ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD (Department of Commerce TA!

ATION MANA"EMENT (#$%& C'EC(LIST SEMESTER AUTUMN, )*&%

This packet comprises the following material: 1. 2. 3. #. %. Text Book (One) Course Outline ssignment !o. 1"2 ssignment $orms ( 2 sets ) &che'ule for assignment su(mission an' tutorial meetings.

)n this packet" if *ou fin' an*thing missing out of the a(o+e mentione' material" please contact at the a''ress gi+en (elow:

Ma+,+n- Off+cer A,,ama I./a, Open Un+0er1+t2 '3#, I1,ama/a4

M56amma4 M5n+r A6ma4 (Course Coor'inator)

ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

(Department of Commerce

7ARNIN"
&8 )8 %8 PLA"IARISM OR 'IRIN" O9 "'OST 7RITER(S 9OR SOLVIN" T'E ASSI"NMENT(S 7ILL DEBAR T'E STUDENT 9ROM A7ARD O9 DE"REE:CERTI9ICATE, I9 9OUND AT ANY STA"E8 SUBMITTIN" ASSI"NMENT(S BORRO7ED OR STOLEN 9ROM OT'ER(S AS ONE;S O7N 7ILL BE PENALI<ED AS DE9INED IN =AIOU PLA"IARISM POLICY>8 YOU ARE REQUIRED TO SOLVE ALL QUESTIONS I9 YOU ARE UNABLE TO UNDERSTAND ANY QUESTION O9 ASSI"NMENT, DO SEE( 'ELP 9ROM YOUR CONCERNED TUTOR8 BUT (EEP IN MIND T'AT TUTORS ARE NOT SUPPOSED TO SOLVE T'E ASSI"NMENT QUESTIONS 9OR YOU8 Seme1ter? A5t5mn, )*&% MarA1? &** Pa11 MarA1? $*

Co5r1e? Ta@at+on Mana-ement (#$%& Le0e,? M8 Com

ASSI"NMENT No8 &

(Un+t1? &BC ,. 1 -r. .hurshee'" a /akistani national" was emplo*e' as the chief financial officer in 0ulfi1ar 2as Compan* (02C)" since 1334. $ollowing information pertains to his income for the tax *ear 2412: ()* Income from ZGC .hurshee' was emplo*e' with 02C up to 31 5ecem(er 2411. 5uring this perio' he recei+e' the following emoluments: Basic salar* of 6s. #44"444 per month" me'ical allowance of 6s. 7%"444 per month an' utilit* allowance e1ui+alent to 148 of (asic salar*. compan*9maintaine' car for official an' pri+ate use. The car was purchase' two *ears ago at a cost of 6s. % million. ccor'ing to the compan*:s polic*" 02C 'e'ucte' 6s. 14"444 per month from his salar*" for pri+ate use of the car. On 31 ;ul* 2411" .hurshee' ha' un'ergone a ma<or surger* an' incurre' an expen'iture of 6s. 1"%44"444. 02C reim(urse' the entire amount as a special case as it was not co+ere' un'er the terms of emplo*ment. 5ue to poor health" .hurshee' opte' for earl* retirement on 31 5ecem(er 2411 un'er the compan*:s +oluntar* retirement scheme. =e recei+e' the following (enefits on his retirement: 6s. 7"%44"444 as a gol'en han'shake un'er the +oluntar* retirement scheme. 6s. 3"144"444 from an unappro+e' gratuit* fun' maintaine' (* 02C. 2

Transfer of compan*:s car for 6s. 2">44"444. The amount was 'e'ucte' from his final settlement. The fair market +alue of the car as of 31 5ecem(er 2411 was 6s. 2"?44"444. The tax 'e'ucte' at source for the tax *ear 2412 amounte' to 6s. 3"7%4"444.

