Solved Past Papers Income Tax Numericals of Icmap Stage IV - (2003 To 2015)

Chapter 25 Solved Past Papers Income Tax Numericals of ICMAP Stage IV - (2003 to 2015)
Chapter
28
SOLVED PAST PAPERS INCOME TAX NUMERICALS OF
ICMAP STAGE IV - (2003 TO 2015)
Note: All the following questions have been solved under the Income tax Ordinance, 2001 effective from July 01,
2015
Q.NO.4 March 2015 Mr. Hassan has been working as an Accounts Executive in Prime Limited which is a public limited
company. In addition to his salary, other perks and allowances are also provided to him by his employer. He has various
other sources of income as well. Assume you are income tax consultant and Mr. Hassan has submitted the following
information for the tax year ended on June 30, 2015 for calculation of is taxable income and tax liability:
Rupees
Basic salary per annum 500,000
Perquisites and allowances paid by the employer:
House rent allowance 110,000
Utilities 25,700
Entertainment allowance 13,000
Reimbursement of medical expenses 7,750
Two cars have been provided to Mr. Hassan and maintained by the company. One car is used wholly for the company’s
business purposes having cost of Rs. 300,000 and the other one is used for his family exclusively costing to Rs. 350,000.
Income from other sources:

· Mr. Hassan has been maintaining a profit and loss sharing account in ITC bank. The bank has credited a profit of Rs.
11,300 in his account during tax year.
· He is also a non-professional writer and has received Rs. 20,000 on account of his literary work which was starter and
completed during the year.
Other information:
· Mr. Hassan paid annual premium of Rs. 12,000 for life insurance policy and Rs. 4,000 for health insurance policy.
· He also paid donation of Rs, 15,000 to an approved charity organization.

· He also paid Zakat of Rs. 10,000 under the Zakat and Usher Ordinance, 1980.
Required:
Calculate the taxable income and tax liability of Mr. Hassan for the tax year 2015. Provide all necessary notes to support
your calculations.
Solution
Name of Tax Payer : Mr. Hassan
Conceptual Approach to Taxes _________________________________489

Income year ended : 30th June 2016

Tax year : 2016
Personal Status : Individual
Residential Status : Resident
Computation of taxable income and tax thereon
Rs. Rs.
Income from Salary
Basic Salary 500,000
Utilities 25,700
Reimbursement of medical expenses 7,750 -
Conveyance for personal use (350,000 x 10 % ) 35,000
683,700
Income from Other Sources
Non-professional writer fee 20,000
20,000
Total income 703,700
Less: Zakat (10,000)
Taxable Income 693,700
Computation of tax liability

Tax on Rs. 693,700
[ Rs.2,000 + (693,700 - 500,000) x 5% ] 11,685
Less: Rebate only on life insurance premium

( 11,685 / 693,700 x 12,000 ) 202
Less: Rebate on donation
( 11,685 / 693,700 x 15,000 ) 253 (455)
Tax payable under NTR 11,230
Add tax FTR on PLS account on Rs. 11,300 @ 10% 1,130
Tax payable with return 12,360
Notes - 1
Car provided by the employer which was wholly used for business purpose will not be added
in the income of Mr. Hassan as the same was used for the discharge of offical duties.
Q.NO. 4 August 2014 Prime Leather Works (Pvt.) Limited has provided following information for the tax year
2014 to calculate its taxable income and tax liability:
Description Note Amount (Rs. )

Sales 1 60,000,000
Less: Cost of sales 2 -40,000,000
Gross Profit 20,000,000
Less: General and admin expenses 3 -12,000,000
Less: Selling expenses 4 -3,000,000
Add: Other Income 5 1,000,000
Net Profit 6,000,000
1 Total sales include sales of Rs. 20 million which are subject to final taxation.
490_______________________________ Conceptual Approach to Taxes

2 Cost of sales includes accounting depreciation of Rs. 4 million.

3 The following expenses are also included in the general and administrative expenses:
a. Accounting depreciation of Rs. 2 million.
b. Bonus paid to the employees Rs. 3 million.
c. Provision for doubtful receivables Rs. 1.5 million.
d. Provision for the post employment benefits Rs. 2 million.
e. Fines and penalties paid to Federal Board of Revenue (FBR) Rs. 0.7 million.
4 Selling expenses include commission expense of Rs. 1.5 million. However, tax has not been withheld
while making the payment of the commission.
5 Other income includes the following items:
a. Accounting gain on disposal of fixed assets Rs. 0.2 million.
b. Interest income Rs. 0.3 million.
c. Dividend income from listed securities Rs. 0.5 million.
Additional Information:
6 Tax depreciation is Rs. 10 million.
7 Bad debts of Rs. 0.5 million.
8 Gratuity paid amounting Rs. 1.7 million.
9 Taxable gain on disposal of fixed asset is Rs. 0.15 million.
10 Breakup of advance tax is as follows:
a. On supplies u/s 153 Rs. 0.7 million.
b. Tax on utilities Rs. 0.3 million.
c. Tax on cash withdrawals Rs. 0.05 million.
d. Tax on dividend income Rs. 0.05 million.
e. Tax on interest income Rs. 0.03 million.
Required:
Calculate taxable income and net tax liability of Prime Leather Works (Pvt .) Limited for tax year 2014.
Solution
Prime Leather Works (Pvt.) Limited

Resident : Private Company
Tax Year: 2016
Rupees Rupees
Income from Business
Net Profit before tax 6,000,000
Add: Inadmissible items

Accounting Depreciation in cost of sales 4,000,000
Accounting Depreciation in admin exp. 2,000,000
Provision for doubtful receivable 1,500,000
Provision for post employment benefits 2,000,000
Fines and penalties 700,000
Commission expense 1,500,000
Taxable gain on disposal 150,000 11,850,000
17,850,000
Less: Admissible items
Accounting gain on disposal 200,000
Tax depreciation 10,000,000

Bad Debts 500,000 (10,700,000)

7,150,000
Less: Dividend income cover under SBI (500,000)
6,650,000
Less: Apportionment of sales subject to final taxation
(6,650,000 x 20 / 60 ) (2,216,667)
Total Taxable Income 4,433,333
Computation of tax liability:
Tax on Rs. 4,433,333 @ 32 % A 1,418,667

Alternate Coporate tax u/s 113 C
Tax on Rs. 6,000,000 x 17% B 1,020,000
Minimum Tax u/s 113
Tax on Rs. 60,000,000 @ 1 % C 600,000
Tax liability higher of A , B or C 1,418,667
Tax on Rs. 20,000,000 @ 4% 800,000
2,218,667
Tax on dividend income Rs. 500,000 @ 10 % 50,000
2,268,667
Less: advance tax (800,000 + 300,000 + 50,000 + 50,000 + 30,000) (1,230,000)
Balance tax payable 1,038,667
Q. NO.4 Spring 2014
Mr. Samiullah has been working as Assistant Manager-Marketing for last 15 years in M/s. Moonlight Limited, a public limited
company. In addition to salary, perks and allowances given to him by the company, he has various other sources of income.
Assume that Mr. Samiullah is 62 years and has been retired from the company services on June 30, 2014. You are his Tax
Consultant. He has submitted the following information for the tax year ended June 30, 2014 in order to seek your advice in
respect of the calculation of his taxable income and tax liability.
Rupees
A. i) Basic salary per annum 500,000
ii) Perquisites and al allowances paid by the employer:
Bonus 80,000
Dearness allowance 180,000
Gratuity (scheme approved by FBR) 625,000
Encashment of leave preparatory to retirement 120,000
B. Property Income:
Mr. Samiullah rented his house @ Rs. 12,000 per month w.e.f 1st Jul y, 2013. He received a deposit of
Rs.150,000 not adjustable against rent, out of which he refunded Rs.75,000 to previous tenant, who vacated the
house after 3 years' occupancy. Tenant also paid property tax of Rs. 6,000 as per lease agreement. Assume that
Mr. Samiullah claimed the following expenditure for the year ended 30th June, 2014:-
Rupees Rupees

Interest on borrowed capital 7,000

Insurance premium paid to cover the risk for property damage 10,000
Repair and maintenance expenses 25,000
C. Other information
Share from unregistered firm (AOP) 20,000
D. Zakat deducted at source 8,000
Required:
(a) Calculate the taxable income and tax liability of Mr. Samiullah for the year ended June 30, 2014.
(b) Mr. Samiullah is 62 years. Can he claim a tax rebate @ 50% available to senior citizens? Why or why not? State
the reasons in support of your answer.
Solution: (a)
Mr. Samiullah (Resident)

Computation of taxable income and tax liability
For the Tax year 2016
INCOME FROM SALARY U/S 12 (Rupees) (Rupees)
Basic salary 500,000

Bonus 80,000
Encashment of leave preparatory to retirement 120,000
Gratuity (scheme approved by FBR) 625,000
Exempt U/C 13(iii) of Part I of 2nd Schedule (200,000) 425,000
Total taxable salary (A) 1,540,000
INCOME FROM PROPERTY U/S 15
Rent received (Rs. 12,000 x 12 months) (Note 1) 144,000

Property tax paid by tanent 6,000
Advance not adjustable against rent [150,000 - (75,000 x 3/10)] / 10 = 12,750
162,750
Less admissible deductions U/S 15A
1/5th repair allowance (Rent chargeable to tax Rs. 162,750 x 1/5) = (32,550)
Interest on borrowed capital (7,000)
Insurance premium paid to cover the risk for property damage (10,000) 113,200
(B)
INCOME FROM OTHER SOURCES U/S 39
Share from unregistered firm (AOP) (Assumed under NTR and after tax) (C) 20,000
(Included for rate purposes)
Total income (A + B +C) 1,673,200
Less: Zakat (8,000)

Taxable income under NTR 1,665,200
As taxable salary is more than 50% of the total taxable income, hence the taxpayer is a salaried person and accordingly his
tax liability is computed as under.

