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  BT-Feb 2014    1 of 4 ICMA   Pakistan   FALL 2013 (FEBRUARY 2014) EXAMINATION   Wednesday, the 26th February 2014 BUSINESS TAXATION  –   (LA-402) SEMESTER-4   Time Allowed: 02 Hours 30 Minutes Maximum Marks: 80 Roll No.: (i) Attempt all questions. (ii) Answers must be neat, relevant and brief. (iii) In marking the question paper, the examiners take into account clarity of exposition, logic of arguments, effective presentation and language. (iv) Read the instructions printed inside the top cover of answer script CAREFULLY before attempting the paper. (v) Use of non-programmable scientific calculators of any model is allowed. (vi) DO NOT write your Name, Reg. No. or Roll No., or any irrelevant information inside the answer script. (vii) Question Paper must be returned to invigilator before leaving the examination hall. Marks Q.2 (a) Define the term ‘ Electronic Record ’  as per the Income Tax Ordinance, 2001. 03 (b) Macro Trading (MT) is a sole proprietorship owned by Mr. Waheed. He is engaged in the manufacturing and supplying of herbal products for last many years. His taxable income for the year ended June 30, 2013 was Rs.1,000,000. Mr. Waheed ’ s Tax Advisor apprised him to pay advance tax for the tax year ended June 30, 2014. Required  Keeping in view his Tax Advisor ’ s advice, Mr. Waheed need explanation with regards to the following queries as per the Income Tax Ordinance, 2001: (i) How the amount of advance tax liability would be calculated for the tax year ended June 30, 2014? 01 (ii) What would be the “ period of quarter ”  and “ last date for payment of advance tax ”   under each of the following quarter namely: Serial No. Quarter Ended Period of Quarter Last Date for Payment of Advance Tax 1 September ? ?  2 December ?   ?  3 March ?   ?  4 June ?   ?   04 (iii) As amount of advance tax is calculated on the basis of the assessed tax liability of t h e latest tax year, which sources of income shall not be included while computing taxable income and tax liability of the latest tax year? 02 (iv) If Mr. Waheed is of the opinion that his tax liability for the current year is less than the previous year, then how will he adjust the amount of his advance tax installments? 01 Q.3 (a) Noorani Merchant and Co., is a tax consultancy firm. It has a list of clients who seek advices in respect of various tax matters. Required: Assume that you have been working as a Tax Advisor of Noorani Merchant and Co., and is given a task to determine the residential status of the following clients for the tax year ended June 30, 2014 under the given three scenarios. Also substantiate your answer with reasons in the light of the provision of the Income Tax Ordinance, 2001 and the Income Tax Rules, 2002: (i) Mr. Fahim resides in London and works as Chief Accountant in a British Company. Assume that he has come to Pakistan for the first time on a special assignment from his company on March 1, 2014 and left Pakistan on October 31, 2014. 02 (ii) Mr. Saleem is a Federal Government employee. Assume that he is posted to the United Arab Emirates for taking special training on Petroleum Exploration Project from July 1, 2013 to June 30, 2014. 02 PTO  BT-Feb 2014    2 of 4 Marks (iii) Ms. Saima has got a job in St. Micheal Pharma, a reputable company of United State of America (USA). She went to USA on December 28, 2013 to assume her responsibilities as a Managing Director of the company. Assume that in April, 2014 her company sent her to China on training. On May 31 st  2014 on her way back to USA she stayed in Karachi for three days due to cancellation of flights. 02 (b) There are various modes of charging Income Tax under the Income Tax Ordinance, 2001 commonly known as “ Tax Regimes ” . Briefly descr ibe each of the following modes of taxation:  –   (i) Normal Tax Regime (NTR) 02 (ii) Separate Tax Regime (STR) 02 (iii) Final Tax Regime or Presumptive Tax Regime (FTR) 02 (iv) Minimum Taxation Regime (MTR) 02 Q.4 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 allowances paid by the employer: Bonus 80,000 Entertainment allowance 10,000 Dearness allowance 180,000 House rent allowance 225,000 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 July, 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 expenditures 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. 20 (Note: See page # 4 for tax rates of salaried-person for the tax year, 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. 02  BT-Feb 2014    3 of 4 Marks Q.5 (a) As per the Sales Tax Special Procedure (Withholding) Rules, 2007 answer the following: (i) For the purpose of deduction and deposit of sales tax who can be regarded as ‘ withholding agents ’ ? 04 (ii) The withholding agent is required to issue a certificate to the supplier showing certain particulars. Enumerate those particulars. 02 (b) (i) As per section 8(1) of the Sales Tax Act, 1990 in respect of which goods, a registered person is not entitled to deduct or reclaim the input tax? Specify any five (05). 05 (ii) Briefly state in the light of the provisions of the Sales Tax Act, 1990 whether the following persons can reclaim input tax? !  Alpha Private Limited is a renowned company established in 1990. It is registered under the said Act and deals in taxable and non-taxable supplies. 01 !  Mr. Amir is a non-registered person under the said Act, deals in taxable supplies only. 01 (c) Shalimar Private Limited (SPL) manufactures and supplies household electrical goods to Altamash Enterprises (AE). Both the companies are registered under the Sales Tax Act, 1990. During the month of January, 2014 SPL had supplied 30 washing machines to AE. However, AE decided to return 16 washing machines to SPL due to sub-standard quality. Required: Under the provision of the Sales Tax Rules, 2006 describe the procedure to be followed by Altamash Enterprises (AE) for returning the goods. 05 Q.6 (a) Beta (Pvt.) Limited is engaged in imports, trading and local manufacturing of certain taxable consumer goods including products like detergents which are subject to levy of sales tax on retail price basis. During the month of December, 2013 the following information of the company is compiled: Required : In the light of the provisions of the Sales Tax Act, 1990 and rules made there under, calculate the sales tax liability of Beta (Pvt.) Limited for the month of December, 2013. 07 (b) Define the following terms as per section (2) of the Federal Excise Act, 2005: (i) Establishment 02 (ii) Non-Fund Banking Service 02 (c) The tax on the capital value of the assets is called the ‘ capital value tax ’ . Identify the situations where capital value tax would be payable. 04 PTO Rs. ‘ 000  Sales: Sales of locally manufactured taxable goods (other than detergents) 20,000 Sales of imported finished goods on value addition basis 2,750 Sales of imported detergents to wholesalers [31,250 packets @ Rs.240 each packet]   7,500 Sales of locally manufactured detergents to wholesalers [30,000 packets @ Rs.225 each packet] 6,750 Imports and Local Purchases: Import of raw materials for in-house consumption  – Taxable 10,000 Import of finished goods  –  other than detergents 2,000 Import of finished goods  –  detergents 1,000 Local purchases of raw materials - Taxable 8,750 Additional Information: Retail price of detergents (imported and locally manufactured) is Rs.250 per packet of 1.5 kilograms each Note  : All above amounts are exclusive of sales tax.  BT-Feb 2014    4 of 4 Extract of Tax Rates for Salaried Person Sr. No. Taxable Income (Rupees) Rate of Tax 1 Where the taxable income does not exceed Rs.400,000 0% 2 Where the taxable income exceeds Rs.400,000 but does not exceed Rs.750,000 5% of the amount exceeding Rs.400,000 3 Where the taxable income exceeds Rs.750,000 but does not exceed Rs.1,400,000 Rs. 17,500 + 10% of the amount exceeding Rs.750,000 4 Where the taxable income exceeds Rs.1,400,000 but does not exceed Rs.1,500,000 Rs. 82,500 + 12.5% of the amount exceeding Rs.1,400,000 5 Where the taxable income exceeds Rs.1,500,000 but does not exceed Rs.1,800,000 Rs. 95,000 + 15% of the amount exceeding Rs.1,500,000 THE END
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