Other Information On 1 ;anuar* 2412" .hurshee' commence' (usiness of marketing of horticultural plants an' relate' items. =owe+er" 'ue to intense competition" he ha' to win'9up this +enture on 31 -a* 2412. 5uring this perio'" he ha' incurre' a loss of 6s. 7%4"444. =e purchase' %444 shares for 6s. %44"444 from initial pu(lic offering of a new liste' compan* on 1 ;une 2411. =e claime' a tax cre'it of 6s. >4"444 on such in+estment" against the tax pa*a(le for the tax *ear 2414. On 1% ;une 2412" he sol' these shares for 6s.744"444. =e incurre' a loss of 6s. %44"444 on the sale of his sharehol'ings in a pri+ate limite' compan*. =e sol' his personal car at a profit of 6s. 344"444. On 1 -arch 2412" he purchase' an apartment for 6s. %"444"444. >48 of this amount was finance' (* a sche'ule' (ank. 5uring the tax *ear 2411" he pai' markup amounting to 6s. 127"%44. On 1 pril 2412" he rente' out the flat to -r. ('ul &attar at a monthl* rent of 6s. 2%"444 an' recei+e' a'+ance rent for eight months. =is a+erage tax rate for the prece'ing three *ears is 1?8. Re.5+re4? i. Compute the amount of taxa(le income" tax lia(ilit* an' tax pa*a(le@ (refun'a(le)" if an*" for the tax *ear 2412. ii. Briefl* comment on the items which are not consi'ere' (* *ou in the a(o+e computation. ,. 2 a) An'er the pro+isions of )ncome Tax Or'inance" 2441 certain persons are re1uire' to pa* minimum tax at the rate of 18 of their turno+er. ()* Re.5+re4? i. Bxplain the term CTurno+er: for the purpose of minimum tax. ii. Dist the persons who are re1uire' to pa* minimum tax. iii. 5iscuss the rules relating to carr* forwar' of minimum tax pai' to the su(se1uent *ears. An'er the )ncome Tax Or'inance" 2441 the loss surren'ere' (* a su(si'iar* compan* ma* (e claime' (* the hol'ing compan* for set off against its (usiness income in that tax *ear an' following two tax *ears" su(<ect to certain con'itions. Re.5+re4? Dist the con'itions which are necessar* for claiming the su(si'iar*:s losses.

()

,. 3 a)

()

Briefl* 'iscuss the resi'ential status of the following persons for the tax *ear 2411 un'er the )ncome Tax Or'inance" 2441. (&$ i) -r. &hah has (een working as an )nformation nal*st in the -inistr* of $oreign ffairs. On 1 !o+em(er 2411" he was poste' to /akistan Bm(ass* in Cana'a for three *ears. ii) sif Dearning Center is a partnership concern" pro+i'ing )T training to professionals in /akistan" A B an' &au'i ra(ia. Ap to 31 ;ul* 2411" the management an' control of its affairs was situate' partl* in /akistan. =owe+er" with effect from 1 ugust 2411" the entire management an' control of the affairs of the partnership was shifte' to 5u(ai. iii) -r. Dia1uat was sent to /akistan on a special assignment (* his A.9(ase' compan* on 1 -arch 2412. =e left /akistan on 3 &eptem(er 2412. i+) $aroo1 Tra'ing DDC was incorporate' as a limite' lia(ilit* compan* in A B. The management an' control of its affairs are situate' wholl* in /akistan. Bxplain the following as specifie' in the )ncome Tax Or'inance" 2441. i) )n'ustrial An'ertaking ii) $air -arket Ealue iii) pportionment of Bxpen'itures