COMPUTATION OF TAX LIABILITY:
Total income taxable under NTR (including share from AOP) 1,665,200
Tax on Rs. 1,665,200 [92,000 + 15% x (1,665,200 - 1,500,000)] 116,780

Less Tax on share from a unregistered firm (AOP) [Rs. 116,780 / 1,665,200 x 20,000] = 1,403
Balance tax on taxable income (excluding share from AOP) 115,377
Solution: (b)
Although Mr. Samiullah has met one condition of age of 60 years or more on the first day of the tax year however because
his taxable income exceeds Rs.1(M) therefore 50% reduction in tax liability under clause 1A of Part III of 2nd Schedule to the
Income Tax Ordinance, 2001 as senior citizen shall not be allowed.
Spring 2013 Q. 4
M/s. Golden Gate Limited (GGL) is a private limited company. The company manufactures and supplies consumer goods.
GGL sells its product through various distributors in Karachi, Lahore and Islamabad. The following is the profit and loss
account of GGL for the year ended on June 30, 2013:
Rs. '000' Rs. '000'

Sundry expenses 2,240 Gross Profit 235,200
Office salaries 29,120 Interest on bank deposit 300
Rent, rates & taxes 8,960 Recovered bad debts
Legal charges 2,016 (allowed in the past) 448
Finance charges on leased assets 350 Dividend 672
Advertisement 5,600
Auditor's fees 6,720
Cost of issue of debentures 5,600
Loss on sales of furniture 2,240
Provident fund contribution 7,840
Bad debts 4,480
Vehicle expenses 8,960
Fire insurance premium 7,840
Preliminary expenses 1,008
Provision for taxes 10,080
Provision for bad debts 4,480
Liquidated damages 3,360
Depreciation 44,800
Net Profit 80,926
236,620 236,620
The following information is available:

(i) Sundry expenses include donation of Rs. 502,000 paid to an unrecognized charitable institution.
(ii) Office salaries include Rs.6,000,000 paid to one of the directors.
(iii) Provident Fund is recognized by the Income Tax Department.
(iv) Vehicle expenses are not vouched and verifiable to the extent of Rs.1,881,000.
(v) Actual depreciation works out to Rs.32,650,000 only.
(vi) Lease rental for the year are Rs.1,750,000.
Required:

Calculate the taxable income and tax liability of the company for the tax year 2013 from the above data.
Solution
M/S GOLDEN GATE LIMITED (GGL)

COMPUTATION OF TAXABLE INCOME & TAX THEREON
FOR THE TAX YEAR 2016
INCOME FROM BUSINESS U/S 18 Note Rs. Rs.
Profit as per accounts 80,926,000
Add: Inadmissible items U/S 21 & 174
Provision for taxes 10,080,000

Provision for bad debts 4,480,000
Unvouched vehicle expenses 1,881,000
Donation to un-recognised institution 502,000
Accounting depreciation 44,800,000
Finance charges on lease asset 350,000 62,093,000
143,019,000
Less: Admissible items U/S 20
Lease rental 1,750,000
Tax depreciation 32,650,000
Dividend (To be taxed under FTR) 672,000 35,072,000
Taxble income under NTR 107,947,000
Alternative Corporate tax U/S 113C [Accounting profit under NTR x 17%] (A) 13,757,420
[Rs. 80,926,000 x 17%]
Tax liability under corporate tax under NTR @ 32% (B) 34,543,040
Actual tax payable under NTR: higher of (A) or (B) 34,543,040

Add: Tax liability under FTR on dividend income (Rs. 672,000 x 10%) 67,200
Total tax liabiltiy 34,610,240
Add: Tax on gross dividend receipts 67,200
Total tax liabiltiy 34,677,440
Less: Tax deducted on dividend 1 67,200
Assumptions and basis
1. It is assumed that tax on dividend income has duly been deducted and deposited, hence credit of the same has
been claimed against tax liability under final tax regime (FTR).
2. It is assumed that loss on sale of furniture and bad debts are in accordance with the provisions of sections 22
and 29 of the Income Tax Ordinance, 2001.
3. It is assumed that company is resident and although minimum tax under section 113 is applicable, however the
same has not been computed in the absence of turnover and accordingly no comparison with tax under normal
tax regime (NTR) has been made.
4. It is assumed that the preliminary expenses are in accordance with the provisions of section 25 of the Income
Tax Ordinance, 2001.

Q.5 August 2012
Global International Limited engaged in the manufacturing and trading of FMCG in the country . The shares of the
company are listed on all the stock exchanges of Pakistan. Following information has been extracted from the profit and
loss account of the company for the year ended 30th June, 2012.
Rupees
Sales 55,300,000
Cost of sales 22,120,000
Gross profit 33,180,000
Add:
Dividend received 300,000
Less
Director's sal aries 7,500,000
Staff salaries 12,150,000
Contribution to employees provident fund (a) 1,320,000
Administrat ive and selling expenses 2,550,000
Depreciation (b) 1,100,000
Entertainment expenses (c) 950,000
Insurance (d) 900,000
Fees (e) 650,000
Total expenses 27,120,000
Net income 6,360,000
Note:
(a) Employees' Provident Fund Trust is revocable at the option of Managing Director of the company and an application for
approval has been filed with the relevant tax authority.
(b) Depreciation includes Rs .300,000 for plant & machinery. Depreciation on all assets is charged on rates for normal
depreciation given in the Third Schedule to the Income Tax Ordinance, 2001. Written down value of plant & machinery for
the purpose of calculating tax depreciation is Rs.1,350,000 which includes addition during the year of new machinery of the
value Rs.650,000.
(c) Entertainment expenses include Rs.200,000 reimbursed to a director of the company for which no support is available.
(d) Insurance includes prepaid expenses amounting to Rs.320,000.
(e) The company has paid fees to the tax consultant for defending taxpayer's appeal in Income Tax Appellate Tribunal.
Required:
Compute the taxable income and the tax liability of the Global International Limited. Give proper comments where any given
information has not been utilized in the computation.
Solution Q.5 August 2012
Global International Limited

For the tax year 2016
Rs. Rs.
INCOME FROM BUSINESS U/S 18
Profit before tax as per accounts 6,360,000
Add: Inadmissible items U/S 21
(a) Employee's provident fund (unapproved) 1,320,000

(b) Accounting depreciation on plant and machinery 300,000

(c) Entertainment expenses without supporting evidence 200,000
(d) Prepaid insurance 320,000
2,140,000
Less: (b) Tax depreciation on plant and machinery (N-1) 340,625

Dividend (taxable under the head income from other sources) 300,000
640,625
7,859,375
Dividend income (covered under FTR) 300,000
Total taxable income 7,859,375
Alternative Corporate tax U/S 113C (A) 1,081,200

[[Accounting profit under NTR Rs. 6,360,000 x 17%]
Corporate Tax
Tax on Rs. 7,859,375 x 32% (B) 2,515,000
Minimum tax u/s 113 (55,300,000 x 1%) (C) 553,000
Tax liability under NTR: Higher of (A), (B) or (C) 2,515,000
Tax liability under FTR:

Tax on gross dividend @ 10% 30,000
2,545,000
Less: Tax deducted on gross dividend (N-2) (30,000)
(N-1) Tax depreciation on plant and machinery:

Normal Initial Total
W.D.V. depreciation allowance depreciation
15% 25%
Rs. Rs. Rs. Rs.
U/S 22 U/S 23
Opening WDV 1,350,000
Less addition during the year (650,000)
700,000 105,000 - 105,000
Addition during the year 650,000

Less 25% initial allowance 162,500
487,500
Less: Initial allowance (650,000 x 25%) - 162,500 162,500
Normal depreciation on addition during the year

(WDV Rs.487,500 x 15%) 73,125 - 73,125
178,125 162,500 340,625
N-2: In the abscence of information it has been assumed that tax on dividend has duly been deducted & deposited.
N-3: As the legal fee for defending taxpayer's appeal in Income tax Appellate Tribunal is admissble expense hence the
same has no effect on the taxable income.

February - 2013 Q. 4
Mr. Noor has been working as a senior Manager in Karachi Terminal Limited, Assume he has proivded following
information about his income pertainig to year ended June 30, 2013:
Salary Income Rupees

Bonus 100,000
Medical allowance (actual expenses Rs.30,000) 80,000
Contribution by Mr, Noor towards recognized provident fund (including 168,000
equal conribution by the company)
Interest credited during the year (provident fund) 300,000
Other Income
Remuneration for literary work. (Mr. Noor is a non-professional writer) 120,000
Profit on profit and loss sharing bank account (net of 10 % tax withheld) 9,000
Capital loss on sale of shares of public listed company 35,000
Rent from house let out 192,000

Expenditure claimed against property income :
Property tax 15,000
Repair & maintenance 5% of rent
Other Information :
Zakat paid 10,000
Note: It is assumed that literary work was started and completed during the tax year.
Required:
Being a tax consultant you are required to calculate Mr. Noor's taxable income and his income tax liability
for the tax year 2013.
Solution
Name of Taxpayer Mr.Noor

Nation Tax Number xxx
Tax year 2016
Personal status Individual - salaried
Residential status Resident
Computation of income & tax thereon
Rs. Rs.
INCOME FROM SALARY U/S 12

Bonus 100,000
House rent allowance (N-1) 420,000
Medical allowance (N-2) -
Employer contribution towards recognized provident fund (N-3) -
Interest on provident fund (N-4) -

1,444,000
CAPITAL (LOSS) U/S 37 (N-5) -
Remuneration for literary work 120,000
Rental income 192,000
Less property tax (15,000)

1/5th repair allowance rent chargeable to tax (Rs. 192,000 x 1/5) (38,400) 138,600
Total Income 1,702,600
Less zakat paid (assumed under Zakat & Ushar Ordinance) (10,000)
Taxable Income 1,692,600
Tax on income under NTR:
Tax on Rs.1500,000 92,000

Tax @ 15% on [1,692,600 - 1,500,000] 28,890 120,890
Add tax on profit on PLS account (Rs.10,000 x 10%)= 1,000
Total tax liability 121,890
Less tax already paid / deducted at source

Tax deducted on profit on PLS account U/S 151 (1,000)
Balance tax payable 120,890
NOTES:
(N - 1) House rent allowance is totally taxable.

(N - 2) Medical Allowance: Rs.
Medical Allowance 80,000

Less exempt upto 10% of basic salary U/C 139 (840,000 x 10%) 84,000
-
(N - 3) Contribution towards recognized provident Fund:
Employer's contribution to provident fund (Rs. 168, 000/2) 84,000

(Equal contributiion by the employer company)
Less: Exempt upto lower of 10% of salary (924,000 x 10%) 92,400
OR Rs. 100,000. 100,000 92,400
-
Nothing will be included in total income of the tax payer as the contribution is within the exemption limit.
Salary for provident fund purposes mean basic salary plus dearness allowance (i.e. Rs. 840,000 + 84,000).
No treatment of employee contribution as the same is already included in taxable salary of the
employee.

(N - 4) Rs.
Amount of interest credited 300,000

Less exempt higher of 1/3rd of salary (Rs. 924, 000/3) or interest @ 16% p.a. 308,000
Taxable amount -
Interest credited to a provident fund is exempt upto the higher of one-third of salary or amount on
interest calculated @ 16% p. a. As the rate of interest is not given hence 1/3rd of salary has been taken
as exempt.
(N - 5) Capital gain on sale of shares of listed companies is taxable as a separate block of income. Loss on such
shares may be set- off by a person against gain on securities chargeable to tax. There is no treatment of
the said loss as there is no gain on sale of securities.
(N - 6) Profit on PLS bank account received are taxable under Final Tax Regime hence are not included in total
income. Tax deducted is treated as fina discharge of tax liability for such income.
APRIL - 2012 Q. 5
Mr. Abdul Rehman is Chief Accountant in a multinational company. He is assumed to have received the following
perks during the tax year 2012:
Income from Salary: Rs.

