TAX Mock September 2023

Certificate in Accounting and Finance Stage Examination
Prepared by: Sir Ali Imran

26 August 2023
3 hours –100marks
Additional reading time – 15 Mins
CAF-02 Tax Practices
Instructions to examinees:
(i) Answer all EIGHT questions.
(ii) Answer in black pen only.
(iii) Tax Rates are given on last page
Q.1 (a) Ali, Zohaib and Asad are partners of a resident firm in Pakistan, under the name and style
AZA & co. (AZA) which is engaged in manufacturing and local supply of auto spare
parts. All partners have equal share of profits and losses in the firm.
Following information has been extracted from accounting records of AZA for the tax year
2023:
Rs. in “000”
Sales 421,200
Cost of sales (273,780)
Gross profit 147,420
Admin & Selling Expenses (64,290)
Finance Charge (47,220)
Total expenses (111,510)
Other income 5,700
Profit Before tax 41,610
Additional information:
i. The above accounts have been prepared on cash basis and stock-in-trade has been
valued on the prime-cost method. However, the partners want to change the method of
accounting from cash basis to accrual basis. In this respect, following information has
been gathered:
Opening Closing
balances balances
Rupees in “000’
Stock-in-trade using prime-cost method 15,600 22,500
Stock-in-trade using absorption-cost method 17,700 26,400
ii. Cost of goods sold includes cost of used machinery imported from China on 31 July 2022
amounting to Rs. 6,330,000. The cost includes payment of custom duty of Rs. 270,000
and income tax of Rs. 330,000 to the Collector of Customs.
iii. Administrative and selling expenses include:
• Payment of Rs. 114,000 to a local hotel for holding annual eid-milan party for the
employees, key customers and their families.
• Payment of a fixed monthly remuneration of Rs. 450,000 to each partner.
• Payment of Rs. 540,000 for purchase of accounting software on 1 January 2023. The
software is expected to be used for fifteen years.
iv. Financial charges are net of interest income of Rs. 1,080,000 (net of tax @ 10% deducted
by the bank), earned by the firm on its savings accounts.
Required: Under the provisions of Income Tax Ordinance, 2001 and Rules made thereunder,
compute the total income, taxable income and tax payable by AZA using accrual basis of
accounting. (10)
Page 1 of 6
(b) Besides the share of income from AZA, Asad has received the following amounts from his
employment with Zahid Pakistan Limited (ZPL) during the tax year 2023:
(i) A monthly salary of Rs. 600,000.
(ii) Reimbursement of Rs. 1,050,000 for actual cost of medical services for him and his
dependents, from an insurance company, under the health insurance policy.
On 31 March 2023, he purchased a car from ZPL for Rs. 332,400. The market value of
this car on 31 March 2023 was Rs. 750,000.
Required: Compute total income, taxable income and tax liability of Asad for Tax year 2023.
(07)
Q.2 (a) What is greenfield industrial undertaking? Discuss the tax benefits available to such
undertakings? (05)
(b) Gillani and Company (GC), a sole proprietor, is dealing in various consumer products in
Pakistan.During the year ended 30 June 2023, GC’s taxable income for the year was Rs. 1.6
million.
Required:
Under the provisions of the Income Tax Ordinance, 2001 compute the amount of net income
taxpayable by GC and amount of income tax to be carried forward, for the tax year 2023, in
each of the following situations:
(i) GC’s sales were Rs. 122,500,000 inclusive of sales tax.
(ii) GC’s sales were Rs. 111,000,000 inclusive of sales tax. (04)
(c) On 1 December 2022 Xing ping citizen of china was appointed by a Chinese company as a
technical director for Pakistan. He has provided you the following details.
Arrival in Pakistan 15 December 2022

Joined office in Pakistan 20 December 2022
Visit to Dubai on an official trip 21-30 March 2023
Visit to South Korea for vacations 12-21 April 2023
Visit to northern areas of Pakistan for personal trip 4-9 June 2023
In view of the provisions of the Income Tax Ordinance, 2001 and related Rules thereunder,
comment on the residential status of Xing ping for the tax year 2023. (03)
Q.3 Asif a resident individual, is working as researcher at Khawaja Institute (KI) which is a non-profit
research institution and is duly recognized by Higher Education Commission. KI is entirely owned
and funded by Burger Limited (BL), a company listed on the Pakistan Stock Exchange Details of
his monthly remuneration during the year ended 30 June 2023 are given below:
Rupees
Basic salary 400,000
Medical allowance 40,000
Fair market rent of accommodation 200,000
In addition to the above, he was also provided the following:

• Health insurance for Sageer and his dependents as per the terms of employment. For this
purpose, KI is paying annual insurance premium of Rs. 80,000.
• Provident fund contribution of Rs. 30,000 per month to a recognized provident fund. An equal
amount was also contributed by Sageer to the fund.
Additional Information
i. On 1 July 2022, Sageer was granted an option to acquire 10,000 shares in ZL at a price of Rs.
112 per share under an employee share scheme. Sageer bought the option on the same date
by paying Rs.200,000 to KI when the fair market value of the option was Rs. 250,000. He
exercised the option on 30 September 2022 when the fair market value was Rs. 150 per
share.
Page 2 of 6
ii. As per the scheme, he was not allowed to sell or transfer the shares before 31 December
2022. On 31 December 2022, the fair market value of shares was Rs 162. On 30 May 2023,
he sold 5,000 of these shares at Rs.145 per share.
iii. On 1 July 2022, Sageer obtained an interest free loan of Rs 2,500,000 from KL in exchange
for which he agreed to waive the interest receivable on his provident fund balance
maintained with KI. Interest provided on provident fund balance for the year was 8%.
iv. On 31 August 2022, he received leave encashment of Rs. 200,000 relating to previous year.
v. During the year, tax of Rs. 200,000 was deducted at source by KI.
Other information relevant to tax year 2023;

(i) On 15 January 2023, he sold a shop situated in Karachi for Rs. 15,000,000. He had purchased
this shop in 1 July 2021 for Rs. 19,000,000 out of which Rs. 5,000,000 was paid in cash.
(ii) On 1 March 2023, he sold a residential plot situated in Faisalabad for Rs. 18,000,000. The
plot was inherited from his father in December 2017. Purchase price of the plot was
8,000,000.
(iii) In June 2020, Sageer independently developed learning courses for sale through a web-
based marketplace managed by a company situated outside Pakistan. On 25 June 2023, he
received USD 5500 into his dollar account from sale of these courses. Withholding income
tax @ 9% was deducted from the receipt as per the income tax laws of the foreign country.
Relevant exchange rates were as follows:

25 June 2023 USD 1 = PKR 284
30 June 2023 USD 1 = PKR 288
Average exchange rate for June 2023 USD 1 = PKR 250
(iv) 1 June 2023, Sageer paid Rs. 3,500,000 as donation to a non-profit organization listed in the
13th Schedule of the Income Tax Ordinance, 2001.
Required:
compute the taxable income and net tax payable by or refundable to Sageer for the year ended 30
June 2023. Show all relevant exemptions, exclusions and disallowances. (18)
Q.4 (a) Shubina is dissatisfied with the order issued by the Comm. (Appeals) and wants to file an
appeal to the Appellate Tribunal because payment of this amount will cause hardship to her.
Required:
Under the provisions of the Income Tax Ordinance, 2001
i. state the time period within which an appeal may be filed by Shubina AppellateTribunal.
(01)
ii. Discuss different types of orders that the Appellate Tribunal may make for
disposing of an appeal. (01)
iii. explain what action(s) the Appellate Tribunal may take for ensuring that no undue
hardship will be caused to Shubina because of the payment of this demand. (01)
iv. discuss the option(s) available to Shubina for defending her case, if the Appellate
Tribunal issues an order confirming the amended assessment order issued by the
Comm. (Appeal) (01)
v. Describe the formation of Appellate Tribunal. (03)
(b) State the time period within which the original or the previously amended assessment order
can further be amended. (03)
(c) What is Special Audit Panel? Briefly discuss its provisions under Income Tax Ordinance. (04)
Q.5 A resident person owning capital Assets in Pakistan will be taxed on 5% of FMV of capitalassets
situated in Pakistan give exceptions to the rule stated above. (06)
Page 3 of 6
Q.6 (a) Under the sales tax Act 1990 Rules briefly describe temporary sales tax registration. Also
state the rights obligations and responsibilities of a person holding temporary registration.
(05)
(b) Discuss the term “cottage industry” and taxability of supplies of cottage industry. (03)
(c) Under what circumstances the person making the taxable supply shall be jointly and severely
liable with the person receiving taxable goods? (03)
Q.7 Hashir association (HA) is registered under the sale Tax Act, 1990 MA, is engaged in the business
of manufacturing and supplying of fast moving consumer goods. Following information is
available from HA's records for the month of August 2023:
Purchases
Taxable good from registered person 9,920,000
Taxable good from unregistered person 2,800,000
Exempt good from unregistered person 1,040,000
Supplies
Taxable good to registered person 17,390,000
Taxable good to unregistered person 3,120,000
Exempt good to unregistered person 3,480,000
Export of taxable good to UAE 2,600,000
Export of exempt good to UAE 3,800,000
Additional information
(i) taxable goods from registered persons include:
• materials worth Rs. 586,000 which were exclusively used for manufacturing taxable
supplies
• materials worth Rs, 1,350,000. which were exclusively used for manufacturing export
related goods.
• goods worth Rs. 300,000 which were purchased in cash from a supplier.
• 1000kg of detergents purchased at a cost of Rs720,000 in one kg packing covered under
Third Schedule. Retail price of detergent per kg is Rs.1800 By the end of August 2023
600 kg were supplies to an unregister wholesaler at the price of 1580 per kg
(ii) Taxable good supplied to unregistered include goods worth Rs. 640,000 which were sold to
a customer who did not provide CNIC or NTN detail these good were purchased from a
registered supplier for Rs 550,000 during August 2023.
(iii) Following fixed assets were purchased during the month of August 2023;
Fixed assets Purchased cost Usage
Machine A 4,000,000 To ensure quality standard of packing for export
Machine B 6,000,000 To manufacture taxable (local) as well as exempt
(local) good
Furniture and 2,000,000 To use in office premises
fitting
(iv) Electricity bill of Rs. 1,918,900 was paid in cash The bill was inclusive of sale tax of Rs.
308,500.
(v) Sales tax credit brought forward from last month amounted to Rs. 2,275,160,
(vi) Input tax of Rs. 372,000 pertaining to purchase made on 1 February 2023 was inadvertently
remain unclaimed,
All the above figures are exclusive or sales tax. except where it is specified otherwise, Sales
payable at the rate of 18%.
Required:
ln the light of the provisions of Sale Tax Act. 1990 and Rules made thereunder, compute the
amount or sales tax payable by or refundable to HA and input tax to be carried forward, if any.
For the tax period August 2023. (15)
Page 4 of 6
Q.8 (a) State one objective of tax laws in each of the following independent cases:
i. In Finacial year 2023, FED on cigerattes has been increased to 154%
ii. Zero rating export goods under the Sales Tax Act, 1990
iii. FED on business class and First class, air tickets has been increased to 20%
iv. Tax on cash deposit/withdrawal by non-filer
v. Introduction of tax holiday period for construction related industries
vi. Decrease in tax rate for online sales
vii. Tax credit to persons employing fresh graduates
viii. Allow expenditure on research and development (04)
(b) Under the Constitution of Pakistan, briefly describe formation of National Finance
Commission. Briefly describe its duties? (03)
(THE END)
Page 5 of 6
Tax Rates
Division1. For individual non-salaried case/AOP

Taxable Income Rate of Tax
1. Up to Rs. 600,000 0%
2. Rs. 600,001- Rs. 800,000 5% of the exceeding Rs. 600,000
3. Rs. 800,001 - Rs. 1200,000 10,000 + 12.5% of the amount exceeding Rs. 800,000
4. Rs. 1200,001 - Rs. 2400,000 60,000 + 17.5% of the amount exceeding Rs 1,200,000
5. Rs. 2400,001 - Rs. 3,000,000 270,000 + 22.5% of the amount exceeding, 2,400,000
6. Rs. 3,000,001 - Rs. 4,000,000 405,000 + 27.5 % of the amount exceeding 3,000,000
7. Rs. 4,000,001 - Rs. 6,000,000 Rs. 680,000 + 32.5% of the amount exceeding Rs 4 m.
8. Over Rs. 6,000,000 Rs. 1,330,000 + 35% of the amount exceeding Rs 6 m.
Division 2 For individual salaried case.

Taxable Income Rate of Tax
1. Up to Rs. 600,000 0%
2. Rs. Rs. 600,001- Rs. 1,200,000 2.5% of the exceeding Rs. 600,000
3. Rs. Rs. 1,200,001- Rs. 2,400,000 15,000 + 12.5% of the amount exceeding 1,200,000
4. Rs. Rs. 2,400,001- Rs. 3,600,000 165,000 + 20% of the amount exceeding 2,400,000
5. Rs. 3,600,001 - Rs. 6,000,000 405,000 + 25% of the amount exceeding, 3,600,000
6. Rs. 6,000,001- Rs. 12,000,000 1,005,000 + 32.5% of the amount exceeding 6 m
7. Exceeding Rs. 12,000,000 Rs 2,955,000 + 35% of the amount exceeding Rs 12 m
Initial allowance 25%Depreciation rates

P&M 15%
Computer 30%
Motor Vehicle 15%
Building 10%
Tax on Capital Gain under Sec 37 A 12.5%
Minimum tax under section 113.

The minimum tax as percentage of the person’s turn over for the year is 1.25%
Tax rate of Capital gain on immovable property
S.no Holding period Open plot Constructed Flats

property
1. does not exceed 1 year 15% 15% 15%
2. Exceeds 1 year but up to 2 years 12.5% 10% 7.5%
3. Exceeds 2 years but up to 3 years 10% 7.5% 0%
4. Exceeds 3 years but up to 4 years 7.5% 5% -
5. Exceeds 4 years but up to 5 years 5% 0% -
6. Exceeds 5 years but up to 6 years 2.5% - -
Exceeds 6 years 0%
Page 6 of 6
TAX - Mock
Suggested Answers
Certificate in Accounting and Finance – Autumn 2023
Solution 1(a)
AZA & Co.
Computation of total income taxable income & tax payable
Marking plan
Rs.
Profit before tax 41,610,000
Add:
(1)
Closing stocks (Absorption-marginal) (26,400,000-22,500,000) 3,900,000
(1)
Cost of plant 6,330,000
(1)
Monthly remuneration to partners (450,000*3*12) 16,200,000
(1)
software 540,000
LESS
(1)
Initial Allowance 6,000,000*25% (1,500,000)
(1)
Depreciation of plant (6,000,0000-15,00,000)*15% (675,000)
(1)
Amortization of software (540,000÷15)*181÷365 (17,853)
Finance charges
Taxable income
I (1,080,000)
65,307,147
(1)
SB
Tax liability under NTR (1,330,000+ 35% x (55,087,150) 22,087,501
(1)
Tax on profit on debt (SBI) (1,080,000/.90)*15% 180,000
Total tax liability 22,267,501
(.5)
Advance tax (330,000)
(.5)
Tax deducted on profit on (120,000)
Tax payable 21,817,501
Profit after tax deduction of AOP 43,489,464
Ali (43,489,464/3) 14,496,550
Zohaib 14,496,550
Asad 14,496,550
Solution 1(b)
ASAD
TAXABLE INCOME & TAX LIABILITY
FOR TY 2023
Income from salary
Basic salary (600,000*12) 7,200,000 (1)
Reimbursement of medical service (as per the term of employment) - (1)
Car transferred (750,000-332,400) 417,600 (1)
Taxable income 7,617,600
Add: share of profit from AOP for rate purpose (1a) 14,496,550 (1)
Taxable income for rate purpose 22,114,150 (1)
Tax liability [(1,330,000 + (22,114,150 - 6,000,000) x 35% 6,969,742 (1)
Tax liability on actual Taxable income (6,969,742/22,114,150 x 2,400,920 (1)
7,617,600)
Page 1 of 7
TAX - Mock
Suggested Answers
Solution 2(a)
“Greenfield industrial undertaking” means-

• A new industrial undertaking which is:
✓ Setup on land which has not previously been utilized for any commercial, industrial or manufacturing
activity and is free from constraints imposed by any prior work; (1)
✓ Built without demolishing, revamping, renovating, upgrading, remodeling or modifying any existing
structure, facility or plant; (1)
✓ Not formed by the splitting up or reconstitution of an undertaking already in existence (1)
✓ Using any process or technology that has not earlier been used in Pakistan and is so approved by the
Engineering Development Board; (1)
• Is approved by the Comm.
Greenfield industrial undertaking falls within the definition of eligible persons and the benefit available to
the eligible person is a tax credit of 25% of the eligible investment. This tax credit will be available against
normal tax payable including minimum tax and final taxes. Unadjusted amount of tax credit may be carried
forward to 2 subsequent tax years. (1)
Solution 2(b)
I Computation of tax liability of Gillani & Co.

