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Certificate in Accounting and Finance – Spring 2018
Rupees
N-1: Warehouse constructed 1,040,000
Initial allowance @ 15% (1,040,000×15%) 156,000
Tax depreciation @ 10% [(1,040,000–156,000)×10%] 88,400
Total depreciation 244,400
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PRINCIPLES OF TAXATION
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Certificate in Accounting and Finance – Spring 2018
Capital gain
From sale of land
Sale proceeds (cost of the assets) 3,750,000
Cost of land (2,000,000)
Taxable income (separate block of income) 1,750,000
Accordingly, the sale proceeds of the building and land are computed as under:
Land = 10×3/8 = Rs. 3.75 million
Building = 10×5/8 = Rs. 6.25 million
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PRINCIPLES OF TAXATION
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Certificate in Accounting and Finance – Spring 2018
Ans.3 (a) (i) Under the Income Tax Ordinance, 2001 if in the opinion of the Commissioner,
an asset is acquired from any income chargeable to tax but could not be
charged to tax, it is considered to be a concealed asset.
(b) (i) The Commissioner of income tax is empowered to amend the assessment of
the taxpayer within five years from the end of the financial year in which the
Commissioner has issued or treated to have issued the assessment order to the
taxpayer Accordingly, in this case amendment can be made by 30 June 2019.
(ii) Where the Commissioner has issued the amended assessment order to the
taxpayer, the limitation period should be later of:
five years from the end of the financial year in which the original
assessment order is issued or treated as issued by the Commissioner; or
one year from the end of the financial year in which the amended
assessment order is issued or is treated as issued to the tax payer.
The time limitation for the next assessment will therefore to be by 30 June
2019.
(c) Mr. Bruce Lee is not a resident for the tax year 2017 as he was present for less than
183 days in Pakistan i-e 178 days as follows:
Months Days
December 2016 (15-12-16 is also included) 17
January 2017 31
February 2017 28
March 2017 31
April 2017 30
May 2017 31
June 2017 30
198
Less: Number of days visited to Dubai – March (10)
Less: Number of days visited to South Korea – April (10)
178
For not considering the days spent on personal trip within Pakistan.
(d) Under the provisions of the Income Tax Rules 2002, following are the records to be
kept by a tax payer in respect of his income from:
(i) Salary
Salary certificate indicating the amount of salary and tax deducted
therefrom.
(ii) Property
Tenancy agreement, if executed
Tenancy termination agreement, if executed
Receipt for amount of rent received
Evidence of deductions claimed in respect of premium paid to insure
the building, local rate, tax, charge or cess, ground rent, profit/interest
or share in rent on money borrowed, expenditure on collecting the rent,
legal services and unpaid rent.
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PRINCIPLES OF TAXATION
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Certificate in Accounting and Finance – Spring 2018
Exempt income:
Sale of Sugar cane worth of Rs. 910 million (200,000×4,550)
received from agricultural land -
Taxable income 18
(b) (i) On or before 31 August next following the end of tax year.
(ii) On or before 30 September next following the end of the tax year.
(iii) Due date fixed for submission of tax return by the Commissioner.
(iv) Due date specified in the notice for submission of tax return or thirty days
from the date of issuance of notice.
(v) If tax year ends between 1 January On or before 31 December next
to 30 June following the end of tax year.
If tax year ends between 1 July to On or before 30 September next
31 December following the end of tax year.
Speculation Losses
(i) If a person sustains a loss in a tax year from any speculation business, he can
set off such loss only against profits of any other speculation business carried
on by him during the same tax year.
(ii) In the subsequent years too, the speculation loss can be set-off against income
of any speculation business only. It means that loss from speculation business
cannot be adjusted against income under any other head.
(iii) If a person has a speculation loss carried forward for more than one tax years,
the loss of earliest tax year shall be set-off first.
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PRINCIPLES OF TAXATION
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Certificate in Accounting and Finance – Spring 2018
Ans.5 (a) The taxation system may also be utilized to achieve the following non revenue
objectives as follows:
Ans.6 (a) (i) 2% further tax is not payable in the following cases even if the supplies are
made to unregistered persons:
Electricity energy supplied to domestic and agricultural consumers.
Natural gas supplied to domestic consumers and CNG stations.
Motor oil, diesel oil, jet fuel, kerosene oil and fuel oil.
Goods sold by the retailers to end customers.
Supply of goods directly to end customers including food, beverages,
fertilizers and vehicles.
Items listed in Third Schedule to the Sales Tax Act, 1990.
Second hand worn clothing and other worn articles falling under PCT
heading 6309.0000.
Fertilizers.
Supplies by steel melters, re-rollers and ship breakers operating under
Chapter XI of Sales Tax Special Procedure Rules, 2007.
Supplies covered under the Fifth Schedule to the Sales Tax Act, 1990.
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PRINCIPLES OF TAXATION
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Certificate in Accounting and Finance – Spring 2018
(ii) Following is the list of goods which are exported but shall not be charged at
the rate of zero percent:
(b) Where a person files application for sales tax registration as a manufacturer prior to
installation of machinery, for the purpose of import of machinery to be installed by
him, temporary registration as manufacturer shall be allowed to him for a period of
sixty days.
After receiving temporary registration, the person shall be allowed to import plant,
machinery and raw materials, etc. as a manufacturer, subject to submission to the
customs authorities of a post-dated cheque equal to the difference in duties and
taxes to be availed as a manufacturer.
In case the list of machinery is not provided within sixty days of issuance of the
temporary registration, such temporary registration shall be disabled and the post-
dated cheques submitted shall be encashed.
A person holding temporary registration shall file monthly return, but shall not
issue a sales tax invoice and if such invoice is issued, no input tax credit shall be
admissible against such invoice.
No sales tax refund shall be paid to the person during the period of temporary
registration and the amount of input tax may be carried forward to his returns for
subsequent tax periods.
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PRINCIPLES OF TAXATION
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Certificate in Accounting and Finance – Spring 2018
(THE END)
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