Utilities 40,600
Employer's contribution to recognized provident fund 31,950
Medical allowance 37,300
Leave encashment 50,600
T.A / D.A for official duty 33,300
Bonus 82,500
During the year, tax has been deducted on salary at Rs.26,500. Further he has paid Zakat at Rs.35,000 under
the Zakat and Ushar Ordinance and Rs.56,000 as donation to an approved institution.
Mr. Abdul Rehman has been provided with a 1300cc car which cost Rs.1,250,000 to the company. The car is
used for both personal and official purposes.
Capital Gain: Rs.
Capital gain on buying and selling of shares of an unlisted company
(shares were held for eight months). 52,000
Income from Property:
Four years ago he rented out his house for a monthly rent of Rs.24,000. At that time he also received Rs.120,000
from the tenant as deposit which is not adjustable against monthly rent. During the current tax year he received
Rs.288,000 as rent.
Required:
Compute taxable income and tax liability of Mr. Abdul Rehman for the tax year 2012.
Solution:
Mr. Abdul Rehman (Resident)


INCOME FROM SALARY U/S 12 (Rupees) (Rupees)

Utilities 40,600
Employer's contribution to recognized provident fund 31,950
Exempt upto lower of:
- Rs. 100,000 OR
- 10% of Basic salary i.e 41,250 41,250 -
Exempt upto lower of 10% of basic salary U/C 139 41,250 -
T.A / D.A for official duty (Exempt) -
Conveyance (1,250,000 x 5%) U/R 5 62,500
Bonus 82,500
Total taxable salary (A) 831,500
CAPITAL GAIN U/S 37
Capital gain on buying and selling of shares of an unlisted

company (shares were held for eight months). (B) 52,000
Rent received (Note 1) 288,000

Advance not adjustable against rent (120,000 / 10) 12,000
Rent chargeable to tax 300,000
Less 1/5th repair allowance of rent chargeable to tax (Rs. 300,000 x 1/5) (60,000)
Net rent chargeable to tax (C) 240,000
(A + B + C) 1,123,500
Less: Zakat 35,000
Taxable income under NTR 1,088,500
As taxable salary is more than 50% of the total taxable income, hence the taxpayer is salaried person
Total income taxable under NTR 1,088,500
Tax on Rs. 1,088,500 [14,500 + 10% x (1,088,500 - 750,000)] 48,350

Less: Tax credit on donation U/S 61:
Tax credit shall be allowed on lower of the following:
- Actual amount of donation i.e. 56,000
- 30% of taxable income i.e. 1,088,500 x 30% = 326,550
Tax credit = 56,000 x 48,350 / 1,088,500 2,487
Less: Tax deducted at source 26,500
Note 1 In the absence of information only 1/5th repair allowance has been claimed against income from property.
Summer - 2011 Q. 2 (c) (i)
From the following compute the amount of "Income from Property" chargeable to tax for the year ending June 30, 2010
Rupees
Rent of the property 50,000 (per month)

Forfeited amount under a contract for the sale 100,000

Refundable security deposit 500,000
Annual maintenance charges paid by the owner of the property 25,000
Solution:
Name of taxpayer
Rs.
Rent of property (Rs. 50,000 x 12 months) 600,000

Add: Forfeited amount under a contract for the sale 100,000
Less 1/5th repair allowance of rent chargeable to tax before any deduction (140,000)
(Ignore maintenance expenses that may be less or more than 1/5th allowance)
Rent chargeable to tax for taxability purposes 560,000
(N - 1) No treatment of refundable security has been made as the same shall autocatically transferred to rental income
on expiry against which advance rent has been given.
Summer - 2011 Q. 5
Mr. Hussain Ahmad is an officer in a public listed company. He derived the following salary income during the tax
year ended June 30, 2010:
Rs.
 Basic salary 50,000 (per month)
 House rent allowance 22,500 (per month)
 Utility allowance 5,000 (per month)
 Medical allowance 6,000 (per month)
 Leave encashment 50,000
(i) Company also provide him with a 800CC car valuing Rs. 600,000 as per books of accounts. The car is used for
official and personal purposes.
(ii) He has paid Zakat of Rs. 25,000 to an approved institution.
(iii) He paid a donation of Rs. 20,000 to a charitable institution for which a tax credit is allowed u/s 61.
(iv) He paid donation of Rs.10,000 to an approved institution specified u/c (61) of part 1 of second Schedule.
(v) He received a pension amounting to Rs. 7,000 p.m from his past employment in the government.
Required: Compute the amount of taxable income and tax liability of Mr. Hussain for the tax year 2010.
Solution:
Mr. Hussain Ahmad (Resident)
Rs. Rs.
Basic salary (Rs. 50,000 x 12 months) (Note - 1) 600,000

House rent allowance (Rs. 22,500 x 12 months) (Note - 1) 270,000
Utility allowance (Rs. 5,000 x 12 months) (Note - 1) 60,000
Medical allowance (Rs. 6,000 x 12 months) 72,000
Less: Exempt upto 10% of basic salary U/C 139 60,000 12,000
Leave encashment (Note - 1) 50,000

Conveyance (Rs. 600,000 x 5% of cost of asset to employer) U/R 5 30,000

Pension as Govt. employee (exempt u/c 9 of Part I of second schedule) -
Total income 1,022,000
Less: Zakat paid (maximum upto total income) (25,000)
Donation to institution specified in u/c 61 of Part 1 of 2nd Schedule:
Lower of following two amounts shall be deducted from income (as exempt income)
- 30% of taxable income (30 / 130 on Rs. 997,000) however here is 997,000
less 10,000 donation allowable = 987,000 x 30% = 296,100 or
- Actual amount of donation i.e. Rs. 10,000 (10,000)
Taxable income 987,000
As the person is having only salary income hence tax liability for a salaried person is computed as under:
Tax on Rs. 987,000 [14,500 + 10% x (987,000 - 750,000)] 38,200
Less: Tax credit on donation u/s 61

Tax credit shall be allowed on lower of following
- 30% of taxable income i.e Rs. 296,100
- Actual amount of donation i.e. Rs. 20,000
Tax credit = (20,000 x 38,200 / 987,000) (774)
(Note 1) Basic salary, utility allowance, house rent allowance and leave encashment are totally taxable.
Summer - 2010 Q. 5
The Trading & Profit and Loss Account of M/s. Arshad Limited for the year ended on 30th June, 2009 is as under;
Rs. "000" Rs. "000"

Sales 2,300,000
Less: Cost of sales 1,571,000
Gross profit 729,000
Less: expenses
Salaries and wages 170,000
Office rent 55,000
Telephone expenses 39,500
Travelling and conveyance 41,500
Forwarding 61,000
Entertainment 2,500
Miscellaneous 9,000
Office stationery 9,000
Depreciation 58,000
Income tax for last year 54,000
Bad debts 9,000
Doubtful debts 5,000
Donations 900
Liquidated damages 500
Insurance 6,000
Provision for taxation 79,000 (599,900)
Net Profit 129,100
Notes and additional information:
(i) A sum of Rs. 900,000 written off last year and allowed by the Income Tax Department, has been recovered and
credited to bad debt reserve.

(ii) Un-vouched and un-detailed expenses included in the entertainment amounted to Rs. 350,000.
(iii) Depreciation allowable as per the Income Tax Law is Rs. 66,000,000.
(iv) Salaries and wages include payment of Rs. 250,000 without deducting tax at source.
(v) Salary paid amounting to Rs. 240,000 in cash.
(vi) Donation Rs. 500,000 paid to an approved institution specified in Clause (61) of part I of second schedule.
(vii) Donation Rs. 400,000 paid to an approved institution but not specified u/c (61) of part I of second schedule.
(viii) Pre-paid insurance Rs. 250,000.
Required: Compute the taxable income and tax liability of the Company for the tax year 2009.
Solution:
M/s Arshad Limited
Computation of taxable income and tax liabiltiy:
Rs. Rs.
INCOME FROM BUSINESS U/S 18 (000) (000)
Profit as per accounts 129,100
Add: Inadmissible items
Accounting depreciation 58,000

Income tax for last year 54,000
Doubtful debts 5,000
Donation to approved institution (credit shall be allowed) 400
Donation to approved institution (under clause 61) 500
Provision for taxation 79,000
Bad debts recovered from allowed portion (assumed credited to liability 900
otherwises the same shall be ignored for taxable income comuptation as
already included in given accounting profit)
Unvouched and un-detailed expenses 350
Payment of salaries without tax deduction & cash payment (Rs.250,000 + 240,000) 490
Pre-paid insurance 250
198,890
Less: Admissible items 327,990
Tax depreciation (66,000)

Less: Donation to approved institution (under clause 61)
(Straight deduction shall be allowed up to lower of
actual amount of donation or 20% of taxable income)
- Actual amount of donation i.e. Rs. 500,000 (500)
- 20% of taxable income i.e. Rs. 43,665,000
Comparison shall be made in separately 20% x (Rs. 261,990,000 x 100 / 120)
Alternative Corporate tax U/S 113C (A) 21,947

[[Accounting profit under NTR Rs. 129,100 x 17%]
Tax on taxable income @ 32% (B) 83,677
Turnover tax u/s 113 @ 1% of Rs.2,300,000,000 (C) 23,000
Tax liability higher of (A), (B) or (C) 83,677

Less: Tax credit on donation

Tax credit shall be allowed on lower of:
- 20% of taxable income i.e Rs. 52,298

- Rs.400
Hence tax credit (400 x 83,677 / 261,490) 128
Winter - 2009 Q. 4
Following is the Profit and Loss account of M/s Fast Track Company (Pvt.) Ltd for the year ended on 30-06-2009
Rs. Rs.
Sundry expenses 8,000 Gross Profit 840,000
Office salaries 104,000 Casual income 2,000
Rent, rates and taxes 32,000 Premium on issue of debentures 40,000
Income tax 10,400 Recovered bad debts
Legal charges 7,200 (allowed in the past) 1,600
Advertisement 20,000 Dividend 8,000
Auditor's fees 24,000
Cost of issue of debentures 20,000
Loss on sales of furniture 8,000
P. F. contribution 28,000
Bad debts 16,000
Vehicle expenses 32,000
Fire insurance premium 28,000
Communication 3,600
Liquidated damages 12,000
Depreciation 160,000
Net Profit 326,400
891,600 891,600
Required:
Compute the net taxable income of the company for the tax year 2010 from the above data after keeping in view
the following notes:
(i) Sundry expenses include Rs.1,600 paid to an institution not recognized u/s 61.
(ii) Office salaries include Rs.20,000 paid to one of the directors.
(iii) Provident Fund is recognized by the Income Tax Department.
(iv) Vehicle expenses are not vouched and verifiable to the extent of Rs.6,000.
(v) Actual depreciation works out to Rs.136,000 only.
Solution:
M/s Fast Track Company (Pvt) Limited
Computation of taxable income
For the tax year 2016 Rs. Rs.
Profit as per accounts 326,400
Add:
Income tax 10,400
Unvouched vehicle expenses 6,000
Donation to unapproved institution 1,600
Accounting depreciation 160,000 230,000

Less:
Tax depreciation 136,000
Dividend (excluded to calculate income from business) 8,000 144,000
412,400
Dividend income (Not to include in taxable income as fully covered under final tax regime) -
Notes:
1. Cost on issue of debenture and premium on issue of debenture expenses alongwith casual income, preimum on
issue of debentures and recovery from already allowed bad debts have no impact on taxable income hence the
same has been ignored.
2. In the abscence of sales no turnover tax has been computed, however where the turnover tax is higher than the
tax as compared to the tax under normal tax regime and alternative corporate tax U/S 113C of the Ordinance
then the same is to be paid by the Company.
Summer - 2009 Q. 3(b)
Mr. Ali Hassan a professor and Irani citizen entered into an employment contract with a government university in Pakistan for
teaching and research work. The university is incorporated u/s 42 of the Companies Ordinance, 1984 as a non-profit
organization.
The employment contract was effective from November 01, 2007. However, Mr. Ali Hassan arrived in Pakistan on November
02, 2007. Since November 03, 2007 was Sunday therefore he could not join his office. On Monday November 04, 2007 he
became ill and had to be hospitalized for the next five days and joined office on November 09, 2007. Due to his continuous
illness he took sick leave and went back to Iran on November 10, 2007.
Mr. Ali Hassan came back to Pakistan on January 03, 2008 and remained in Pakistan for the purpose of his employment till
June 30, 2008.
Required:
(i) State the provisions applicable to .Resident Individual. under Rule 14 of the Income Tax Rules, 2002, to
determine the number of days an individual is present in Pakistan.
(ii) Determine the residential status of Mr. Ali Hassan with reasons in accordance with Rule 14 of the Income Tax
Rules, 2002.
Solution:
(i)
The following rules apply in computing the number of days an individual is present in Pakistan in a tax year:
(a) A part of a day that an individual is present in Pakistan (including the day of arrival in, and the day of departure
from, Pakistan) counts as a whole day of such presence;
(b) the following days in which an individual is wholly or partly present in Pakistan count as a whole day of such
presence:
(i) a public holiday;