For the tax year 20X1
Income tax payable under normal tax regime

Situation 1 Situation 2
--------- Rupees ---------
SB
Taxable income 1,600,000 1,600,000
Income tax
60,000 + (1,600,000-1,200,000) x 17.5% A 130,000 130,000 (1)
Income tax payable under minimum tax
Gross sales 122,500,000 111,000,000
Less: Sales tax (18/118) (18,686,440) (16,932,203) (1)
103,813,560 94,067,797
Turnover tax u/s 113 @ 1.25% B 1,297,670 *N/A (1)
Tax liability of GC (Higher of A and B) 1,297,670 130,000
Carried forward of excess tax 1,167,670 - (1)
*Because turnover is less than Rs. 100 million.
Solution 2(c)
The number of days Xing Ping (citizen of china) spent in Pakistan is less than 183 days so his status will be
non-resident. (1.5)
Months Days
December 2022 (15-12-16 is also included) 17 (.5)
January 2023 31
February 2023 28
March 2023 (21+2) 23 (.5)
April 2023 (12+10) 22 (.5)
May 2023 31
June 2023 30
Total 182
Page 2 of 7
TAX - Mock
Suggested Answers
Solution 3
Mr. Asif
COMPUTATION OF TAXABLE INCOME AND TAX LIABILITY
TAX YEAR 30 JUNE 2023
Income from salary (w-1) 8,390,000
Capital gain (w-2) 11,000,000
Income from business (W-3) 1,716,484 (2)
Total Income 21,106,484
Less: Capital gain taxable as SBI (11,000,000) (.5)
Tax liability under NTR (1,005,000 +32.5% x 4,106,484) 2,339,607
Less: Full time teacher Allowance (1,781,750 x 25%) (445,438) (1)
1,894,169
Less: Foreign Tax Credit -Lower of (154,483) (2)
Average Rate (1,894,169/10,106,484 x 1716,484) = 321,705
Actual (5500 x 284)/.91 x 9%) = 154,483
Tax liability 1,739,686
Tax credit on Donation (1,739,686/10,106,484 x 3,031,945) (521,905) (1)
*Lower of
30% of 10,106,484
Actual
I 3,031,945
3,500,000
SHOP holding period 1-2 years (1,000,000 x 10%)
PLOT holding period 5-6 years (10,000,000 x 2.5%)
Tax withheld by KL
100,000
250,000
(200,000)
(.5)
(.5)
SB
Tax Payable 1,367,781
Capital loss on securities c/f for 3 years (W-2.1) 85,000 (1)
(W 1) salary
Basic salary (400,000 × 12) 4,800,000 (.5)
Medical allowance (40,000 × 12) 480,000 (.5)
Accommodation Higher of 2,400,000 (1)
- Fair market value (200,000*12) = 2,400,000
- 45% of basic salary (45% x 4,800,000) =
2,160,000
Health insurance (medical facility given by employer is exempt) - (.5)
ER contribution to provident fund 360,000 210,000 (1)
Less: exempt upto lower of (150,000)
(1/10*4,800,000)480,000 or 150,000
Employee share scheme (w-1.1) 300,000
Interest free loan N-1 - (1)
Leave Encashment 200,000 (.5)
Income under the head salary 8,390,000
(W-1.1) Employee share scheme
Fair market after the restriction period (162x10,000) 1,620,000 (.5)
Cost of option (200,000) (.5)
Exercise price (112x10,000) (1,120,000) (.5)
300,000
(W 2) Capital Gain
Gain on sale of shop in Karachi [15M-14M (19-5)] 1,000,000 (1)
Gain on sale of residential plot in FSD (18M-8M) 10,000,000 (1)
11,000,000
(W-2.1) Sale of Shares

Sale Proceed (145x5,000) 725,000
Cost of Option (100,000)
Cost of Shares (112 x 5,000) (560,000)
Amount already taxed under the head Salary (300,000/2) (150,000)
Capital Loss c/f (85,000)
Page 3 of 7
TAX - Mock
Suggested Answers
(W-3) Income from business [(5,500 x 284)/.91] = 1,716,484
N-1 As Sagheer has agreed to waive interest receivable on his provident fund balance maintained with KL.
Therefore, interest on loan obtained from KL will be exempt.
N-2 A penalty pf 5% on the amount of cash given to purchase the immovable property will be imposed. i-e
(5,000,000 x 5%) 250,000
Solution 4(a)
i. Shubina can file an appeal with APPELATE TRIBUNAL within 60 days from the date of service of decision
of comm.(appeal).
ii. In disposing of an appeal, the APPELATE TRIBUNAL may:
▪ Where the appeal relates to an assessment order, the Appellate Tribunal may make an order to
- affirm, modify or annul the assessment order; or
- Place the case to the Comm. or Comm. (Appeals) for further enquiry.
▪ Where appeal relates to decision other than assessment, Tribunal may make an order to affirm, vary
or annul the decision.
▪ The Tribunal can only increase an assessment or decrease refund after opportunity of showing cause
is provided to taxpayer.
iii.
I
On receiving application, if Tribunal considers that the recovery of tax (which is also upheld by the Comm.
(Appeals)), shall cause undue hardship to taxpayer, the Tribunal may stay recovery of tax up to 180 days
and will cease to have effect on the expiration of 180 days. It will be done after providing Comm. an
opportunity of being heard. In computing the aforesaid period of 180 days, the period, if any, for which
recovery of tax was stayed by a High Court shall be excluded
SB
iv. Shubina may refer this case to high court within the 90 days of the order of the Appellate Tribunal.
However, If the order relates to question of fact, the decision of the Appellate Tribunal shall be final.
v. The Appellate Tribunal shall consist of a chairperson and judicial and accountant members appointed by
the Prime Minister.
Person may be appointed as a judicial member if he
- Has exercised the powers of a District Judge and is qualified to be a Judge of a High Court;
- Is or has been an advocate of a High Court and is qualified to be a Judge of the High Court;
Person may be appointed as an accountant member if he is:
- OIR equivalent to the rank of Chief Comm.
- Comm. or Comm. (Appeals) having at least 3 years’ experience.
- CA/CMA if he has practiced professionally for at least 10 years.
Federal Govt. shall appoint a member of Tribunal as Chairperson and, except in special circumstances, he
should be a judicial member.
Solution 4(b)
Further Amendment of assessment (1.5 mark per bullet)
Comm. is also empowered to amend further as many times as may be necessary, the original assessment order
as amended previously within the later of:
▪ 5 years from the end of the financial year in which the original assessment order is issued by the Comm.; or
▪ 1 year from the end of the financial year in which the amended assessment order is issued.
Solution 4(cv)
Special Audit Panel (.5 mark per bullet)
▪ Board may appoint as many special audit panels as may be required to conduct an audit, including a forensic
audit of the income tax affairs of any person and class of person & the scope of such audit shall be as
determined by the Board or the Comm.
▪ The panel shall comprise of any two or more members from an OIR, firm of CA or CMA or any other person
as directed by the Board.
▪ The Panel is headed by Chairman who shall be an officer of IR.;
▪ Powers for the purpose of conducting an audit shall only be exercised by an OIR who is member of the panel
& authorized by the Comm.
Page 4 of 7
TAX - Mock
Suggested Answers
▪ Where a person fails to produce any, documents and records, required to be maintained for audit the Comm.
may make best judgment assessment & Assessment already made or treated to have been made shall be of
no legal effect.
▪ If any member of the panel other than Chairman, is absent from conducting an audit, the audit conducted by
the special audit panel shall not be invalid or be called into question merely on account of such absence;
▪ Functions performed by the OIR as members of special audit panel to conduct audit, shall be treated to be
performed by special audit panel
▪ Board may prescribe the mode and manner of constitution, procedure and working of the special audit
panel.
Solution 5 (1 mark per bullet)

▪ one immovable property owned by the resident person
▪ self-owned business premises from where the business is carried out by the persons appearing on the active
taxpayers’ list at any time during the year
▪ self-owned agriculture land where agriculture activity is carried out by person excluding farmhouse and
land annexed thereto
Note: Farmhouse means a house constructed on a total minimum area of 2000 square yards
with a minimum covered area of 5000 square feet used as single dwelling unit.
▪ immovable property allotted to:
I
✓ a shaheed or dependents of a shaheed belonging to Pakistan Armed Forces.
✓ a person or dependents of the person who dies while in the service of Pakistan armed
forces or Federal or provincial government.
✓ a war wounded person while in service of Pakistan armed forces or Federal or provincial
government or
SB
✓ an ex-serviceman and serving personnel of armed forces or ex-employees or serving
personnel of Federal and provincial governments, being original allottees of the capital
asset duly certified by the allotment authority.
▪ Any property from which income is chargeable to tax under the Ordinance and tax leviable is paid thereon
(for example property subject to rental income).
▪ Immovable property in the first tax year of acquisition where withholding tax on the acquisition has been
paid.
▪ Where the fair market value of the capital assets in aggregate excluding the capital assets mentioned above
does not exceed Rs 25 million.
▪ Immovable property owned by a provincial government or a local government.
▪ Immovable property owned by a local authority, a development authority, builders and developers for land
development and construction.
Solution 6 (a)
▪ Where a person files application for sales tax registration as a manufacturer without having installed
machinery, for the purpose of import of machinery to be installed by him, temporary registration as
manufacturer shall be allowed to him for a period of 60 days subject to furnishing of the complete list of
machinery to be imported along with Bill of Lading (BL) or Goods Declaration (GDs). (1)
▪ The temporary registration shall be issued by the computerized system within 72 hours of filing of the
complete application. (1)
▪ After receiving temporary registration, the person shall be allowed to import plant, machinery and raw
materials, etc.as a manufacturer, subject to submission to the customs authorities of a post-dated cheque
equal to the difference in duties and taxes to be availed as a manufacturer. (.5)
▪ If the above requirements are not fulfilled within 60 days of issuance of the temporary registration, such
temporary registration shall be disabled and the post-dated cheques submitted shall be encashed. (.5)
▪ Person holding temporary registration shall file monthly return but shall not issue a sales tax invoice and if
such invoice is issued, no input tax credit shall be admissible against such invoice. (1)
▪ No sales tax refund shall be paid to the person during the period of temporary registration and the amount
of input tax may be carried forward to his returns for subsequent tax periods. (1)
Solution 6 (b)
Cottage industry Cottage industry means a manufacturer concern, which fulfils each of following conditions
namely:
▪ Does not have an industrial gas or electricity connection (.5)
Page 5 of 7
TAX - Mock
Suggested Answers
▪ Is located in a residential area (.5)
▪ Does not have a total labor force of more than 10 workers; and (.5)
▪ Annual turnover from all supplies does not exceed Rs 10 million (.5)
Local supplies of goods made by cottage industry are exempt from sales tax (6 th schedule). (1)
Solution 6 (c)
Where a Regd. person receiving a taxable supply from another Regd. person is in the knowledge or has
reasonable grounds to suspect that some or all of the tax payable in respect of the goods supplied would go
unpaid, such person as well as the person making the taxable supply shall be jointly and severally liable for
payment of such unpaid amount of tax. The burden to prove this shall be on the tax department.
The Board may exempt any transaction or transactions from the provisions of this section. (3)
Solution 7
Hashir Association
Computation of Sales Tax Payable/Refundable
For the tax period August 2023
Output tax (W-1) 3,715,560
Input tax: Lower of:
b/f 2,275,160
For the period (1,460,143 +(586000x18%) (.5) 1,565,623
Input tax on PPE (W-4)

Sales tax refundable
I
90% of output tax (3,715,560 × 90%)
3,840,783
3,344,004 (3,344,004)
(924,192)
(552,636)
SB
Further tax payable to FBR (3,120,000 - 948,000) ×3% (2) 65,160
Export refund (452,714+720,000 + [1,350,000 × 18%]) (3) (1,415,714)
c/f input tax (3,840,783-3,344,004) (1) 496,779
W-1) OUTPUT TAX
Supplies to registered person 17,390,000
Supplies to unregistered person 3,120,000
3rd schedule (1800-1580) × 600 132,000 (1)
Total taxable supplies 20,642,000
Sales tax @ 18% 3,715,560
W-2) COMMON INPUT TAX

Purchase from registered suppliers 9,920,000
Material for taxable supplies (586,000) (1)
Material for export (1350,000) (1)
Purchase in cash (300,000) (1)
1000 Kg of Tea [1000×1,800(1,800,000 - 720,000)] 1,080,000 (1)
Sales for a unregistered person without NTN & CNIC (550,000) (1)
Total purchase 8,214,000
Sales tax @ 18% 1,478,520
Input tax related to purchase made in Feb 372,000 (1)
Sales tax on electricity bill 308,500 (1)
Common input tax 2,159,020
W-3) INPUT TAX ON PPE

Machine Alpha for export 4,000, 000
Sales tax @ 18% 720,000
Machine Beta for taxable & exempt supplies 6,000,000

Sales tax @ 18% 1,080,000
Page 6 of 7
TAX - Mock
Suggested Answers
W-4) APPORTIONMENT
Adjusted value of supply Common Input tax Input tax on PPE
Taxable 20,642,000 1,460,143 924,192
Exempt 3,480,000 246,163 155,808
Zero rated 6,400,000 452,714 -
Total 30,522,000 2,159,020 1,080,000
Note: Input tax cannot be claimed on office equipment (.5)
Solution 8 (a)
(i) Discourage use of cigarettes (.5)
(ii) Encourage exports (.5)
(iii) Fair distribution of wealth (.5)
(iv) Documentation of economy (.5)
(v) Encourage construction in the country (.5)

(vi) Encourage online transactions, with the aim to document the economy. (.5)
(vii) Reducing unemployment in the country (.5)
(viii) Encourage research and development for business purposes (.5)
Solution 8 (b)
▪
I
The President shall constitute NFC consisting of the Minister of Finance of the Federal Govt., the Ministers
of Finance of the Provincial Govts, and such other persons as may be appointed by the President after
consultation with the Governors of the Provinces. (1)
It shall be the duty of the NFC to make recommendations to the President as to: (2)
- Distribution between the Federation and the Provinces of the net proceeds of the taxes
SB
- Making of grants-in-aid by the Federal Govt. to the Provincial Govts;
- Exercise by the Federal Govt. and the Provincial Govts of the borrowing powers conferred by the
Constitution;
- Any other matter relating to finance referred to the Commission by the President.
Page 7 of 7
TAX-PRACTICES
SUGESTED SOLUTION
Answer No.1
Uzma
Income tax return for tax year 2023
Income from property Rupees

Income of minor – Rental income from bungalow (150,000×2) *300,000
Rental income from shop (200,000 × 2) 400,000
700,000
Less: Repair allowance (1/5th of rent) (140,000)
Total income from property 560,000
Income from Business

Income of minor – share of profit from AOP (For rate purpose only)
(4,000,000 × 2÷12) *666,667
Income from other sources

Gift received on birthday from cousins 250,000
Taxable Income of Uzma (560,000+250,000) A 810,000
Income for rate purpose (810,000 + 666,667) B 1,476,667
Tax on 1,200,000 60,000

Tax on remaining at 17.5% 48,417
Tax liability for rate purpose C 108,417
Tax payable by Uzma A×C÷B 59,470
*Note: Sara may include these income in her return.
Shariq
Income tax return for tax year 2023
Rupees
Capital Gain
Gain on disposal of assets – non recognition rule -
Income from property

