT's) own view then he
(Ali Ahmed) may prefer an appeal to the appellate authority.
9 The incomes of Mr. Suruj Miah for the income year 2001-2002 were as follows: PE — III
(i) Salary income Tk.1,24,000. May-
(ii) Agricultural income in Bangladesh Tk.40,000.
June —
(iii) Debenture interest from a company in Nepal Tk.30,000 received in Bangladesh
(iv) Share of profit from a partnership business in Pakistan Tk.70,000 which has 2003
not been brought in Bangladesh.

(v) Income from property Tk.60,000.
(vi) Loss of a business in Bangladesh Tk.25,000.
Find out total income of Mr. Suruj Miah if he is a : (i) Resident; (ii) Non-Resident.
Mr. SurujMiah
(i) Resident :
(i) Salary Income - 124,000

Agricultural income 40,000
Less : Cost of production 60% 24,000 16,000
Debenture Interest (Nepal) 30,000

Profit on partnership firm (Pak) 70,000
Income from property 60,000
Less : A Repair 15,000 45,000
285,000
Less : Loss of Business 25,000
260,000
(ii) Non-Resident :
Salary Income - 124,000
Agricultural income 40,000
Debenture Interest (Nepal)
Share of Profit on partnership (Pak) 70,000
30,000
Income from property 60,000 60,000
3,24,000
Less : Loss of Business 25,000
299,000

Draft Exam Practice Kit For CA Professional Level Tax Planning & Compliance Covering Finance Act 2018

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Draft Exam Practice Kit For CA Professional Level Tax Planning & Compliance Covering Finance Act 2018

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CA Professional Level

Tax Planning & Compliance

Syllabus area Weighting

Critical aspects of income tax and its administrative functioning: L01

In the examination, candidates may be required to:

Basic concepts of taxation

Country Fiscal Management & Taxation

Introduction to Bangladesh income tax

Basics of income tax

o) meaning and formation of Taxes Appellate Tribunal

Tax computation of business entities and individuals: L02

2 Tax calculation, tax rates, incomes, allowances, exemptions, credits, accounting of

In the examination, candidates may be required to:

b) explain the income deemed to accrue or arise in Bangladesh

c) describe the provision regarding un-explained investments, income or expenditures and

Computation and adjustments of income tax

Tax incentives and exemptions

tax holiday, withdrawal and cancellation of tax holiday, maintenance/compliance

Tax collection (Withholding/TDS, Advance Taxation, Tax Payments)

l) brief procedure of deduction or collection of tax at source

Tax reporting (Various Returns)

Tax assessment of individual (complex) and business entities

Introduction to accounting of income tax

In the examination, candidates may be required to:

Liabilities in special cases

with prejudice to other liability

f) describe the Orders of Appellate Joint Commissioner, Commissioner or Appellate

Offences and prosecutions

Appeal and reference

Power of Income Tax Authorities including search & seizure

Alternative dispute resolution

In the examination, candidates may be required to:

Double taxation relief

e) explain the issuance of temporary registration number, displaying of TIN certificate,

k) describe the factors to be considered in judging uncontrolled international transaction,

m) explain the conflicts of interest, disclosure of information for taxation, confidentiality

Tax Research, planning, compliances, VAT and other taxes LO5

In the examination, candidates may be required to:

f) explain alternative tax strategies relating to corporate transformation, alternative tax

Value Added Tax and other taxes:

j) computation and adjustments of VAT collection (Withholding, Advance VAT, VAT

l) describe VAT reporting, liabilities in special cases, special provisions relating to

Tax holiday for tourist Industry u/s 46 2A,2B &2C

standards to be maintained by a tourist industry for the purpose of tax holiday

Courtesy: Saiful Islam Mozumder, ShirazkhanBasak& Co. smozumder@outlook.com cell-01711-981920

Define the following in relation to Income Tax Ordinance. 1984:- PE — Ill

(ii)According to Section 2(45) of ITO 1984:

Loss from Agriculture:

Loss upto Tk. 5,000/- cannot be carried forward .

State the provision of law in the following cases: PE — III

Courtesy: Saiful Islam Mozumder, ShirazkhanBasak& Co. smozumder@outlook.com cell-01711-981920

Courtesy: Saiful Islam Mozumder, ShirazkhanBasak& Co. smozumder@outlook.com cell-01711-981920

Define the following in relation to income Tax Ordinance, 1984:- PE — III

Courtesy: Saiful Islam Mozumder, ShirazkhanBasak& Co. smozumder@outlook.com cell-01711-981920

wholly in Bangladesh in that year;

Courtesy: Saiful Islam Mozumder, ShirazkhanBasak& Co. smozumder@outlook.com cell-01711-981920

Courtesy: Saiful Islam Mozumder, ShirazkhanBasak& Co. smozumder@outlook.com cell-01711-981920

Courtesy: Saiful Islam Mozumder, ShirazkhanBasak& Co. smozumder@outlook.com cell-01711-981920

Speculation loss Setoffagainst speculationloss Limit six years:onlyagainst

(a): When Straight line method of depreciation is allowable

Normal depreciation rate:

Courtesy: Saiful Islam Mozumder, ShirazkhanBasak& Co. smozumder@outlook.com cell-01711-981920

(b) Excess perquisites on employer's assessment