(ii) a day of leave, including sick leave;
(iii) a day that the individual's activity in Pakistan is interrupted because of a strike, lock-out or
delay in receipt of supplies; or
(iv) a holiday spent by the individual in Pakistan before, during or after any activity in Pakistan;
(c) a day or part of a day where an individual is in Pakistan solely by reason of being in transit between two different
places outside Pakistan does not count as a day present in Pakistan.
(ii)
Days

- Day of arrival in Pakistan on November 2, 1

- Public holiday (Sunday) on November 3, 1
- Sick leave from November 4, to November 9 6
- Day of departure from Pakistan on November 10, 1
- From January 3rd (day of arrival) to 30-06-2016 180
189
As his stay in Pakistan has met the condition of minimum 183 days, therefore he is resident individual under Rule 14 of the
Income Tax Rules, 2002.
Summer - 2009 Q. 4
Mr. Jamshaid is an executive in a group of companies. He derived following incomes during tax year 30-06-2008.
Particulars
(i) Salary Income (per month):
Rs.
· Basic Salary 20,000
· House rent allowance 8,000
· Utility allowance 1,000
· Medical allowance 1,000
· Expenses on children books 400
He is also provided with a 1000cc car, which is partly used for company business. As per books of accounts, the cost of the
car is Rs.650,000. He has also been granted with a housing loan of Rs.500,000 on which no profit/ interest has been
charged.
In addition to above, he also received gratuity of Rs.70,000 from his previous employer during the year. The gratuity fund is
not approved by the Commissioner Income Tax or Federal Board of Revenue.
Tax deducted at source from salary amounted to Rs.15,000.
(ii) Property Income:

Rs.
· Rent from a house let out per month 10,000
· He incurred following expenses on this property during the year:
- Repairs 30,000
- Collection charges 7% of rent
- Ground rent 10,000
- Property tax 15,000
- Rent-sharing with housing finance company 3,000 per month
He received a deposit of Rs.200,000, not adjustable against rent, out of which he refunded Rs.100,000 to previous tenant
who vacated the house after 3 years tenancy.
Rs.
(iii) Other Income:
· Profit on PLS bank account (net of 10% tax withheld) 9,000

· Commission from insurance company and from sale of plots 18,000
(net of 10% taxes withheld)
· Lecturing and examination services fees from professional institutes 18,800
(net of 6% tax withheld)
· Birthday present cash bonds 50,000
(iv) Gain on sale of shares of KayToo Ltd., a public listed company 55,000
Required: As a tax consultant you are required to compute Mr. Jamshaid’s total income and his income tax liability for the tax
year 2008.

Solution
Mr. Jamshaid
Computation of taxable income and tax liability:
Rs. Rs.
Basic salary (Rs. 20,000 x 12 months) 240,000

House rent allowance (Rs. 8,000 x 12 months) 96,000
Utility allowance (Rs. 1,000 x 12 months) 12,000
Less: Exempt upto 10% of basic salary U/C 139 of Part 1 of 2nd schedule 24,000 -
Expenses on children books (reimbursed by employer) 4,800
Conveyance (650,000 x 5%) U/R 5 of Income tax Rules, 2002 32,500
Interest free loan (not included in taxable income as loan does not
exceed Rs. 500,000) -
Gratuity received 70,000
Less: Exempt under clause 22 of Part I of 2nd Schedule lower of:
- Rs. 75,000
- 50% of amount receivable i.e. 35,000 35,000 35,000
420,300
Rent from house (Rs. 10,000 x 12 months) 120,000

Add: unadjustable advance [(200,000 - (100,000 x 3) /10)] /10 17,000
Less: allowable expenses U/S 15A
- Repairs (Actual restricted to 1/5th of rent chargeable to tax) (27,400)
- Collection & admin. Exp (Maximum 6% of rent chargeable to tax) (8,220)
- Ground rent (10,000)
- Property tax (15,000)
- Rent-sharing with housing finance company 3,000 per month
Less: Rent sharing with housing finance company (36,000) 40,380
Lecturing and examination services fee (18,000 / 90%) 20,000

Birthday present cash bonds (Not taxable as a sort of liability) -
As the taxable salary income of the indiviual constitute more than 50% of the total taxable income hence tax under salary
slab is computed as under.
Tax liability under NTR

Tax on Rs. 480,680 [0 + 2% x (480,680 - 400,000)] (A) 1,614
Less tax under NTR on services income (assumed same amount
as profit on services) Rs.20,000 x 1,614 / 480,680 (B) 67
Net tax under NTR (A - B) (C) 1,546
Minimum tax on services (Rs. 20,000 x 10%) = (D) 2,000 2,000
Tax liability (C) plus higher of (B) and (D) 3,546
Tax liability under FTR / SBI
Tax on profit on PLS account (9,000 x 10% / 90%) 1,000
Tax on commission (18,000 x 10% / 90%) 2,000

Tax on gain on shares of public listed company

(assumed that holding period is more than 4 years) -
Less: Tax deducted at source
On salary 15,000
Profit on PLS account 1,000
On commission income 2,000
On sevices 1,200
19,200
Balance tax refundable (12,654)
Winter - 2008 Q. NO. 3 (b)

Four partners firm comprising Mr. JS, KK, TT, RR are sharing profit and losses equally. The unadjusted loss of “AOP” stands
at Rs. 444,000. Mr. RR submits resignation and retires from business.
Required: 1- State the Set off and Carry forward of losses of AOP’s.
2- Compute the amount of loss to be carried forward by the firm.
Solution
1- State the Set off and Carry forward of losses of AOP’s.
An AOP, being taxable independent of its members, is entitled to set-off and carry forward its losses as other persons are
entitled. As the share received by a member out of the incomes of an AOP is exempt from tax, the member is not allowed to
set-off and carry forward his respective share in losses of the AOP. Only AOP can set-off and carry forward its losses in
accordance with the rules specified in sections 56 to 59 of the Income Tax Ordinance, 2001
2- Compute the amount of loss to be carried forward by the firm.
Rs.
Total unadjusted loss 440,000
Less: share of Mr. RR ( 440,000 / 4) 110,000
Loss to be carried forward 330,000
Winter - 2008 Q. 4
Mr. Shahbaz is an officer in a Pakistani Airline. He provided the following particulars of his sources of income pertaining to
the tax year 2009:
Rs.
Salary 210,000
Bonus 10,000
Reward on passing an examination required by the terms of his employment 35,000
House allowance (per month) 10,000
Conveyance allowance (per month) 1,500
Medical allowance (Actual expenses Rs. 17,000) 20,000
Flying allowance 60,000
Property income (including Rs. 2,000 per month for rent of furniture and fittings) 120,000
Expenditures claimed:
· Legal expenses 7,500
· Property tax 5,000
· Insurance premium 3,000
· Water charges paid (current Rs.10,000 + arrears Rs. 2,000) 12,000
Dividend (Zakat deduction Rs. 250 and tax deduction Rs. 1,000) 10,000
Birthday present 10,000
Insurance money received on maturity of policy 100,000
Capital gain on sale of shares of a private ltd., co.
(Shares were retained for 18 months) 25,000
Expenses on children education (receipts are available) 40,000
Professional books purchased (receipts are available) 5,000

Zakat paid 10,000

Tax deducted at source 10,000
Required:
Compute total income and tax liability of Mr. Shahbaz for the tax year 2009.
Solution
Mr. Shahbaz
Computation of taxable income tax liability
Rs. Rs.
Salary 210,000
Bonus 10,000
Reward on passing an examination required by the terms of his employment 35,000
House allowance (totally taxable) (Rs. 10,000 x 12 months) 120,000
Conveyance allowance (assumed not for discharge of official performance) (Rs. 1,500 x 12) 18,000
Medical allowance (Actual expenses shall be ignored) 20,000
Less: Exempt upto 10% of basic salary U/C 139 21,000 -
Entertainment allowance (assumed not for discharge of official performance) 12,000
Flying allowance (Note 2) 60,000 -
430,000
Income from property (including furniture & fixtures) 120,000
Less: rent of furniture and fittings (Rs. 2,000 x 12 months) 24,000
Less: allowable expenses

1/5th repair allowance of rent chargeable to tax 19,200
Legal expenses 7,500
Property tax 5,000
Insurance premium 3,000
Water charges paid (current Rs.10,000 + arrears Rs. 2,000) 12,000
46,700 49,300
CAPITAL GAINS U/S 37
Gain on sale of shares of private company (25,000 x 75%) 18,750
(Holding period is more than 1 year hence 25% is exempt)
Rent of furniture and fittings (accrual basis 2,000 x 12) 24,000
Less: Zakat (including zakat paid on shares) 10,250
Taxable income including SBI income 511,800
COMPUTATION OF TAX LIABILITY;
As the salary income of the individual constitute more than 50% of the total income hence tax under salary slab
is computed as under.

Tax on Rs. 511,800 [2% x (511,800 - 400,000)] 2,236
Flying allowance (Rs. 60,000 x 2.5%) 1,500
(Taxable as separate Block of income @ 2.5% upto one annual Basic Pay)
Tax on dividend (SBI under FTR) 1,000

Tax on dividend 1,000

Other tax deducted at source 10,000
11,000
(Note 1) Birthday present, insurance policy on maturity, expenses on childern education and professional books
purchased have no impact on computation of taxable income and tax thereon.
(Note 2) Flying allowance received as Officers other than as Pilot shall not be included in taxable income as the same is
taxable as a SBI @ 2.5% upto basic pay u/c (1) of Part III of 2nd Schedule to the Income Tax Ordinance, 2001. If
the flying allowance is more than the basic pay then the balance shall be included in the taxable income under
NTR of the individual.
If the flying allowance and other allowances shall be received as Pilot of any Pakistani Airline the same shall be
included in the taxable income under NTR upto basic pay. If the flying and other allowances are more than the
basic pay then the balance shall be taxable as a SBI @ 7.5% u/c (1AA) of Part III of 2nd Schedule to the ITO,
2001.
Summer - 2008 Q. 2(b)

Mr. Naseer is an employee of M/s. ABC (Pvt) Limited, the terms of employment provide that the tax will be paid by the
company. The company paid a total of Rs. 1,535,000/= to Mr. Naseer and the Income Tax Department. The rate of tax is
14%.
Required: Calculate the amount of tax paid by ABC (Pvt) Limited u/s 149 of the Income Tax Ordinance, 2001 on account of
salary on account of salary and the amount of salary paid to Mr. Naseer.
Solution
Salary ?
Tax @ 14% ? x 14%
Total amount paid 1,535,000
? + (? x 14%) = 1,535,000
1.14? = 1,535,000
? = 1,535,000 / 1.14
? = 1,346,491
Salary paid (as calculated above) = 1,346,491
Tax paid (1,535,000-1,346,491) = 188,509
Summer - 2008 Q. 4
Company Zaighm Chemicals (Pvt) Ltd . was incorporated on 1st January, 2006 and started its production and services
activities from 15th January 2006. Company has total 150 employees. Its paid-up capital and reserves as on 30-06- 2006
were as under:-
Rs.
Paid-up capital 21,000,000
Losses carried forward (taxable loss) (155,000)
General reserves -
20,845,000
During the financial year ended 30-06-2007, its books of accounts show the following balances:
i) Raw Material
a Imported value (before custom duty and taxes) 55,000,000
a Local purchases 4,500,000
ii) Other manufacturing / trading expenses 6,500,000
iii) Selling and admin expenses 12,600,000
78,600,000
Additional information:
1) To sell its products, the company's value addition is 30% of the cost of goods sold.