Rental income from bungalow (150,000 × 10) 1,500,000
Rental income of shop (200,000 × 10) 2,000,000
3,500,000
Less: Repair allowance (1/5th rent) (700,000)
2,800,000
Income from business
Salary from AOP – For rate purpose only 1,200,000
Share of profit from AOP – For rate purpose only (4,000,000×10/12) 3,333,333
4,533,333
Taxable income of Shariq without minor's business income 2,800,000

Add: Minor's Income from business - Sara's bakery (Since taxable income of Shariq is
higher than Uzma's, therefore Sara's business income from bakery will be added to
Shariq's taxable income) 800,000
Taxable income of Shariq A 3,600,000
Taxable income for rate purpose B 8,133,333
Tax on 6,000,000 1,330,000

Tax on remaining at 35% 746,667
Tax liability for rate purpose C 2,076,667
Tax liability of Shariq A×C÷B 919,180.33
Since Uzma is the legal representative of Shariq, she is liable to pay tax in respect of Shariq's income for the
tax year 2023.
The liability of Rs. 919,180 will be first charge on Shariq's estate.
Answer No. 2
1) Loan provided to CEO

The loan provided to the CEO, who is a shareholder of a private limited company as defined in the Companies Act,
2017, falls under the definition of dividend to the extent of accumulated profits of FLPL. Therefore, the addition of
interest income as deemed income on this loan is an incorrect treatment.
2) Sales to unregistered dealer

The inadmissible expenses attributable to sales made to an unregistered person amount to Rs. 73 million. This
calculation is derived as follows:
𝐴𝑚𝑜𝑢𝑛𝑡 𝑜𝑓 𝑑𝑒𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑐𝑙𝑎𝑖𝑚𝑒𝑑 𝑢𝑛𝑑𝑒𝑟 ‘𝑖𝑛𝑐𝑜𝑚𝑒 𝑓𝑟𝑜𝑚 𝑏𝑢𝑠𝑖𝑛𝑒𝑠𝑠’
𝑥 𝐴𝑚𝑜𝑢𝑛𝑡 𝑜𝑓 𝑠𝑎𝑙𝑒𝑠 𝑒𝑥𝑐𝑙𝑢𝑠𝑖𝑣𝑒 𝑜𝑓 𝑠𝑎𝑙𝑒𝑠 𝑡𝑎𝑥
𝑇𝑢𝑟𝑛 𝑜𝑣𝑒𝑟 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑡𝑎𝑥 𝑦𝑒𝑎𝑟
866 𝐖 − 𝟏
𝑥 106
1252
The amount of Rs. 73 million is less than 86.6 million (10% of 866), so it should be added back instead of Rs. 40
million on this account.
W-1: Amount of deduction claimed under income from business Rs. in million
Expenses (Given) 840
Accounting depreciation (51)
Tax depreciation 77
866
3) Gain on sale of showroom

The deduction of the accounting gain on the sale of showroom from the profit before tax is the correct treatment.
However, classifying this gain as ‘Capital gain’ (separate block of income) is incorrect. The showroom is not a capital
asset, rather it is a depreciable asset. Therefore, tax gain/loss on sale of showroom should be computed and
added/deducted to the profit before tax amount. The computation of gain/loss on sale of showroom is as follows:
Rs. in million
Sale proceeds 158
Less: Book value:
Cost (Consideration received treated as cost) 158
Tax depreciation [120 – 64(120×0.96)] (56)
(102)
Tax gain on sale of showroom 56
4) Government debt securities
Interest income on government debt securities by CFAK is subject to tax under the NTR regime instead of the FTR
regime. However, it should be classified under ‘Income from other sources’.
Regarding the treatment of the loss on the sale of government debt securities, deducting it from profit before tax is an
incorrect treatment. Instead, the loss should be added to the profit before tax. Further, since government debt securities
is classified as security defined in section 37A under the head of capital gain, setting off the loss on the sale of
government debt securities with the gain on sales of unlisted shares is not correct. The loss on the sale of government
debt securities can only be set off with securities mentioned in section 37A. Therefore, this loss should be carried
forward for the subsequent three tax years, in accordance with Section 37A.
5) Gain on sale of unlisted securities

The addition of the gain on the sale of unlisted shares into profit before tax is an incorrect treatment. Instead, it should
be deducted from profit before tax. Further, the gain on the sale of unlisted securities is not subject to tax under a
separate block of income. Instead, it should be subject to tax under the NTR regime classified under the head of capital
gain. Moreover, the entire gain should be subject to tax, rather than just 75% of the gain amount.
Accounting and tax depreciation
Adding back of accounting depreciation is the correct treatment. However, tax depreciation should be deducted last.
Before deducting tax depreciation, the b/f business loss should be taken into account.
Brought forward business losses and unabsorbed tax depreciation
The brought forward business loss related to the tax year 2016 could not be taken into account in the tax year 2023 as
business loss shall not be carried forward for more than six tax years. However, b/f business loss related to the tax
year 2020 can be set off against the current year’s income.
The brought forward unabsorbed tax depreciation should be set off against 50% of the income chargeable under the
head “income from business”, after setting off the brought forward loss. Consequently, the entire unabsorbed
depreciation of Rs. 186 million (being lower than 188 million) [376(W-2)×50%] instead of Rs. 93 million can be
adjusted against the income of this year.
W-2: Income from business Rs. in million

Profit before tax 562
Less: Other income (150)
Inadmissible expense (73+8) 81
Tax gain on showroom 56
Accounting depreciation 51
600
Less: b/f business loss – 2020 (224)
376
Taxable income:
In given calculation, the entire capital gain is deducted from total income to determine the taxable income, which is
incorrect rather it should be just Rs. 18 million on account of loss of sale of government debt securities that shall be
added back into total income to arrive at taxable income.
Answer No. 3
Heatwave Pakistan
Tax period May 2023
Computation of sales tax payable/refundable/carry forward
Taxable supply Amount of sales

Sales tax rate
(Rs. in million) tax (Rs. in
million)
Input Tax
Purchased auto-parts in retail packing 20 18% 3.6
(2.5×8)
Remaining purchases from registered suppliers 198 18% 35.64
(218–20)
Purchase auto parts from the unregistered taxpayer 40 (no input -
allowed)
Import of 40 electric cars 248 25% 62

(40×6.2)
Import of 25 heavy motorbikes in CBU condition 17.5 25% 4.38

(25×0.7)
Import of parts for manufacturing of motor cars 600 18% 108
Electricity bill 19 18% 3.42

(16+4–1)
Payment for software maintenance services 12 5% 0.6
Common input tax for the month 217.64
Add: Input Tax on Fixed Asses 500 18 90
Total input tax for the month 307.64
Output Tax
Supply of 32 imported electric vehicles 240 25% 60
(32×7.5)
Supply of 200 locally manufactured motor cars to 900 18% 162
registered persons (200×4.5)
Supply of motorcycles parts to non-active distributors* 10 18% 1.8
Supply of 1000 motorcycles to unregistered person 110 18% 19.8
(1,000×0.11)
Supply of 20 heavy motorbikes to unregistered person 15 18% 2.7
(20×0.75)
Total Taxable Supplies 1275 246.3
Exports of 300 motorcycles to Sri Lanka 45 Zero-rated -

(300×0.15)
Sale of 10 ambulance vehicles to a hospital run by a non- 90 Exempt -
profit organization (10×9)
Total output tax for the month 1,410 246.3
Sales Tax Liability Rs. in m Rs. in m

Output Tax 246.3
Less : Input Tax (Lower of)

90% of OP tax (246.3*0.9= 221.67)
Or
BF Input tax : 14
Input Tax for the period w-1 196.8 (210.8)
35.5
Less : Input Tax on Fixed Asset (81.38)

Input tax C/F on fixed asset ( 35.5-81.38 = 45.88)
Add: Further Tax (10*3%) 0.3
Sales Tax Payable 0.3
Sales Tax Refundable (6.94+2.88) (9.82)
W-1 Apportionment of Input Tax
Rs. in Millions
Value of Supply Common Input tax Input tax on Fixed Asset
Taxable Supplies 1275 196.8 81.38
Exempt Supplies 90 13.9 5.74
Zero Rated Supplies 45 6.94 2.88
Total 1410 217.64 90
Answer No. 4 a)
1) Since the sales tax is claimable on accrual basis, so the Input tax would be (8,000,000 x 18% = 1,440,000),
while 80% of the amount is paid but complete sales tax can be claimed in current month while payment
have to be made within 180 days
2) 30,000/113 * 13 = 3,451 Sales tax paid for services to courier company can be claimed
3) Sales Tax would be charged at (9,800 x 9,500 x 18% = 16,758,000) as these are fall under third schedule so
tax will be charged at retail price
4) Sales tax of (9,800 x 2,500 x 18% = 4,410.000) will be claimed as refund
5) Insurance will be ignored
6) Supply to EPZ for further manufacturing is charged at 0%, so the corresponding input tax will be claimed
as refund (8,000,000/5,000 = 1,600 x 1000 = 1,600,000 x 18% = 288,000)
7) Sales tax will be paid at the time of import will be amounting to Rs 750,000 (3m x 25%)
8) Sales Tax will be charged @ 25% in case of supply of imported goods (7,000,000 x25% =1,750,000)
Answer No. 4 b)
Since AJ is engaged in the supply of articles of jewelry and has a shop measuring more than 1000 square feet it falls
in the category of Tier 1 retailers and is required to be registered with the sales tax authorities.
Being a Tier 1 retailer, AJ will be required to file monthly sales tax returns and pay sales tax with the return as per
the relevant provision of the STA.
AJ is also required to integrate its retail outlet with the Board’s computerized system for real-time reporting of sales
in order to avoid the following consequences:
• In case, AJ does not integrate its outlet in the manner described above, the adjustable input tax for the
period shall be reduced by FBR
• AJ’s gas and electricity connections can be disconnected
Answer No. 4 c)
i) Input tax of Rs. 9 million (50m × 18%) was paid at the time of purchase of jewellery. However, input tax of
Rs. 7.92 (44m × 18%) can be claimed in the sales tax return for the month. Input tax of Rs. 1.08 million
(6m × 18%) cannot be claimed because it pertains to personal consumption.
Sales tax of Rs. 8.64(48m x 18%) million will be charged on supplies made through retail outlet. Jewellery
gifted by Nawab from the shop's inventory is not a taxable supply, therefore no output tax shall be paid by
NJ on this transaction.
ii) Hand-made jewellery has been purchased from a local unregistered manufacturer therefore no sales tax will
be charged to NJ on this purchase. However, Output tax of Rs. 2.7 million (18% × 15m) will be charged by
NJ to the customer.
iii) In the given exchange transaction, value of supply is Rs. 1.28 million (128,000× 10) being the open market
price. So output tax of Rs. 0.23 million [1.28m× 18%] shall be charged on sale of the jewellery. Input tax of
Rs. 0.184 million [18% × 1,024,000(128,000×8)] can be claimed by NJ.
Answer No. 5 a)
In the given situation, the following are the potential breaches of fundamental principles of the Code of Ethics for
Chartered Accountants:
Integrity:
Advising BPL to conceal its past tax evasion would raise doubts about HA’s integrity. Encouraging or assisting BPL
in continuing to conceal past tax evasion undermines this principle and compromises public trust in the fairness and
effectiveness of the tax system
Confidentiality:
While HA has a responsibility to maintain client confidentiality, she also has a duty to disclose tax evasion to tax
authorities or government authorities.
If there are legal obligations or regulatory requirements to disclose the illegal activities, it would be her first
responsibility to disclose this fact as per law.
Professional Behavior:
HA should prioritize compliance with tax laws. By assisting BPL in filing accurate tax returns without disclosing
past evasion, HA may be facilitating ongoing non-compliance,
which contradicts the duty to promote lawful behavior. Agreeing to not disclosing past tax evasion to obtain the
engagement might account for non-compliance with relevant laws and regulations of taxation.
Answer No. 5 b)
Within six months of the commencing day and thereafter at intervals not exceeding five years, the President shall
constitute a National Finance Commission consisting of the Minister of Finance of the Federal Government, the
Ministers of Finance of the Provincial Governments, and such other persons as may be appointed by the President
after consultation with the Governors of the Provinces.
Answer No. 6 a)
(i) Normal assessment:
If a taxpayer has furnished a complete return of income other than a revised return, the Commissioner shall be
treated to have assessed the income and tax due thereon.
Best judgment assessment:
• This type of judgment is made where a person fails to
▪ furnish return of income in response to notice of a commissioner; or

▪ furnish a return as required to be filed by air carrier or shipping companies; or
▪ furnish the wealth statement; or
▪ produce before the commissioner, or a special audit panel or any person employed by a
firm of chartered accountants or a firm of cost and management accountants, accounts,
documents and records required to be maintained or any other relevant document or
evidence that may be required by him for the purpose of making assessment of income
and determination of tax due thereon.
• Under any of the above cases, the Commissioner may, based on any available information or material and
to the best of his judgment, make an assessment of the taxable income of the person and the tax due
thereon.
(ii) Notice of discontinued business:
Sole proprietor shall give the Commissioner a notice in writing to that effect within fifteen days of the
discontinuance of business. He shall furnish a return of income for the period commencing on the first day of the tax
year in which the discontinuance occurred and ending on the date of discontinuance and this period shall be treated
as a separate tax year.
(iii) Following additional records are required to be kept by sole proprietor whose business income exceeding
Rs. 500,000 as compared to a sole proprietor whose business income is up to Rs. 500,000.
▪ In case of a wholesaler, distributor, dealer and commission agent, where a single transaction exceeds Rs.
10,000, the name and address of the customer;
▪ Cash book and/or bank book;
▪ General ledger or annual summary of receipts, sales, payments, purchases and expenses under distinctive
heads;
▪ Where a single transaction exceeds Rs. 10,000 with the name and address of the payee; and
▪ Where the taxpayer deals in purchase and sale of goods, quarterly inventory of stock-in-trade showing
description, quantity and value.
Answer 6 b)
i) Rubina can file an appeal with Commissioner (Appeals) within 30 days from the date of service of
notice of demand which is 31 August 2019.
ii) In disposing of an appeal, the Commissioner (Appeals) may:
▪ make an order to confirm, modify or annul/set aside the assessment order, after examining such
evidence as required by him respecting the matters arising in appeal or causing such further
enquires to be made as he deems fit; or
▪ in any other case, make such order as the Commissioner (Appeals) thinks fit.
iii) If the Commissioner (Appeals) is also of the opinion that payment of this amount will cause undue
hardship to Rubina he may, after affording an opportunity of being heard to the Commissioner against
whose order appeal has been made, stay the recovery of such tax for a period not exceeding thirty days
in aggregate. The Commissioner (Appeals), after affording opportunity of being heard to the
Commissioner against whose order appeal has been made, may stay the recovery of such tax for a
further period of thirty days, provided that the order on appeal shall be passed within the said period of
thirty day
iv) Rubina may appeal to the Appellate Tribunal (AT) against the order issued by the Commissioner
(Appeals) within sixty days of the date of service of order of Commissioner (Appeals).
Answer No. 7
Miss Mirchi.
Resident individual.
Tax Year, 2022
Computation of taxable income.
Rs. RS.
Income from salary.
Basic salary (400,000*12) 4,800,000
Living Allowance (200,000*12) 2,400,000
Medical Allowance (44,000*12) 528,000
Less exempt up to 10% of B.S (480,000)
48000 48,000
Message Chair 570,000
Super annuation Fund -
Total Salary 7,818,000
Income from property.
Forfeited Deposit 2,000,000
Rent (150,000-20,000) 130,000*12 1,560,000

Forfeited deposit (600,000*1/12) 60,000
3,620,000
Less Expenses.
1/5 of RCT (724,000)
Total income from property. 2,896,000
Income from Other source.
Lease of factory (1,500,000/12*11) 1,375,000
Less dep. (12,500)
1,362,500
RS. RS.
Income from capital gain.
Disposal of gold 750,000
Cost (350,000)
(35000) 365,000
insurance Claim. 900,000
less cost (350,000)
premium (24,000)
lawyer fee (50,000) 476,000
Disposal Of Shares U/S 37.
FMV/consideration. 803,000
Less
Commission (40,150)
Cost of shares (324,000)
Bonus shares (250*15) W-1 (3750) 435,000
Disposal of Shop
FMV 9,850,000
Less cost(9,000,000-5,750,000) (3,250,000) 6,600,000
Disposal of flat
FMV 4,300,000
Less cost (750,000) 3,550,000

