BAHRIA UNIVERSITY (KARACHI CAMPUS)

FINAL TERM EXAMINATION – Fall SEMESTER 2023

(PRINCIPLES OF TAXATION – ACC 220)

Class: BS (A & F) 4 Morning session

Course Instructor: M. Khalid Petiwala / Azeem Hussain Siddiqui Time Allowed: 2 Hours
Date: 16 January 2024 Session: I Max Marks: 40

Student’s Name: ____________________ Reg. No: _________

Note: (Start each question from new page)

Question 1 [CLO-1]

There are certain modes of transfer of capital assets on which gain or loss is not recognized.

You are required to list down the above modes of transfer along with the definition of relatives.
(Marks 5)

Question 2 [CLO-1]

Mr. Shakir has so many assets including capital assets.

He wants to dispose off all of his assets as he is planning to shift from Pakistan to Canada.

Mr. Mangal Pandey is a tax consultant who is a friend of Mr. Shakir. Mr. Pandey informed him
that there are specified capital assets on the disposal of which gain if any is taxable but loss if
any is not recognized.

You are required to list down the capital assets on which loss if any is not recognized but gain if
any is taxable. (Marks 5)

Question 3 [CLO-2]

Mr. Irshad Bhatti purchased an open plot few years ago and disposed off the same in the first
week of July 2023. The details of the sale transaction are as under:

- The open plot was sold at a sale price of Rs.48,000,000. The fair market value as the
time of sale was Rs.45,000,000.

- Broker has charged commission of @ 1% of the sale price at the time of sale.

- Transfer authority of the government has collected advance income tax @ 3% of the sale
value from Mr. Irshad.

Page 1 of 4
Purchase related details of the said plot were as under:

- The plot was acquired in the 2 nd week of April 2018 at a purchase price of Rs.28,000,000.
Payment was made through banking channel.

- Broker has charged commission @ 1% of the purchase cost which was paid through a
crossed cheque.

- Stamp duty and other registration charges were Rs.2,400,000.

Required:
Calculate tax payable or refundable on the above disposal of plot for the tax year 2024.
(Marks 10)

Question 4 [CLO-1]

Mr. Bilawal is planning to start manufacturing of fast-moving consumer goods (FMCGs) at a

small scale to judge the feasibility of the project.

He contacted a tax consultant to get the knowledge of registration of his business entity under
the Sales Tax Act, 1990. The tax consultant has informed him about cottage industry and the
benefit available to a cottage industry under the Sales Tax Act, 1990.

You are required to list down the conditions for a cottage industry. (Marks 4)

Also state the benefit available to a cottage industry. (Mark 1)

Question 5 [CLO-2]

Ms. Swaleha has purchased an apartment in a residential area of Multan on 25 th November 2017
and immediately rented out the apartment to Ms. Javeria at a monthly rent of Rs.390,000.

Ms. Javeria has also paid a deposit of Rs.2,500,000 on 1 st December 2017 which was refundable
at the time of vacating the apartment.

Ms. Swaleha refunded the deposit of Rs.2,500,000 to Ms. Javeria when she vacated the
apartment on 31st August 2023.

Ms. Swaleha again rented out the apartment to Ms. Shajeea on a monthly rent of Rs.480,000 on
1st November 2023.

Ms. Shajeea also paid Rs.4,500,000 as deposit which is refundable at the time of vacating the
apartment.

Ms. Swaleha has incurred the following expenses which she wants to claim against rental
income:

- Rs.720,000 on repairs including paints and polish of doors and windows.

- Legal charges of Rs.580,000 for a court case related to the said apartment. However, she
paid Rs.420,000 till 30th June 2024 and the balance is still outstanding.

Page 2 of 4
 - Broker’s commission and collection charges were Rs.980,000.

In the month of September 2023, Ms. Swaleha decided to sell the apartment at a price of
Rs.75,000,000 and received a deposit of Rs.5,400,000 from a buyer through an initial contract.
However, the buyer has subsequently refused to purchase the apartment and the deposit of
Rs.5,400,000 was forfeited.

Required
You are required to calculate property income for the tax year ended 30.6.2024 and tax liability
thereon, if any. (Marks 10)

Question 6 [CLO-1]

Mr. Munir wants to start manufacturing of garments for which certain assets are required to be
purchased including immovable properties.

Mr. Munir was informed by his friends that a business entity is required to pay the purchase
price of the assets through banking channel with specified limits.

If payment is made other than banking channel then there will be adverse consequences.

You are required to list down the assets and limits which are required to be paid through
banking channel and also the consequences of default in this respect. (Marks 5)

Income Tax Rates: Category 1 (for individual non-salaried case)

TAXABLE INCOME RATE OF TAX
1. Up to Rs.600,000 0%
2. Rs.600,001 – Rs.800,000 7.5% of amount exceeding Rs.600,000
3. Rs.800,001 – Rs.1,200,000 Rs.15,000 + 15% of amount exceeding
Rs.800,000
4. Rs.1,200,001 – Rs.2,400,000 Rs.75,000 + 20% of the amount
exceeding Rs.1,200,000
5. Rs.2,400,001 – Rs.3,000,000 Rs.315,000 + 25% of the amount
exceeding Rs.2,400,000
6. Rs.3,000,001 – Rs.4,000,000 Rs.465,000 + 30% of the amount
exceeding Rs.3,000,000
7. Over Rs.4,000,000 Rs.765,000 + 35% of the amount
exceeding Rs.4,000,000

Page 3 of 4
Income Tax Rates: Category 2 (for individual salaried case)
TAXABLE INCOME RATE OF TAX
1. Up to Rs.600,000 0%
2. Rs.600,001 – Rs.1,200,000 2.5% of the amount exceeding
Rs.600,000
3. Rs.1,200,001 – Rs.2,400,000 Rs.15,000 + 12.5% of the amount
exceeding Rs.1,200,000
4. Rs.2,400,001 – Rs.3,600,000 Rs.165,000 + 22.5% of the amount
exceeding Rs.2,400,000
5. Rs.3,600,001 – Rs.6,000,000 Rs.435,000 + 27.5% of the amount
exceeding Rs.3,600,000
6. Over Rs.6,000,000 Rs.1,095,000 + 35% of the amount
exceeding Rs.6,000,000

Tax rates on capital gain on disposal of immovable property

Rate of tax
Open Constructed Flats
Holding Period Plots Property
1 Does not exceed 1 year 15% 15% 15%
2 Exceeds 1 year but does not exceed 2 years 12.5% 10% 7.5%
3 Exceeds 2 years but does not exceed 3 years 10% 7.5% 0%
4 Exceeds 3 years but does not exceed 4 years 7.5% 5% 0%
5 Exceeds 4 years but does not exceed 5 years 5% 0% 0%
6 Exceeds 5 years but does not exceed 6 years 2.5% 0% 0%
7 Exceeds 6 years 0% 0% 0%

- The end -

Page 4 of 4