,. # -r. gha is registere' un'er the &ales Tax ct" 1334. =e is engage' in the suppl* of househol' appliances an' has pro+i'e' *ou the following information for the month of ugust 2412: (&$ i) &upplies ma'e 'uring the month were as follows: Rupees Docal taxa(le supplies to registere' persons 3%"%44"444 Docal taxa(le supplies to unregistere' persons 1"744"2%4 Bxports to A& an' Cana'a 2%"%44"444 &upplies of exempt goo's %"23%"444 2oo's worth 6s. 1"%44"444 were returne' (* a registere' person. /roper 'e(it@cre'it notes ha+e (een issue' in this regar'. ii) $ollowing purchases were ma'e 'uring the month: Rupees /urchases from registere' persons %#"%%4"444 /urchases from unregistere' persons 14">44"444 2oo's purchase' from unregistere' persons were exclusi+el* use' for making taxa(le supplies. n amount of 6s. 7%4"444 is pa*a(le to a registere' person since 1 $e(ruar* 2412. iii) &ales tax cre'it of 6s. >14"444 has (een (rought forwar' from pre+ious month. i+) &ales tax is pa*a(le at the rate of 178. ll the a(o+e amounts are exclusi+e of sales tax. +) gha is also re1uire' to pa* a penalt* of 6s. 14"444 un'er the &ales Tax ct" 1334 on account of certain 'efects in the maintenance of recor's. #

Re.5+re4? Compute the sales tax pa*a(le@(refun'a(le) (*@to -r. gha along with input tax to (e carrie' forwar'" if an*" in the sales tax return for the month of ugust 2412. ,. % An'er what circumstances" a registere' person (ecomes lia(le to (e 'e9registere' un'er the &ales Tax ct" 1334. lso state the proce'ures for 'eregistration as enumerate' in the &ales Tax 6ules" 244>. (&* ,. > -r. 2ohar has recentl* (een registere' un'er the &ales Tax ct" 1334. =e is engage' in the export an' 'istri(ution of consumer pro'ucts. Before filing the first return" he wishes to o(tain a'+ice on the following matters: (&* i) Bligi(ilit* for a refun' if input tax pai' is in excess of the output tax pa*a(le for the month. ii) Conse1uences of non9pa*ment of the entire amount of tax 'ue as in'icate' in the return. iii) Concept of pro+isional an' final a'<ustment. Re.5+re4? Comment on each of the a(o+e matters. ,. 7 &tate the pro+isions of &ales Tax ct" 1334 relating to maintenance an' retention of recor's (* a registere' person making taxa(le supplies. (&* "UIDELINES 9OR ASSI"NMENT D & The stu'ent shoul' look upon the assignments as a test of knowle'ge" management skills" an' communication skills. Fhen *ou write an assignment answer" *ou are in'icating *our knowle'ge to the teacher: Gour le+el of un'erstan'ing of the su(<ectH =ow clearl* *ou thinkH =ow well *ou can reflect on *our knowle'ge I experienceH =ow well *ou can use *our knowle'ge in sol+ing pro(lems" explaining situations" an' 'escri(ing organiJations an' managementH =ow professional *ou are" an' how much care an' attention *ou gi+e to what *ou 'o. To answer a 1uestion effecti+el*" a''ress the 1uestion 'irectl*" (ring important relate' issues into the 'iscussion" refer to sources" an' in'icate how principles from the course materials appl*. The stu'ent must also (e a(le to i'entif* important pro(lems an' implications arising from the answer. $or citing references" writing (i(liographies" an' formatting the assignment" shoul' (e followe'. / format

