Applied Tax

ACCT – 370 Spring 2022

TEST 1
100 Marks

Q1: Briefly discuss the residential status of the following person for the tax year 2022 under the Income
Tax Ordinance, 2001:

a) Mr. Shah has been working as an Information Analyst in the Ministry of Foreign Affairs. On
1.11.2021, he was posted to Pakistan Embassy in Canada for three years.

b) AS Learning Centre is a partnership concern providing IT training to professionals in Pakistan,

UAE and Saudi Arabia. Up to 31 July 2021, the management and control of its affairs was
situated partly in Pakistan. However, with effect from 1 st August 2021, the entire management
and control of its affairs was shifted to Saudi Arabia.

c) Mr. Lewis was sent to Pakistan on a special assignment by his UK-based company on 1 st March
2022. He left Pakistan on 9 September 2022. He had never visited Pakistan ever before this.

d) F Trading LLC was incorporated as a limited liability company in UAE. The management and
control of its affairs are situated wholly in Pakistan.

(12 Marks)

Q:2 Mr. Zaheer, a resident per for tax purposes requested you to calculated his tax liability from the
following information for tax year 2022:

i) Monthly salary of Rs.1,350,000.

ii) He received a bonus of Rs. 1,750,000 on 1 st February 2022 in relation to TY2022.
iii) Taxable other source of income for the year of Rs.2,000,000
iv) Zakat payment of Rs.230,000 to his deserving relatives and Rs.750,000 to Edhi Foundation, a
registered charity for tax purposes.
v) He obtained a loan 3 years ago for the acquisition of his house under a housing finance
scheme from a scheduled bank. He paid a mark-up on the loan of Rs.190,000 during the
year.

(20 marks)

Q:3 Discuss the tax treatment of the following items under the Income Tax Ordinance 2001 and the
Income Tax Rules 2002 made thereunder. Where necessary, provide workings and appropriate
reasoning for your conclusions:

a) Saira’s annual salary is Rs.1,200,000. She has been provided with a company security guard. The
monthly salary of the guard is Rs. 10,000 and is all covered by Saira’s company.
 Also, the company provided her with a refrigerator, cooking range and washing machine for her
use at home. The book value of these appliance is Rs.200,000 as at 1 July 2021 and Saira is
expected to return these items to the company after 4 years. The company charges a 15%
depreciation on these appliances in its books.

What is Saira’s taxable salary for tax year 2022?

(8 marks)

b) Mr. Waseem received an amount of Rs. 500,000 as arrears of salary pertaining to the tax year
2021 in the tax year 2022. Discuss the options available with Mr. Waseem under the ITO,2001
and what matters he should consider in deciding the best option for him if his taxable salary for
TY 2022 is Rs.6,000,000 and in TY 2021 was Rs. 4,600,000. Support your answer with relevant
calculations.

(20 marks)