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INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN

Fall (Winter) 2010 Examinations

Saturday, the 27th November 2010

BUSINESS TAXATION - (S-302)

STAGE 3

Time Allowed

2 Hours 45 Minutes Maximum Marks

80(i) Attempt ALL questions.

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

(iii) In marking the question paper, the examiners take into account clarity of exposition, logic of arguments,effective presentation, language and use of clear diagram / chart, where appropriate.

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

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

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

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

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

(i) Association of Persons

(ii) Resident Company

(iii) Profit on Debt

05

05

05

(b) What are the various amounts received by an employee as profit in lieu of or in additionto salary and wages, which would be considered as part of salary? 05

Q. 3 (a) Describe the various provisions of the Income Tax Ordinance, 2001 regarding bad debtsallow ability. 08

(b) Define the term tax avoidance scheme. 02

(c) (i) State the Rule 4 of the Income Tax Rules, 2002 for valuation of accommodationprovided by an employer to the employee for the purpose of computing the incomechargeable to tax under the head salary.

05

(ii) Which books of account, documents and records, a taxpayer deriving incomechargeable under the head income from business is required to maintain as perthe Rule 29 (1) of the Income Tax Rules, 2002?

05

Q. 4 (a) Define the following terms under the Sales Tax Act, 1990:

(i) Person

(ii) Cottage Industry

03

02

(b) (i) What are the goods that shall be charged to tax at zero percent under the SalesTax Act, 1990? 03

(ii) What are the exceptions to the above Rule?02

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MarksQ. 5 Mr. Ahmad is a resident individual and employed in a company. During the year ending on

June 30, 2010, following amounts have been paid to him:Rs.

Basic pay 27,470 P.M.House rent 12,362 P.M.Bonus 54,940Utilities 2,747 P.M.Medical allowance 4,247 P.M.Cost of living allowance 4,121 P.M.

Leave encashment 29,668(i) He has been provided a company maintained car, which was used partly for official and

partly for personal purposes. The employer leased the car from a bank. Fair value of theleased car was Rs.1,200,000 at the inception of the lease.

(ii) He has paid Zakat amounting to Rs.100,000/- to an approved institution.

(iii) He has purchased newly issued shares of listed companies amounting to Rs.250,000/-through initial public offering (IPO).

(iv) He has paid donations to an un-approved institution amounting to Rs.50,000/- and to anapproved institution, specified in Clause (61) of Part I of Second Schedule, amounting toRs.50,000/-.

(v) Capital gain on sale of shares of a private limited company amounted to Rs.25,000. Shareswere retained by Mr. Ahmad for more than one year.

(vi) Company provided a driver to Mr. Ahmad and he was paid Rs.6,000 per month.

(vii) Company also provided an interest-free loan to Mr. Ahmad amounting to Rs.500,000 at thebeginning of the year. Benchmark rate is 12% for tax year 2010.

Required:

Compute the taxable income and tax liability of Mr. Ahmad for the tax year 2010. 20

Q. 6 (a) As per the Customs Act, 1969:

(i) Under what conditions the drawbacks are not allowable? 03

(ii) What is the time limit for claiming the refund of overpaid custom duties? 02

(b) Under the Federal Excise Act, 2005, on which excisable goods and services, federal

excise duty is levied? 03

(c) Define the following terms under the Federal Excise Act, 2005:

(i) Non-tariff area 01

(ii) Establishment 01THE END

TAXRATESFORSALARIEDTAXPAYERSFORTAXYEAR2010(EXTRACT)

Sr.# Taxable Income Tax Rate

1 Where the taxable income does not exceed Rs.200,000 0%2 Where the taxable income exceeds Rs.200,000 but does not exceed Rs.250,000 0.50%

3 Where the taxable income exceeds Rs.250,000 but does not exceed Rs.350,000 0.75%4 Where the taxable income exceeds Rs.350,000 but does not exceed Rs.400,000 1.50%5

Where the taxable income exceeds Rs.400,000 but does not exceed

Rs.450,000 2.50%6 Where the taxable income exceeds Rs.450,000 but does not exceed Rs.550,000 3.50%7 Where the taxable income exceeds Rs.550,000 but does not exceed Rs.650,000 4.50%8 Where the taxable income exceeds Rs.650,000 but does not exceed Rs.750,000 6.00%9 Where the taxable income exceeds Rs.750,000 but does not exceed Rs.900,000 7.50%10 Where the taxable income exceeds Rs.900,000 but does not exceed Rs.1,050,000 9.00%11 Where the taxable income exceeds Rs.1,050,000 but does not exceed Rs.1,200,000 10.00%

Provided further that where the total income of a taxpayer marginally exceeds the maximum limit of a slab in the Table, theincome tax payable shall be the tax payable on the maximum of that s lab plus an amount equal to:

(i) 20% of the amount by which the total income exceeds the said limit where the total income does not exceed Rs. 550,000(ii) 30% of the amount by which the total income exceeds in each slab but total income does not exceed Rs.1,050,000(iii) 40% of the amount by which the total income exceeds in each slab but total income does not exceed Rs.2,250,000(iv) 50% of the amount by which the total income exceeds in each slab but total income does not exceed Rs.4,550,000(v) 60% of the amount by which the total income exceeds in each slab but the total income exceeds Rs.4,550,000

The rate of tax payable on bonus as IDPT as income tax shall be 30% for the tax year 2010.