ASSI"NMENT No8 )
(Un+t1? &BC This assignment is a research9oriente' acti+it*. Gou are re1uire' to select an* tra'ing@manufacturing@non9tra'ing organiJation of *our interest which supports *ou in preparing a report of a(out 1444 wor's on the topic allotte' to *ou" to (e su(mitte' to *our teacher for e+aluation. &elect one of the following topics accor'ing to the last 'igit of *our roll num(er. $or example" if *our roll num(er is /93#271?4 then *ou will select issue K 4 (the last 'igit): 9 TOPICS? Comparati+e stu'* of philosoph* of tax un'er )slam" ;u'aism an' Christianit*. 4. /rinciples of taxation 1. Bconomic conse1uences of 'ifferent t*pes of taxes (e.g. 'irect" in'irect) 2. Conse1uences of tax e+asion with respect to (usiness entit*" an' econom* as a whole 3. Tax as a tool of fiscal polic* #. Tax structure of /akistan (merits" 'emerits)" comparati+e stu'* with other south %. sian 'e+eloping countries an' recommen'ations for impro+ement =istor* of tax reforms in /akistan" critical re+iew of tax reforms in /akistan" >. comparati+e stu'* of tax reforms with other south sian countries Tax management with special focus on corporate tax (comprehensi+e 'iscussion 7. regar'ing tax management +ersus tax e+asion) Tax re+enue management in /akistan ?. Tax (ase" chargea(ilit*" an' collection 3. The report shoul' follow the following format: 1. Title page 2. cknowle'gements 3. n a(stract (one page summar* of the paper) #. Ta(le of contents %. )ntro'uction to the issue ((rief histor* I significance of issue assigne') >. /ractical stu'* of the organiJation (with respect to the issue) 7. 5ata collection metho's ?. &FOT anal*sis (strengths" weaknesses" opportunities I threats) rele+ant to the issue assigne' 3. Conclusion (one page (rief co+ering important aspects of *our report) 14. 6ecommen'ations (specific recommen'ations rele+ant to issue assigne') 11. 6eferences (as per / format) 12. nnexes (if an*) "UIDELINES 9OR ASSI"NMENT D )? 1.% line spacing Ase hea'ers an' su(hea's throughout all sections OrganiJation of i'eas >

Friting skills (spelling" grammar" punctuation) /rofessionalism (rea'a(ilit* an' general appearance) 5o more than repeat the text Bxpress a point of +iew an' 'efen' it.

7OR(S'OPS The workshop presentations pro+i'e stu'ents opportunit* to express their communication skills" knowle'ge I un'erstan'ing of concepts learne' 'uring practical stu'* assigne' in assignment K 2. Gou shoul' use transparencies an' an* other material for effecti+e presentation. The transparencies are not the presentation" (ut onl* a toolH the presentation is the com(ination of the transparencies an' *our speech. Forkshop presentation transparencies shoul' onl* (e in t*pe' format. The transparencies shoul' follow the following format: 1) Title page 2) n a(stract (one page summar* of the paper) 3) )ntro'uction to the issue ((rief histor* I significance of issue assigne') #) /ractical stu'* of the organiJation (with respect to the issue) %) 5ata collection metho's >) &FOT anal*sis (strengths" weaknesses" opportunities I threats) rele+ant to the issue assigne' 7) Conclusion (one page (rief co+ering important aspects of *our report) ?) 6ecommen'ations (specific recommen'ations rele+ant to issue assigne') "UIDELINES 9OR PRESENTATION? -ake e*e contact an' react to the au'ience. 5onLt rea' from the transparencies or from report" an' 'onLt look too much at the transparencies (occasional glances are accepta(le to help in recalling the topic to co+er). 1%9minute presentation can (e practice' se+eral times in a'+ance" so 'o that until *ou are confi'ent enough. &ome people also use a mirror when rehearsing as a su(stitute for an au'ience. 7EI"'TA"E O9 T'EORY E PRACTICAL ASPECTS IN ASSI"NMENT D ) E 7OR(S'OP PRESENTATIONS ssignment K 2 I workshop presentations are e+aluate' on the (asis of theor* I its applica(ilit*. The weightage of each aspect woul' (e: Theor*: >48 pplica(ilit* (practical stu'* of the organiJation): #48 Note? ssignments an' /resentation carr* 344 -arks: ssignment 41 ssignment 42 (&u(mission) ssignment 42 (/resentation) 7

