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The Institute of Chartered Accountants of PakistanFoundation/Modular Examinations Autumn 2001September 04, 2001TAXATION (MARKS 100)FE-2 (Paper-3)/Module ‘C’, SM ‘1’, ‘5’, ‘7’ & ‘9’ (3 hours)
Q.1 Define and explain the following with reference to the Income Tax Ordinance, 1979:(a) Assessment Year
(03)
(b) Special Income Year
(02)
(c) Resident
(03)
(d) Tax
(02)
(e) Average rate of tax
(02)
 Q.2 Discuss briefly the legal position with respect to the admissibility or otherwise of thefollowing as business expenditure under the Income Tax Ordinance, 1979:(a) Amount paid as income tax.
(02)
 (b) Capital expenditure incurred on scientific research in Pakistan.
(02)
 (c) Share of profit paid to a bank under a scheme of musharika.
(02)
 (d) Interest paid by a firm to a partner of the firm.
(02)
 (e) Salary paid otherwise through a crossed bank cheque etc. notexceeding five thousand rupees.
(02)
 Q.3 In the light of provisions of Income Tax Ordinance 1979, who is liable to discharge the taxliability of a deceased person, and to what extent?
(06)
 Q.4 Your client “A bank” has received a notice under Section 92 of the Income Tax Ordinance,1979 for the recovery of tax from one of their account holder. Please advise your client onits obligations.
(12)
 Q.5 Can the income tax be recovered from a director or shareholder of a a private companywhose liability is limited to the extent of amount paid on shares subscribed by him.
(05)
 Q.6 Describe briefly the provisions relating to re-opening of a completed assessment, includingperiod of limitation, if any?
(10)
 Q.7 Mr Amir Ali is manager finance in a multinational company. He has received the followingsalary and other perquisites during the year ended on June 30, 2000:Basic salary Rs. 35,000 p.m.Bonus 180,000House allowances 18,000 p.mUtilities allowance 50,000 p.a.The employer provided him a 1300 c.c. car for office/personal use and medical facilityworth Rs.25,000 during the year.Compute the total income of Mr Amir Ali and tax payable thereon.
(10)
 
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(2)Q.8 T & H Enterprises is a registered firm comprising of two equal partners named Tariq andHamid. During the year ended on 30
th
June 2001 the partners besides their shares in thefirm enjoyed income and sustained losses from the sources given below:Tariq(a) Income accrued abroad but not remitted to Pakistan. Rs.72,000(b) Shares of loss from an association of persons 5,000(c) Zakat paid 26,500Hamid(a) Speculation loss 25,000(b) Profit on sale of car 13,000(c) Income tax refund 5,000z(d) Zakat paid 14,000The profit and loss account of the registered firm for the year ended on 30
th
June, 2001,shows the following position:Rs. Rs.Salaries 300,000 Gross profit b/d 480,000Office maintenance 5,000 Dividend from Public Co. 250,000Repairs 38,000Provision for bad debts 14,000Super tax paid for last year 5,000Legal expenses 15,000Commission to Tariq 16,000Premium of life policies of Partners 5,000Depreciation 34,000Net profit:Tariq 149,000Hamid 149,000 298,000730,000 730,000Notes(i) Tariq & Hamid are paid Rs.45,000 and Rs.55,000 respectively as salary. This isincluded in total salary expense.(ii) Repairs includes Rs.18,000 being cost of a typewriter to be depreciated by 10%(iii) Legal expenses include Rs.6,000, which are not tax deductible(iv) Tax Depreciation excluding typewriter Rs.14,000Compute:a) the total income of the firm and taxes payable by it.b) the total income of each partner and tax thereon.
(20)
 Q.9 a) A person and his spouse are wealth tax assessees. A minor son of them also ownsa property. State whether the same is taxable and if yes, how?
(05)
b) An individual has transferred its property for an inadequate consideration for hisbenefit. Describe the consequences of the same under the Wealth Tax Act.
(05)
c) A non-resident person has obtained funds from a Pakistani bank and purchased aproperty outside Pakistan with that funds. Describe the impact of assets held abroadand admissibility of debt incurred in Pakistan for the purposes of determination of his net wealth.
(05)
 
(THE END)
 
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T
HE
I
NSTITUTE OF
C
HARTERED
A
CCOUNTANTS OF
P
AKISTAN
 Foundation/Modular Foundation Examinations Spring 2002March 5, 2002TAXATION (MARKS 100)FE-2 Paper 3 – Modular C8 (Module : ‘C’, SM ‘1’, ‘5’, ‘7’ & ‘9’) (3 hours)
Q.1 Define the following with reference to the Income Tax Ordinance 1979 :a) Assesseeb) Capital assetc) Dividendd) Public Company
(08)
 Q.2 State the classes of income tax authorities under the Income Tax Ordinance, 1979.
(05)
 Q.3 Briefly explain the provisions of Income Tax Ordinance regarding the claim of :a) rebate for legal and educational expenditure incurred during the income yearby an assessee.b) allowance for sum expended by an assessee on the purchase of books.
(06)
Q.4 Mr. Ashraf made the following donations during the income year 2000-2001:a) Rs. 200,000 in cash to a relief fund sponsored by the Government.b) Personal car to an institution referred to in Clause (91) of the Second Schedule. Thiscar was purchased by Mr. Ashraf four years ago at the cost of Rs. 80,000.The fair market value is Rs.60,000
 
c) Medicines to a private hospital purchased at the total cost of Rs. 10,000.Please advice Mr. Ashraf regarding the allowance for donation which may be claimedby him keeping in view the requirement of Section 47 of the Income Tax Ordinance 1979if his income for the relevant income year has been assessed at Rs. 800,000.
(08)
 Q.5 Explain whether the following are admissible as business expenditure under theIncome Tax Ordinance 1979 :a) Repayment of principal amount of lease rentals of plant & machinery.b) Sales tax paid on the purchase of raw material to be used in the production of exempt supply.c) Dividendd) Provision in respect of doubtful debts.e) Penalty levied under Section 108 of the Income Tax Ordinance, 1979 for failureto file statement under Section 139.
(10)
Q.6 Mr. Javaid, Managing Director of a multi national Company has submitted thefollowing data for the income year ending 30 June 2001:Basic Salary Rs. 130,500 p.mBonus 325,500House rent allowance 43,500 p.mUtilities 13,050 p.m
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