Taxation Mid Term Paper Fall 2020

KINNAIRD COLLEGE FOR WOMEN
Mid Term Examinations – Fall 2020

DEPARTMENT: ACCOUNTING AND FINANCE DEPARTMENT
Course Title: Taxation Total Marks: 20

Time Allowed: 1 Hour & 15
Course Instructor: Naila Sadiq
Minutes
Semester: 5th Semester
Part II – Subjective Type

Student Name: ________________________ Student No: __________________
Time: ___________________ Marks: ______________________
Instructions for Part II: All Questions are compulsory
Question No 2: Mr. Mobeen is a chartered accountant and working as finance manager of

XYZ (PVT) Limited. During the financial year 2017, his emolument package includes
followings:
i. Pay Rs. 50,000 p.m.
ii. Bonus Rs. 100,000.
iii. Leave encashment Rs. 50,000.
iv. Mr. Mobeen is provided with a car of 1,300cc. The said car was purchased in
the last year for a consideration of Rs. 500,000. Running and maintenance
cost of the said vehicle is borne by employer. The said vehicle is being used
partly for the private and partly for business use.
v. Mr. Mobeen is provided with a furnished accommodation of 1000 square
yards in Lahore and company bears rent of Rs. 20,000 p.m. of the said
accommodation.
vi. The salary paid in respect of the cook and guard appointed on the residence of
Mr. Mobeen aggregates to Rs. 10,000 p.m.
vii. According to the terms of employment, the company bears all the medical
expenses of Mr. Mobeen. Total expenses incurred on this account aggregates
to Rs. 75,000.
viii. The company also provided air tickets & other expenses worth Rs. 85,000 for
Mr. Mobeen and his family trip to UAE for summer leaves.
ix. During the year, Mr. Mobeen was deputed to Islamabad for the month of
December, 2016 in order to resolve certain administrative issues. He was paid
a relocation allowance of Rs. 35,000 in addition to his normal salary.
x. The company granted Mr. Mobeen an interest free loan for a sum of Rs.
800,000 on 1 January, 2017.
xi. In July 2013, Mr. Mobeen was granted an option to acquire 1000 shares of
Alpa (Pvt.) Limited (Parent Company of his employer). The option was
exercisable on completion of three years’ employment with the Company. He
paid an amount equivalent of Rs. 100,000 to acquire the option whereas the
fair market value of such option at that time was Rs. 150,000. On July 4, 2016
he paid a sum equivalent of Rs. 200,000 to acquire the said shares which were
issued to him on July 21, 2016 when the market value of the shares was
equivalent of Rs. 350 per share. Mr. Mobeen disposed off the shares on June
21, 2017. The sales proceeds received amounted to Rs. 375,000.
xii. Mr. Mobeen tendered his resignation to the company on June 29, 2017 and he
was paid a sum of Rs. 120,000 on account of gratuity from the unapproved
gratuity fund on the said date.
xiii. Mr. Mobeen accepted the offer of M/S ABC (Pvt.) Limited to join that
organisation and he received a sum of Rs. 75,000 as inducement allowance on
account of leaving the past employer.
Required: Compute the taxable income and tax liability of Mr. Mobeen for the tax year
2017. (10 Marks)
Note: tax rates are given at last page of question paper:
Question No 3: Under the provisions of the Income Tax Ordinance, 2001: (5 Marks)
(a) state the requirements regarding change in tax year from normal to
special.
(b) Despite having income tax laws under income tax ordinance 2001,
most people can hide their income to avoid taxes. Where the
problems lie? Explain
Question No 4: Briefly explain the income tax implications in respect of each of the
following independent situations: (5 Marks)
i. 15 February 2017 Ahmad discarded a machine which he had imported from China for
Rs. 1,000,000 on 1 January 2017 to start the business. However, the machine was
badly damaged during the shipment, rendering it unfit for use. The shipping company
paid him Rs. 850,000 as damages. The scrap value of the machine on the date it was
discarded was estimated to be Rs. 200,000. The documentation charges incurred in
connection with the claim for damages were Rs. 25,000.
ii. On March 01, 2017 Mr. Sohail sold 10,000 shares in Pakistan Telecommunication
Limited, a company listed on Karachi Stock Exchange for Rs. 300,000. He had
purchased these shares on July 01, 2016 for Rs. 200,000. Brokerage and other
expenses on sale transaction were Rs. 1,500 including Rs. 300 being tax withheld at
source.
iii. On June 16, 2017 Amjad sold his personal car for Rs. 1,500,000. The car has been
originally purchased for Rs. 1,200,000 on September 13, 2014.
1.
Sr.No. Taxable Income (Rs.) From To Rate of Tax
1 Up to Rs. 400,000 0%
2 Exceeds Rs. 400,000 but does not exceed Rs. 2% of the amount exceeding Rs.
500,000 400,000
3 Exceeds Rs. 500,000 but does not exceed Rs. Rs. 2,000 + 5% of the amount
750,000. exceeding Rs. 500,000
4 Exceeds Rs. 750,000 but does Rs. 14,500 + 10% of the amount
not exceed Rs. 1,400,000 exceeding Rs. 750,000
5 Exceeds Rs.1,400,000 but Rs. 79,500 +12.50% of the amount

does not exceed Rs. 1,500,000 exceeding Rs. 1,400,000
6 Exceeds Rs. 1,500,000 but Rs. 92,000 + 15% of the amount

7 Exceeds Rs. 1,800,000 but Rs. 137,000 + 17.5% of the amount





12 Exceeds Rs. 7,000,000 Rs. 1,422,000 + 30% of the amount

exceeding Rs. 7,000,000

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KINNAIRD COLLEGE FOR WOMEN

Mid Term Examinations – Fall 2020

Course Title: Taxation Total Marks: 20

Part II – Subjective Type

Time: _ Marks: ____

Instructions for Part II: All Questions are compulsory

Question No 2: Mr. Mobeen is a chartered accountant and working as finance manager of

5 Exceeds Rs.1,400,000 but Rs. 79,500 +12.50% of the amount

6 Exceeds Rs. 1,500,000 but Rs. 92,000 + 15% of the amount

7 Exceeds Rs. 1,800,000 but Rs. 137,000 + 17.5% of the amount

8 Exceeds Rs. 2,500,000 but Rs. 259,500 + 20% of the amount

9 Exceeds Rs. 3,000,000 but Rs. 359,500 + 22.5% of the amount

10 Exceeds Rs. 3,500,000 but Rs. 472,000 + 25% of the amount

11 Exceeds Rs. 4,000,000 but Rs. 597,000 + 27.5% of the amount

12 Exceeds Rs. 7,000,000 Rs. 1,422,000 + 30% of the amount

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