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Taxation II
Time allowed
 –
3 hoursTotal Marks
 –
100
[N.B.-The figures in the margin indicate full marks. Questions must be answered in English. Examiner willtake account of the quality of language and of the way in which the answers are presented.Separate answer books should be used for each section. Different parts, if any, of the same questionmust be answered in one place in order of sequence.]
Marks1. What amendments were made by the Finance Act 2008 in respect of the following?- 10(a)
 
Tax exemption of Dividend of a Mutual Fund and a Unit Fund.(b)
 
Increase in the special exemption limit of Income from Agriculture of an assessee havingAgriculture Income only and no other income.(c)
 
Deduction at source from interest on deposit of post office savings bank account.(d)
 
Deduction at source from rental value of vacant land, plant and machinery.(e)
 
Deduction of tax from advertising bill of newspaper, magazine and private television channel.2. Briefly explain the tax implications in the following cases: 6(a)
 
Non-Governmental Organizations(b)
 
Private Educational Institutions(c)
 
Co-operative Societies(d)
 
Gratuity Fund of an international organization based in Bangladesh.3. Specify the significant conditionalities in the following cases: 6(a)
 
Re-opening of assessment u/s 93 and 120(b)
 
Appeal (first) and appeal (Second)(c)
 
Appeal against Order of TRO(d)
 
Correction of apparent error.4. What is meant by Double Tax-Treaty (TT)? What salient features are usually there in a TT?With how many countries Bangladesh has entered into TT? Which one is the last one? TT isregulated by which Section & Schedule of ITO 1984? 85. Indicate the two circumstances u/s 75(1) and seven conditions u/s 75(1A) when a person isrequired to submit an annual tax return. 66. Mrs. Rahim FCA is a retired Government Officer. She is 71 years of age. Currently she works asAdvisors of XYZ Ltd. and ABC Ltd., private companies in Bangladesh. She also works as a parttime consultant for UNDP and World Bank. During the twelve months ended 30 June 2008 shereceived the following income:(a) From XYZ Ltd.Basic Salary Tk.20,000/= p.m.House Rent 11,000/= p.m.Medical Allowance 2,000/= p.mConveyance Allowance 1,000/= p.m.(b) From ABC Ltd.Basic Salary Tk.20,000/= p.m.House Rent 9,000/= p.m.Entertainment Allowance 2,000/= p.mConveyance Allowance 1,000/= p.m.Bonus Tk.40,000/= p.mNo car was provided by the company.
 
(c)
 
Consultancy fees of Tk.4,00,000 in total from UNDP for her work in Bangladesh andTk.3,00,000 (in equivalent US dollar) from World Bank for her work in Bhutan and Nepal.
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(d)
 
Rental income @Tk.25,000 p.m. from an apartment owned by her. It is used by a foreigner as hisresidence. She paid municipal tax of Tk.40,000/=, land revenue of Tk.2,000/= and a fireinsurance premium of Tk.15,000/= during the year. The apartment remained vacant for 2 monthsduring the year.(e)
 
Dividends of Tk.50,000/= received from investment in shares of a number of listed companies.(f)
 
She made a capital gain of Tk.2,00,000 by buying and selling listed company shares during the year.(g)
 
She earned an interest income of Tk.15,000/= from post office savings bank account.(h)
 
She entered into a contract with a developer on 1/11/07 for erecting a six storied buildingwith 10 flats out of which she will get 5 flats free of cost. In addition, she will be givenTk.60,00,000 in cash, to be paid in 3 equal installments of Tk.20,00,000 each in November2007, 2008 and 2009. She received Tk.20,00,000 in November 2007.(i)
 
She had an apartment which was sold for Tk.1 crore (which was same as the Mouza value)on 1 August 2007. The buyer paid all the costs (including 5% capital gain tax, stamp duty,registration costs etc.) at the time of registration in August 2007. The apartment was boughtby her on 1 August 2000 at a cost of Tk.40 lac.(j)
 
Mrs. Rahim is a lecturer at the ICAB evening coaching classes and is also involved in the ICABexamination process. She is also a regular contributor of articles to the ICAB Journal andnewspapers. From these sources she received the following additional income during the year:TakaLecture Fees 60,000Payments for articles published 25,000Questions setting and scripts examination fees 12,000She paid Tk.3,000 to a part-time typist for typing manuscripts of her articles.(k)
 
She received Tk.25,000 from agricultural land by selling crops.(l)
 
She received honorarium of Tk.50,000 during the year as a Board Director of Rupali Bank Ltd.
Other information are as follows
:
•
 