2) Both the raw material and finished goods are subject to following levies:
i) Sales Tax @15 %.
ii) Additional Sales Tax @ 2 % on imports.
iii) Special Federal Excise Duty @ 1 % on imports and goods sold.
iv) Customs duty on import value @ 25%.
v) Income Tax @ 6% on import value plus customs duty and Sales Tax.
3) Manufacturing expense includes Rs. 5,000,000 on account of depreciation charged on plant and machinery and Rs.
80,000 charged on computers in selling and administration expenses. The rate of depreciation charged by company on both
types of assets is 25%.
4) A laptop purchased for Rs. 80,000 for use by the Chief Executive was charged to profit and loss expenses.
5) Utilites bills amounting to Rs.760,000 charged to profit and loss expense include Rs. 86,000 of withholding income tax and
Rs. 134,000 sales tax.
6) No opening and closing stocks.
7) Applicable tax depreciation: @15% on machinery and @ 30% on computer and laptop respectively (ignore initial tax
depreciation)
Required:
a) Under what category this company falls for Income Tax purposes?
b) Workout company's sales.
c) Workout its net profit chargeable to income tax for the tax year 2007 (ignore initial depreciation).
d) What are company's tax and duties liabilities under the:
i) Customs Act, 1969. ii) Sales Tax Act, 1990
iii) Federal Excise Act, 2005 iv) Income Tax Ordinance, 2001
Solution
a) Under what category this company falls for Income Tax purposes?
Being as manufacturer the income of the company is fully covered under Normal Tax Regime u/s 153 of the Income tax
Ordinance, 2001 and being as small company the rate of tax shall be 25%.
b) Workout company's sales

Sales = Cost of goods sold + (Cost of goods sold x 30%)
Sales = 79,750,000 + (79,750,000 x 30%)
Sales = 79,750,000 + 23,925,000
Sales = 103,675,000
Cost of goods sold
Imported value (before custom duty and taxes) 55,000,000
Custom duty @ 25% 13,750,000
Local purchases 4,500,000
Other manufacturing / trading expenses 6,500,000
79,750,000
c) Workout profit chargeable to income tax
Rs. Rs.
Sales 103,675,000
Selling and admin expenses 12,600,000
Profit before tax as per accounts 11,325,000
Add: Accounting depreciation ( 5,000,000 + 80,000 ) 5,080,000

Purchase of Laptop charged to profit and loss account 80,000
Income tax and sales tax paid with electricity bills (86,000 + 134,000) 220,000
5,380,000
Less: Tax depreciation:
On plant and machinery [ (5,000,000 / 25%) x 15%] 3,000,000

On computers [ (80,000 / 25%) x 30%] (Assumed for business use) 96,000

On laptop (assumed used) (Rs. 80,000 x 30%) 24,000
3,120,000
13,585,000
Less: Losses b/f 155,000
Taxable income 13,430,000
d) (iv)
Alternative Corporate tax U/S 113C (A) 1,925,250

[[Accounting profit under NTR Rs. 11,325,000 x 17%]
Tax on Rs. 13,430,000 @ 25% (B) 3,357,500
Minimum tax u/s 113

Tax on Rs. 103,675,000 x 1% (C) 1,036,750
Tax liability: Higher of (A), (B) or (C) 3,357,500
Less:
Tax required to be on imports
[ { (55,000,000 + 13,750,000) x 1.17 } x 5% ] 4,021,875
Advance tax paid with electricity bill 86,000
4,107,875
d) (i)
Duty payable under Custom Act, 1969.
Imported value (before custom duty and taxes) 55,000,000
Custom duty @ 25% 13,750,000
d) (ii)
Tax payable under Sales Tax Act, 1990.
3% additional sales tax is not applicable on imports to be used for own use.
Output tax:
Sales tax on sales (103,675,000 x 17%) 17,624,750
Input tax:
Sales tax on purchases [ (55,000,000 + 13,750,000) x 17%] 11,687,500
Sales tax payable 5,937,250
d) (iii)
Tax payable under Federal Excise Act.
No amount is payable under this Act in tax year 2016 as SED is no more applicable.
Winter - 2007 Q. 2(b)

“X” Limited has granted an option to all of its employees for purchase of its 1,000 shares at a price of Rs. 25/- per share.
Habib, one of the employees has exercised the option available to him. The market value of the shares at the time of
exercise of option was Rs. 45/- per share.
Required: Compute the income, if any, chargeable under the following heads of income:
(i) Salary income; and (ii) Capital gain
Solution
Mr. Habib
Computation of taxable income

FMV of shares under employee shares scheme (1,000 x 45) Note 1 45,000
Less: cost of shares (1,000 x 25) 25,000
20,000
CAPITAL GAIN U/S 37 Note 2 -

Note 1: It is assumed that shares were issued to employees without any restriction on their sale or transfer.
Note 2: As shares have not been sold by Mr. Habib, hence nothing shall be taxable under head capital gain.
Winter - 2007 Q. 4
Mr. Arif, Baqar and Umer are member of an Association of Persons (AOP) "FRIENDSCO" and share the profit &
loss in the ratio of 1:2:3 respectively. They wanted to know their tax liability for the tax year, 2008. Accountant of
M/s FRIENDSCO., has prepared the following profit and loss account:
(Rupees)
Sales 6,400,000
Net profit before tax 800,000
1. It is a wholesale business and sales include supplies of Rs. 800,000 to government departments subject to
withholding tax.
2. Expenses include:
(i) Accounting depreciation of Rs. 75,000 on vehicle with W.D.V., of Rs. 500,000
(ii) Provision for bad debts of Rs. 50,000 has been made, whereas actual bad debts are Rs. 80,000.
(iii) Commission of Rs. 120,000 has been paid to Mr. Arif for promotion of sales
(iv) Utility bills amounting to Rs. 80,000 charged to expenses include Rs. 15,000 income tax withheld on
these bills.
3. Mr. Baqar is a sleeping partner. He is working as full time teacher in a university and receives monthly pay and
allowances as under:
(i) Pay Rs. 60,000
(ii) House rent allowance Rs. 30,000

4. Mr. Umer is in reciept of income from property of Rs. 50,000 per month.
5. The accounting depreciation on vehicle is also charged @ 15% of W.D.V., which coincides with the statutory
rate of depreciation.
Solution
M/s FRIENDSCO
AOP
Rs. Rs. Rs.
Total NTR FTR

Allocation percentage (on basis of sales) 100% 87.50 12.50

(Rs. 5,600,000 / 6,400,000 x 100) = 87.5%
Sales 6,400,000 5,600,000 800,000

Cost of sales 3,200,000 2,800,000 400,000
Gross profit 3,200,000 2,800,000 400,000
Selling and admin exp. (assumed including bad debts) 2,400,000 2,100,000 300,000
Net profit before tax 800,000 700,000 100,000
Add:
Accounting depreciation 75,000 65,625 9,375
Provision for bad debts 50,000 43,750 6,250
Commission paid to partner (Mr. Arif) 120,000 105,000 15,000
Income tax withheld on utility bills 15,000 13,125 1,875
260,000 227,500 32,500
Less:
Tax depreciation (Rs. 500,000 x 15%) = 75,000 65,625 9,375
Taxable income of AOP 985,000 861,875 123,125
Tax liability under NTR:

Tax on Rs. 861,875 [32,000 + 15% x (861,875 - 750,000)] (A) 48,781
Minimum tax u/s 235(4)

Tax paid with electricity bill (B) 15,000
Higher of (A) or (B) 48,781

Tax on Government Supplies (Rs. 800,000 x 4.5%) = 36,000
Less: Tax paid / deducted at source
Tax on supplies ( Rs.800,000 x 4.5%) 36,000
Tax on electricity bills 15,000
51,000
Divisible Income of AOP:
Taxable income under NTR 861,875

Tax on income under NTR 48,781
Divisible income 813,094
AOP income from FTR has been ignored for divisiable income among the partners.
Calculation of share of profit from AOP

TOTAL Mr. Arif Mr. Baqar Mr. Umer
Share 6 1 2 3
Commission 120,000 120,000 - -

Balance divided (in sharing ratio) 693,094 115,516 231,031 346,547
813,094 235,516 231,031 346,547
COMPUTATION OF TAXABLE INCOME and TAX LIABILITY OF MEMBERS

Mr. Arif Mr. Baqar Mr. Umer

Pay (Rs. 60,000 x 12 months) 720,000

Income from property - - 600,000
Share from AOP (for rate purpose) - 231,031 346,547
Taxable income for rate purpose 1,311,031 946,547
Note: Share from AOP has not been included in income of Arif and Umer as they have no other income
chargeable to tax under NTR.
Computation of tax liability: Mr. Arif Mr. Baqar Mr. Umer
As the salary income of Mr. Baqar constitute more than 50% of the total income hence tax under salary slab is
computed as under.
Tax on Rs. 1,311,031 [14,500 + 10% x (1,311,031 - 750,000)] - 70,603 -

Tax on Rs. 946,547 [32,000 + 15% x (946,547 - 750,000)] - - 61,482
Less: 40% reduction to full time teacher - 28,241 -

- 42,362 61,482
Less: Tax on share profit from AOP
(42,362 / 1,311,031 x 231,031) - 7,465 -
(61,482 / 946,547 x 346,547) - - 22,510
Balance tax payable - 34,897 38,972
Note: In the absence of information it has been assumed that the property income is after allowable expenses.
Summer - 2007 Q. 4
Colonel (Retired) Ahmed Ali is the Managing Director of a listed public company and has provided the following details of his
expected income and expenses for the year ending June 30, 2007:
Salary income:
1. Basic salary Rs. 1,800,000 per year
2. Dearness allowance 10% of basic salary
3. Medical allowance Rs. 25,000 per month
Managing Director is not entitled for any reimbursement of actual expenses of hospitalization or medical
treatment.
4. The company disbursed on July 1, 2006 to Colonel Ahmed Ali, Rs. 3 million interest free loan to be recovered
from the final dues on retirement. The bench mark rate for the year 2007 is 7% as notified by Federal
Government
5. Company has paid Rs. 850,000 as annual rent for the accommodation provided to Managing Director.
6. He has been provided with a company maintained car for business and personal use. The purchase price of car
is 1.2 million. Company also pays salary to driver @ Rs. 8,000 per month
7. Colonel Ahmed Ali is receiving pension from Army @ Rs. 10,000 per month
Property income:
Colonel Ahmed Ali owns a flat, which has been let out @ Rs. 45,000 per month. He has incurred following
expenses to date on flat during the year.
a) Repair and maintenance Rs. 30,000 / -

b) Property tax Rs. 20,000 / -

c) Insurance of flat Rs. 15,000 / -
Other Income:
1. Colonel Ahmed Ali has also received Rs. 500,000 as his share u/s 92(1) of Income Tax Ordinance, 2001 being
the member of an AOP, where the AOP has paid the tax.
2. Colonel Ahmed Ali has won a cash prize of Rs. 200,000 from a company which offered the prize for promotion
of sales u/s 156 of Income Tax Ordinance.
Required: Compute the expected total income, taxable income and income tax thereon for the tax year 2007.
Solution
Colonel (Retired) Ahmed Ali

Computation of taxable income and tax liabiltiy
Rs. Rs.
Basic salary 1,800,000

Dearness allowance (Rs. 1,800,000 x 10%) 180,000
Interest free loan (3,000,000 x 10% p.a. for the whole year) 300,000
Accommodation provided
Higher of:
Actual Rs. 850,000; or
45% of basic salary i.e. 810,000 850,000
Conveyance ( 1,200,000 x 5%) U/R 5 60,000
Salary to driver (Rs.96,000 x 50% for personal use) 48,000
Pension from Army (exempt) -
Taxable salary income 3,358,000
Rent (Rs. 45,000 x 12 months) 540,000

1/5th fixed repair allowance irrespective of actual repair and maintenance (108,000)
Property tax (20,000)
Insurance of flat (15,000)
397,000
Share of profit from AOP included for rate purposes 500,000
Taxable income for rate purposes 4,255,000
As the salary income of the indiviual constitute more than 50% of the total income hence tax under salary slab is
computed as under.
Tax on Rs. 4,255,000 [597,000 + 27.5% x (4,255,000 - 4,000,000)] 667,125
Tax on income excluding share from AOP

(667,125 x 3,755,000 / 4,255,000) 588,732
Tax liability under SBI as FTR

Cash prize under section 156 (Rs. 200,000 x 20%) 40,000
Note: Although no information has been provided however the aforesaid liability shall be reduced by Rs. 40,000 tax

deducted at source on cash prize.
Winter - 2006 Q. 5
You are engaged in the Income Tax Consultancy services. One of your clients Mr. A.B Malik, an employee of M/s. Excellent
Airlines, Peshawar, asks you to determine his total income, taxable inocme and income tax payable by him for tax year, 2007
on the basis of the following information:
Salary Income (per month)
Basic salary Rs. 22,500/- (in pay scale of Rs. 15,000 - 750 - 26,250)
Dearness allowance Rs. 1,500/-
Special relief allowance @ Rs. 15% of basic salary.
Flying allowance Rs. 15,000/-
Entertainment allowance Rs. 500/-
Medical allowance @ 5,000/- No free medical facility of hospitalization or re-imbursement of medical charges is provided by
the employer.
Accommodation is provided by the employer. Mr. A. B. Malik is entitled to house rent allowance @ 60% of the minimum of
pay scale, had the accommodation not been provided.
A 800cc vehicle is provided by the employer partly for official and partly for private use. The cost of the vehicle to the
employer is Rs. 450,000/-
Property Income
Mr. A. B. Malik owns a house which is on rent @ Rs. 16,000 per month.
Investment / contribution during the year.
Investment in shares Rs. 50,000.

Contribution to an approved pension fund Rs. 100,000.
Mr. A. B. Malik also obtained the concessional loan amounting to Rs. 1,500,000/- from the employer, mark-up rate of which is
4% per annum (Assume that the benchmark rate for the tax year, 2007 is 9% per annum).
Solution
Mr. A.B. Malik
INCOME FROM SALARY U/S 12: Rs. Rs.

Dearness allowance (Rs. 1,500 x 12 months) 18,000
Special relief allowance (Rs. 270,000 x 15%) 40,500
Accommodation:
Higher of 60% or 45% of MTS [(Rs. 15,000 x 12) x15%] 108,000
Conveyance (450,000 x 5%) U/R 5 22,500
Concessional loan from employer
Interest at benchmark rate of 10% 150,000
Less actual interest at 4% 60,000 90,000
588,000
Flying allowance (Note 1) 180,000 -

INCOME FROM PROPERTY U/S 15:

Rent (16,000 x 12) (assumed after deductions) 192,000


Tax on Rs. 780,000 [14,500 + 10% x (780,000 - 750,000)] (A) 17,500
Less: Tax credit on investment in shares and insurance
- Actual amount of investment i.e. Rs. 50,000
- 20% of taxable income i.e. Rs. 156,000
- Rs. 500,000
Tax credit = (50,000 x 17,500 / 780,000) 1,122
Less: Tax credit on contribution to approved pension fund
- Actual amount of contribution i.e. Rs. 100,000
- 20% of taxable income under NTR including SBI income i.e. Rs.156,000
Tax credit = (100,000 x 17,500 / 780,000) 2,244

(B) 3,365
Add: Tax on Flying allowance (Rs.180,000 x 2.5% upt One annual basic pay) (C) 4,500
Balance tax payable D=A-B+C 18,635
(Note 1)
Flying allowance received as Officers other than as Pilot shall not be included in taxable income as the same is taxable as a
SBI @ 2.5% upto one basic pay u/c (1) of Part III of 2nd Schedule to the Income Tax Ordinance, 2001. If the flying allowance
is more than the basic pay then the balance shall be included in the taxable income under NTR of the individual.
If the flying allowance and other allowances will be received as Pilot of any Pakistani Airline the same shall be included in the
taxable income under NTR upto basic pay. If the flying & other allowances are more than basic pay then the balance shall be
taxable as a SBI @ 7.5% u/c (1AA) of Part III of 2nd Schedule to the Income Tax Ordiannce, 2001.
Summer - 2006 Q. 4
Mr. Asghar Abbas is assistant manager in an engineering organization. He has engaged you as his tax consultant and
provided you with the following information of his estimated incomes and expenses for the year ending 30th June, 2006:-
Salary Income (per month) Rs.

Basic salary 18,000
Utility allowance 6,000
Conveyance allowance 5,000
Mr. Asghar owns and maintains a car, which he uses partly for his personal and partly for business use of his employer. In
January, 2006 he remained admitted in the hospital for 10 days and the employer reimbursed hospitalization charges of Rs.
25,000.
Property Income (per month)
He owns 5 shops, which are rented out. His income and expenses in this behalf are as under:
Rs.
Annual rent of 4 shops 96,000

Shop No. 5 remained occupied for 7 months at a rent of Rs. 1,200 per month.
It was vacated through court order for which Mr. Asghar incurred Rs. 6,000 as
legal expenses
Ground rent 2,000
Collection charges paid 6,000
Property tax (This amount includes Rs. 5,000 of last year's tax not paid 10,000
2005.)
Agricultural Income 60,000
Dividend received on investment in shares of a public limited company (gross) 20,000
The employer has deducted tax at source from salary amounting to Rs. 12,000.
Required: You being a tax consultant of Mr. Asghar Abbas, calculate his taxable income and tax payable along
with this payable along with his tax return.
Solution
Mr Asghar Abbas
INCOME FROM SALARY U/S 12 Rs. Rs.

Less: Exempt upto 10% of basic salary U/C 139 (Note - 1) 21,600 14,400
Conveyance allowance (Rs. 5,000 x 12 months) 60,000
Hospitalization charges reimbursed (Note- 1) 25,000
(Assumed that it is not in accordance with the terms of employment) 507,400
Rent of 4 shops 96,000

Rent of shop No. 5 (1,200 x 7) 8,400
104,400
Less: Admissible deductions U/S 15A
Legal expenses (6,000)
1/5th fixed repair allowance (20,880)
Ground rent (2,000)
Collection charges paid (6,000)
Property tax (Excluding Rs. 5,000 of last year's tax not paid) (5,000)
(39,880)
Net income from property chargeable to tax 64,520
Agricultural income (exempt u/s 41 & assumed tax paid under provincial law) 60,000 -
computed as under.
Tax on Rs. 571,920 [2,000 + 2% x (571,920 - 500,000)] 5,596
Tax liability under SBI as FTR

Tax on dividend income 2,000

Less: Tax paid / deducted at source:
On salary 12,000
On dividend income (although not given in question) 2,000
(Note-1) If the medical reimbursement of medical expeses to employee are provided alongwith medical allowance as per
terms of employment then the 10% exemption for medical allowance shall not be allowed however the medical re-
imbursement shall be totally exempt from tax provided the hospital / clinic NTN and bills are provided by the employee.
Winter - 2005 Q. 5
Following are the details of Mr. Shakeel for the financial year ended June 30, 2005 who is employed with the Institute of
Computer Sciences as Professor. He joined the Institute on July 1, 2004. Previously he worked with Institute of computer
studies. He was required to give 3 months' notice to his previous employer to terminate his employment. He served notice
period for 1 month and his current employer paid the notice pay equivalent to 2 months' salary to the previous employer
amounting to Rs. 150,000. Other details for the year are as follows:
Salary Income
Rs. per month
Pay 90,000
Utilities 9,000
No company maintained car was provided to him. However, 175 litres petrol per month was given to him @ Rs. 50
per litre.
Investments
Investment in shares of listed companies 175,000
House loan
Payment of interest to Commercial Bank on house loan 250,000
Charitable Donation: He paid Rs. 50,000 to non-profit organization.
Required: Compute taxable income and tax liability of Mr. Shakeel for tax year 2005. Prepare and present all
necessary workings.
Solution
Mr. Shakeel - Resident

Rs. Rs.
Pay (Rs. 90,000 x 12 months) 1,080,000

Utilities (Rs. 9,000 x 12 months) 108,000
Petrol from employer (175 x 50 x 12) (assumed not for offical performance) 105,000
Employee's obligation paid by employer 150,000
Taxable salary income 1,929,000

As there is only salary income hence tax liability for salaried individual in computed as under.
Tax on Rs. 1,929,000 [137,000 + 17.5% x (1,929,000 - 1,800,000)] 159,575
Tax credit on investment in shares and insurance U/S 62



- Rs. 1,000,000
Tax credit = (175,000 x 159,575 / 1,929,000) 14,477
Tax credit on mark up on house loan U/S 64 (No more available) -
Tax credit on donation U/S 61


Tax credit = (50,000 x 159,575 / 1,929,000) 4,136

18,613
Summer - 2005 Q. 5
Following are the details of income of Mr. A. Rehman for the financial year ended June 30, 2004, who is employed with a
company as Senior Manager.
Salary income:
Pay Rs. 60,000 per month
House rent allowance Rs. 27,000 per month
Utilities Rs. 8,000 per month
He was provided with a company maintained car of 800 cc, partly for business and partly for his personal use. The cost of
the car to the company was Rs. 500,000.
Rental income:
Rs.
Annual letting value of property 372,000
(including Rs. 120,000 for furniture and fixtures).
During the year property remained vacant for 4 months 8,000
Ground rent paid 200,000
Business income 200,000
Capital gains:
Cost of shares of unlisted companies (bought in 1986) 500,000
Sale proceeds of shares 600,000
Investments:
Investment in shares of listed companies 180,000
Premium paid for life annuity eligible u/s 63 45,000
Required:
Compute taxable income & tax liability of Mr. A. Rehman for the year. Prepare & present all necessary workings.
Solution
Mr. A. Rehman - Resident
Tax year 2016
Rs. Rs.
Pay (Rs. 60,000 x 12 months) 720,000
Utilities (Rs. 8,000 x 12 months) 96,000
Conveyance (500,000 x 5%) U/R 5 25,000
1,165,000
INCOME FROM BUSINESS (asumed under NTR) U/S 18 200,000

8 months letting value of property [ (372,000 - 120,000) x 8/12] 168,000

Less: 1/5th of rent as repair allowance (33,600)
Less: Ground rent (200,000) (65,600)
Rent of furniture and fixture (assumed for 8 months) 120,000

Sale proceeds of shares 600,000
Less: cost of shares 500,000
100,000
Less: 25% exempt as sold after one year from the date of
purchase u/s 37 25,000 75,000
computed as under.

Tax on Rs. 1,494,400 [79,500 + 12.5% x (1,494,400 - 1,400,000)] 91,300
Tax credit on investment in shares and insurance U/S 62
- Rs. 1,000,000
Tax credit = (180,000 x 91,300 / 1,494,400) 10,997
Tax credit on contribution to approved pension fund U/S 63
- Actual amount of contribution i.e. Rs. 45,000
Tax credit = (45,000 x 91,300 / 1,494,400) 2,749
13,746
Winter - 2004 Q. 5
Mr. Baqar, Mr. Hadi, and Mr. Mikdad are members of an Association of Persons, (AOP) which is doing business under the
name of M/s BHM Associates. As per their agreement, Mr. Baqar is entitled to receive 5% interest on his capital employed,
besides his share from profit. Mr. Hadi is entitled to receive commission of 1% in recognition of his efforts to promote sales.
The profit is to be distributed equally amongst the members. During the year ended June 30, 2004, the books of accounts of
M/s BHM Associates showed following results:
Rs.
Sales 4,500,000
Further Notes are as under:
1. An asset, which has a written down value of Rs. 100,000 on July 1, 2003 was disposed of for Rs. 150,000 on May 30,
2004. Neither depreciation nor gain on its disposal was recorded in the books of accounts (Assets are depreciated at rates
given in the third schedule to the Income Tax Ordinance, 2001).
2. Interest on capital employed and commission on sales were properly recorded in the books of accounts and paid to Mr.

Baqar and Mr. Hadi.

3. Provision for bad debts charged to profit and loss account was 6% of sales. During the year actual bad debts written off
amounted to Rs. 150,000.
4. Capital employed by each member of AOP is as under:

Rs.
Mr. Baqar 1,000,000
Mr. Hadi 200,000
Mr. Mikdad 300,000
5. Other incomes of members were as under
(A) Mr. Baqar received salary of Rs. 300,000 (inclusive of house rent allowance of Rs. 120,000) from another company
during the year. The employer deducted Rs. 21,000 tax at source from salary. He also earned profit of Rs. 20,000 on his
bank deposits on which 10% tax was withheld by the bank.
(B) Mr. Hadi in addition to his commission and share of AOP income has also received agricultural income of Rs. 120,000
during the year. His income from his own buniness for the year ended June 30, 2004 was Rs. 100,000.
(C) Mr. Mikdad during the year supplied goods to government departments worth Rs. 1,500,000 on which Income Tax @
3.5% was withheld by those departments
Required:
Work out the following:
(i) Taxable income of M/s BHM Associates (AOP), for the year, 2004.
(ii) Taxable income of each of its members and their tax liabilities for the tax year, 2004.
Solution
M/s BHM Associates - Resident AOP
For the tax year 2016 Rs.
Sales 4,500,000
Add:
Interest on capital to Mr. Baqar ( Rs. 1,000,000 x 5% ) 50,000
Commission to Mr. Hadi ( Rs. 4,500,000 x 1% ) 45,000
Gain on sale of fixed assets ( 150,000 - 100,000 ) 50,000
( no depreciation shall be charged in the year of disposal)
Provision for bad debts (6% of sales) 270,000
415,000
Taxable income of AOP 695,000

Tax on Rs. 695,000 [7,000 + 10% x (695,000 - 500,000)] 26,500
Divisible Income of AOP:
Taxable income under NTR 695,000
Tax on income under NTR 26,500
Divisible income 668,500
Calculation of share of profit from AOP
TOTAL Mr. Baqar Mr. Hadi Mr. Mikdad

Share 3 1 1 1
Commission 45,000 45,000
Interest on capital employed 50,000 50,000
Balance (divided in partners) 573,500 191,167 191,167 191,167
668,500 241,167 236,167 191,167
Computation Of Taxable Income and Tax Liability Of Members
Mr. Baqar Mr. Hadi Mr. Mikdad
Salary 300,000 - -
INCOME FROM BUSINESS U/S 18 - 100,000 -
Agricultural income (exempt under section 41) -

Taxable income 300,000 100,000 -
Share from AOP 241,167 236,167 -
Taxable income for rate purpose 541,167 336,167 -
Note: Share from AOP shall not be included in the income of Mr. Mikdad as he has no source of income
chargeable to tax under NTR.
Note: Tax rates for salaried individuals shall be applied on taxable income of Mr. Baqar, Tax rates for
non-salaried individual shall be applied on taxable income of Mr. Hadi.
Computation of tax liability: Mr. Baqar Mr. Hadi Mr. Mikdad
[2,000 + 5% x (540,167 - 500,000)] 4,008 - -
Tax on income excluding share from AOP 2,222 - -

Tax on profit on debt U/S 151 (Rs. 20,000 x 10%) 2,000 - -

Tax on sale of goods U/S 153 (Rs. 1,500,000 x 4.5%) - - 67,500
2,000 - 67,500
Total tax liability 4,222 - 67,500
Less: tax deducted at source
On salary U/S 149 21,000 - -
Profit on debt U/S 151 2,000 - -
on supply of goods U/S 153 - - 67,500
23,000 - 67,500
Balance tax refundable (18,778) - -
Summer - 2004 Q. 5
Mr. Qais Mansoor is Director-cum-Company Secretary of M/s Badar Salam and Co. Ltd., since the year 1990.
His monthly remunerations are as follows:
Rs.
Basic salary 20,000
32,333
He was provided maintenacne cost of his private car used wholly for the company business on actual basis aggregating Rs.
20,000. He received bonuses equivalent to three basic salaries, plus two basic salaries as special merit rewards during the
year.
The company disbursed funeral expenses of his parents in the amount of Rs. 20,000 and also medical costs on birth of his
twin sons in the sum of Rs. 100,000 latter being as per employment terms.

The company has also provided him with free furnished accommodation costing Rs. 200,000 per annum. The company also
paid his tax liability of Rs. 20,000.
He was decorated with the President's Award, in August 2002 and March 2003 worth Rs. 500,000.
He earned capital gains on sale of listed shares (Rs. 20,000) and on sale of land (Rs. 100,000).
Tax deducted from salary Rs. 40,000
He paid following amounts evidenced by receipts bearing payees N.T.Ns, wherever, applicable:
1. School fees @ Rs. 3,000 per month, for each of his two daughters.
2. Fee to personal silicitor and tax adviser Rs. 20,000.
3. Prior year income and penalties Rs. 50,000.
4. Donation to approved institutions Rs. 500,000.
5. Purchase of second car for Rs. 1,000,000 for family use.
Required: As a tax consultant you are required to calculate total income, and tax liability of Mr. Qais Mansoor for tax year
2003.
Solution
Mr. Qais Mansoor - Resident
Rs. Rs.
Bonus (20,000 x 3) 60,000
Medical allowance (taxable as medical re-imbursment separately provided) (Rs. 2,000 x 12) 24,000
Reimbursement of official expenses (exempt) -
Special merit reward (20,000 x 2) 40,000
Personal expenses paid by company (Funeral expenses) 20,000
Accommodation:
Higher of Rs. 200,000, or
45% of B.S i.e. Rs.108,000 200,000
Tax liability paid by employer 20,000
727,996
Capital gain on sale of shares of listed company (SBI)

(0% rate on the assumtion of holding period of shares is more than four years)
Gain on sale of land (not taxable on assumption of holding period is more than two years) -
President's award (exempt under 2nd schedule) -

computed as under.
Tax on Rs. 727,996 [2,000 + 5% x (727,996 - 500,000)] 13,400
Tax credit on donation U/S 61

Tax credit = (218,399 x 13,400 / 727,996) 4,020


Less: Tax deducted from salary 40,000
Tax paid by employer 20,000
60,000
Note: There is no treatment of school fee of children, fee to solicitor and tax adviser, prior year income and penalties and
purchase of car.
Summer - 2003 Q. 5
Mr. Musaddiqe Noor is a consultant in a group of companies. He derived following income during the income year July 1,
2002 to June 30, 2003:
Particulars Rs.
Per month
(i) Salary income
Basic salary 20,000
He is also provided with a 1,000 cc Car, which is partly used for company's business. He has also been granted with a
housing loan of Rs. 500,000 on which no profit/interest has been charged.
In addition to above, he also received gratuity of Rs. 75,000 from his previous employers during the year. The gratuity fund is
not approved by the Commissioner of Income Tax or CBR.
Tax deducted at source from salary amounted to Rs. 15,000.
(ii) Property income Rs.

Rent from a house letout (per month) 10,000
He incurred following expenses on this property during the year:
Repairs 30,000
Collection charges: 7% of rent
Ground rent 10,000
Property tax 15,000
Rent-sharing with housing finance company (per month) 3,000
He received a deposit of Rs. 200,000, not adjustable against rent, out of which he refunded Rs. 100,000 to previous
tenant, who vacated the house after 3 years' tenancy.
(iii) Other income Rs.

Profit on PLS Bank account (net of 10% tax withheld) 9,000
Commission from insurance Company and from sale of plots
(net of 5% taxes withheld) 19,000
Lecturing and examination services fees from professional
institutes (net of 5% tax withheld) 19,000
Required:
As a tax consultant you are required to compute Mr. Musaddique's total income and his income tax liability for the tax year
2003.
Solution
Mr. Musaddiqe Noor - Resident
Computation of tax liability
Rs. Rs.


Less: Exempt upto 10% of basic salary U/C 139 24,000 -
Conveyance (Value no given hence 5% of Rs.1,000,000 assumed) U/R 5 50,000

Interest free loan from employer (As the amount of loan is Rs. 500,000 hence
nothing shall be added as benefit in the salary income of employee U/S 13(7) -
Un-approved gratuity 75,000
Less: Exempt upto lower of:
Rs. 75,000, OR
50% of the amount receivable i.e. 37,500 37,500 37,500
435,500
Rent (with share of HBFC) 120,000

Un-adjustable advance [ 200,000 - (100,000 / 3) / 10] / 10 17,000
Total rent 137,000
Less admissible expenses

Repairs (restricted to 1/5th of rent chargeable to tax) 27,400
Collection & admin. charges (restricted to 6% of rent chargeable to tax) 8,220
Ground rent 10,000
Property tax 15,000
Rent-sharing with housing finance company (per month) 36,000
Balance amount chargeable to tax 96,620 40,380
Lecturing and examination services fees (18,000 x 100 / 90) 20,000

Tax on Rs. 495,880 [0 + 2% x (495,880 - 400,000)] 1,918
Less proportionate tax on consultancy services

(1,918 / 495,880 x 20,430) 77
Balance tax under NTR 1,840
Proportionate tax on consultacny services as above (D) 77
Minimum tax on services
Rs. 20,000 @ 10% (E) 2,000
Add: Higher of (D) and (E) shall be included in tax under NTR 2,000
Total tax liability under NTR 3,840
Tax liability under FTR
Profit on PLS account (9,000 x 10 / 90 ) 1,000
Tax on commission @ 10% ( 18,000 x 10 / 90) 2,000
3,000
Total tax liability under NTR and FTR 6,840
Less: Tax paid / deducted at source
On salary 15,000
On profit on PLS account 1,000
On commission ( 20,000 x 10% already deducted on gross receipts) 2,000

On services ( 20,000 x 10% as per given rate on gross receipts) 2,000

20,000
Balance tax refdundable (13,160)
Winter - 2003 Q. 6
Akeel Hospital is an unregistered partnership firm owned by Dr. Raees and Lady Doctor Mrs. Ramis. You being a tax
practitioner have been approached to prepare the Income Tax Return of the firm from following revenue account and other
relevant data as provided to you for the tax year 2003:
Akeel Hospital
Revenue Account
Year 2003
Rs. Rs.
Salaries 1,200,000 Gross In-patient receipts
Hospital supplies 300,000 (before tax deductions) 2,500,000
Electricity 200,000
Communication 100,000 O.P.D collections
Insurance 60,000 (before tax deductions) 500,000
Water 20,000
Repair and maintenance 20,000 Sale of scrap 100,000
Depreciation on Fixed
assets (excluding burnt
out equipment) 100,000
Property taxes 50,000
Radiology/Lab Expenses 100,000
Professional fees paid 50,000
Expenses on free weekly
clinic for community 100,000
Unsupported payments 50,000
Penalties for non-observance
of good environmental regulations. 50,000
Net profit 700,000
3,100,000 3,100,000
Other informaton / data:

(i) Depreciation includes Rs. 20,000 on a car completely in personal use of partners.
(ii) Salaries include drawings of Rs. 100,000 made by each of the partners.
(iii) A Philanthropist donated Rs. 1.0 million through cheque for construction of special cancer ward.
(iv) Taxes withheld by corporate clients aggregated Rs. 200,000.
(v) Mr. Waqar, a friend, extended an interest-free loan of Rs. 100,000 to the hospital during the year.
(vi) A foreign patient, being satisfied with Hospital's best quality care gave a cash gift of Rs. 150,000 for further improving the
Hospital's services. This amount has not been accounted for so far.
(vii) A surgical equipment costing Rs. 100,000 was accidentally burnt out, while dacoits took away Rs. 50,000 from the safe-
lockers. Both items are fully insured and the claim has been fully admitted by the insurance Company.
(viii) The Hospital has added 10 renowned companies to the panel with expected increase of Rs. 2,000,000 in future
revenue.
(ix) Salaries include excess perquisites of Rs. 80,000.
Required: Work out Hospital's total income and tax liability for tax year 2003.
Solution
Akeel Hospital - Resident AOP


Rs.
Add: Depreciation on personal car 20,000
Partners drawings (Rs. 100,000 x 2) 200,000
Cash gift not accounted for as deemed income u/s 39 150,000
Unsupported payments 50,000
Penalties for non-observance of good environmental regulations 50,000
470,000
The tax liability shall be higher of tax on taxable income or Minimum tax under 153.
Tax on Rs. 1,170,000
[32,000 + 15% x (1,170,000 - 750,000)] (A) 95,000
Less proportionate tax on receipts covered under minimum
tax liability Rs. 95,000 / 1,170,000 x 1,070,000 (Related to (B) (86,880) 8,120
income from services) (Balance tax related to sale of scrap)
OR
Minimum tax liability u/s 153
Gross receipts 3,000,000
10% of gross receipts (C) 300,000
Hence higher of (B) or (C) is to be added under NTR, hence 300,000
308,120
Less: Tax withheld by corporate clients 300,000
Notes
1. It is assumed that tax depreciation and accounting depreciation are same.
2. Interest on loan and donation have not been accounted for as the same are liability for the hospital to construct
Special Cancer Ward and return the loan from friend. Assumed both were being received through cross
cheques otherwise the same shall be treated as income u/s 39.
3. As loss incurred by burning of surgical equipments and by theft was fully insured, hence no gain or loss has
been considered for the purpose of computation of taxable income.
4. There is no treatment of excess perquisites included in salaries, as this concept is no more applicable.
5. There is no impact of reveune to be increased in future due to new clients induction.
6. Sale of scrap has not been shown as income from other sources as already included in the net profit.
7. No trunover tax has been computed as the revenue of the AOP's turnover does not exceeds Rs.50 million.
Summer - 2003 Q. 4
Being a tax consultant you have been provided with the following information in respect of Mr. A.D Chughtai, a senior
manager of a local company for the period 1st July, 2002 to 30th April, 2003 (Tax year, 2004):
Rs.
Basic pay / wages 210,000

Houes rent 115,500
Cost of living allowance 7,860
Utilities 31,500
Orderly / Servant allowance 30,000
Bonus / ex-gratia 70,000

Company car 1300 cc

(Partly used for company's business)
Leave fare assistance 17,500
Employer's contribution to provident fund 21,786
Employer's contribution to pension fund 27,300
Income tax deducted u/s 149. 60,000

In addition to the above you have been provided with the following data:
i) Dividend income 17,500

(Withholding tax deducted Rs. 1,750, Zakat deducted Rs. 250)
ii) Profit on PLS Account 20,000
(Withholding tax deducted Rs. 2,000, Zakat deducted Rs. 1,520)
iii) Professional fee received 10,000
(Withholding tax deducted Rs. 500)
iv) School fee paid for two children 25,000
(Receipts show National Tax Number)
Legal expenses (consultant fee) 12,500
(Receipts show National Tax Number)
vi) There is no time scale for this position
Required: Work out the taxable income and tax liability of Mr. A. D. Chughtai for the Tax year, 2004
Solution
Mr. A.D. Chughtai
Tax year 2016
Rs. Rs.
Basic pay / wages 210,000
House rent 115,500
Less: exempt upto 10% of basic salary U/C 139 21,000 -
Cost of living allowance 7,860
Utilities 31,500
Orderly / Servant allowance 30,000
Bonus / ex-gratia 70,000
Company car 1300 cc (5% of assumed value of Rs. 1,200,000) U/R 5 60,000
Leave fare assitance 17,500
Employer contribution provident fund 21,786
Less: exempt upto lower of:
Rs. 100,000, OR
10% of (basic salary + dearness allowance) i.e 21,000 21,000 786
Employer's contribution to pension fund (assumed not maintained by employer) 27,300
570,446
Professional fee 10,000
Less Zakat paid on profit on PLS account and dividend receipts (Rs. 250 + 520) 1,770


Tax on Rs. 578,676 [2,000 + 5% x (578,676 - 500,000)] (A) 5,934
Less proportionate tax on professional services (B) 103
Rs.5,934 / 578,676 x 10,000 5,831
Mimimum tax u/s 153
Tax deductible (professional income services Rs.10,000 x 10%) (C) 1,000
Higher of (B) or (C) 1,000
6,831
Tax liability under FTR
Tax on dividend U/S 150 1,750
Tax on profit on PLS account U/S 151 2,000
3,750
On dividend income 1,750
On profit on PLS account 2,000
Tax deducted on professional fee 1,000
Tax deducted u/s 149 60,000
64,750
Summer - 2003 Q. 5
Dr. A. A. Qureshi a medical practitioner, furnishes his Receipt and Payment Account for the period 1st July, 2002 to 30th
April, 2003 (Tax year, 2004).
Payments Rs. Receipts Rs.
Rent of clinic 24,000 Consultation fees 450,000

Household expenses 96,000 Visiting fees 100,000
Purchase of motor car 300,000 Remuneration from articles
Purchase of surgical equipments 40,000 published in magazines 12,000
Advance income tax 60,000 Rental income 72,000
Salary to assistant 36,000 Gifts from patients 30,000
Car running expenses 30,000
Property tax 12,000
Depreciation of motor car 80,000
Stationery 5,000
Utilities 25,000
Required:
Compute the income for the relative tax year and tax thereon after taking into account the following facts:
i) Two-third of car running expenses are in connection with personal use.

ii) Depreciation on car should be charged according to the rules.
iii) Investment in Defense Saving Certificates at Rs. 30,000.
Solution
Dr. A. A. Qureshi - Resident
Rs. Rs.
Consultation fees (Note - 1) 450,000
Less: Expenses
Rent of clinic 24,000
Household expenses (Not allowed being personal) -

Purchase of motor car (Capital nature payment) -

Purchase of surgical equipments (Capital nature payment) -
Salary to assistant 36,000
Car running expenses (30,000 x 1 / 3 related to business) 10,000
Property tax 12,000
Depreciation:
(Motor car (300,000 x 15% x 1/3 business) U/S 22 15,000
Surgical equipments (initial 40,000 x 25%) U/S 23 10,000
Surgical equipments (normal 30,000 x 15%) U/S 22 4,500
Stationery 5,000
Utilities 25,000
141,500
Net profit from business 308,500
Property income (assumed after allowable deductions) 72,000
Visiting fees 100,000
Remuneration from articles in magazines 12,000
Gifts from patients (Not chargeable to tax because of personal nature liability) -
112,000
Total taxable income including property income taxable under NTR as SBI 492,500

As the taxpayer is a non salaried person hence tax liability is computed as under:
Tax on Rs. 492,500 [0 + 7% x (492,500 - 400,000)] 6,475
Less: Advance income tax paid 60,000
Note-1 The question has been solved on the assumption that no tax on consultation fee has been deducted during the year
othewise the same shall constitute as minimum tax liability U/S 153 of the Income Tax Ordinance, 2001.
Note - 2 Investment in DSC's shall be accounted for in the personal wealth statement of the taxpayer.

Solved Past Papers Income Tax Numericals of Icmap Stage IV - (2003 To 2015)

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Solved Past Papers Income Tax Numericals of Icmap Stage IV - (2003 To 2015)

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Chapter 25 Solved Past Papers Income Tax Numericals of ICMAP Stage IV - (2003 to 2015)

Income from other sources:

· He also paid donation of Rs, 15,000 to an approved charity organization.

Name of Tax Payer : Mr. Hassan

Conceptual Approach to Taxes _________________________________489

Income year ended : 30th June 2016

Computation of tax liability

Less: Rebate only on life insurance premium

Description Note Amount (Rs. )

490_______________________________ Conceptual Approach to Taxes

2 Cost of sales includes accounting depreciation of Rs. 4 million.

Prime Leather Works (Pvt.) Limited

Add: Inadmissible items

Conceptual Approach to Taxes _________________________________491

Bad Debts 500,000 (10,700,000)

Computation of tax liability:

Tax on Rs. 4,433,333 @ 32 % A 1,418,667

Q. NO.4 Spring 2014

A. i) Basic salary per annum 500,000

ii) Perquisites and al allowances paid by the employer:

492_______________________________ Conceptual Approach to Taxes

Interest on borrowed capital 7,000

D. Zakat deducted at source 8,000

Mr. Samiullah (Resident)

INCOME FROM SALARY U/S 12 (Rupees) (Rupees)

Basic salary 500,000

INCOME FROM PROPERTY U/S 15

Rent received (Rs. 12,000 x 12 months) (Note 1) 144,000

INCOME FROM OTHER SOURCES U/S 39

Less: Zakat (8,000)

Conceptual Approach to Taxes _________________________________493

COMPUTATION OF TAX LIABILITY:

Tax on Rs. 1,665,200 [92,000 + 15% x (1,665,200 - 1,500,000)] 116,780

Rs. '000' Rs. '000'

The following information is available:

494_______________________________ Conceptual Approach to Taxes

M/S GOLDEN GATE LIMITED (GGL)

INCOME FROM BUSINESS U/S 18 Note Rs. Rs.

Profit as per accounts 80,926,000

Add: Inadmissible items U/S 21 & 174

Provision for taxes 10,080,000

COMPUTATION OF TAX LIABILITY:

Actual tax payable under NTR: higher of (A) or (B) 34,543,040

Assumptions and basis

Conceptual Approach to Taxes _________________________________495

Q.5 August 2012

(d) Insurance includes prepaid expenses amounting to Rs.320,000.

Solution Q.5 August 2012

Global International Limited

Profit before tax as per accounts 6,360,000

Add: Inadmissible items U/S 21

(a) Employee's provident fund (unapproved) 1,320,000

496_______________________________ Conceptual Approach to Taxes

(b) Accounting depreciation on plant and machinery 300,000

Less: (b) Tax depreciation on plant and machinery (N-1) 340,625

Dividend income (covered under FTR) 300,000

Total taxable income 7,859,375

COMPUTATION OF TAX LIABILITY:

Alternative Corporate tax U/S 113C (A) 1,081,200

Minimum tax u/s 113 (55,300,000 x 1%) (C) 553,000

Tax liability under NTR: Higher of (A), (B) or (C) 2,515,000

Tax liability under FTR:

(N-1) Tax depreciation on plant and machinery: