SUGGESTED SOLUTIONS/ ANSWERS – SUMMER 2019 EXAMINATIONS 1 of 9

BUSINESS TAXATION [S3] – STRATEGIC LEVEL-1

Marks
Question No. 1
(a) (i) Unexplained Income or Assets – section 111 of the Income Tax Ordinance, 2001: 05
Unexplained income or assets may be defined as, where:
1) Any amount is credited in a person‘s books of account;
2) A person has made any investment or is the owner of any money or valuable article;
3) A person has incurred any expenditure; or
4) Any person has concealed income or furnished inaccurate particulars of income
including:
 The suppression of any production, sales or any amount chargeable to tax; or
 The suppression of any item of receipt liable to tax in whole or in part,
And the person offers no explanation about the nature and source of the amount credited or
the investment, money, valuable article, or funds from which the expenditure was made or
the explanation offered by the person.

(ii) Agriculture Income under the Income Tax Ordinance, 2001: 06

Provided that where a taxpayer explains the nature and source of the amount credited or the
investment made, money or valuable article owned or funds from which the expenditure was
made, by way of agricultural income, such explanation shall be accepted to the extent of
agricultural income worked back on the basis of agricultural income tax paid under the
relevant provincial law.
Where the declared cost of any investment or valuable article or the declared amount of
expenditure of a person is less than reasonable cost of the investment or the valuable article,
or the reasonable amount of the expenditure, the Commissioner may, having regard to all
the circumstances, include the difference in the person‘s income chargeable to tax under the
head ―Income from Other Sources in the tax year to which the investment, valuable article
or the expenditure relates.
There are no confirmed figures related to revenue generation from agriculture income. The
people who believes that agriculture income should be taken into tax net in Pakistan, claim
that despite the fact that contribution of agriculture sector in the national income is around
25% or above yet there is very nominal contribution from this sector in the revenue resource
generation of the country i.e. they do not pay income tax.
On the other hand, the people who oppose the inclusion of agriculture income in tax net have
opinion that they are already paying agriculture tax to government, controlled on agricultural
prices.
It is very easy to say that like other sectors, income from agriculture should also be taxed but
its assessment and collection is very difficult and impracticable because of many reasons, for
example:
(a) It’s not possible to calculate agriculture income and tax on the income as compared with
other sectors.
(b) Income from agriculture is already taxed (fixed tax) and collected by provinces on the
basis of ownership of Land.

DISCLAIMER: These suggested answers including write-ups, tables, charts, diagrams, graphs, figures etc., are uploaded for the use of ICMA Pakistan members, students and faculty members only. No part of it can be reproduced,
stored in a retrieval system or transmitted in any physical/ or electronic form or by any other means including electronic, mechanical, photocopying, recording or otherwise without prior written permission of the ICMA Pakistan. The
suggested answers provided on and made available through the ICMA Pakistan’s website may only be referred, relied upon or tre ated as general guidelines and NOT a substitute for professional advice. The ICMA Pakistan has
provided suggested answers on the basis of certain assumptions for general guidance of the students and there may be other possible answers/ solutions based on different assumptions and understanding. The ICMA Pakistan and its
Council Members, Examiners or Employees shall not be liable in respect of any damages, losses, claims and expenses arising out of using contents of these suggested answers. It is clarified that the ICMA Pakistan shall not be liable
to attend or receive any comments, observations or critiques related to the suggested answers.
 SUGGESTED SOLUTIONS/ ANSWERS – SUMMER 2019 EXAMINATIONS 2 of 9
BUSINESS TAXATION [S3] – STRATEGIC LEVEL-1
Marks
(b) (i) Treatment of Funds as Taxable Income from Unexplained Sources under section 111 of the 03
Income Tax Ordinance, 2001:
 Foreign Exchange Remittance – Rs.3,000,000:
The amount credited in the books of account of a person to the extent it originates from
foreign exchange remitted from outside Pakistan through normal banking channels which
is cashed into Pakistan rupees by a scheduled bank is not taxable under section 111.
Hence the amount of is not taxable.
 Cash Borrowed from Uncle – Rs.2,000,000:
Since Mr. Raees Panjwani has borrowed the amount from his uncle and all the
documentary evidence to this extent is available, it is explainable in his hands and
cannot be treated as income under section 111 of the Ordinance.
 Agricultural Income – Rs.3,000,000:
Where a taxpayer explains the nature and source of any amount credited in his books of
account by way of agricultural income, such explanation is acceptable only to the extent
of the agricultural income worked back on the basis of agricultural income tax paid under
the relevant provincial law of agricultural income tax. Consequently, only Rs. 300,000 will
be treated as explainable and Rs. 2,700,000 will be treated as income under section 111
of the Ordinance.

(ii) Taxing of Funds as Income from Other Sources under section 111 of the Income Tax 02
Ordinance, 2001:
Mr. Raees Panjwani has obtained a loan from his uncle of Rs.2,000,000 in cash which is fully
documented and explainable for the purposes of section 111. However, since the amount
has been received from his uncle otherwise than by a crossed cheque drawn on a bank or
through a banking channel, it will be treated as income chargeable to tax under the head
‘Income from other sources’.

DISCLAIMER: These suggested answers including write-ups, tables, charts, diagrams, graphs, figures etc., are uploaded for the use of ICMA Pakistan members, students and faculty members only. No part of it can be reproduced,
stored in a retrieval system or transmitted in any physical/ or electronic form or by any other means including electronic, mechanical, photocopying, recording or otherwise without prior written permission of the ICMA Pakistan. The
suggested answers provided on and made available through the ICMA Pakistan’s website may only be referred, relied upon or tre ated as general guidelines and NOT a substitute for professional advice. The ICMA Pakistan has
provided suggested answers on the basis of certain assumptions for general guidance of the students and there may be other possible answers/ solutions based on different assumptions and understanding. The ICMA Pakistan and its
Council Members, Examiners or Employees shall not be liable in respect of any damages, losses, claims and expenses arising out of using contents of these suggested answers. It is clarified that the ICMA Pakistan shall not be liable
to attend or receive any comments, observations or critiques related to the suggested answers.
 SUGGESTED SOLUTIONS/ ANSWERS – SUMMER 2019 EXAMINATIONS 3 of 9
BUSINESS TAXATION [S3] – STRATEGIC LEVEL-1
Marks
Question No. 2
Mr. Huang
Computation of Taxable Income and Tax Payable or Refundable
for the tax year 2018
Rupees
Basic salary (Rs.250,000 x 12) 3,000,000 0.5
Fixed medical allowance [Rs.400,000 – (Rs.3,000,000 x 10%)] 100,000 1.5
Perquisite representing car [W-1] 90,000 0.5
Fuel allowance [(Rs.30,000 x 12) x 50%] 180,000 1.5
Perquisite representing accommodation [W-2] 1,350,000 0.5
Services of a security guard [W-3] 102,000 0.5
Employee share scheme – amount to be treated as salary [W-4] 1,500,000 1.5
Reimbursement of child’s school fee (Rs.50,000 x 9) 450,000 1.0
Perquisite representing concessional loan [W-5] 54,904 0.5
Perquisite representing return air ticket to Shanghai 150,000 0.5
Income under the head ‘salary’ 6,976,904
Income from other sources – Income from delivering lectures [W-6] 300,000 0.5
Total taxable income under normal tax regime (NTR) 7,276,904 1.0
Tax on taxable income [Rs.290,000 + (Rs.7,276,904 – Rs.4,000,000) x 20%] 945,381 1.0
Tax on income assessable under final tax regime (FTR)
Tax on commercial imports of Chinese food supplements [W-7] 22,000 0.5
Tax on commercial import of toys from China [W-8] 27,500 0.5
Total tax payable 994,881
Tax Already Paid:
Tax paid with school fee of his child 15,000 1.0
Tax deducted at source by his employer 940,000 1.0
Tax collected on imports (Rs.22,000 + Rs.27,500) 49,500 0.5
Tax collected at the time of purchase of pre-paid cards for mobile
phone 15,000 0.5
Total tax paid 1,019,500
Tax payable with return/ statement of FTR (24,619) 1.0

Workings:
Rupees
W-1: Where a car is provided for personal as well as business use:
Fair market value (FMV) of the car at the time of obtaining lease 1,800,000
5% of FMV to be treated as value of the perquisite (Rs.1,800,000 x 5%) 90,000 0.5

W-2: Accommodation:
Basic salary 3,000,000 0.5
Value of the perquisite (Rs.3,000,000 x 45%) 1,350,000 0.5

DISCLAIMER: These suggested answers including write-ups, tables, charts, diagrams, graphs, figures etc., are uploaded for the use of ICMA Pakistan members, students and faculty members only. No part of it can be reproduced,
stored in a retrieval system or transmitted in any physical/ or electronic form or by any other means including electronic, mechanical, photocopying, recording or otherwise without prior written permission of the ICMA Pakistan. The
suggested answers provided on and made available through the ICMA Pakistan’s website may only be referred, relied upon or tre ated as general guidelines and NOT a substitute for professional advice. The ICMA Pakistan has
provided suggested answers on the basis of certain assumptions for general guidance of the students and there may be other possible answers/ solutions based on different assumptions and understanding. The ICMA Pakistan and its
Council Members, Examiners or Employees shall not be liable in respect of any damages, losses, claims and expenses arising out of using contents of these suggested answers. It is clarified that the ICMA Pakistan shall not be liable
to attend or receive any comments, observations or critiques related to the suggested answers.
 SUGGESTED SOLUTIONS/ ANSWERS – SUMMER 2019 EXAMINATIONS 4 of 9
BUSINESS TAXATION [S3] – STRATEGIC LEVEL-1
Marks
Rupees
W-3: Security Guard:
Annual salary paid to the security guard (Rs.18,500 x 12) 222,000
Less: Amount paid by Mr. Huang to the employer on this account
(Rs.10,000 x 12) (120,000)
Value of the perquisite taxable as salary 102,000 0.5

W-4: Fair Market Value (FMV) of the Shares:

Deemed consideration on June 01, 2018 when restriction to
sell the shares was removed (50,000 x Rs.40) 2,000,000
Less: Cost of acquisition of shares (50,000 x Rs.10) (500,000)
Amount to be treated as salary 1,500,000 0.5

W-5: Loan at a Mark-up of 6% per annum:

Loan given to Mr. Huang on August 01, 2017 1,500,000
Benchmark rate of mark-up per annum for the tax year 2018 10%
Mark-up on the basis of benchmark rate [(Rs.1,500,000 x 10%) x 334/365] 137,260
Mark-up actually charged at 6% per annum [(Rs.1,500,000 x 6%) x 334/365] (82,356)
Concession to be treated as salary 54,904 1.5

W-6: Service Income:

Gross receipt – No withholding tax (WHT) 300,000 0.5

W-7: Sale of Chinese Food:

Total sale proceeds from the sale of Chinese food
supplements 550,000
Less: Cost of imports 400,000
Payment to salesman 20,000 (420,000)
Income – not relevant for tax working 130,000 0.5

W-8: Total Sale Proceeds from sale of toys: 350,000

Less: Cost of import of toys (500,000)
Loss from the transaction – To be ignored, cannot be set off
against any income (150,000) 1.0