Mrs. Rahim has taken a life insurance policy in favour of her son and has paid quarterlypremiums of Tk.5,000/= each throughout the year.
•
 
She spent Tk.10,000 on professional and technical books and publications during the year.
•
 
She paid an annual subscription of Tk.4,800/= to ICAB on 1/7/07.
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She owns and maintains a motor car.
•
 
She sold the shares of a listed company for Tk.2,00,000, which she bought for Tk.1,50,000 in the incomeyear 2006-2007, and for which she claimed and received the allowable tax rebate for the investment. Shehas again bought shares of 3 other listed companies during the year for Tk.6,00,000/=.
•
 
Mrs. Rahim’s declared income in the assessment year 2008-2009 is at least 20% more thanthat of the assessment year 2007-2008.
Required:
 Compute the total income of Mrs. Rahim for the assessment year 2008-2009, advising whether sheshould submit the return under Section 82BB “Universal Self Assessment” or under normal procedure. 147. The following adjusted accounts appeared in the records of Oak Ltd., an accrual basis company, forthe year ended December 31, 2007. Numbers in brackets refer to the items in Additional Information.
Revenues and Gains
Tk.000Net sales 90,000 (1)Dividends 6,000 (2)Interest 800 (3)Gain on sale of shares 1,000 (4)Equity in earnings of Tech Partnership 6,000 (5)Keyman life insurance proceeds 25,000 (6)Insurance proceeds from fire loss claim 1,500 (7)Tax refund 500 (8)Total 1,30,800
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Costs and Expenses
Cost of goods sold 52,500 (9)Salaries and wages 26,000 (10)Doubtful accounts 2,000 (11)Taxes 9,000 (12)Security services 300 (13)Audit, accountancy and taxation services 500 (14)Office Rent 600 (15)Car Rental 100 (16)Interest 2,500 (17)Donations 1,800 (18)Board meeting attendance fee 300 (19)Depreciation 8,000 (20)Other expenses 3,000 (21)Corporate Income Tax 4,500 (22)Total 111,100Net Income 19,700Dividends Paid 9,000 (23)
Additional information
(1) Trade accounts receivable at December 31, 2007, and at December 31, 2006, amounted toTk.3,30,00,000 and Tk.2,00,00,000 respectively.(2) Dividends include:i)
 
Tk.20,00,000 declared and paid in 2007 by an unrelated taxable local company whoseshares are traded on DSE and CSE;ii)
 
Tk.20,00,000 received in 2007 from a Singapore based company which remitted thedividend amount net of an withholding tax of Tk.2,00,000 in equivalent Singapore dollar;iii)
 
Tk.20,00,000 received in 2007 from a Russian company, which remitted the dividendamount net of an withholding tax of Tk.4,00,000 in equivalent Rubel.(3) Interest revenue comprises interest on government bonds issued in 1997 and purchased byOak in 1997.(4) Gain on sale of shares arose from the following purchase and sale of shares in an unrelatedcompany listed on DSE and CSE:Bought in 2004 Cost Tk.12,00,000Sold in 2007 Proceeds of sale Tk.22,00,000(5) Oak owns 50% of Tech Partnership. The other 50% is owned by an unrelated individual.Tech reported the following tax information to Oak:
Oak’s share of 
:Partnership ordinary income Tk.79,00,000Net long-term capital loss (19,00,000)The firm paid a tax of Tk.13,66,250 on the Oak’s share of net earnings.(6) Oak owned the Keyman life insurance policy, paid the premiums, and was the directbeneficiary. The proceeds were collected on the death of Oak’s Controller.(7) Insurance proceeds were received in 2007 against claim for damage of stock of goods byfire in 2006. The cost of goods damaged was Tk.10,00,000, and the market value on thedate of fire was Tk.18,00,000. The damaged goods did not have any salvage value.(8) The tax refund arose from Oak’s overpayment of corporate Income tax on the 2007-2008 return.(9) Cost of goods sold relates to Oak’s net sales.(10) Salaries and wages include inter alia:-(a)
 
Salary of Finance Manager Tk.6,00,000 (consolidated) paid in cash, not by cheque orbank transfer;(b)
 
Officers’ compensation of Tk.15,00,000 under Voluntary Retirement Scheme;(c)
 
Gratuity (unrecognized) provision of Tk.15,00,000 and gratuity payment of Tk.10,00,000;(d)
 
Incentive bonus of Tk.20,00,000 to officers and non-officers.
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