144 -arks 144 -arks 144 -arks

COURSE OUTLINE (#$%&

Un+tB& ADVANCE TOPICS IN TA!ATION 1.1 /hilosoph* of tax 1.1.1 )slamic philosoph* of tax 1.1.2 Comparati+e stu'* of tax un'er )slam" ;u'aism an' Christianit*. 1.2 /rinciples of taxation 1.3 Conse1uences of tax e+asion with respect to (usiness entit*" an' econom* as a whole 1.# $ighting with tax e+asion 1.% Tax as a tool of fiscal polic* 1.> Tax structure of /akistan (merits" 'emerits)" Comparati+e stu'* with other &outh sian 'e+eloping 1.7 Countries an' recommen'ations for impro+ement 1.? =istor* of tax reforms in /akistan" Critical re+iew of tax reforms in /akistan" Comparati+e stu'* of tax reforms with other &outh sian Countries 1.3 Tax management with special focus on corporate tax 1.14 Tax re+enue management in /akistan 1.11 Tax (ase" chargea(ilit*" an' collection INCOME TA! ORDINANCE )**& F+t6 Re,e0ant R5,e1 2.1 Comprehension of Basic 6ules an' Concepts 2.2 Basic principles of construction" rele+ant 'efinitions@concepts 2.2.1 /ersons Msection 2(#2)N 2.2.2 )ncome Msection 2(23)N 2.2.3 Total income (with special 'e(ate on 'istri(ution of total income un'er +arious hea's) 2.2.# Taxa(le income Msection 2(>#)N 2.2.% ssessment Msection 2(%)N 2.2.> Tax 2.2.7 Taxpa*er Msection 2(>>)N 2.2.? Tax *ear Msection 2(>?)N 2.2.3 ccumulate' profit Msection 2(1)N 2.2.14 5i+i'en' Msection 2(13)N 2.2.11 )n'ustrial un'ertaking 2.2.12 /ermanent esta(lishment Msection 2(#1)N 2.2.13 ssociates 2.2.1# 6esi'ent an' non9resi'ent persons Ta@ A4m+n+1trat+on 3.1 Tax authorities Msection 247N 3.2 Circulars" or'ers an' 'irections issue' (* the $e'eral Boar' of 6e+enue ($B6) Msections 24>" 213 I 21#N ?

Un+tB)

Un+tB%

3.3 3.# 3.% 3.> 3.7 Un+tBG

'+ance rulings Msection 24> N. ppellate &*stem M&ections 127 to 13>N Commissioner )nlan' 6e+enue ( ppeals) ppellate Tri(unal Conceptual 'iscussion regar'ing point of law an' point of fact

Ta@ on Ta@a/,e Income (I #.1 =ea's of income Msection 11N #.2 )ncome for tax purposes Msection 3 I 14N #.3 Tax pa*a(le on taxa(le income M$irst &che'ule to the Or'inanceN #.# &alar* #.#.1 Concept of emplo*ment" emplo*er" emplo*ee an' salar* #.#.2 Basis of assessment #.2.3 6esi'ential status of salarie' person #.2.# Bmplo*ee share schemes #.2.% /er1uisites ((enefits9in9kin') #.2.> Taxation at source from salar* #.2.7 6etirement (enefits (/ension" gratuit*" pro+i'ent fun') #.2.? Bmplo*ment termination (enefits #.2.3 Bxemptions an' tax concessions regar'ing salar* #.3 )ncome from Other &ources M&ections 33" #4" %%(1)" >7" ?3" 141(>)" 111N #.3.1 Concept of other sources un'er the Or'inance #.3.2 llowa(le 'e'uctions Ta@ on Ta@a/,e Income (II %.1 )ncome from propert* %.1.1 Concept of propert* un'er the Or'inance %.1.2 Blements of propert* income %.1.3 Computation of taxa(le income an' tax pa*a(le un'er the hea' propert* %.1.# Bxemptions an' lower rate taxation of income from propert* %.1.% -etho'" manner an' mo'e of propert* tax %.2 )ncome from (usiness M&ections 1? to 3>N %.2.1 Concept of (usiness un'er the Or'inance %.2.2 /rinciples regar'ing chargea(le income %.2.3 2eneral principles for allowa(le 'e'uctions %.2.% 5e'uctions allowe' Msection 24N %.2.# 5e'uctions not allowe' M&ection 21N %.2.> Bxemptions an' tax concessions %.3 Capital 2ains %.3.1 Concept of Capital sset un'er the Or'inance %.3.2 /rinciples for computing capital gains %.3.3 5e'uction of losses 3