Explanation of items not included in the Computation of Taxable Income: 03

 Amount paid to the Council of Engineers in China:
No deduction on account of any expenditure incurred by an employee to derive the amount
chargeable to tax under the head ‘Salary’ is allowed in computing taxable income.
 Rent from Apartment in China:
Mr. Huang is a resident of Pakistan by virtue of his employment here and his stay in Pakistan
does not exceed three years. Further, the amount of rent has not been received in Pakistan.
Therefore, his income from the rent of the apartment in China is exempt from tax in Pakistan.
 Donation paid to Beijing University, China:
The donation paid to Beijing University, China is not an admissible deduction. Further, the
amount does not qualify for tax credit as the university is situated outside Pakistan.
DISCLAIMER: These suggested answers including write-ups, tables, charts, diagrams, graphs, figures etc., are uploaded for the use of ICMA Pakistan members, students and faculty members only. No part of it can be reproduced,
stored in a retrieval system or transmitted in any physical/ or electronic form or by any other means including electronic, mechanical, photocopying, recording or otherwise without prior written permission of the ICMA Pakistan. The
suggested answers provided on and made available through the ICMA Pakistan’s website may only be referred, relied upon or tre ated as general guidelines and NOT a substitute for professional advice. The ICMA Pakistan has
provided suggested answers on the basis of certain assumptions for general guidance of the students and there may be other possible answers/ solutions based on different assumptions and understanding. The ICMA Pakistan and its
Council Members, Examiners or Employees shall not be liable in respect of any damages, losses, claims and expenses arising out of using contents of these suggested answers. It is clarified that the ICMA Pakistan shall not be liable
to attend or receive any comments, observations or critiques related to the suggested answers.
 SUGGESTED SOLUTIONS/ ANSWERS – SUMMER 2019 EXAMINATIONS 5 of 9
BUSINESS TAXATION [S3] – STRATEGIC LEVEL-1
Marks
Question No. 3
(a) Income Tax Authorities – section 207 of the Income Tax Ordinance, 2001: 05
There shall be the following income tax authorities for the purpose of this Ordinance and rules
made thereunder namely:
(a) Board
(b) Chief Commissioner Inland Revenue
(c) Commissioner Inland Revenue
(d) Commissioner Inland Revenue (Appeals)
(e) Additional Commissioner Inland Revenue
(f) Deputy Commissioner Inland Revenue
(g) Assistant Commissioner Inland Revenue
(g-a) Special audit panel
(h) Inland Revenue Officer
(i) Inland Revenue Audit Officer
(i-a) District Taxation Officer Inland Revenue
(i-b) Assistant Director Audit
(j) Superintendent Inland Revenue
(k) Inspector Inland Revenue
(l) Auditor inland revenue

(b) Jurisdiction of Income Tax Authorities – section 209 of the Income Tax Ordinance, 2001: 05
(1) Subject to this Ordinance. The Chief Commissioners, the Commissioners and the
Commissioners (Appeals) shall perform all or such functions and exercise all or such powers
under this Ordinance as may be assigned to them in respect of such persons or classes of
persons or such areas as the Board may direct. [Provided that the Board or the Chief
Commissioner, as the case may be, may transfer jurisdiction in respect of cases or persons
from one Commissioner to another.]
(2) The Board or the Chief Commissioner may, by an order, confer upon or assign to any officer
of Inland Revenue all or any of the powers and functions conferred upon or assigned to the
Commissioner, under this Ordinance, in respect of any person or persons or classes of
persons or areas as may be specified in the order.
(3) The Officer of Inland Revenue referred to in sub-section (2) shall for the purposes of this
Ordinance, be treated to be the Commissioner.
(4) Within the area assigned to him, the Commissioner shall have jurisdiction, -
(a) in respect of any person carrying on business, if the person's place of business is within
such area, or where the business is carried on in more than one place, the person's
principal place of business is within such area; or
(b) in respect of any other person, if the person resides in such area:
(5) Notwithstanding anything contained in this section, every Commissioner shall have all the
powers conferred by, or under, this Ordinance on him in respect of any income arising within
the area assigned to him.
(5A) The power to confer jurisdiction under this section shall include the power to transfer
jurisdiction from one income tax authority to another.

DISCLAIMER: These suggested answers including write-ups, tables, charts, diagrams, graphs, figures etc., are uploaded for the use of ICMA Pakistan members, students and faculty members only. No part of it can be reproduced,
stored in a retrieval system or transmitted in any physical/ or electronic form or by any other means including electronic, mechanical, photocopying, recording or otherwise without prior written permission of the ICMA Pakistan. The
suggested answers provided on and made available through the ICMA Pakistan’s website may only be referred, relied upon or tre ated as general guidelines and NOT a substitute for professional advice. The ICMA Pakistan has
provided suggested answers on the basis of certain assumptions for general guidance of the students and there may be other possible answers/ solutions based on different assumptions and understanding. The ICMA Pakistan and its
Council Members, Examiners or Employees shall not be liable in respect of any damages, losses, claims and expenses arising out of using contents of these suggested answers. It is clarified that the ICMA Pakistan shall not be liable
to attend or receive any comments, observations or critiques related to the suggested answers.
 SUGGESTED SOLUTIONS/ ANSWERS – SUMMER 2019 EXAMINATIONS 6 of 9
BUSINESS TAXATION [S3] – STRATEGIC LEVEL-1
Marks
Question No. 4
(a) Taxation of Association of Persons (AOP) – section 88 and section 92 of the Income Tax 05
Ordinance, 2001:
Provisions of the Income Tax Ordinance, 2001 are summarized below:
1) An AOP shall be liable to tax in respect of its incomes, which are chargeable to tax.
2) Any amount received by a member out of the income of AOP shall be exempt from tax.
3) Although the share of income from AOP is exempt from tax and a member is not required to
furnish the return of his income, if he has no other source of income, but where such person
has also some other sources of income then his share from AOP shall be included for the
rate purposes. Under such a case the following procedure shall be adopted:
Procedure for Computation:
(1) Compute taxable income (including share from AOP).
(2) Compute tax on taxable income as per rates specified in the First Schedule.
(3) Divide the amount of tax computed as above by the taxable income (including share from
AOP). In this way an average rate of tax shall be arrived at.
(4) Apply the average rate to the actually taxable income (excluding share from AOP) and the
resultant figure shall be the amount of tax liability.

(b) Computation of Taxable Income and Tax Payable

Name of Taxpayer : AFU Limited
National Tax Number : XXXXXX
Tax Year Ended On : June 30, 2018
Tax Year : 2018
Personal Status : Non-Listed Company
Residential Status : Permanent Establishment of a Non-Resident
Rupees
Taxable income
Profit – as per profit and loss account 2,000,000 0.75
Add: Inadmissible transactions:
Accounting depreciation 350,000
Finance charge on leased assets [N-1] 150,000
Interest paid to other branches abroad [N-5] 30,000 530,000 0.75
Total 2,530,000 1.0
Less: Tax depreciation 500,000
Computer software cost [N-2] 200,000
Lease rentals [N-1] 260,000 960,000 0.75
Taxable income 1,570,000 1.0
Tax liability (Rs.1,570,000 @ 29%) [N-6] 455,300 1.25

DISCLAIMER: These suggested answers including write-ups, tables, charts, diagrams, graphs, figures etc., are uploaded for the use of ICMA Pakistan members, students and faculty members only. No part of it can be reproduced,
stored in a retrieval system or transmitted in any physical/ or electronic form or by any other means including electronic, mechanical, photocopying, recording or otherwise without prior written permission of the ICMA Pakistan. The
suggested answers provided on and made available through the ICMA Pakistan’s website may only be referred, relied upon or tre ated as general guidelines and NOT a substitute for professional advice. The ICMA Pakistan has
provided suggested answers on the basis of certain assumptions for general guidance of the students and there may be other possible answers/ solutions based on different assumptions and understanding. The ICMA Pakistan and its
Council Members, Examiners or Employees shall not be liable in respect of any damages, losses, claims and expenses arising out of using contents of these suggested answers. It is clarified that the ICMA Pakistan shall not be liable
to attend or receive any comments, observations or critiques related to the suggested answers.
 SUGGESTED SOLUTIONS/ ANSWERS – SUMMER 2019 EXAMINATIONS 7 of 9
BUSINESS TAXATION [S3] – STRATEGIC LEVEL-1
Marks
Notes:
N-1: Financial charges on assets acquired on lease are inadmissible, whereas the total rentals
paid during the year shall be allowed as deduction.
N-2: Computer software cost is generally treated as revenue expense and is allowed as
admissible expense.
N-3: It is presumed that the tax depreciation has been computed after rectification of the entry
relating to the computer software.
N-4: In the absence of the total Head Office expenses, total world turnover of the company and 1.5
total turnover in Pakistan, it is not possible to compute the admissible amount of head
office expenses charged to the company. Thus, it is presumed that the expenses shown in
the profit and loss account are within the permitted limit.
N-5: Interest paid to other branches is not admissible expense under section 105.
N-6: Alternate Corporate Tax is lesser than the Corporate Tax, hence, tax liability of the
company shall be the Corporate Tax.

Question No. 5
(a) Moon Light (Pvt.) Limited
Computation of Sales Tax Liability
for the tax period August 2018
Rupees
Output Tax:
Supplies to registered person (Rs.5,000,000 x 17%) 850,000 1.0
Supplies to non-registered person (Rs.1,000,000 x 17%) 170,000 1.0
Supplies to retailers (Rs.600,000 x 17%) 102,000 1.0
Total output tax 1122,000 1.5
Less: Credit note adjustment in respect of sales return (Rs.150, 000 x 17%) (25,500) 1.0
Total 1,096,500 1.5
Input Tax Adjustment:
Purchases from registered suppliers (Rs.700,000 x 17%) 119,000 1.0
Purchases from non-registered suppliers (no input tax; Rs.300,000) – (119,000) 1.0
*Input tax – within the limit, so allowed 977,500 1.5
Further tax (Rs.1,000,000 x 3%) 30,000 1.0
Total sales tax payable 1,007,500 2.0
*Restricted upto 90% of output tax (Rs.1,096,500 x 90/100 = Rs.986,850) 1.5

DISCLAIMER: These suggested answers including write-ups, tables, charts, diagrams, graphs, figures etc., are uploaded for the use of ICMA Pakistan members, students and faculty members only. No part of it can be reproduced,
stored in a retrieval system or transmitted in any physical/ or electronic form or by any other means including electronic, mechanical, photocopying, recording or otherwise without prior written permission of the ICMA Pakistan. The
suggested answers provided on and made available through the ICMA Pakistan’s website may only be referred, relied upon or tre ated as general guidelines and NOT a substitute for professional advice. The ICMA Pakistan has
provided suggested answers on the basis of certain assumptions for general guidance of the students and there may be other possible answers/ solutions based on different assumptions and understanding. The ICMA Pakistan and its
Council Members, Examiners or Employees shall not be liable in respect of any damages, losses, claims and expenses arising out of using contents of these suggested answers. It is clarified that the ICMA Pakistan shall not be liable
to attend or receive any comments, observations or critiques related to the suggested answers.
 SUGGESTED SOLUTIONS/ ANSWERS – SUMMER 2019 EXAMINATIONS 8 of 9
BUSINESS TAXATION [S3] – STRATEGIC LEVEL-1
Marks
(b) (i) Active Taxpayer: 04
Active taxpayer means a registered person who does not fall in any of the following
categories:
(1) Who is blacklisted or whose registration is suspended or is blocked u/s 21 of the Sales
Tax Act, 1990.
(2) Who fails to file the return within the due date for two (2) consecutive tax periods as
required u/s 26 of the Sales Tax Act, 1990.
(3) Who fails to file return of income u/s 114 or wealth statement u/s 115 of the Income Tax
Ordinance, 2001, by the due date; and
(4) Who fails to file two (2) consecutive monthly or an annual withholding tax (WHT)
statement u/s 165 of the Income Tax Ordinance, 2001.

(ii) Difference between ‘Exempted’ and ‘Zero Rated’ Supply: 08

Exempted Supplies Zero Rated Supplies

It means a supply, which is exempted from It means a supply, which is charged to tax at
the levy of Sales Tax by the Federal the rate of zero percent under section 4 of
Government by giving a notification in the the Sales tax Act, 1990.
Official Gazette under section 13 of Sales
tax Act, 1990.
A person making an exempt supply is not In case of zero-rated supply the person
entitled to get refund/ adjustment of input making the supply is entitled to get refund for
tax. input tax paid on his business purchases.

A complete list of such exempted supply has Following goods shall be charged at the rate
been provided in the Sixth Schedule. of zero percent.
1. Goods exported out of Pakistan.
2. Goods specified in the Fifth Schedule.
3. Supply of stores and provisions for
consumption aboard a conveyance
proceeding to a destination outside
Pakistan.
4. Such other goods as the Federal
Government may notify.
Maintenance of records under the Sales Tax Maintenance of records under the Sales Tax
Act is not required. Act is compulsory.
Persons making exempt supplies are not Persons making zero-rated supplies are
required to file return under the Sales Tax Act. required to file return under the Sales Tax Act.

DISCLAIMER: These suggested answers including write-ups, tables, charts, diagrams, graphs, figures etc., are uploaded for the use of ICMA Pakistan members, students and faculty members only. No part of it can be reproduced,
stored in a retrieval system or transmitted in any physical/ or electronic form or by any other means including electronic, mechanical, photocopying, recording or otherwise without prior written permission of the ICMA Pakistan. The
suggested answers provided on and made available through the ICMA Pakistan’s website may only be referred, relied upon or tre ated as general guidelines and NOT a substitute for professional advice. The ICMA Pakistan has
provided suggested answers on the basis of certain assumptions for general guidance of the students and there may be other possible answers/ solutions based on different assumptions and understanding. The ICMA Pakistan and its
Council Members, Examiners or Employees shall not be liable in respect of any damages, losses, claims and expenses arising out of using contents of these suggested answers. It is clarified that the ICMA Pakistan shall not be liable
to attend or receive any comments, observations or critiques related to the suggested answers.
 SUGGESTED SOLUTIONS/ ANSWERS – SUMMER 2019 EXAMINATIONS 9 of 9
BUSINESS TAXATION [S3] – STRATEGIC LEVEL-1
Marks
Question No. 6
(a) Manufacture – under section 2 (16) of the Federal Excise Act, 2005: 05
General Meanings:
It means and includes any process incidental or ancillary to the completion of a manufactured
product and any process of re-manufacture, remaking, reconditioning or repair and the process of
packing or re-packing such product.
Meanings in Relation to Tobacco:
‘Manufacture’ includes the preparation of:
 Cigarettes  Cigars
 Cheroots (cigars with both end open  Biris
 Cigarette, pipe or hookah tobacco  Chewing tobacco
 Snuff (powdered tobacco taken into the nose by snuffing
 Preparation of unmanufactured tobacco by drying, cutting and thrashing of raw tobacco.

(b) Sales Tax Mode – under section 2 (21 a) of the Federal Excise Act, 2005: 05
It means the manner of collection and payment of excise duties chargeable under the Federal
Excise Act, 2005 and specified to be collected and paid under the Sales Tax Act, 1990 and rules
made thereunder, as if the excise duties were the sales tax chargeable under section 3 of the
Sales Tax Act. In such a case the notifications, orders and instructions made or issued under the
Sales Tax Act and rules shall, mutatis mutandis, apply to the excise duty so chargeable.

THE END

DISCLAIMER: These suggested answers including write-ups, tables, charts, diagrams, graphs, figures etc., are uploaded for the use of ICMA Pakistan members, students and faculty members only. No part of it can be reproduced,
stored in a retrieval system or transmitted in any physical/ or electronic form or by any other means including electronic, mechanical, photocopying, recording or otherwise without prior written permission of the ICMA Pakistan. The
suggested answers provided on and made available through the ICMA Pakistan’s website may only be referred, relied upon or tre ated as general guidelines and NOT a substitute for professional advice. The ICMA Pakistan has
provided suggested answers on the basis of certain assumptions for general guidance of the students and there may be other possible answers/ solutions based on different assumptions and understanding. The ICMA Pakistan and its
Council Members, Examiners or Employees shall not be liable in respect of any damages, losses, claims and expenses arising out of using contents of these suggested answers. It is clarified that the ICMA Pakistan shall not be liable
to attend or receive any comments, observations or critiques related to the suggested answers.