Total income 23,502,600
Less sboi
flat (3,550,000)
shop ( 6,600,000)
U/S 37 A (435,100)
Total income under NTR 12,917,500
LESS ZAKAT (80,000)
Taxable income under NTR 12,837,500
TAX liability under NTR 3,723,125
Add tax on SBOI
U/S 37 A (435,100*12.5%) 54,388
Flat (3,550,000*0%) 0
Shop (6,600,000*10%) 660,000
Tax payable 4,437,513

Certificate in Accounting and Finance Stage Examination
August 19 ,2023
3 hour – 100 marks
Additional Reading Time – 15 minutes
CAF 2 -TAX PRACTICES

Mock
Instructions to examinee
(i) Answer All nine Questions
(ii) Answer in Black pen only
(iii) Attempt each Question on new page.
Question-1
Mr. Iqbal, joined as a Chief Engineer in a listed company Tameer Limited (TL) on 1 September 20X3.
He derived following emoluments during the tax year ended 30 June 20X4:
Rupees
Basic salary ( per month) 300,000
Milk allowance (per month) *10,000
* He bought milk of Rs. 7,000 per month.
In addition to the above emoluments, Mr. Iqbal was also provided the following:
(i) Bonus equal to one month basic salary. However, bonus amount was adjusted in proportion to
the duration of his stay in the company. The bonus amount was paid to him on 30 June 20X4.
(ii) A reimbursement of Rs. 36,000 in respect of driver‘s salary. Mr. Iqbal paid Rs. 60,000 to driver.
(iii) A fully furnished accommodation. The fair market value of the rent was Rs. 85,000 per month.
(iv) An amount of Rs. 50,000 was paid by TL to an approved pension fund.
(v) On 1 November 20X3, Iqbal obtained a loan of Rs. 7,000,000 @ 6% per annum. First installment
of Rs. 5,000,000 was repaid on 31 March 20X4 and remaining loan was waived by employer on
31 May 20X4.
Mr. Iqbal informed following further for the tax year 20X4:
(i) He received sales tax refund of Rs. 225,000 related to tax year 20X2. The amount included
Rs. 25,000 being compensation for delayed refund.
(ii) Iqbal started a partnership business with his elder brother on 1 February 20X4. Both of them
were sharing equally in the profit or loss of the business. The accounting profit of AOP is
Rs. 2,000,000 after adjusting monthly salary of Rs. 50,000 of Iqbal.
(iii) Annual rent of Rs. 800,000 is received from letting out a building on 1 Oct 20X3 to KK
Enterprise (including Rs. 5,000 per month for arranging two security guards for the building).
Following expenses were incurred by Mr. Iqbal in this year: Repairs Rs. 200,000, Fire insurance
premium Rs. 30,000, Ground rent Rs. 10,000, Security guard salary Rs. 8,000 and Interest of
Rs. 15,000 on a house loan.
(iv) During the year, Iqbal was surprised to receive Rs. 500,000 in cash (as gift) and a laptop worth
Rs. 200,000 from his wife. His wife holds National Tax Number.
(v) On 1 Jan 20X4, his bank account in UAE was credited with AED 49,500 (1AED = Rs. 72) for
dividend received from a UAE company. The amount is net off 10% tax. He brought 60% in
Pakistan.
(vi) On 1 July 20X3, Mr. Iqbal contributed Rs. 1,600,000 to an approved pension fund after obtaining
cash loan from his father of Rs. 300,000.
(vii) On 1 May 20X2 Iqbal received 3,000 shares, by way of a gift from his father, in Lucky Inc., a
company registered on Toronto Stock Exchange. On 1 January 20X0 his father had bought these
shares at a price of CAD 20 per share (equivalent to PKR 1,300 per share). The market value of
each share at the time of transfer to Iqbal was CAD 28 (equivalent to PKR 2,100 per share). On
15 June 20X4 Iqbal sold all shares in Lucky Inc. to an investor for CAD 32 per share and paid a
brokerage commission of CAD 0.2 per share to the stock broker. He also paid income tax of
CAD 1,500 to the tax authorities in Toronto. The exchange rate at the time of above transaction
was CAD 1 = PKR 90.
Required: Compute the income and tax payable by Mr. Iqbal for the tax year 30 June 20X4.
Note: Show all relevant exemptions, exclusions and disallowance (17)
Page 1
Question-2
King and Lamda (equal partners) are running a partnership firm in Pakistan since long named KL
Enterprise. Both Mr. King and Mr. Lamda are UK nationals. During current tax year King did not
visited Pakistan, however Lamda visited Pakistan twice for 10 days for taking business decisions.
Following information is extracted from KL‘s records for year ended 30 June 2016:
Rs.
Sales 90,000,000
Profit before taxation 45,385,000
Administrative and selling expenses include the following:
(i) Marketing expense of Rs. 90,000 in total paid to 10 persons equally in cash.
(ii) Legal expenses of Rs.1,000,000 in respect of a dispute over territorial rights.
(iii) Rs.3,000,000 paid in respect of an unsuccessful court case filed by customer.
(iv) Rs.2,600,000 contributed to a foreign pension fund maintained for employees.
(v) Rs.1,800,000 on 1.11.2015 to improve features of production department software. Life is
indefinite.
(vi) Rs.650,000 in respect of the cost of two ramps. The ramps were built for disabled persons.
(vii) Accounting depreciation and amortization amounts to Rs. 1,875,000.
(viii) Motor expenses as follows:
Total Cost of running Lamda‘s car. (It is used 70% for private journeys) 50,000
Cost of running another motor car used by the production manager 80,000
Parking fines paid to Government on production manager car 30,000
Financial charges include the following:
(i) Mark-up of Rs.1,200,000 paid on a loan from bank for advancing loans to employees.
(ii) Mark-up of Rs.9,000,000 on short term loan obtained for working capital.
Other income includes the following:
(i) Gain on sale of 30,000 shares in Blue listed company. These are sold for Rs.120 per share in
March 2016. KL purchased these shares in May 2015 at a cost of Rs.35 per share.
(ii) Rs. 0 gain for sale of vehicles to employees. Rs.2,450,000 is received from employees. The FMV
and tax WDV of cars was Rs.5,250,000 and Rs.3,320,000 respectively. These are sold at
accounting WDV.
(iii) Gain on sale of shares in ML (Pvt.) company. On 1.7.12 KL acquired 200,000 shares at Rs.50
per share. On 1.9.15 KL sold 100,000 shares at price of Rs.85 per share to a foreign investor. The
market value at that time was Rs.80 per share. On 1.2.16 KL sold remaining shares for Rs.75 per
share to a local investor. The market value at time of sale was Rs.78 per share. The gain recorded
in books is equal to actual sale proceeds less cost.
(iv) Bad debt recovery of Rs. 90,000 which was not previously allowed as deduction.
(v) Foreign source business income of Rs. 600,000.
Other information:
1. The assessed losses brought forward from tax years 2014 and 2015 were as follows:
2015 2014
-----Rupees-----
Business loss before depreciation 2,900,000 3,550,000
Unabsorbed tax depreciation 2,550,000 -
2. Tax paid on foreign income is Rs. 70,000.
3. Tax depreciation and amortization (except software and ramps) for TY 2016 is 1,500,000.
Required: Calculate income and tax payable by KL for year ended June 30, 2016. (show exclusions) (20)
Page 2
Question-3
a) Specify with reasons, whether the following independent acts may be considered as a tax evasion
or tax avoidance:
(i) In order to reduce his tax liability, Mr. Jaffer, a resident individual, paid a donation of
Rs. 100,000 to non-profit organanisation.
(ii) Sakhi Limited (SL) paid 50% of Ahmad‘s salary i.e. Rs. 50,000 in cash whereas the
remaining 50% of his salary was credited to his bank account. SL claimed Rs. 50,000 as
admissible deduction in its return of income.
(iii) In order to reduce her tax liability, Mrs. Shamim who runs her own business, paid higher
salary to her self, keeping in view that lower slab rates are applicable on salary income as
compared to income from business. (4.5)
b) Explain the provisions in constitution relating to Natural gas and hydro-electric power. (3.5)
Question-4
Khalida and Nasreen (K&N) is running business to manufacture beauty soaps and detergents with the
capital of Rs. 60 million. Khalida and Nasreen will share profits in the ratio of 70:30 respectively.
Following information is extracted from the records of K&N for financial year ended 30 June 2023.
Rupees in mill.
Total turnover (Excluding sales tax) 400
Cost of sales (180)
Gross profit 220
Operating expenses (78)
Interest expense (10)
Donation (12)
Other income 4
Profit before tax 124
(i) All sales are made to sales tax registered distributors except a sale of Rs. 157.3 million (inclusive
of sales tax @ 18% and further tax @ 3%) to Kabir Limited, an un-registered distributer.
(ii) Operating expenses include:
 salary of Rs. 5 million to Nasreen.
 Rs. 8 million loss on disposal of a machine. Machine was imported in TY 2021 for
Rs. 30 million (including Rs. 10 million custom duty and Rs. 5 million withholding tax).
A loan of 80,000 Pound was obtained on 1 March 2021 to finance the purchase and it
was fully repaid in same year on 1 May 2021. The disposal transaction took place on 1
March 2023 and the consideration received on disposal comprise of Rs. 20 million in
cash and a piece of land having fair value of Rs. 3 million. The fair value of machine at
time of disposal was Rs. 21 million.
(iii) Interest expense represent amount payable to Khalida on a loan utilized for business under an
agreement.
(iv) 20% Donations were made to charitable educational institutes, included in the Thirteenth
schedule of the Income Tax Ordinance, 2001. Remaining amount was given to Baji Saira a mutal
friend of the two who will help earthquake affected people in Turkey.
(v) Relevant exchange rates were as follows:
1 March 2021 1 Pound = PKR 315
1 May 2021 1 Pound = PKR 330
30 June 2021 1 Pound = PKR 325
Required: Calculate taxable income and tax payable by AOP for year ended 30 June 2023. Your
computation should start from sales figure. (10)
Page 3
Question-5
Under the provisions of the Income Tax Ordinance, 2001 briefly describe the following:
(i) Mr. Amjad has received a show cause notice under section 122 and has filed an offer of
settlement. The oversight committee has decided the case and the taxpayer is satisfied
with the Committee decision.
Required: What action is now required at taxpayer‘s end? (4)
(ii) There is a dispute of ownership regarding a house owned by Mr. Kamran. The rental
income earned from renting out the house is Rs. 6,000,000 in TY 2012. The Civil court
decided on 15 May 2020 that it the property of Kamran. Commissioner issued an
assessment order on 12March 2021.
Required: Is Commissioner justified in issuing the notice after lapse of so much time? (2)
(iii) High Court has decided a question of law in favour of tax payer. The Commissioner has
some of the years pending in respect of same issue. Later on in April 2020 supreme Court
decided the case against taxpayer.
Required: What is the power available to Commissioner in this regard relating to
pending year and by which date Commissioner can exercise this power? (2)
Question-6
In December 2016, Kamran signed a future contract with Anjum for the purchase of 500 shares of PEL at Rs.
32 per share. The delivery was expected to be made in March 2017. Anjum also agreed to repurchase the entire
lot at the price prevailing on the date of sale.
In March 2017 price of PEL shares decreased to Rs. 29 per share and Kamran sold the entire lot to Anjum
without taking delivery.
Calculate gain/(loss) and specify head of income in the books of Kamran? (3)
Question-7
i. Explain the provisions relating to limitation on setoff and carry forward of losses? (3)
ii. Whether an agent will be considered as ―permanent establishment‖ under Income Tax
Ordinance, 2001? (3)
iii. If a leasing company disposes off an asset to lessee how it will calculate the consideration
received? (1)
Page 4
Question-8
Ghumman Associates (GA), a sole proprietor business, is registered under the Sales Tax Act, 1990 and is
engaged in multiple businesses. GA has a factory located in Faisalabad. GA has allocated 20% of its
factory area for the residences of its workers. Following information has been extracted from GA‘s
records for the month of February 2023:
Rupees
Supplies
Taxable goods to registered customers 5,000,000
Exempt goods to registered customers 800,000
Taxable goods to un-registered customers 1,500,000
Exports of taxable goods to South Africa 1,800,000
Exports of exempt goods to Malaysia 500,000
Purchases
Taxable goods from registered suppliers 1,900,000
Taxable goods from un-registered suppliers 900,000
Imports (exclusive of 20% custom duty) 4,000,000
(i) Supplies of taxable goods to registered customers include:
 80 units of product Alpha sold to a registered customer on 5 February 2023 at a price of
Rs. 500 per unit but after 3 days a dispute arose and GA agreed to:
- Accept the return of 30% of goods on 12 Feb and
- Reduce the price of remaining units by Rs. 80 per unit
 20 cartons of 40 Kg tea to a registered customer for Rs. 150 per kg. The customer will
pay cheque of Rs. 40,000 and hand over a license having fair value of Rs. 65,000.
 Goods worth Rs. 450,000 were supplied to Shaukat Industries at a trade discount of 15%.
GA normally provides discount at same percentage.
 Goods worth Rs. 200,000 were supplied to un-registered distributor, Abbas. However,
his NTN/NIC was not demanded from him at the time of sale.
(ii) Supplies of taxable goods to unregistered customers include sales of Rs. 250,000 to a person who
will use these goods for decorative purposes in his house.
(iii) Purchases from registered suppliers include:
 Goods worth Rs. 500,000 purchased from Jatt Brothers. The goods were delivered to GA
on 15 December 2022. However, input could not be claimed in December due to non-
availability of invoice. The invoice was received on 5 February 2023.
 Purchase of sulphuric acid worth Rs.100,000 which is used in exempt goods exported to
Malaysia.
 Purchase of electronic items amounting to Rs. 70,000. 30% were of inferior quality and
were returned.
(iv) Rs. 90,000 of balances had been outstanding since 12 August 2022. 70% of these were settled on
15 February 2023 and the remaining will be paid on 15 March 2023.
(v) A debit note of Rs. 230,000 was issued to a supplier from whom purchases of Rs. 800,000 were
made on 12 March 2022.
(iv) A machine was acquired for Rs. 2,800,000. The machine is solely used for making exempt goods
for local sale.
(v) Sales tax of Rs. 150,000 has been paid for the supply of electricity to the factory of GA.
(vi) Construction material of Rs. 2,000,000 has been purchased during the month. 60% of the
material was used for renovation of the factory building and the remaining was sold at a mark-up
of 20% on cost. The goods are ready; however the customer has not yet picked up the goods due
to an emergency.
All the above figures are exclusive of sales tax, except where it is specified otherwise. Sales tax is payable
at 18%.
Page 5
Required:
In the light of the provisions of the Sales Tax Act, 1990 and Rules made thereunder, compute the amount
of sales tax payable by or refundable to GA and input tax to be carried forward, if any, for the tax period
February 2023. (17)
Question-9
Queen Limited (QL), a registered importer, exporter and manufacturer, is primarily engaged in the
manufacture and export of a wide range of goods. Following activities were carried out by the company
during the year:
(i) 60,000 kg of chemical, sold at a price of Rs. 140 per kg. The value of chemical fixed by the
Federal Board of Revenue (FBR) was Rs. 135.
(ii) Import of 1,000 kg of un-manufactured goods from Brazil. The value assessed by the customs
authorities at import stage amounted to Rs. 880,000. The Federal excise tax paid on import is
Rs. 30,000.
(iii) Storage batteries purchased at a price of Rs. 650,000. QL paid the amount via online transfer of
money into supplier‘s business bank account. However, this account has not yet been declared by
the supplier to the Commissioner Inland Revenue.
(iv) QL being exporter for sales tax purposes, filed an application for refund of Rs. 186,000 on
account of input tax paid on raw material exported to Iran. The refund is expected to be received
soon. QL is also required to pay a default surcharge of Rs. 25,000 to the income tax department
for late filing of monthly withholding tax statement.
(v) In July 2017 QL sold certain taxable goods worth Rs. 535,000 to an un-registered wholesaler at a
wholesale price of Rs. 50 per pack and collected further tax at the rate of 3% of the value of
supplies. In November 2017, the internal auditor pointed out that these goods had an actual sale
price of Rs. 65 per pack to which customer agreed also.
Required:
In the light of the provisions of Sales Tax Act, 1990 advise the management of the company as to the
chargeability/ adjustment of sales tax in each of the above situations. (10)
Page 6
Rates of Tax for Individuals andAssociation of Persons
(1) The rates of tax imposed on income of every individual and association of persons
except a salariedindividual shall be as set out in the following Table, namely:—
S. No Taxable Income Rate of Tax
1. Where taxable income does not exceedRs. 600,000 0%
2. Where taxable income exceeds Rs. 600,000 5% of the amount exceeding Rs. 600,000
but does not exceed Rs. 800,000
3. Where taxable income exceeds Rs. 800,000 Rs. 10,000 + 12.5% of the amount
but does not exceed Rs. 1,200,000 exceeding Rs. 800,000
4. Where taxable income exceeds Rs. 60,000 + 17.5% of the amount
Rs. 1,200,000 but does not exceedRs. exceeding Rs. 1,200,000
2,400,000
5 Where taxable income exceeds Rs. 2,400,000 Rs. 270,000 + 22.5% of the
but does not exceedRs. 3,000,000 amount exceeding Rs. 2,400,000
6 Where taxable income exceeds Rs. 405,000 + 27.5% of the
Rs. 3,000,000 but does not exceedRs.4,000,000 amount exceeding Rs. 3,000,000
7. Where taxable income exceeds Rs. 680,000 + 32.5% of the
Rs. 4,000,000 but does not exceed amount exceeding Rs. 4,000,000
Rs.6,000,000
Where taxable income exceeds Rs. 1,330,000 + 35% of the
8.
Rs.6,000,000 amount exceeding Rs. 6,000,000
(2) Where the income of an individual chargeable under the head ―‗salary‖ exceeds seventy-
five per cent of his taxable income, the rates of tax to be applied shall be as set out in the
following Table, namely:—
S. No Taxable Income Rate of Tax
(1) (2) (3)
Where taxable income does not exceed Rs. Rs. 0
1.
600,000
2. 2.5% of the amount exceeding
Where taxable income exceeds Rs. 600,000 but
does not exceed Rs. 1,200,000 Rs. 600,000
3. Where taxable income exceeds Rs. 1,200,000 but Rs. 15,000 + 12.5% of the
does not exceed Rs. 2,400,000 amount exceeding Rs. 1,200,000
4. Where taxable income exceeds Rs. 2,400,000 but Rs. 165,000 + 20% of the
5. Where taxable income exceeds Rs. 3,600,000 but Rs. 405,000 + 25% of the
6. Where taxable income exceeds Rs. 6,000,000 but Rs. 1,005,000 + 32.5% of the
7. Rs. 2,955,000 + 35% of the
Where taxable income exceeds Rs. 12,000,000
amount exceeding Rs. 12,000,000
Page 7
Rates of tax for immoveable property
Gain
S.No. Holding Period Open Constructed Flats
Plots Property
(1) (2) (3) (4) (5)
1. Where the holding period does not exceed one 15% 15% 15%
year
2. Where the holding period exceeds one year but 12.5% 10% 7.5%
does not exceed two years
3. Where the holding period exceeds two year but 10% 7.5% 0
does not exceed three years
4. Where the holding period exceeds three year 7.5% 5% -
but does not exceed four years
5. Where the holding period exceeds four years 5% 0 -
but does not exceed five years
6. Where the holding period exceeds five years but 2.5% - -
does not exceed six years
7. Where the holding period exceeds six years. 0% - -
Rates of tax for securities