Un+tB$

Un+tBH

Ta@ Cre4+t1 an4 M+n+m5m Ta@ ISect+on1 H& to H$ E Sect+on1 &&% to &&%BJ >.1 &et9off an' Carr* $orwar' of Dosses M/art E))) of Chapter )))N >.1.1 /rinciples relating to inter9hea'9a'<ustments >.1.2 6ules for carr*ing forwar' an' su(se1uent a'<ustments >.2 /roce'ure M/arts ) an' )) of Chapter ON >.3 )ncomes chargea(le as minimum tax >.# /ersons lia(le to pa* minimum tax >.% '+ance Tax I $inal Tax 6egime (Fithhol'ing Tax) >.%.1 &pecial focus on section 1>3 >.%.2 Comparati+e 'iscussion regar'ing tax 'e'ucte' at source (withhol'ing tax) treate' as a'<usta(le" minimum or final tax. >.> 5efault &urcharge M/art O)) of Chapter ON >.7 &ales Tax ct 1334 with 6ele+ant 6ules@!otifications >.7.1 O+er+iew" &cheme an' &cope Compre6en1+on of Ba1+1, R5,e1 an4 Concept1 Re,e0ant 4ef+n+t+on1:concept1 rears 5ue 'ate Msection 2(3)N Bxempt suppl* Msection 2(11)N 2oo's Msection 2(12)N -anufacturer or pro'ucer I -anufacture or pro'uce )nput tax Msection 2(1#)N 6egistere' person Msection 2(2%)N &uppl* Msection 2(33)N Tax Msection 2(3#)N Tax )n+oice Taxa(le acti+it* Msection 2(3%)N Taxa(le suppl* Msection 2(#1)N 0ero rate' suppl* Tax perio' Msection 2(#3)N Time of suppl* Msection 2(##)N Scope an4 Pa2ment of Ta@ ISect+on1 % to &% F+t6 re,e0ant r5,e1J ?.1 &cope of chargea(ilit*" mo'e of collection etc ?.2 0ero rating ?.3 Change in the rate of tax ?.# Time an' manner of pa*ment ?.% 5etermination of tax lia(ilit* ?.> Tax cre'it not allowe' ?.7 5e(it an' cre'it note ?.? Bxcess amount to (e carrie' forwar' or refun'e' ?.3 ssessment of tax ?.14 &hort9pai' amounts reco+era(le without notice ?.11 Bxemption 14

Un+tBK 7.1 7.2 7.3 7.# 7.% 7.> 7.7 7.? 7.3 7.14 7.11 7.12 7.13 7.1# 7.1% Un+tB#

Un+tBC

Ret5rn1, Re-+1trat+on an4 A5t6or+t+e1 ISect+on1 )H, )K, )# F+t6 re,e0ant r5,e1J 3.1 6eturns 3.1.1 !ormal 6eturn 3.1.2 nnual return 3.1.3 &pecial 6eturn 3.1.# $inal 6eturn 3.2 6egistration (&ections 1#" 21" with rele+ant rules) 3.2.1 6e1uirement of registration 3.2.2 Compulsor* registration 3.2.3 5e9registration 3.3 uthorities (&ections 34" 34 " 34B" 34C" 345" 3455" 34B" 31" 32 an' 32 )

Recommended Books: 1. Text Book of Business Taxation (* )<aJ li Faince" pu(lishe' (* Faince ca'em*" $aisala(a'. 2. =uJaima I )kram:s LTax Daws of /akistanL MOfficial +ersion can (e 'ownloa'e' from www.f(r.go+.pk 3. /ractical =an'(ook of )ncome Tax (* 5r. )kramul =a1" pu(lishe' (* Dahore Daw /u(lications email: infoPhuJaimaikram.com Fe(site: http:@@huJaimaikram.com Advance Readings/Source Material: #. &*nopsis of taxation (* -irJa -unawar =ussain. %. Earious articles on tax laws an' issues a+aila(le at http:@@huJaimaikram.com >. -aterial at official we(site (www.f(r.go+.pk) of $B6. 7. 6eforms in Tax 'ministration of /akistan" report (* &*e' &hahi' =ussain" www.google.com.

QQQQQQQQQQ

11