Holding Period 2023 and
onwards
Securities acquired on Securities
or before 30.06.2022 acquired on or
after 01.07.2022
1. Where the holding period does not exceed one year 15%
2. Where the holding period exceeds one year but does
12.5%
exceed two years
3. Where the holding period exceeds two years but
12.5% 10%
does not exceed three years
Where the holding period exceeds three years but [Irrespective of the 7.5%
4. holding period]
does not exceed four years
Where the holding period exceeds four years but 5%
5.
does not exceed five years
Where the holding period exceeds five years but 2.50%
6.
does not exceed six years
7. Where the holding period exceeds six years 0%
Future commodity contracts entered into by 5%
8.
members of Pakistan Mercantile Exchange
Depreciation Rate
Assets Rate of
depreciation
Buildings (All types) 10%
Furniture and fittings, Plant and machinery – general, Motor vehicles and ships, 15%
Technical and professional books
Computers and allied items including printer, monitor and IT related plant and 30%
machinery
Aircrafts and aero engines 30%
Initial allowance Rate

Assets Rate
Plant and machinery 25%
Page 8
Suggested Solution CAF-02
Answer-1 Marks
Mr. Iqbal
Taxable Income and Tax thereon 0.25
TY 20X4
Income from salary (W-1) 6,866,000 0.25
Income from capital gain – FSI (W-3) 4,686,000 0.25
Income from property (W-2) 389,000 0.25
Income from other source - Foreign source dividend (W-6) 3,960,000 0.25
Income from other source (W-4) 862,000 0.25
Share of profit from AOP (W-5.2) 1,250,000 0.25
Taxable Income for rate purpose 18,013,000
Tax on above (1,330,000 + 35% x 12,013,000) 5,534,550 0.5
Actual tax (5,534,550 / 18,013,000) x 16,763,000 5,150,484 0.5
Less: Foreign tax credit (lower of): [Sec.103]

 Actual foreign tax (55,000 - 49,500) x 72 396,000 0.5
 Pakistani tax (5,150,484/16,763,000 x 3,960,000) 1,216,722 (396,000) 1
Less: Foreign tax credit (lower of): [Sec.103]

 Actual foreign tax 1,500 x 90 135,000 0.5
 Pakistani tax (5,150,484/16,763,000 x 4,686,000) 1,439,788 (135,000) 1
4,619,484
Less: Tax credit on approved pension fund [Sec.63] (5,534,550/18,013,000) x 1,600,000 (491,605) 1.5
C is lower of:
 1,600,000 or
 20% of 16,763,000= 3,352,600
Tax payable to Government 4,127,879 0.25
(W-1) Income from salary

Basic Salary [Sec.12(1)] (300,000x10) 3,000,000 0.25
Milk allowance [Sec.12(2)(c)] (10,000 x 10) 100,000 0.25
Bonus [Sec.12(2)(c)] (300,000 x 10/12) 250,000 0.25
Reimbursement of driver salary [Sec.12(2)(d)] 36,000 0.25
Accommodation (higher of)
- 45% of basic salary [Sec.13(12)] (3,000,000 x 45%) 1,350,000 0.5
- Fair Market Rent (85,000 x 10) 850,000 1,350,000 0.5
Contribution to approved pension fund by employer - 0.25
Interest benefit on loan outstanding [Sec.13(7)]
(7,000,000 x 4% x 5/12 + 2,000,000 x 4% x 2/12) 130,000 1
Loan waived by employer [Sec.13(9)] 2,000,000 0.25
6,866,000
(W-2)Income from property
Rentals (Adj. (iii)) [Sec.15(1)] 800,000 x 9/12 – (5,000 x 9) 555,000 0.5
Rent chargeable to tax 555,000
Less: Admissible expenses
- Repair allowance (1/5 x 555,000) (111,000) 0.25
- Fire insurance premium (30,000) 0.25
- Ground rent (10,000) 0.25
- Interest on loan (15,000) 0.25
389,000
Page 1
(W-3) Income from Capital Gain - FSI

Considered received on disposal of shares (3,000 x 32 x 90) 8,640,000 0.5
Less: Cost of acquisition (3,000 x 1,300) (3,900,000) 0.25
Less: Brokerage commission (3,000 x 0.2 x 90) (54,000) 0.5
4,686,000
(W-4) Income from Other Source

- Compensation for delayed refund [Sec.39(1)(cc)] 25,000 0.25
- Service in relation to building [Sec.39(1)(fa)] (5,000 x 9) – 8,000 37,000 0.25
- Gift received in cash 500,000 0.25
- Gift received – laptop from relative - 0.25
- Cash loan from his father [Sec.39(3)] 300,000 0.25
862,000
(W-5.1) Income from business - AOP

Accounting profit 2,000,000 0.25
Add: Inadmissible expenses
Salary to Iqbal (50,000 x 5) [Sec. 21(j)] 250,000 0.25
Income from business 2,250,000
(W-5.2) Taxation of Members

Divisible Income
Taxable Income of AOP 2,250,000
Share of profit
Iqbal Elder Brother Total
Salary (50,000 x 5) 250,000 - 250,000 0.25
Profit share (Equal Share) 1,000,000 1,000,000 2,000,000 0.5
Total 1,250,000 1,000,000 2,250,000
(W-6) Calculation of gross amount of dividend 0.75

Net Dividend = Gross dividend - Tax Deducted
49,500 =X - 10% of X
X = 55,000 AED
Dividend in PKR (55,000 x 72) = 3,960,000
Page 2
Answer-2
King and Lamda
Taxation of AOP (Resident) 0.5
Income and tax thereon
Rs in 000
Income from business Pakistan source (W-1) 34,452 0.5
Income from capital gain [S.37(3)] [100,000 x (85 – 50) + 100,000 x (78-50)] 6,300 1
Income from capital gain – separate block (W-1) 2,550 0.5
Income from business – FSI 600 0.5
Total Income 43,902
Less: Income from capital gain – separate block (2,550) 0.5
Taxable income 41,352
Tax payable 1,330,000 + 35,352,000 x 35% 13,703 0.5

Less: Foreign tax credit on income from business:
Lower of: [S.103]
a) Pakistan average rate of tax (13,703/41,352 x 600) 199
b) Foreign income tax paid 70 (70) 1
13,633
Add: Tax on securities (2,550 x 12.5%) 319 0.5
Tax payable to Government 13,952 0.5
(W-1) Income from business Pakistan source Rs. (000)

Profit before tax 45,385 0.5
Add: Inadmissible expenses
Individual payment of advertisement of Rs. 9,000 (90,000/10) (allowed) [S. 20(1)] - 0.5
Legal expense (being wholly and exclusively for business is allowed) [S. 20(1)] - 0.5
Unsuccessful court case (being wholly and exclusively for business is allowed) - 0.5
Contribution to unapproved pension fund being foreign [S.21(e)] 2,600 0.5
Capital expenditure for improvement of software wrongly expensed [S.21(n)] 1,800 0.5
Capital expenditure for building ramps wrongly expensed [S.21(n)] 650 0.5
Accounting Depreciation and amortization [S.22(1)] 1,875 0.5
Car running expense for private use [S.21(h)] (50 x 70%) 35 0.5
Production manager car running costs (allowed) [S.20(1)] - 0.5
Parking fines paid [S.21(g)] 30 0.5
Mark up bank loan (allowed) [S.20(1)] - 0.5
Mark up short term loan (allowed) [S.20(1)] - 0.5
Tax Gain on disposal of vehicles at market value (5,250 - 3,320) 1,930 0.5
Tax bad debt recovery [S.29] (W-2) 0
8,920
Less: Gain on sale of securities 30,000 x (120 – 35) 2,550 0.5
Accounting gain on vehicle 0
Gain on disposal of shares in ML 100,000 x (85 – 50) + 100,000 x (75-50) [S.37] 6,000 1
Accounting Bad debt recovery [S.29] 90 0.5
Foreign source business income 600 0.5
(9,240)
Income from Business before depreciation and amortization – PSI 45,065 0.25
Page 3
Less: b/f business loss before depreciation [S.57] ( 3,550 + 2,900) (6,450) 0.5
38,615
Less: Depreciation and amortization c/y (W-3) (1,613) 0.25
37,002
Less: unabsorbed depreciation and amortization b/f (lower) (2,550) 1
- Actual 2,550
- 50% of 37,002
34,452
(W-2) Tax bad debt recovery

Amount received 90
Less: Actual amount of bad debt 90
Less: Previously allowed as deduction (0) (90)
0 0.5
(W-3) Tax amortization, depreciation and initial allowance
Depreciation on ramp (building) [S.22] 650 x 10% 65 0.5
Amortization on improvement of intangible [S.24] **(1,800/25 x 243/366) 48 1
Tax amortization and depreciation on other assets 1,500 0.5
1,613
** In tax year 2016 in February there were 29 days [S.24(4)]
Answer-3
(a) (i) Mr. Jaffer paid charity to reduce the tax liability by availing tax credit available under
Income Tax Ordinance, 2001. Thus, this is tax avoidance.
(ii) Sakhi Limited paid 50% of the salary to Mr. Ahmed in cash, so that only 50% of salary
may be disclosed to tax authorities and tax burden on Mr. Ahmed may be reduced which
is against law. This is tax evasion.
(iii) Mrs. Shamim will pay lower rate tax on Income from Salary and will claim deduction of
salary under the head Income from business which is not allowed. This is tax evasion.
(1.5 marks each)
(b) Natural gas and hydro-electric power [161]
(i) (a) the net proceeds (receipts) of:
 Federal excise duty on natural gas charged at well-head and
 royalty collected by the Federal Government
shall not form part of the Federal Consolidated Fund and shall be paid to the Province
where well-head is located (1.5)
(b) the net proceeds of Federal excise duty on oil charged at well-head shall not form part of
the Federal Consolidated Fund and shall be paid to the Province where well-head is
located. (1)
(ii) The net profits earned from the bulk generation of power at a hydro-electric station shall be paid to
the Province. (1)
Explanation - "net profit" means revenue from supply of power less operating expenses (including taxes,
duties, interest, and depreciations and element of obsolescence).
Page 4
Answer-4
Khalida and Nasreen
Income and Tax Thereon
TY 2016 0.25
Rs. In 000
Income from business (W-1) 192.3 0.5
Taxable Income – NTR 192.3
Tax liability(Higher of)
- Tax under normal tax regieme (1,330,000 + 35% of 186,300,000) 66.5 0.5
Less: Tax credit = A/B x C = (66.5/192.3 x 2.4) (0.8) 0.75
C is lower of 2.4 and 20% of 192.3 0.25
65.7
- Tax on turnover (400 x 1.25%) 5 0.5
Payable to Government 65.7 0.25
(W-1) Income from business

Revenue 400 0.25
Less: Cost of sales (180) 0.25
Operating expenses (78 – 5 – 8) (65) 0.75
Interest expense (10 – 10) (-) 0.5
Donation [12 – 2.4(20% of 12)] = 9.6 – 9.6 (-) 0.75
(245)
Allowed (245 – (W-4) 24.5) (220.5) 0.5
Add: Other income (4 + 8.8) 12.8 0.5

192.3
(W-2) Tax Gain/(loss) on Disposal TY 2022

Consideration (Higher of:) 23 0.5
- Actual (20 + 3) = 23
- Fair value = 21
Less: Tax Written down value on Disposal (14.2) 0.5
Tax gain on disposal 8.8
(W-3) Initial allowance and tax depreciation on new machine

Cost (30 – 5) 25 0.25
Exchange gain on repayment 80,000 Pound x (330 – 315) 1.2 0.5
Cost [S. 76] 26.2
Less: Initial allowance (26.2 x 25%) (6.6) 0.25
19.6
Less: Tax depreciation -TY 2021 (19.6 x 15%) (2.9) 0.25
Tax WDV 16.7
Less: Tax depreciation -TY 2022 (16.7 x 15%) (2.5) 0.25
Tax WDV 14.2
(W-4) Expense disallowed (lower of)

- 245/400 x 130* 79.6 0.5
- 10% of 245 24.5 0.5
Sale to unregistered (157.3/120 x 100) = 130*
Page 5
Answer-5
(i) Where the taxpayer is satisfied with the decision of Committee:
(a) the taxpayer shall deposit the tax (including penalty and default surcharge as per
Committee decision);
(b) Commissioner shall amend assessment according to Committee decision after tax
payment (including penalty and default surcharge) as per decision of the Committee;
(c) taxpayer shall waive right of appeal against such amended assessment; and
(d) no further proceedings shall be undertaken on issues decided by the Committee if the tax
has been deposited by the taxpayer. [S. 122A] 4 Marks
(ii) If there is a dispute in a Civil Court on ownership of a property whose income is chargeable, an assessment
order may be issued within 1 year of the end of the financial year in which Court decided the case.
The civil court has decided the case on 15 May 2020. It means that the Commissioner can issue the
assessment order by 30 June 2021. As the assessment order is issued 12 March 2021, the commissioner is
justified in issuing the assessment order as it is within the time limit i.e. 30 June 2021. [S. 125] 2 Marks
(iii) (1) Where a question of law has been decided by High Court or the Appellate Tribunal, the
Commissioner may, follow this decision for same taxpayer for other years pending before
him, even if Commissioner is going in an appeal against the order.
(2) In case the decision is reversed (means that now it is decided against taxpayer), the
Commissioner may modify all the assessments. This modification is to be made within 1
year of receipt of appellate order. In this case, the general limits for issuing assessment
order will not apply. So modification can be made by April 2021. [S. 124A] 2 Marks
Answer-6
Income from Business – Speculation 1
Share price of PEL shares in March 2017 (500 x 29) 14,500 1
Purchase price of PEL shares in December 2016 (500 x 32) (16,000) 1
Speculation loss (1,500)
Answer-7
i. A person who has succeeded another person in a business (except inheritance), he cannot set off (or
carry forward) the loss of other person. [S.59A] [Chapter 14]
In case of association of persons, any loss of AOP shall be set off or carried forward against the
income of the association. [S.59A] [Chapter 12]
A member of an AOP cannot setoff (or carry forward) the loss of AOP against his income.
[S.59A] [Chapter 12]
The loss due to depreciation, amortisation and initial allowance deductions (allowed under sections 22,
23 and 24) that has not been set off, it shall be set off against the income from business (after setting
off loss under sub-section (1)), in the following tax year and so on until completely set off. The
amount not setoff shall be added the relevant amounts in following years. [S.57 (4)]
If taxable income for current year is equal to or more than Rs.10 million than brought forward
depreciation, amortization and initial allowance shall be set off against 50% of income. [S.57 (4)] (3 Marks)
ii. a person acting in Pakistan (the agent) [other than an independent agent acting in the ordinary course
of business] on behalf of the person shall be considered as permanent establishment if the agent –
(i) - exercises an authority to conclude contracts on behalf of the other person or
- plays the principal role and conclude contracts without material modification and these
contracts are-
(a) in the name of the person; or
(b) for the transfer of ownership of (or granting of the right to use) property
owned by that enterprise; or
(c) for providing services by that person; or
(ii) has no authority but habitually maintains stock (merchandise) for regular deliveries on
behalf of the other person: 3 Marks
iii. The actual consideration received by a bank or leasing company (approved by the Commissioner) for
an asset leased by the company to another person shall be the residual value received on maturity of
Page 6
the lease agreement. The condition is that the residual value plus the amount realized during the term
of the lease of the asset is not less than the original cost of the asset. [S.77] 1 Mark
Answer-8
Ghumman Associates
Sales tax Liability
for the month of February 2023
0.5
Calculation of tax liability Rs. in “000” 0.5
Output tax (7,444 x 18%) 1,339.92 0.5
Less: Input tax (lower of)
- Actual input tax 955 0.5
b/f input ( not allowed) - 955
- 90% of output (1,339.92 x 90%) 1,205.93 (955) 0.5

384.92
Further tax @3% of sale to un-registered (1,450 x 3%) 44 0.5
Tax Payable 428.92
Refund against exports 321 0.5
(W-1) Calculation of input tax

Rs. in “000”
Purchase from registered person (1,900 - 500 - 100) x18% 234 0.75
Taxable goods from un-registered supplier of 900 - 0.5
Imports (4,000 x 1.2) x 18% 864 0.5
Purchase from Jut (500 x 18%) 90 0.25
Less: Purchase return of electronic items (70 x 30%) x 18% (3.78) 0.5
Less: Payment not made within 180 days (90 x 18%) (16.2) 0.5
Less: Purchase return through debit note (230 x 18%) (41.4) 0.5
Sales tax on electricity (80% for taxable activity) (150 x 80%) 120 0.5
Construction material (2,000 x 40%) x 18% 144 1
1,390
(W-2) Apportionment of input tax

Input tax Input tax
Turnover
(Other) (Machine)
Taxable local supplies (7,443.5 – 200)` 7,244 955 - 0.5
Sales with no NIC/NTN 200 26 0.5
Exports (1,800 + 500) 2,300 303 + 18 = 321 - 1
Exempt 800 106 504 0.75
10,544 1,390
*100 x 18% = 18
(W-2.1) Machine (Specific input)

Machine (for exempt local supplies) (2,800 x 18%) 504 0.5
Page 7
(W-3) Taxable sale
Rs. „000‟
To Registered Customer:
Taxable supplies –registered (5,000 – 120 (20 x 40 x 150 ) - 450 – 200) 4,230 0.75
Sales return (80 x 30%) x 500 (12) 0.5
Price reduction (80 x 70%) x 80 (4.5) 0.5
Supply of tea (20 x 40 x 150) 120 0.75
Trade discount to Shaukat Industries (As per norms) 450 0.25
Supply of goods to end consumer 250 0.25
Sale of construction material (2,000 x 40%) = 800 (cost) /100 x 120 = 960 1
To Unregistered Customer:
Taxable supplies – un-registered (1,500 – 250) 1,250 0.75
To unregistered distributor, Abbas 200 0.5
1,450
7,444
Answer-9
(i) Value of supply shall be the price fixed by the Board. However if supply is made higher than value fixed by
Board the value shall be the actual price. Therefore value of supply will be Rs.140 per kg. [VOS defintion]
(ii) In case of imported goods, value of supply shall be the value determined under Customs Act including
custom duty and excise duty charged on it. Thus in this case, value of goods imported from Brazil shall be
Rs. 910,000 (Rs. 880,000 + Rs. 30,000). [VOS definition]
(iii) Payment must be made from business bank account of buyer to business bank account of the supplier. Bank
account of both buyer and supplier should be declared to Board at the time of registration/through change of
particulars subsequently. As above condition is not fulfilled QL will not be entitled to claim input tax.
[Section 73]
(iv) If a registered person is liable to pay any tax, default surcharge or penalty under any law administered by
Board, the refund under Sales Tax Act shall be made after adjustment of that amount. Thus Rs. 25,000
default surcharge shall be adjusted against exports refund of Rs. 186,000. [Section 10]
(v) The supplier (seller) shall issue a debit Note (in duplicate) where for any valid reason the value of supply
mentioned in invoice issued has increased. Thus QL shall issue a debit to increase the value from Rs. 535,000
to Rs. 695,500 (535,000 / 50 x 65). [Rule 21]
(Each point carry 2 Marks)
Page 8
The Professionals’ Academy Of Commerce
Pakistan’s Leading Accountancy Institute
Certificate in Accounting and Finance Stage Examinations
23 August, 2023
3 hours – 100 marks
Additional reading time - 15 minutes
Tax Practices
Instructions to examinees:
(i) Answer all EIGHT questions.
(ii) Answer in black pen only.
(iii) Tax rates are given on the last page.
Q.1 Miss. Zukhruf planned to open a vocational institute in the rural area of Multan to provide free basic education
and skills of stitching garments to the needy women.
For this purpose:
(a) She purchased a building for Rs. 10 million (inclusive of cost of land Rs. 4,500,000) on July 02, 2023.
The payment was made through banking channel.
(b) She imported sewing machines from china on July 10, 2022 for Rs. 10,000,000. To finance these
machines, she obtained loan from a foreign bank of U.S dollar 30,000 on July 03, 2022 payable in four
equal installments starting from December 31, 2023. The rate of exchange on July 03, 2022 was 1USD =
Rs. 266 while the exchange rate on December 31, 2022 was 1USd = 260. Moreover, she received subsidy
amounting Rs. 2,000,000 from Local Government in this regard.
(c) Vocational institute was ready for operations on July 30, 2022. However, she could not start the
operations due to shortage of funds despite the fact that she obtained a loan of Rs. 500,000 in cash from
her friend Fatima. Therefore, she decided to give this institute on lease to her friend Saba against monthly
rent of Rs. 350,000 effective from August 01, 2022.
(d) Miss Zukhruf also owned two houses(House no. A/3 and A/4) located in Model town Lahore in same
block. Both the houses are given on rent (rent agreements date December 31, 2021).
House no. A/3 has been given at a monthly rent of Rs.100,000 with 10% increment after every year. She
also received non adjustable security deposit of Rs. 1,000,000.
House No. A/4 has been given to his cousin Shahir, who is lawyer, at monthly rent of Rs. 80,000. further,
no security deposit was received from him. She incurred following expenses in respect of these houses:
(i) Property tax paid Rs. 200,000.
(ii) Depreciation charged as per laws of Income Tax Ordinance, 2001 Rs. 1,250,000.
(iii) Legal charges incurred in defending the case relating the dispute over title of house no. A/4 Rs.
250,000.
(iv) Insurance premium paid for both houses Rs. 350,000.
(v) Salary paid to person appointed for collecting the rent Rs. 150,000.
(vi) Unpaid rent Rs. 800,000 relating tax year 2020 written off in the current year as it is no more
receivable despite all possible efforts.
(vii) Payment of interest amounting Rs. 100,000 paid to bank against amount borrowed for major
renovations of the both houses.
(e) During the tax year, she also contributed Rs. 450,000 towards approved pension fund.
(f) During the tax year, she received dividend amounting Rs. 240,000 (net off zakat Rs. 15,000 and
withholding tax @ 15%) from a public company.
Required:
Under the provisions of the Income Tax Ordinance, 2001 and Rules made there under, compute under the
correct head of income the total taxable income and tax liability of Miss Zukhruf for the tax year 2023 (Initial
allowance rate is 25% for eligible depreciable asset and tax depreciation rate is 10% for building and 15% for
all other depreciable assets).
Note: Show all the relevant working notes, exemptions, exclusions and disallowances. (14)
Tax Practices | Page 2 of 9
Q.2
(a) Mr. and Mrs. Taha Hassan Hameed Butt are equal partners in "THHB" that is engaged in the manufacturing
and trading of shoes and other related items. Income statement of "THHB" for the year ended June 30, 2023
is as follows:
Rs. In thousands
Sales 156,000
Cost of sales (130,000)
Gross profit 26,000
Admin and selling expenses (10,000)
Financial charges (500)
Other charges (300)
Other income 600
Profit before tax 15,800
THHB got the approval from the Commissioner regarding the change of accounting method from "accrual
basis" to "cash basis" before the year end. However, above income statement has been prepared on accrual
basis. Other relevant information in this regard is as follows:
 The above figure of sales included account receivables amounting Rs. 6 million in respect of sales made
on credit that have not been received till the year end.
 Cost of sales and admin expenses included expenses of Rs. 2 million that were paid after the year end.
 Closing stock Rs. 2.5 million have been determined using absorption cost method whereas it could be Rs.
2 million if prime cost method was used. THHB intends to use absorption cost method in future as well.
(b) Other information is as follows:

(i) Cost of sales included demurrage paid to custom authorities Rs.1, 500,000 in respect of shoes and raw
material imported from Italy.
(ii) Cost of sales included a penalty of Rs. 125,000 on failure to deposit income tax withheld from the
salaries of factory staff.
(iii) Cost of sale included finished goods purchased amounting Rs. 20 million from various suppliers.
Payments were made via proper banking channel and tax was also deducted on payments made in this
regard except finished goods purchased from Mr. Ateeb amounting Rs. 2 million (THHB did not deduct
the tax at source which was required to be deducted under the provisions of Income Tax Ordinance,
2001 while making the payment to Mr. Ateeb at the request of Mr. Ateeb).
(iv) On January 01, 2023, Mr. Taha started using one of the office equipment at his residence. The market
price of the equipment at that time was Rs. 2.5 million whereas accounting WDV and tax WDV was Rs.
2.1 million and Rs. 2.2 million respectively. However, no adjustment made in this regard.
(v) Admin expenses included Rs. 400,000 paid by THHB to Industrial Welfare School that provides the
free education to the children of factory employees and workers of THHB.
(vi) Admin and selling expenses included Rs. 2,500,000 which was incurred in relation to an advertising
campaign launched prior to the introduction of a new product line in an effort to enhance public
awareness. The said expenditure was incurred on January 01, 2023. It is expected that said campaign
will provide benefit of more than one year.
(vii) Other income included gain on disposal of listed company securities amounting Rs. 500,000. The
aforesaid securities were purchased on 10th July 2022 and were disposed on the last day of the tax year.
(viii) Mr. Taha was doing part time job in a company from where he resigned on June 30, 2022. On July 10,
2022 Mr. Taha received received following amounts in final settlement:
 Salary Rs. 500,000 and
 Rs. 6,000,000 from unrecognized provident fund which included contributions made by Mr. Taha
amounting Rs. 2,000,000. Rest of the amount received represent the employer's contributions and
interest on provident fund balance.
(ix) During the year, Mr. Taha won prize of Rs. 300,000 on prize bond. Tax deducted u/s 156 amounted to
Rs. 45,000.
(x) During the year, Mr. Taha received digital watch (having FMV Rs. 250,000) from his friend as birthday
present.
(xi) During the year, Mr. Taha donated his four years old car to approved charitable institution which he
purchased for Rs. 1,000,000.
(xii) Mr. Taha has agricultural land situated in the nearby area of Sialkot which he has given on rent. Total
rent received during the year amounting Rs. 1,500,000.
(xiii) During the year, Mr. Taha received cash prize amounting Rs. 500,000 from President of Pakistan for his
contributions towards the welfare of the society.
Required:
Under the provisions of the Income Tax Ordinance, 2001 and Rules made there under, compute under the
correct head of income the total income, the taxable income and tax liability of the following for the tax year
2023:
(a) THHB (11)
(b) Mr. Taha (09)
Note: Show all the relevant working notes, exemptions, exclusions and disallowances. Also compute
minimum tax u/s 133, if applicable.
Q.3
(a) Mr. Hamza, a Pakistani citizen, is working as a company secretary in Qaari Limited (QL), an un-listed public
company, engaged in the business of production and supply of olive oil. Following are the details of his
emoluments during the year ended 30 June 2023.
Rupees
Basic Salary (per month) 450,000
Medical allowance (per month) 50,000
(b) Other information is as follows:
(i) A 1800 CC company maintained Honda Civic car both for business and private use. The car was
purchased at the 1st day of tax year 2021 at a cost of Rs. 3,000,000. However, the current market
value of the car is Rs. 3,500,000.
(ii) A special payment of Rs. 75,000 in lieu of leave was made available to him. Mr. Hamza, however,
voluntarily waived his right to receive such payment.
(iii) Free provision of two cans of olive oil per month. The market value of each can was Rs. 15,000.
(iv) In July 2022, he was granted an employee stock option to purchase up to 15,000 shares in QL’s
holding company, Trio Limited, situated in Bermuda, at an option price of USD 3 per share. The
shares were required to be purchased within eighteen months from the option date. Mr. Hamza
exercised the option in September 2022 to purchase 6,000 shares when the market price of the shares
was USD 5 per share. After two months of the acquisition, Mr. Hamza sold 5,000 shares at a price of
USD 8.5 per share. (Assume the dollar rupee parity on the above dates was USD 1 = PKR 300).
(v) Received a fee of Rs. 200,000 for attending a directors’ meeting of QL’s associated company Molvi
(Pvt.) Limited held in July 2022.
(vi) Received a pension of Rs. 500,000 from his ex-employer.
(vii) Received a royalty of Rs. 3,000,000 from K Publishing on a book written on "Business & Money" .
Mr. Hamza completed the book in 26 months and all the costs relating to its publication were borne
by the publisher. The applicable tax rates in tax years 2021 and 2022 were 16% and 18% respectively.
Mr. Hamza do not want to include the whole amount in the current year taxable income.
(viii) There was a brought forward capital loss of Rs. 250,000. The loss was suffered by Mr. Hamza on sale
of shares in Ghareeb (Pvt.) Limited.
(ix) During the year, Mr. Hamza purchased a house in Bahria Town , Lahore from his friend at DC value
of Rs. 20 million whereas the FBR value of the aforesaid house was 25 million. The payment for the
house was made through bearer cheque. Mr. Hamza intended to gift this house to her wife on her
birthday to be celebrated in August 2023.
Required:
Compute the taxable income and tax liability of Mr. Hamza for the tax year 2023.
Note: Show all exemptions, exclusions, disallowances and working notes where relevant. (12)
Q.4 Mr. Ubaid Johny is the resident individual for the tax year 2023. Following are the details of his income for
the tax year 2023:
Loss
Pak/Foreign remained
Heads of income Taxable income
Tax paid unadjusted
last year
Pakistan Source:
*Non-Speculation business 8,000,000 120,000 -
Other sources- NTR 1,200,000 15,000 (250,000)
Foreign Source:
Salary 2,500,000 80,000 -
Speculation business (1,500,000) - -
Non-Speculation business 2,000,000 75,000 (1,200,000)
*The above figure of business income arrived after making following adjustments:
 On 1-1-2023, Mr. Ubaid entered into a forward contract with Anum Associates for the purchase of raw
material to be used in his business to guard against the loss though price fluctuations. On the date of
maturity of the contract, Mr. Ubaid did not take the delivery of the raw material but the contract was
settled by making a payment of Rs. 400,000 to Anum Associates.
 In August 2022, Mr. Ubaid signed a future contract with Ayesha Enterprises (AE) for the purchase of
600 metric tons of maize at Rs. 16,800 per metric tons. The delivery was expected to be made in
December 31, 2022. AE also agreed to repurchase the entire lot at the price prevailing on the date of
sale. On December 31, 2022, price of maize increased to Rs. 19,240 per metric ton and Mr. Ubaid sold
the entire lot to AE without taking delivery.
 On 1-3-2023, Mr. Ubaid made different forward contracts to reap the benefit of price fluctuations of tea
in local market. The settlement of these contracts were made on 29-06-2023 by paying Rs. 1,200,000
(without taking any actual delivery).
The foreign tax credit relating to income from speculation business which remained unadjusted during the last
tax year amounted to Rs. 75,000.
Required:
Under the Income Tax Ordinance, 2001:
You are required to compute the taxable income (under correct head of income), net tax liability and tax losses
to be carried forward to next year, if any of Mr. Ubaid Johny for the Tax Year 2023.
Note: Show all the relevant exemptions, exclusions and disallowances. (08)
Q.5 Respond to the following independent scenarios under the Income Tax Ordinance, 2001 and Rules made
thereunder:
(i) Where a taxpayer, in response to a notice for amendment of assessment, intends to settle his case, he
may file offer of settlement in the prescribed form before the assessment oversight committee
(Committee), in addition to filing reply to the Commissioner.
You are required to discuss the steps/procedures that are followed where the taxpayer is satisfied with
the decision of the Committee u/s 122D of Income Tax Ordinance, 2001. (03)
(ii) FBR has powers to enforce filing of returns u/s 114B of the Income Tax Ordinance, 2001.
You are required to explain the provisions to this effect. (04)
(iii) Identify the services that are covered under "IT Enabled Services" as per section 2 (30AE) of the
Income Tax Ordinance, 2001. (02)
Q.6
(a) Assume that you have tax consultancy firm and providing tax related services to various corporate and non-
corporate clients. Following are the some independent scenarios. Response to these scenarios in accordance
with the provisions of Sales Tax Act, 1990 and Rules made thereunder:
(i) Swera departmental store (a Tier-1 retailer) is registered under the Sales Tax Act 1990 and Rules made
thereunder. However it has not integrated his system with FBR despite multiple notices of integration
from the FBR. You are required to explain the consequences of failure of Swera departmental store to
integrate the system with FBR system. (02)
(ii) Saadi Associates (a registered manufacturer) supplied goods amounting Rs. 8 million to unregistered
distributor Mr. Mujtaba. However, sales tax invoice does not bear the NTN/CNIC of Mr. Mujtaba.
Explain the consequences of failure to disclose NTN/CNIC of distributor on invoice. (02)
(iii) The Federal Government is empowered to prescribe any higher rate of tax in respect of taxable goods
specified in third schedule and Federal Government has issued SRO 297(I)/2023 dated 08 March 2023
to this effect. You are required to prescribe higher rate of tax mentioned in aforesaid SRO, type of
supply on which such high rate shall apply and list down only six third schedule goods on which such
SRO is applicable. (04)
(b) Under section 2 (3) of the Sales Tax Act, 1990, an individual and a relative of the individual shall be
considered associates. You are required to explain term "relative" in this context. (02)
Q.7 Rabia Associates (RA) is registered under the Sales Tax Act, 1990, as manufacturer-cum-distributor -cum-
retailer. Following information has been extracted from its records for the month of June 2023:
Supplies:
Taxable goods to registered persons 20,500,000
Taxable goods to unregistered persons 14,000,000
Consumable items to PIA -International flight 4,000,000
Exempt supplies to:
Local market 2,500,000
Dubai 3,500,000
Purchases:
Taxable goods from registered suppliers (for making
normal/local taxable supplies only) 4,000,000
Taxable goods from unregistered suppliers 850,000
Exempt goods from registered suppliers 650,000
Fixed assets from registered supplier 4,500,000
The following additional information is available for June 2023:
(i) Supply of taxable goods to registered persons include the following:
 Supplies of Rs. 2,040,000 which were sold on installment basis to an industrial consumer at a
mark-up of 2%.
 Goods invoiced at Rs. 950,000 (net of discount of 5%) sold to a government official. Normally
RA allow 5% discount to all customers. However, amount of discount was not shown on sales tax
invoice at the request of recipient.
 Goods of Rs. 1,500,000 supplied to Minahil Associates (M.A), a registered manufacturer in
Export Processing Zone. M.A used these goods to manufacture zero rated supplie.
(ii) Taxable goods supplied to unregistered persons contained goods supplied to University of
Management and Technology (UMT) amounting Rs. 11,000,000. Rest of the goods were supplied to
multiple unregistered persons.
(iii) Taxable goods purchased from registered suppliers include:
 Goods amounting Rs. 1,500,000 purchased from Ali Associates who is temporarily registered
under Rule 5A of Sales Tax Rules, 2006.
 Rs. 158,000 was paid to a local beverage company for providing mineral water at RA’s annual
dinner arranged for its valued customers and employees.
 Goods of Rs. 390,000 and Rs. 1,200,000 purchased from Taiba Associate (TA) on 6 June 2023
and 20 June 2023 respectively. On 15 June 2023, the Commissioner suspended TA’s registration
for claiming fraudulent refunds.
 Printed stationery of Rs. 500,000 was purchased from "Maneeha Associates" for the maintenance
of factory records.
(iii) Fixed assets purchased from registered suppliers include:

 fiscal electronic cash register and office equipment from a corporate supplier at a price of Rs.
650,000 and Rs. 300,000 respectively.
 Delivery trucks worth Rs. 3,000,000 were purchased for timely distribution of goods to
customers.
(iv) As part of a settlement deal with Habib Bank Limited, RA agreed to set off its hypothecated stock of
Rs. 750,000 against an overdue loan of Rs. 950,000. The open market price of the goods was
estimated at Rs. 1,100,000.
(v) HA under misapprehension collected additional sales tax of Rs. 64,000 (on exempt supplies) from one
of its customers. 70% of the goods on which additional sales tax was collected are still lying with the
customer as unsold stock.
(vi) RA paid Rs. 700,000 against bill board advertisement to "Esha Associates". Sales tax amounting Rs.
112,000 was paid on aforesaid payment under second Schedule of Punjab Provincial Sales Tax on
Services Act, 2012. Relevant law does not prohibit from taking its credit.
(vii) In May 2023 the excess of input tax over output tax amounted to Rs. 40,000. Whereas, sales tax paid
on account of restriction on the adjustment of input tax in excess of 90% of the output tax u/s 8(b)
amounted Rs 20,000
(viii) RA is required to pay a penalty of Rs. 50,000 under the Sales Tax Act, 1990 on account of certain
defects in the maintenance of records.
(ix) All the above figures are exclusive of sales tax, wherever applicable. Sales tax is payable at the rate of
18%.
Required:
Under the provisions of the Sales Tax Act, 1990 and Rules made there under, compute the amount of sales tax
payable by or refundable to RA and the amount of sales tax to be carried forward, if any, for the tax period
June. 2023.
Note: Show all exemptions, exclusions and disallowances where relevant and give brief reasons for the
treatment of
 Goods supplied to UMT
 Additional sales tax collected from the customer (19)
Q.8
(a) Briefly describe the duties of "National Finance Commission" as per Article 160 of the Constitution of
Pakistan. (04)
(b) Briefly explain the tendency of taxpayer towards tax avoidance under different approaches of ethics and
morality for taxpayer. (04)
(THE END)
Solution Q # 01
Miss. Zukhruf
Computation of Taxable Income And Tax Liability
Tax Year 2023
Marks
Rupees Alloc.
Income From Property:
Gross Rent: N-1 2,620,000 2
Less: Allowable deductions N-2 (2,128,800)
Taxable income 491,200 0.25
Income From Other Source:

Lease of building with machinery
Lease rentals 350,000*11 3,850,000 0.5
Less: Allowable deductions
Depreciation on building (10,000,000-4,500,000)*10% (550,000) 1
Depreciation on machinery N-3 (2,883,688) 2
(3,433,688)
416,313 0.25
Loan in cash 500,000 1
Dividend- FTR (240,000+15,000)/85% 300,000 1
1,216,313

Less: Dividend-FTR (300,000)
1,407,513
Less: Zakat (15,000) 0.25
1,392,513 0.25
Tax liability (Non Salaried person case)
Tax 60,000+17.5%*(1,392,513-1,200,000) 93,690 0.25
Less: Tax credit on contribuition to approved pension fund N-4 - 1
Add: Tax liability on dividend 300,000*15% 45,000 0.25
138,690
Notes:
N-1 Gross rent:

House A/3
Rent 100,000*6+110,000*6 1,260,000
Unadjustable deposit 1,000,000*10% 100,000
House A/4
Rent 100,000*6+110,000*6 1,260,000
(Higher of actual rent or fair market rent is taken as rent)
2,620,000
N-2 Deductions U/S 15A
Repair allowance 1/5*2,620,000 524,000 0.75
Depreciation- not allowable deduction - 0.5
Legal charges defending the case 250,000 0.5
Insurance premium 350,000 0.5
Payment of interest 100,000 0.5
Unpaid rent 800,000 0.5
Collection charges (lower of:)
Salary paid 150,000
4% of chargable rent 4%*2,620,000 104,800 104,800 0.75
2,128,800
N-3 (Dep- Sewing machines)
Year-2023
Cost 10,000,000
Less: Subsidy by Local Government (2,000,000)
8,000,000
Less: Exchange gain (266-260)*7,500 (45,000)
7,955,000
Initial allowance @ 25% 7,955,000*25% (1,988,750)
5,966,250
Normal Dep @15% 5,966,250*15% (894,938)
Closing WDV 5,071,313
Total dep exp: 1,988,750+894,938 (2,883,688)
N-4
Tax credit in respect of approved pension fund is available only to a person who is deriving salary or
business income. Consequently, Miss. Zukhruf is not entitled to claim tax credit for contribuition
towards approved pension fund.
14
Solution
Q # 02 (Part a)
THHB
Tax Year 2023
Marks
Rupees Alloc.
Notes
Profit before tax-Accrual basis 15,800,000

Adjustments in profit before tax due to change in accounting method:
Add:
Expenses not paid yet 2,000,000 0.75
Less:
Sales on credit not received yet (6,000,000) 0.75
Closing stock N-1 - 1
Adjusted profit before tax-Cash basis 11,800,000 0.25
Add:
Demurrage paid- Allowable deduction - 0.5
Penalty on failure to deposit income tax withheld 125,000 0.5
Finished goods- Tax is not withheld 2,000,000 0.75
Disallowed amount shall not exceed 20% of total finished goods amount
i.e. 20%*20,000,000=4,000,000
Taxable gain on disposal of office equipment 2,500,000-2,200,000 300,000 0.75
Amount paid by THHB to Industrial Welfare School N-2 - 0.75
Advertisement campaign-Intangible asset 2,500,000 0.75
Less:
Amortization-Advertisement campaign 2,500,000/25*181/365 (49,589) 0.75
Gain on sale of listed securities (500,000) 0.5
Total taxable income 16,175,411 0.25
Capital Gains:
Gain on sale of listed securities (SBI) 500,000 0.75
Total income 16,675,411 0.25

Less: Gain on listed securities-SBI (500,000)
Taxable income-NTR 16,175,411 0.25

Tax libility (Higher of A or B) 4,891,394
A- Normal Tax Liability (Non Salaried)

1,330,000+35%*(16,175,411-6,000,000) 4,891,394 0.5
B- Minimum tax u/s 113

156,000,000*1.25% 1,950,000 0.75
Add: Tax on listed securities 500,000*15% 75,000 0.25

11
N-1
A person accounting for income chargeable to tax under the head “Income from Business” on a
cash basis may compute the person’s cost of stock-in-trade on the prime-cost method or
absorption-cost method.
As THHB intends to use absorption cost method, therefore no adjustment is required in this
regard due to change of accounting method from accrual basis to cash basis.
N-2
A person shall be allowed a deduction for any expenditure (other than capital expenditure)
incurred in a tax year in respect of:
any educational institution or hospital in Pakistan established for the benefit of the person’s
employees and their dependents;
Solution Q # 02 (b)
Mr. Taha
Computation of Total Income, Taxable Income And Tax Liability
Tax Year 2023
Marks
Notes Rupees Alloc.
Income From Salary:
Salary 500,000 0.5

Un Recognized Provident Fund:
Total 6,000,000
Less: Contribuitions by Taha (2,000,000)
Taxable 4,000,000 4,000,000 1
Total taxable salary 4,500,000

Digital watch from friend 250,000 0.75
Prize bond-FTR 300,000 0.75
550,000
Exempt Income
Agiculture income 1,500,000 0.75
President award 500,000 0.75
2,000,000
Total income 7,050,000 0.25

Less: Exempt income:
Agiculture income (1,500,000)
President award (500,000)
Less: Prize bond-FTR (300,000)
Taxable income-NTR 4,750,000 0.5
Add: share from aop for tax rate purpose only
50% of profit before tax of THHB 16,175,411*50% 8,087,705 0.75
Taxable income for rate purpose: 12,837,705 0.25
Tax liability:
Tax liability on total income (Salaried person case) 3,248,197 0.5
2,955,000+35%*(12,837,705-12,000,000)
Tax liability of Mr. Taha: 1,201,845 0.5

3,248,197/12,837,705)*4,750,000
Less: Tax credit on donation:

Eligible amount-Lower of:
Car value 1,000,000*60% or 600,000

30% of taxable income 4,750,000*30% 1,425,000
Tax credit 3,248,197/12,837,705*600,000 (151,812) 1.5
Tax on prize bond 300,000*15% 45,000 0.25

9
Solution Q # 03
Mr. Hamza
Tax Year 2023
Marks
Rupees Alloc.
Income From Salary:
Basic Salary 450,000*12 5,400,000 0.5

Medical allowance
Total 50,000*12 600,000
Less: Exempt (10% of B.S) 10%*5,400,000 (540,000)
Taxable 60,000 60,000 0.75
Car for both uses 3,000,000*5% 150,000 0.75
Leave encashment (benefit due but voluntarily waived off is fully taxable) 75,000 0.75
Perquisites – Olive Oil cans 15,000*2*12 N-1 360,000 1
Employee share scheme (5-3)*6,000*300 3,600,000 1
Pension from ex employer N-2 - 1
Directors meeting fee 200,000 0.75
Total taxable salary 9,845,000
Capital Gains (NTR):
Gain on sale of shares (Trio Limited) (8.5-5)*5,000*300 5,250,000 1

Less: B/f loss on sale of shares of Ghareeb (Pvt) Limited (250,000) 0.5
5,000,000

Royalty received from K Publishing 3,000,000/3 N-3 1,000,000 1
Taxable income (normal tax regime) 15,845,000 0.5
Tax liability (Non Salaried person case)

Tax 1,330,000+35%(15,845,000-6,000,000) 4,775,750 0.5
Add: Tax on royalty income

Tax year 2021 (3,000,000)/3*16% 160,000 0.5
Tax year 2022 (3,000,000)/3*18% 180,000 0.5
5,115,750
Add: Penalty on house 25,000,000*5% N-4 1,250,000 1
Total Tax liability 6,365,750
Notes:
N-1
Any perquisite or benefits for which the employer does not have to bear any marginal cost, as
notified by the Board are exempted from employees’ income. As the Board has not notified any SRO
in this connection, hence the given benefit is fully taxable in the hands of the employee as the same is
not within the ambit of clause (53A) of Part-I of 2nd Schedule to the Income Tax Ordinance, 2001.
N-2
Any pension received by citizen of Pakistan from an ex-employer other than where the person
continues to work for the employer is exempted from person’s income under clause (8) of Part-I of
the 2nd Schedule to the Income Tax Ordinance, 2001.
N-3
According to section 89 of the Ordinance, where the time taken by an author of a literary or artistic
work to complete the work exceeds twenty-four months, the author may elect to treat any lump sum
amount received by him in a tax year on account of royalties as having been received in that tax year
and the preceding two tax years in equal proportions.
As the average rate of tax were low in tax year(s) 2021 and 2022, therefore, Mr. Hamza elected this
option.
N-4
In case any immovable property having fair market value (fbr value or DC rate whichever is
applicable) greater than five million rupees is purchased in cash, then such person shall pay a penalty
of 5% of the FBR value or DC rate whichever is higher.
12
Solution
Q # 04
Mr. Ubaid
Computation of Taxable Income And Net Tax Liability
Tax Year 2023
Marks
Rupees
Notes Alloc.
Pakistan Source:
Income from non- speculation business:
Income from business 8,000,000

Loss on forward contract to avoid price fluctuation N-1 - 1
Less: gain on future contract with AE (Speculation business) (1,464,000) 0.5
(19,240-16,800)*600
Add: Loss on forward contracts (Speculation business) 1,200,000 0.5
7,736,000 0.25
Income from speculation business:
Gain on future contract with AE 1,464,000 0.4

Loss on forward contracts (1,200,000) 0.4
264,000 0.25
Income from other source-NTR 1,200,000 0.25

Other source loss of previous year remained unadjusted N-2 - 0.5
Taxable income-Pak source 9,200,000
Foreign Source:
Salary N-3 Exempt 0.75
Speculation business (1,500,000) N-4 - 0.5
Non-Speculation business
Income for the year 2,000,000
Less: b/f loss (1,200,000) 800,000 0.75
Taxable income-foreign source 800,000
Total taxable income 10,000,000 0.25
Tax liability (non salaried)

1,330,000+35%*(10,000,000-6,000,000) 2,730,000 0.25
Less: Tax credit of foreign business income (Lower of:)
Foreign tax paid 75,000
Pak tax: 2,730,000/10,000,000*800,000 218,400 (75,000) 0.7
Tax credit remained unadjusted N-5 - 0.5
2,655,000
Foreign speculation business loss C/F to next year N-4 1,500,000 0.25
N-1
The forward contract entered into by Anum Associates for the purchase of raw materials used in its
business is in the nature of a hedging contract which was entered into to guard against loss from
future price fluctuations. Such contracts have specifically been excluded from the definition of
speculative business. Therefore, the Rs. 400,000 paid to settle the forward contract is an expenditure
incurred in the normal course of business and is a deductible expenditure
N-2
Loss under the head income from other source can not be carried forward to next year.
Consequently, unadjusted loss of previous year can not be adjusted against the income of current
tax year.
N-3
Any foreign-source salary received by a resident individual shall be exempt from tax if the
individual has paid foreign income tax in respect of the salary. Mr. Ubaid has paid foreign tax on
his foreign salary income, therefore, it shall be exempt in Pakistan.
N-4
Loss from any head of foreign source income cannot be set off against any other head of foreign
source income. All losses shall be carried forward separately for 6 years. Further, foreign loss can
not be set off against Pakistan source income.
N-5
Any tax credit or part of a tax credit allowed for a tax year which is not credited shall not be
refunded, carried back to the preceding tax year, or carried forward to the following tax year.
Total Marks 8
Solution Q # 05
Part (i)
Marks
Alloc.
Where the taxpayer is satisfied with the decision of the Committee:

(a) the taxpayer shall deposit the amount of tax payable including any amount of penalty
and default surcharge as per decision of the Committee;
(b) the Commissioner shall amend assessment in accordance with the decision of the
Committee after tax payable including any amount f penalty and default surcharge as per 0.75 marks
for each
decision of the Committee has been paid; point
(c) the taxpayer shall waive the right to prefer appeal against such amended assessment; and
(d) no further proceedings shall be undertaken under this Ordinance in respect of issues
decided by the Committee unless the tax as per clause (c) has not been deposited by the
taxpayer.
Part (ii) Marks

Alloc.
(a) The Board shall have the powers to issue income tax general order in respect of persons :
• who are not appearing on ATL but are liable to file return.
(b) The income tax general order issued may entail any or all of the following consequences
for the persons mentioned therein, namely:
• disabling of mobile phones or mobile phone Sims
• discontinuance of electricity and gas connection
(c) FBR or the relevant Commissioner may order restoration of mobile phones, mobile phone
1 marks for
sims and connections of electricity and gas, in cases where he is satisfied that :
each point
• the return has been filed or
• person was not liable to file return.
(d) No person shall be included in the general order unless following conditions have been
met with, namely:
• notice to file return of income has been issued;
• date of compliance of the aforesaid notice has elapsed; and
• the person has not filed the return.
Part (iii) Marks
Alloc.
IT enabled services, include but not limited to inbound or outbound call centres, medical
transcription, remote monitoring, graphics design, accounting services, Human Resource

2 marks
(HR) services, telemedicine centers, data entry operations, cloud computing services, data
storage services, locally produced television programs and insurance claims processing.
Solution Q # 06
Part (a)
Marks
(i) Alloc.
Consequences of failure of Swera departmental store to integrate the system with FBR
system.
(a) In case a Tier-1 retailer does not integrate his retail outlet during a tax period or part
1 mark for
thereof, the adjustable input tax for whole of that tax period shall be reduced by 60%.
each point
(b) FBR is empowered to discontinue the supply of gas and electricity while notifying the
gas and distribution companies in case of failure of Tier-1 retailer to integrate his system
with FBR system.
Marks
(ii) Alloc.
Any tax invoice issued shall bear the CNIC/NTN number in case supplies are made by
manufacturer or importer to unregistered distributor. In case of non-compliance:
1 marks for
(a) input tax attributable to supplies made to unregistered distributor on pro-rata basis is
each point
disallowed.
(b) Similarly, expense will be disallowed proportionate to total turnover in income tax.
Marks
(iii) Alloc.
(a) As per SRO 297(I)/2023 dated 08 March 2023 Federal Government has directed to charge
sales tax @ 25% on import and subsequent supply of following third schedule goods: 1 marks for
point (a)
• Aerated water or beverages
0.5 marks
• Cigarettes, Cigars and e-cigarettes for listing
• Cosmetic and shaving items each item of
• Tissue papers 3rd
schedule-
• Household articles including crockery, kitchenware and tableware total 10
• Home appliances in CBU items listed
• Ice cream here,
student can
• Fruit and vegetable juices
write any
• Mattress and sleeping bags six of them.
• Shampoos
Part (b)
Marks
Alloc.
“Relative” in relation to an individual, means:
(a) An ancestor, a descendant of any of the grandparents, or an adopted child, of the 1 marks for
individual, or of a spouse of the individual; or each point
(b) A spouse of the individual or of any person specified in sub-clause (a).

Rabia Associates
Computation of Net Sales Tax Liability
For the Tax Period June 2023
Sales tax liability:

Value of
Sales Tax Rate Output Tax Marks
Output tax supplies
Total taxable supplies N-2 34,110,000 18% 6,139,800 0.25

Exempt supplies N-2 6,000,000 Exempt - 0.25
Zero rated supplies N-2 5,500,000 0% - 0.25
Less: Input tax or 90% of output-whichever is lower
Actual input tax

Input b/f 40,000+20,000 60,000 0.25
Input tax- specific purchase N-1 720,000
Input for the month N-2 2,660,565
3,440,565 0.25
90% of output 6,139,800*90% 5,525,820 (3,440,565) 0.25
2,699,235
Less: Input tax on fixed assets N-2 (161,538) 0.25
2,537,697
Add: Excess tax collected- incidence passed on to consumers N-5 19,200 1.00
Add: further tax @ 3% on supplies to unregistered
UMT- Not applicable being end consumer - 0.25
Others 3,000,000*3% 90,000 0.50
Sales tax payable 2,646,897 0.25
Sales tax refundable on account of zero rated supplies:

Goods purchased N-2 428,998
Fixed asset N-2 26,047
455,045
Less: Penalty payable under Sales Tax Act 1990 (50,000) 0.50
405,045 0.25
Return of excess tax collected- incidence not passed on to consumers N-5 44,800 0.25
Input tax inadmissible- Exempt supplies 467,997+28,415 N-2 496,412 0.25
N-1
Residual Input Tax: Taxable Value Sales Tax Rate Sales Tax
Rs. Rs.
Goods from Ali Associates-Temporarily registered- Input tax inadmissible (1,500,000) 0.75
Mineral water for annual dinner (input tax inadmissible) (158,000) 0.75
Goods purchased from Taiba Associates-Suspended supplier:
Goods purchased before suspension-Input tax admissible - 0.50
Goods purchased after suspension date-Input tax inadmissible (1,200,000) 0.50
Printed stationery- Input tax is admissible - 0.75
19,142,000 18% 3,445,560 0.25
Taxable goods-Un-Registered persons 850,000 Inadmissible - 0.25
Exempt goods from registered suppliers 650,000 Exempt - 0.25
Provincial sales tax - Input tax is admissible - - 112,000 0.75
Residual input tax (for apportionment) 3,557,560 0.25
Taxable goods from registered supplier (for local taxable supplies) N-3 4,000,000 18% 720,000 0.75
Fixed Assets:
Fixed assets from registered supplier 4,500,000

Fiscal electronic cash register- Input tax is admissible - 0.50
Office equipment (input tax inadmissible) (300,000) 0.50
Delivery trucks (input tax inadmissible) (3,000,000) 0.50
1,200,000 18% 216,000 0.25
216,000
N-2
Apportionment of Residual Input Tax:
Value of Fixed Asset-

Input tax
Taxable Supplies-Local: supplies Input tax
Taxable goods-Registered persons 20,500,000
Goods on installment-markup 2,040,000/102*2 (40,000) 0.50
Discount not shown on invoice 950,000/95%*5% 50,000 0.50
Goods to MA in EPZ for further manufacturing -Zero rated supplies (1,500,000) 0.50
Settlement deal with Habib bank Limited 1,100,000 0.75
Taxable goods-Un Registered persons
UMT N-4 11,000,000 1.00
Others 3,000,000 0.25
34,110,000/45,610,000*3,557,560 2,660,565
1.00
34,1100,000/45,610,000*216,000 34,110,000 161,538
Zero Rated Supplies:
Consumable items to PIA -International flight 4,000,000
Goods to MA in EPZ for further manufacturing 1,500,000
5,500,000/45,610,000*3,557,560 428,998
1.00
5,500,000/45,610,000*216,000 5,500,000 26,047
Exempt Supplies:
To local market 2,500,000
To Dubai 3,500,000
(Input tax relating it is inadmissible) 6,000,000/45,610,000*3,557,560 467,997
1.00
6,000,000/45,610,000*216,000 6,000,000 28,415
45,610,000 3,557,560 216,000
19.00
N-3
When the goods are purchased for making specific supply, then input tax on those goods shall not be apportioned. Moreover, input tax
credit shall be available against that specific supply only.
N-4
Taxable supplies to UMT:
A registered person shall not supply goods to unregistered person in excess of Rs. 10 million in a tax period. In case of non-compliance
the supplier shall not be entitled to claim input tax attributable to such excess supplies to unregistered persons. However, this provision
shall not pply in case of supplies to persons not engaged in supply of taxable goods. AS UMT is not involved in making any taxable
supplies, therefore, related input tax shall not be inadmissible.
N-5
Any person who has collected any tax, under misapprehension of any provision of the Act or otherwise, which is in excess of the tax
actually payable and the incidence of which has been passed on to the consumer, shall pay the amount of tax so collected to the Federal
Government.
In this case, since 70% of the stock, on which excess tax of Rs. 44,800 was collected, is still unsold, RA should return this amount to the
customer. However, the balance amount of Rs. 19,200, the incidence of which has been passed on to the consumers should be deposited
with the Federal Government.
Solution Q # 08
Part (a)
Marks
Alloc.
It shall be the duty of the National Finance Commission to make recommendations to the
President as to:
a) the distribution between the Federation and the Provinces of the net proceeds of the taxes;
1 marks for
b) the making of grants-in-aid by the Federal Government to the Provincial Governments;
each point
c) the exercise by the Federal Government and the Provincial Governments of the borrowing
powers conferred by the Constitution; and
d) any other matter relating to finance referred to the Commission by the President.
Part (b) Marks

Alloc.
A utilitarian, concerned with aggregate welfare, might be quite relaxed about tax
avoidance. After all, when tax is avoided, wealth is not destroyed: it is merely kept in the
private sector instead of being transferred to the public sector. The main utilitarian concern
would probably be that it would result in an unintended distribution of the tax burden, as
some of the burden would be shifted from the rich onto people with modest incomes who 1.33 marks
for each
cannot afford clever tax lawyers. That would reduce their satisfaction more than it would
point
increase the satisfaction of the better-off people who have succeeded in reducing their tax
burdens.
A virtue ethicist would perhaps dislike tax avoidance. It is, after all, hardly virtuous to
exploit rules knowing that one is exploiting them in unintended ways to redistribute the
disadvantage away from oneself.
A deontologist would not positively favour tax avoidance, but might not condemn it
either. Deontologists can easily argue for a duty to obey the law: yet obeying the law is
something the tax planner takes care to do, in his own peculiar way.

TAX Mock September 2023

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

TAX Mock September 2023

Uploaded by

Copyright:

Available Formats

Certificate in Accounting and Finance Stage Examination

Prepared by: Sir Ali Imran

Arrival in Pakistan 15 December 2022

In addition to the above, he was also provided the following:

Other information relevant to tax year 2023;

Relevant exchange rates were as follows:

Division1. For individual non-salaried case/AOP

Division 2 For individual salaried case.

Initial allowance 25%Depreciation rates

Tax on Capital Gain under Sec 37 A 12.5%

Minimum tax under section 113.

Tax rate of Capital gain on immovable property

S.no Holding period Open plot Constructed Flats

“Greenfield industrial undertaking” means-

I Computation of tax liability of Gillani & Co.

Income tax payable under normal tax regime

*Because turnover is less than Rs. 100 million.

(W-2.1) Sale of Shares

(W-3) Income from business [(5,500 x 284)/.91] = 1,716,484

Solution 5 (1 mark per bullet)

Input tax on PPE (W-4)

W-2) COMMON INPUT TAX

W-3) INPUT TAX ON PPE

Machine Beta for taxable & exempt supplies 6,000,000

(v) Encourage construction in the country (.5)

Income tax return for tax year 2023

Income from property Rupees

Income from Business

Income from other sources

Income for rate purpose (810,000 + 666,667) B 1,476,667

Tax on 1,200,000 60,000

Tax payable by Uzma A×C÷B 59,470

*Note: Sara may include these income in her return.

Income from property

Taxable income of Shariq without minor's business income 2,800,000

Taxable income for rate purpose B 8,133,333

Tax on 6,000,000 1,330,000

Tax liability of Shariq A×C÷B 919,180.33

The liability of Rs. 919,180 will be first charge on Shariq's estate.

1) Loan provided to CEO

2) Sales to unregistered dealer

3) Gain on sale of showroom

4) Government debt securities

5) Gain on sale of unlisted securities

Accounting and tax depreciation

Brought forward business losses and unabsorbed tax depreciation

W-2: Income from business Rs. in million

Tax period May 2023

Computation of sales tax payable/refundable/carry forward

Taxable supply Amount of sales

Import of 40 electric cars 248 25% 62

Import of 25 heavy motorbikes in CBU condition 17.5 25% 4.38

Electricity bill 19 18% 3.42

Total input tax for the month 307.64

Exports of 300 motorcycles to Sri Lanka 45 Zero-rated -

Sales Tax Liability Rs. in m Rs. in m

Less : Input Tax (Lower of)

Less : Input Tax on Fixed Asset (81.38)

Add: Further Tax (10*3%) 0.3

Sales Tax Payable 0.3

Sales Tax Refundable (6.94+2.88) (9.82)

W-1 Apportionment of Input Tax

Total 1410 217.64 90

(i) Normal assessment: