CFAP 5 AT Supplement

2018
ADVANCED
TAXATION
Supplement
CFAP - 5
Questions & Answers
Question Answer
page page
2 MR. KHAN 2 11
3 MR. YAQEEN 3 12
5 MR. IQBAL 4 14
6 MR.SAIF 6 17
8 MH ASSOCIATES 7 19
26 RM ASSOCIATES 8 26
38 RAZI LIMITED (RL) 9 38
88 WITHHOLDING AGENTS 10 24
93 RECOVERY OF TAX ARREARS 10 25

SUPPLEMENT
QUESTIONS
Overall important note: While solving all the income tax questions it has been
assumed that rates of taxes applicable on filers shall be used unless otherwise
required / stated in the question.
2 Mr. Khan
Mr. Khan has been working for a listed company Turtle Limited (TL) for the last many years. The
details of his emoluments during the tax year ended June 30, 2019 are as under:
Rupees
Basic salary (per month) 350,000

Conveyance allowance (per month) 50,000
In addition to the above cash emoluments, Mr. Khan was also provided with the following:
(a) A rent free furnished accommodation with a fair market rent of Rs. 100,000 per month.
(b) An 1800cc company maintained car, both for business and private use. The car was
purchased by TL on July 1, 2016 at a fair market value of Rs. 2,000,000.
(c) On July 1, 2018 he was provided with an interest free loan of Rs. 2,500,000 which is
repayable in lump sum in December 2019. The prescribed benchmark rate is 10% per
annum. On December 1, 2018 Mr. Khan utilized 60% of the amount of loan for purchasing
a double storey bungalow. The total cost of the bungalow was Rs. 25,000,000. The
bungalow, on its ground floor, also had a suitable space for opening a departmental store.
In order to increase its operational efficiency, TL announced a redundancy scheme to its
employees. Mr. Khan opting for the scheme resigned from TL with effect from January 1, 2019.
Upon resignation, 25% of his outstanding loan balance was waived by TL and the remaining
loan amount was adjusted from his final settlement. He received the following payments from
TL:
Rupees
Compensation under the redundancy scheme 4,000,000

Gratuity under unapproved scheme 2,000,000
Following further information is also available:

(i) Tax of Rs. 1,837,000 was withheld by TL from the above payments.
(ii) Mr. Khan was allowed to purchase the 1800cc car at an accounting book value of Rs.
1,000,000 which he sold in the open market at a price of Rs. 1,500,000.
(iii) On March 1, 2019, Mr. Khan rented out the ground floor of his bungalow to Mr. Riaz, for
establishing a departmental store, at a monthly rent of Rs. 137,500. Due to the strategic
location of the store, he also received adjustable and non-adjustable deposits of Rs.
600,000 and Rs. 500,000 respectively.
(iv) On April 1, 2019, he rented out the residential portion of the bungalow to a Commercial
Bank for their marketing executive. He received gross amount of Rs. 2,400,000 as two
year’s advance rent. The Bank deducted tax of Rs. 197,500 from such payment.
2 The Institute of Chartered Accountants of Pakistan

SUPPLEMENT
(v) A donation of Rs. 500,000 was made to an un-approved trust for the construction of
mosque.
(vi) In July 2016, Mr. Khan was issued shares in TL. The fair market value of shares at the
time of issue was Rs. 500,000. He disposed of these shares in June 2019 at a gain of Rs.
500,000.
Required:
Compute the taxable income, tax liability and tax payable/ refundable, if any, to Mr. Khan for the
tax year 2019. The average rate of tax of Mr. Khan for the last three years was 14%.
Note: Show all exemptions, exclusions and disallowances where relevant.
3 Mr. Yaqeen
Mr. Yaqeen, a Pakistani citizen, returned to Pakistan on 30 June 2018 after residing for six years
in Norway. On 1 July 2018 he joined a private hospital KKUH and received following emoluments:
Rupees
Medical allowance (per month) 60,000
Leave fare assistance 240,000
On 1 January 2019, Mr. Yaqeen resigned from the hospital and joined Dil (Private) Limited
(DPL), a company engaged in health care and production of dental products. Mr.Yaqeen
received Rs. 3,000,000 from DPL as consideration for joining the company. DPL agreed to pay
following emoluments to Mr. Yaqeen for the tax year 2019:
Rupees
Medical allowance (per month) 80,000
Utilities allowance (per month) 100,000
On 1 January 2019, DPL provided him with refrigerator, cooking range and washing machine
for his use at home. The book value of these appliances was Rs. 200,000 and these were
returnable to the company after four years. 15% depreciation was charged by DPL on these
appliances.
On 31 March 2019, he was given an option to purchase 2,000 shares of DPL at Rs. 50 per
share. The breakup value of the company on that date was Rs. 150 per share.
On 1 April 2019, he received a loan of Rs. 5,000,000 from DPL for the purchase of a house.
The profit on loan was payable at the rate of 8% per annum. The prescribed bench mark rate
is 10% per annum.
Other information relevant to Mr. Yaqeen for the tax year 2019 is as under:
(i) On 15 April 2019, he fell ill and was admitted to KKUH where he had been working during
his employment. The hospital incurred Rs. 50,000 on his treatment but charged nothing
to him.
(ii) On 30 April 2019, he received salary arrears of Rs. 900,000 from his ex-employer in
Norway.

SUPPLEMENT
(iii) Mr. Yaqeen had 30 acres of agricultural land in Dheer which he did not cultivate himself.
During tax year 2019, he received annual rent of Rs. 600,000 from the tenant cultivating
the land.
(iv) On 1 May 2019, he spent Rs. 800,000 on the renovation of his residential house. The
entire amount was obtained as a loan from a scheduled bank on which a profit of Rs.
20,000 was paid to the bank during the tax year 2019.
(v) On 15 June 2019, he received insurance claim of Rs. 600,000 against theft of a painting
which was stolen on 31 May 2019. The painting was purchased by him on 1 January
2018 for Rs. 350,000. He had paid insurance premium of Rs. 24,000 and also paid
lawyer’s fee of Rs. 50,000 who represented him in the settlement proceedings.
(vi) On 15 July 2018, Mr.Yaqeen received 20,000 shares in AB (Private) Limited (ABL), a
company incorporated under the Companies Act, 2017 as a dividend in specie. On 30
June 2019, he sold 15,000 shares in ABL for Rs. 425,000. The fair market value of these
shares, on the date of issue, was estimated at Rs. 25 per share.
Required:
Under the provisions of Income Tax Ordinance, 2001 compute the taxable income and net tax
payable for the tax year 2019. Give brief reasons for the treatment of items in (v) and (vi) above.
Also explain the treatment of any items that are not appearing in your computation.
5 Mr. Iqbal
Mr. Iqbal, aged 45 years, is working as a Chief Engineer in a listed company Tameer Limited
(TL). The company is engaged in the manufacture of chipboards for the local market. He derived
following emoluments during the tax year ended 30 June 2019:
Rupees
Cost of living allowance (per month) 50,000
Milk allowance (per month) 10,000
In addition to the above emoluments, Mr. Iqbal was also provided the following:
(i) Special bonus equal to one month’s basic salary paid on 5 June 2019.
(ii) A new company maintained car for his personal use. The car was purchased on1 March
2019 at a cost of Rs. 1,800,000. However, the cost of the car would have been Rs.
3,000,000 had the company obtained it on finance lease. Mr. Iqbal, in accordance with
the terms of his employment, purchased his previous car from TL for Rs. 250,000. This
car was provided to him solely for business purposes. The fair market value of the car at
the time of sale to Mr. Iqbal was Rs. 600,000.
(iii) A reimbursement of Rs. 36,000 in respect of driver’s salary. Mr. Iqbal paid Rs. 60,000 to
the driver for four months.
(iv) A fully furnished accommodation in DHA, Karachi. The fair market value of the rent was
estimated to be Rs. 85,000 per month.
(v) An option to acquire 4,000 shares in TL’s parent company, Tameer Inc. which is listed on
New York Stock Exchange was granted to him in May 2018. Mr. Iqbal exercised the
option on 5 January 2019 at a price of USD 1.5 per share. The market value of the shares
at the close of business on 5 January 2019 was USD 2.5 per share. He sold 3,000 shares
on 30 June 2019 at a price of USD 3 per share. The dollar rupee parity on both the above
dates was USD 1 = Rs.100.

SUPPLEMENT
(vi) On 15 May 2019 Mr. Iqbal was provided 800 shares in TL as a reward for his excellent
performance. However, he was restricted from selling or transferring these shares before
16 November 2019. The market value of these shares at the close of business on 15 May
2019 was Rs. 12.5 per share.
Mr. Iqbal received additional income from the following sources, for the tax year 2019:
(i) Brokerage fee of Rs. 200,000 in connection with the transfer of two apartments in
Islamabad. The brokerage fee was received in cash. Mr. Iqbal incurred an expense of
Rs. 30,000 against telephone costs and air travel to Islamabad in connection with the
above deal. He also paid Rs. 10,000 as a gift to his brother for showing the apartments
to his clients in Islamabad.
(ii) Profit of Rs. 150,000 on a savings account maintained with an Islamic bank. The bank
deducted withholding tax of Rs. 15,000 and Zakat of Rs. 25,000.
(iii) He also received an income tax refund of Rs. 225,000 related to tax year 2017. The
amount included Rs. 25,000 being compensation for delayed refund.
(iv) Annual rent of Rs. 800,000 from letting out a building to KK Enterprise. Following
expenses were incurred by Mr. Iqbal in relation to the building: repairs Rs. 200,000, fire
insurance premium Rs. 30,000, ground rent Rs. 10,000, watchman’s salary Rs. 8,000
and interest of Rs. 15,000 on a loan obtained for building renovation by creating first
charge on the building in favour of a scheduled bank.
Other related information is as under:
 TL deducted withholding tax of Rs. 1,200,000 from Mr. Iqbal’s salary during tax year
2019.
 On 1 July 2018, Mr. Iqbal acquired a life insurance policy and paid a premium of Rs.
500,000. He also contributed Rs. 1,600,000 to an approved pension fund.
 On 1 August 2018, he purchased 50,000 shares in a listed company AB Limited at a
price of Rs. 20 each. On 1 January 2019, AB Limited announced 20% right shares to
existing shareholders at a price of Rs. 18 per share. On 25 January 2019, Mr. Iqbal
subscribed the right issue in full.
 During tax year 2018 his assessed taxable income was Rs. 3,000,000.
Required:
Under the Income Tax Ordinance, 2001 and Rules made there under, compute the taxable
income and income tax payable by or refundable to Mr. Iqbal for the tax year ended 30 June
2019.
Note: Show all exemptions, exclusions and disallowances where relevant.

SUPPLEMENT
6 Mr.Saif
Mr. Saif is a country manager in Rio (Pvt.) Limited (RPL), a company engaged in the business
of manufacturing and supply of beauty products. During tax year 2019, RPL paid him a monthly
basic salary of Rs. 600,000. He is also entitled to a bonus of Rs. 900,000 to be paid in July 2019.
In addition to above, Mr. Saif was also provided the following:
(i) A company maintained car for both his personal and official use. The car was obtained on
lease in 2018 at total rentals of Rs. 2,000,000 to be paid over the lease term. The fair
market value of the car at the commencement of lease was Rs. 1,500,000. RPL also paid
Rs. 100,000 for its maintenance to a local workshop.
(ii) A fully furnished two storey bungalow in a posh locality. The annual rental value of the
bungalow was Rs. 2,400,000.
On 1 January 2019, Mr.Saif let out the first floor of the bungalow to his brother Mr.Moiz at
a monthly rent of Rs. 75,000 and also insured it against the risk of fire. The premium
payable to the insurance company amounted to Rs. 50,000. Mr.Saif paid 50% of the
premium immediately and agreed to pay the balance on 1 July 2019. He also bought an
LCD TV for Rs. 70,000 for the first floor.
(iii) Reimbursement of Rs. 120,000 against air tickets for family vacation. Total cost of tickets
was Rs. 200,000. Mr.Saif paid Rs. 10,000 as advance tax on purchase of tickets.
(iv) On 1 January 2019, RPL sold certain items of old stock to Mr.Saif for Rs. 5,000. The net
realizable value of the stock in RPL’s books as on 30 June 2018 and 31 December 2018
were Rs. 12,000 and Rs. 14,000 respectively. The original cost of the stock was Rs.
25,000.
(v) Withholding tax deducted by RPL from Saif’s salary amounted to Rs. 2,100,000.
Following further information is also available:
(i) On 1 July 2018, he borrowed Rs. 3,000,000 from a bank at 11% mark-up. The amount is
payable in two equal annual instalments starting from 1 July 2019. Out of the above loan,
Mr. Saif utilized Rs. 2,550,000 for the acquisition of a plot of land in an industrial area and
Rs. 450,000 for the purchase of a car for his son. On 1 September,2018 he let out the plot
of land to Mr. Amir at a monthly rent of Rs. 25,000. He also received an un-adjustable
deposit of Rs. 150,000 and paid Rs. 10,000 for levelling and cutting of grass, Rs. 15,000
against ground rent and Rs. 18,000 for rent collection.
(ii) On 1 May 2019 he sold 1,200 shares in Mio Limited at Rs. 50 per share and incurred
incidental expenses of 0.5% of sale proceeds. Mio Limited is an unlisted company in which
55% of the shares are held by Chinese Government. Mr. Saif had received these shares
on 30 June 2018 as dividend in specie from Rahat (Pvt.) Limited. He holds 12,800 shares
in Rahat (Pvt.) Limited costing Rs. 35 each.
(iii) In August 2018,Mr.Saif started a fitness club for corporate executives. The admission and
monthly membership fees for the potential members were fixed at Rs. 25,000 and Rs.
5,000 respectively. A group of 20 persons joined the club in August 2018 whereas 25
persons joined in January 2019 and 30 in March 2019.
Following items were included in club’s profit and loss account for the tax year 2019:
 Monthly salary of Rs. 60,000 to Mr.Saif and Rs. 45,000 to his son by way of a
direct transfer of funds to their bank accounts. His son is a trainer at the club.
Withholding tax deducted from their salaries amounted to Rs. 13,000 and Rs.
4,750 respectively.

SUPPLEMENT
 Rs. 2,750,000 against import of old fitness machines from China. The withholding
tax paid at import stage was Rs. 150,000.
 Fine of Rs. 15,000 which was paid when the truck delivering the fitness machines
from the port to the club was found to be overloaded.
 A fire occurred in a section of the club and repairs had to be undertaken as follows:
 Cost of replacing electrical wiring damaged by fire Rs. 85,000
 Cost of a new non-removable fire protection screen installed to prevent fire

in future Rs. 200,000.
 Other miscellaneous expenses amounting to Rs. 120,000.
(iv) On 15 June 2019,Mr.Saif donated a plot of land to Pakistan Sports Board. He had
purchased this plot in tax year 2004 at a price of Rs. 300,000. However, at the time of
donation, a broker had given him an offer of Rs. 500,000 for the said plot.
Required:
Under the provisions of Income Tax Ordinance, 2001 and Rules made there under, compute the
taxable income and income tax payable by or refundable to Mr. Saif for the tax year 2019.
Note: Show all relevant exemptions, exclusions and disallowances.
8 MH Associates
For the purpose of this question, assume that the date today is 15 August 2018.
Masood and Ali Hassan established a consultancy firm, MH Associates (MHA), for providing
accounting and taxation services to SMEs in Punjab. They share profits and losses in the ratio of
60:40 respectively. During the year ended 30 June 2019 MHA earned profit before tax of Rs.
6,000,000 which included of an exempt income of Rs. 800,000. MHA’s tax liability for the year
amounted to Rs. 1,079,500. However, MHA paid Rs. 1,100,000 as advance tax against the tax
liability.
Following further information is available about Masood for the year ended 30 June 2019:
(i) On 1 May 2018 Masood received 3,000 shares, by way of a gift from his father, in Lucky
Inc., a company registered on Toronto Stock Exchange. On 1 January 2016 his father had
bought these shares at a price of CAD 20 per share (equivalent to PKR 1,300 per share).
The market value of each share at the time of transfer to Masood was CAD 28 (equivalent
to PKR 2,100 per share).
On 15 June 2019 Masood sold 2,500 shares in Lucky Inc. to an investor for CAD 32 per
share and paid a brokerage commission of CAD 0.2 per share to the stock broker. He also
paid income tax of CAD 1,500 to the tax authorities in Toronto. The exchange rate at the
time of above transaction was CAD 1 = PKR 90.
(ii) On 10 June 2019 Masood received royalty of Rs. 2,300,000 on publication of his book
‘Slum-Dwellers’ on children living in urban slums. It took him nineteen months to complete
the book. The entire cost of publication was borne by the publisher. Masood’s average rates
of tax for the last two tax years were 17% and 19% respectively.
(iii) On 20 June 2019 Masood earned gross rent of Rs. 150,000 from a construction company
for using his fork lifter on their site. The company withheld tax of Rs. 12,000 from the
payment. Masood incurred Rs. 15,000 for repair of the fork lifter.
(iv) On 30 June 2019 Masood paid Rs. 50,000 in cash on account of Zakat to an approved
NGO.

SUPPLEMENT
Required:
Under the provisions of the Income Tax Ordinance, 2001 and Rules made there under, compute
the total income, taxable income and tax payable by or refundable to Masood for tax year 2019.
26 RM Associates
For the purpose of this question, assume that the date today is 15 August 2018.
Rahat and Musa are partners in RM Associates (RMA), a firm engaged in the business of
providing consultancy and book keeping services to clients in Pakistan as well as abroad. Rahat
and Musa share profits and losses in the ratio of 4:5 respectively. Following is an extract from
RMA’s profit and loss account for the year ended 30 June 2018:
Rupees
Net revenue 36,500,000
Less:
Salaries (19,780,000)
Rent (1,250,000)
Depreciation/amortization (accounting) (1,680,000)
Software expense (650,000)
Interest expense (135,000)
Other expenses (1,655,000)
Total expenses (25,150,000)
Income before tax for the year 11,350,000
Additional information:
(i) Net revenue includes the following:
 Retainership fee of Rs. 19,710,000 from corporate clients. Withholding tax at the
rate of 7% of the gross receipt was deducted by such clients and the amount is
included in other expenses.
 An amount of Rs. 6,210,000 received under an agreement from a Doha based
company, Isra Middle East, for providing technical services in Doha. The amount
was brought into Pakistan in foreign exchange in compliance with the regulations of
the State Bank. No tax was deducted from the receipt either in Doha or in Pakistan
by the bank.
 Rs. 10,580,000 on account of on-line accounting services provided to various
clients in Iran and Afghanistan. The amount was received in foreign exchange
through normal banking channel. Withholding tax at the rate of 1% of the gross
receipts was deducted by the collecting bank and the amount is included in other
expenses.
(ii) Salaries include Rs. 290,000 and Rs. 355,000 respectively paid to Rahat and Musa per
month.
(iii) The rent was paid in respect of office premises to Lalazar Limited. RMA did not deduct
withholding tax from the payment.

SUPPLEMENT
(iv) Software expense represents purchase of a software on 1 January 2019.
(v) Interest expense was in relation to a vehicle obtained on finance lease. Lease rentals paid
during the year amounted to Rs. 800,000. The lease term of the vehicle ended on 1 June
2019, on which date RMA acquired the vehicle at a residual value of Rs. 950,000. The
market value of the vehicle at the date of its transfer to RMA was estimated at Rs.
1,150,000.
(vi) The tax written down values of RMA’s assets on 1 July 2018 were as follows:
Assets Rupees
Furniture and fixtures 1,700,000
Computers and laptops 840,000
Accounting software (remaining life of 5 years) 5,000,000
Required:
Under the provisions of the Income Tax Ordinance, 2001 compute the taxable income and net
tax liability of RMA for the tax year 2019.
Note: show all relevant exemptions, exclusions and disallowances. Tax rates are given on the
last page.
38 Razi Limited (RL)

Razi Limited (RL) is engaged in the business of production and supply of large variety of
consumer goods. RL is registered with the Inland Revenue Department for sales tax purposes.
Following data has been extracted from RL’s records for the month of May 2019:
Rs. in ‘000
Purchases:
Raw material:
 From local registered suppliers 8,000
 From local un-registered suppliers 2,000
 Import 900
Import of foam from China 1,200
Supplies:
Local:
 Taxable supplies to registered persons 7,200
 Taxable supplies to un-registered persons 3,500
 Exempt goods 250
 Sale of foam imported from China 1,500
Export to Malta 600
Additional information:
(i) RL imported specific machinery at Rs. 1,000,000 from Taiwan for the purpose of
production of shampoo. The machinery is covered under Eight Schedule of the Sales
Tax Act, 1990.

SUPPLEMENT
(ii) Purchases from local registered suppliers include purchase of waste papers of Rs.
300,000 from Parsa Limited.
(iii) 7,500 boxes of tissue papers were purchased from registered suppliers, not included
above, at a wholesale price of Rs. 60 per box. The retail price of these boxes was Rs.
90 per box. These tissue papers were used by RL as a packing material.
(iv) Taxable supplies to registered persons include the following:
 Shampoo worth Rs. 700,000 supplied to a registered exporter Baramad Limited.
 Tiles of Rs. 650,000 supplied to Raja (Pvt.) Limited. These tiles were purchased
directly from the manufacturer in April 2019.
(v) Taxable supplies to un-registered persons include supply of storage batteries worth Rs.
400,000 to a private school. Purchase invoice confirms that these batteries were
purchased in March 2019 from an importer for Rs. 325,000 against payment of sales
tax at the rate of 17%.
(vi) Shampoo and tissue papers are covered under Third Schedule and waste papers are
covered under Eighth Schedule of the Sales Tax Act, 1990 whereas, tiles and storage
batteries are designated as specified goods under Chapter XIII of the Sales Tax Special
Procedures Rules, 2007. All the other items are not specified in the Third Schedule of
the Sales Tax Act, 1990.
(vii) At the end of May 2019, there was no outstanding liability against items mentioned in
(ii), (iii) and (iv) above.
All the above figures are exclusive of sales tax, wherever applicable. Except for the item
specified under Eight Schedule, sales tax is payable at the rate of 17%.
Required:
In the light of the provisions of the Sales Tax Act, 1990 and Rules made there under, compute
the amount of sales tax payable by or refundable to RL for the tax period May 2019. Also compute
the amount of withholding tax, if any.
88 Withholding agents
a. List the persons specified as “Withholding agents” for the purpose of collection of sales tax
under the Sales Tax Special Procedure (Withholding) Rules, 2007.
b. Under the provisions of the Sales Tax Withholding Rules, 2007 state the persons who may
be regarded as withholding agents.
93 Recovery of tax arrears

Describe the powers of an officer of Inland Revenue with regard to the recovery of arrears of tax
as enumerated under the Sales Tax Act, 1990.

SUPPLEMENT
ANSWERS
2 Mr. Khan
Personal status: Individual

Residential status: Resident
Computation of Taxable income and Tax thereon
Tax Year 2019
Rs. in ‘000
Income from Salary
Basic salary for six months (350,000 × 6) 2,100
Conveyance allowance (50,000 × 6) 300
Value of accommodation 945
(45% of basic salary or fair market rent whichever is higher) (Rule 4)
Company maintained car (2.0 million × 5% × 1/2) 50
Interest free loan [(2.5 million) × 10% x 6/12] 125
Interest on amount of loan utilized for the purchase of asset [Sec.13(8) ] -
Amount of loan waived by TL (2.5 million × 25%) 625
Compensation under redundancy scheme [N-1]
Unapproved gratuity 1,925
(2.0 million – 75K exempt under clause 13 of Part I of Second Schedule) [Note]
Car purchased (1.5 million – 1.0 million) [Sec. 13(11)] 500
Total Salary Income (A) 6,570
Rs. in ‘000
Income from property
Rent from Mr. Riaz for the Shop – March to June (137,500 × 4) 550
Non-adjustable security deposit (500,000 x 1/10) [Sec. 16(1)] 50
Refundable security deposit – not taxable (Rs. 600,000) -
Rent from bank for the residential portion –April to June 2019(100,000 × 3) 300
Income from Property as separate Block of Income (SBI) 900

Capital Gain
Sale of share of a listed company (SBI) 500
(Gain on sale of listed shares, which were held for the period of more than 24
months but less than four years - Rs. 500,000 taxable as SBI)
7,070
Less: Donation paid to an un-approved trust (inadmissible deduction) -
Taxable income 7,070

SUPPLEMENT
Computation of tax liability and tax payable: Rs. in ‘000

(As salary income is more than 50% of the total income so Mr. Khan shall be
treated as salaried person)
Total taxable income 7,070
Less: Capital gain (Separate Block Income) (500)
Salary Income (excluding redundancy payment) (A) 6,570
(a) Tax on Rs. 6,570 [Rs. 290+ 20%x (6,570-4,000)] 804
(b) On redundancy payment at the average rate of tax (4,000 x 14%) 560
(on the assumption that Mr. Khan, by notice in writing to the Commissioner,
would elect to be taxed on the basis of average rate of tax)
(c) On capital gain 500 x 15% (holding between 2-4 years and shares acquired 75
in July 2016) 50
(d) On rent chargeable to tax 900 [Rs. 20 + 10% x (900 - 600)]
Total tax liability 1,489
Less: Tax deducted at source from:
Salary income (1,837)
Property income (197.5)
Balance tax refundable (545.5)
3 Mr. Yaqeen
Personal status: Individual

Residential status: Resident
Computation of income tax liability For the tax year 2019
Income from Salary: Rs. ‘000
From KKUH:
Basic salary (500 x 6) 3,000
Medical allowance (60 x 6) 360
Less: exempt up to 10% of basic salary (300)
60
Leave fare assistance 240
From DPL:
Basic Salary (800 x 6) 4,800
Medical allowance (80 x 6 )[exempt being 10% of basic salary] -
Utilities allowance (100 x 6) 600
Amount received as consideration for joining DPL 3,000
Assets received for use at home (200 x 15% /2) 15
Perquisite in the form of concessional loan (10%-8% x 5,000 x (3/12)) 25
Total income under the head salary 11,740

SUPPLEMENT
Capital Gain: Rs. ‘000

Gain on disposal of painting (W-1) 176
Less: 1/4th of gain is exempt due to sale after one year (44)
Net gain on disposal of painting 132
Sale of shares in ABL under NTR (W-2) 50
182
Taxable income for the year 11,922
Computation of net tax liability:

Tax on taxable income as salaried individual [@ 25% on 3,922 +1,090] 2,070.5
15% on dividend in specie (20,000 x 25 x 15%) U/s 236S 75
2,145.5
W-1 Gain on disposal of painting:
Loss of a capital asset is treated as a disposal of an asset and the date on which it is lost is
considered as its date of disposal. The insurance claim received by Mr. Yaqeen, is assumed to
be equal to the fair market value on the date of disposal and is taken as the consideration
received.
The gain is calculated as follows: Rs. ‘000
Consideration received 600
Less: Cost of acquisition:
Purchase price (350)
Insurance premium (24)
Lawyers’ fees (50)
(424)
176
W-2 Gain on sale of shares in ABL:
Any dividend in specie derived in the form of shares in a company is taxable as dividend income
due to omission of clause (103B) Part I of 2nd Schedule from Tax year 2014 & onwards.
Calculation of dividend income and tax thereon in Tax year 2018 Rs. ‘000’
Dividend income (20,000 x 25) 500
Tax @ 15% U/s 236S 75
Computation of capital gain in Tax year 2019:
Consideration received 425
Less: Cost of the dividend in specie [500 / 20x15] (375)
Capital gain 50
Explanation about items not included in the computation of taxable income:
(i) An option to purchase shares under an employee scheme granted to an employee is not
chargeable to tax unless such a right or option is exercised. [Section 14]
(ii) The perquisites received by an employee in the form of free or subsidised medical
treatment provided by a hospital or clinic is exempt from tax. For the purpose of
calculating the perquisites, an ex-employee is included in the definition of employee.
[Clause 53A of Part I of 2nd Schedule]

SUPPLEMENT
(iii) Any foreign source income, in a tax year, of a citizen of Pakistan who was not a resident
in any of the four tax years preceding the tax year in which he became a resident shall
be exempt from tax in the tax year in which he became resident and in the following tax
year. Therefore, salary arrears received by Mr. Yaqeen from his ex-employer in Norway
is exempt from tax in the tax year 2019. [Section 51]
(iv) Rental income from agricultural land received by an owner of such land is treated as
agricultural income and is exempt from tax. Therefore, the amount of Rs. 600,000
received by Mr. Yaqeen is an exempt income. [Section 41]
(v) Subject to certain conditions and limitations, a loan utilized for the construction of a new
house or the acquisition of a house is entitled to be deducted from total income
(deductible allowance). However, the loan obtained by Mr. Yaqeen was for the purpose
of renovation of his existing residential house, therefore, it is not eligible for deductible
allowance. [Section 60C]
5 Mr. Iqbal
Personal Status: Individual

Residential Status: Resident
Com
putation of income tax liability
For the tax year 2019
Income from Salary: Rupees
Basic Salary (300,000 × 12) 3,600,000

Cost of living allowance (50,000 × 12) 600,000
Milk allowance (10,000 × 12) 120,000
Special bonus 300,000
Perquisite representing car W-1 60,164
Benefit on purchase of car ( 600,000 – 250,000) 350,000
Reimbursement of driver’s salary to Mr. Iqbal [Section 13(5)] 36,000
Perquisite representing accommodation W-2 1,620,000
Share option scheme - acquisition ($2.5-$1.5 × Rs. 100 × 4,000) (Section
14(2)) 400,000
Shares issued as a reward – [Section 14(3)] Note-2 -
Total income under the head salary 7,086,164 A
Income from property: [SBI] No deduction allowed for Individual

Rent received 800,000
Capital Gain: Rupees

Sale of 3,000 shares in Tameer Inc. (3,000 × $3 × Rs. 100) 900,000
Less: Cost of acquisition of shares ( $1.0 + $1.5 × Rs. 100 × 3,000) (750,000)
Net gain on disposal of shares (covered u/s 37 & not u/s 37A as the
company is not a public company) 150,000 B

SUPPLEMENT
Income from business: Rupees

Brokerage fee received 200,000
Less: Expenses:
Telephone and travelling (30,000)
Service fees to brother (voluntary payment-gift) (10,000)
160,000 C
Income from other sources:

Compensation against delayed tax refund 25,000
25,000 D
Total income (A+ B + C+ D ) 7,421,164

Less: Zakat paid (25,000)
Taxable income 7,396,164
Tax on Rs. 4,800,000 290,000

Tax @ 20% on the amount exceeding Rs. 4,000,000 (7,396,164– 4,000,000) 679,233
Total gross tax payable under NTR 969,233
Less: Tax credit
 Investment in life insurance [500,000 × 969,233 ÷ 7,396,164] (Note-3

u/s 62) (65,523)
 Contribution to an approved pension fund [900,000 × 969,233 ÷

7,396,164] lower of u/s 63: Rs. 1,600,000 actual or Rs.1,479,200
(20% of taxable income) or Rs. 1,500,000, 30% of preceding year total
taxable income Rs. 900,000 (Rs. 3,000,000 x 30%) [N-4] (117,941)
(183,464)
Net tax payable under NTR 785,769
Add: tax payable under FTR (Bank profit 150,000 x 10%) 15,000
Tax payable under FTR of Rs. 800,000 - Income from property
20,000 + 10% (Rs.800,000 - 600,000)
40,000
Total tax payable 840,769
Less: Taxes withheld at source
 from salary (1,200,000)
 by bank (15,000)
Net tax refundable (374,231)

SUPPLEMENT
Note:
(1) As the earlier car was provided to Mr. Iqbal for business use, no personal benefit was
derived by him; hence, no amount is taxable as a perquisite.
(2) Where the issuance of shares is subject to a restriction on the sale or transfer of the
allotted shares, no amount is chargeable to tax to the employee until the earlier of:
 The time the restriction is removed; or
 The time the employee actually disposes of the shares.
Since neither of these events occurred before 30 June 2019 no amount is taxable as
salary of Mr. Iqbal for the tax year 2019.
(3) According to Section 62(1) of the Income Tax Ordinance, 2001 a resident person who
has invested in new shares or sukuks offered to the public by a listed company and has
also paid life insurance premium on a policy to the life insurance company shall be
entitled for a tax credit, only on any one type of investment. Since the amount paid by
Mr. Iqbal in respect of life insurance premium is more than the amount invested by him
in right shares, he would be entitled for a tax credit on insurance premium paid in life
insurance policy on the lower:
a) Rs. 500,000
b) 20% of Rs. 7,396,000 or
c) Rs. 2,000,000
(4) It is assumed that he joined the above pension fund before the age of 40.
W-1 Perquisite representing car:
The perquisite shall be computed as below:
FMV of the car 1,800,000
10% of the FMV (1,800,000 × 10%) 180,000
Restricted to the number of days it was used in the tax year (122÷365)
[No. of months can also be used] 60,164
W-2 Perquisite representing accommodation:
Annual basic salary 3,600,000
Value of perquisite 45% of the basic salary (3,600,000 × 45%)

FMR is assumed to be the amount that would have been paid in NO
accommodation case. 1,620,000
Annual FMR (85,000 x 12) 1,020,000
Since 45% of the basic salary is higher than FMR, hence the same shall be added in the salary
income of the employee.

SUPPLEMENT
6 Mr. Saif
Personal Status: Individual
Residential Status: Resident
Computation of income tax liability
For the tax year 2019
Income from Salary: Rupees
Basic Salary (600,000×12) 7,200,000
Guaranteed bonus (relates to tax year 2020) -
Air ticket reimbursed 120,000
Perquisite representing carW-1 75,000
(Rs. 100,000 spent by RPL on maintenance is exempt in the hands of Mr. Saif)
Perquisite representing accommodationW-2 3,240,000
Old stock purchased from RPL (Rs. 14,000 – Rs. 5,000) 9,000
Total income under the head salary 10,644,000
Income from property:
Rent of plot of land (25,000 × 10) 250,000
Amount not adjustable against the rent -
(Nothing is to be included in the chargeable income as this provision of law is attracted where
the owner of building and not land receives such amount and No deductions are allowed to
individual as well.)
Capital Gain:
Consideration received on sale of 1,200 shares in Mio Ltd.(1,200 × Rs. 50) 60,000
Less: Cost of acquisition 1,200 x 35 (42,000)
Incidental expenses (0.5% × 60,000) (300)
Net gain on disposal of securities 17,700
Since more than 50% of the shares in Mio Limited are held by China Government, the
company is treated as a public company for capital gain purposes and treated as separate
block of income.
Income from business:
Admission fee received (75 × 25,000) 1,875,000
Membership fee received {(20 × 11 + 25 × 6 + 30 × 4) x Rs. 5,000} 2,450,000
Less: Admissible expenses:
Salaries paid:  Mr. Saif(inadmissible being the owner of the club) -
 Son (45,000 × 11) (495,000)
Fines (inadmissible) -
Cost of repair of electrical wiring (85,000)
Depreciation:  Fitness W-3 machines (996,875)
 Fire W-3 screen (72,500)
Other misc. expenses (120,000)
2,555,625

SUPPLEMENT
Income from other sources:
Rent received from letting out the first floor of the bungalow (75,000 × 6) 450,000
Less: Premium paid ( Rs. 50,000 – Rs. 25,000) (25,000)
LCD T.V (70,000 x 25%) (17,500)
LCD T.V (52,500 x 15%) (7,875)
399,625
Total income 13,616,950
Less: Separate block income - capital gain (17,700)
Less: Donation of plot to Pakistan Sports Board (lower of Actual or 30% of

taxable income) 2nd Schedule Clause 61 (500,000)
Taxable income 13,099,250
Tax on Rs. 8,000,000 1,090,000
Tax @ 25% on the amount exceeding Rs. 8,000,000 (i.e. on 5,099,250) 1,274,813
Tax payable under NTR 2,364,813
Add: Tax payable on capital gain under SBI (15% ×17,700) 2,655
Tax payable on income from property under separate block of income
5% × (Rs. 250,000 – 200,000) 2,500
Total gross tax payable 2,369,968
Less: Taxes withheld at source
 from salary (2,100,000 + 13,000 deducted on his salary by his own

business) (2,113,000)
 on air tickets (10,000)
 on import stage (150,000)
Net tax payable 96,968

Notes
Items not included in computation:
(a) Bonus in July 2019: Salary is taxable on receipt basis hence it will be taxed in Tax year
2020.
(b) Maintenance of car: It is not separate perquisite and included in notional figure calculated
in W-1 below.
(c) Insurance premium: 50% premium paid in July 2019 will not be allowed as income from
other source as it is taxable on receipt basis.
(d) LCD TV: Only depreciation @ 15% is allowed. Whereas, initial allowance is disallowed in
computing income under the head income from other sources except in case of lease of
building together with plant and machinery.

SUPPLEMENT
N-1
Donation to Pakistan Sports Board: In case of donation to institution mentioned in 2 nd schedule
u/c 61, straight deduction is allowed subject to lower of actual amount or 30% taxable income.
N-2
Income / loss under the head “income from property” cannot be adjusted against income under
other heads as the same is now fully covered under separate block of income.
W-1 Perquisite representing car:

FMV of the car at the commencement of lease term 1,500,000
5% of the FMV (1,500,000 × 5%) 75,000
W-2 Perquisite representing accommodation:
Annual basic salary 7,200,000
Value of perquisite 45% of the basic salary (7,200,000 × 45%) 3,240,000
The annual rental value of the bangalow at Rs. 2,400,000 is less than 45% of basic pay, hence
the same shall be considered for the purpose of computing the value of perquisite representing
accommodation. It is assumed that FMR is the amount that would have been paid in case NO
accommodation is provided by employer.
W-3 Depreciation:
Fire Fitness
Screen machine
Cost of fitness machine 200,000 2,750,000
Less: Initial depreciation @ 25% (50,000) (687,500)
150,000 2,062,500
Normal depreciation @ 15% 22,500 (309,375)
WDV at 30-06- 2019 127,500 1,753,125
Total depreciation (Initial + Normal) 72,500 996,875
8 MH Associates
Masood
Computation of Income Tax Liability
For tax Year 2019
Income from Business: Rupees
Share of profit from AOP for rate purpose only (Net profit before tax – exempt 2,472,300
income – tax liability for the year ) x 60%
Hence (6,000,000 – 800,000 – 1,079,500) × 60%)
Capital gains:
Foreign source income:
Gain on sale of shares of Lucky Inc.(W-1) 1,428,750

SUPPLEMENT
Other source income: Rupees
Royalty from book Note 2,300,000
Rent of fork lifter – FTR 150,000
Less: Repair expenses -
2,450,000
Total income (including share of profit from AOP) 6,351,050
Less: Rental income – FTR (150,000)
Income taxable at normal rates (including share from AOP) 6,201,050
Less: Zakat paid to approved NGO (not paid under Zakat and Ushr Ord.) -
Less: Share of profit from AOP (2,472,300)
Taxable income – NTR 3,728,750
Computation of rate of tax:
For non salaried individual on Rs. 6,201,050 [Rs. 600,000 + 29% (Rs. 6,201,050 948,305
– 5,000,000)]
Average rate of tax (948,305 / 6,201,050) x 100 = 15.29%
Tax liability
On industrial plant rental income – Rs.150,000 × 10% 15,000
On balance income – Rs.3,728,750 x 15.29% 570,126
Total tax liability 585,126
Tax credit shall be allowed for the lower of foreign tax liability in respect of sale
of shares or Pakistan tax in respect of foreign source income, calculated by
applying the “average rate of Pakistan income tax” to the net foreign source
income for the year.
Foreign tax credit (1,500 × 90) 135,000
Pakistan tax on foreign source income (1,428,750 × 15.29%) 218,756
The lower of the above two shall be allowed as tax credit (135,000)
Less: Tax credit on payment of Zakat (donation)–not allowed paid in cash 0
Less: Tax paid at source u/s 236Q (12,000)
Excess tax paid by MHA (1,100,000 – 1,079,500)- inadmissible -
Net tax payable for the year 438,126

SUPPLEMENT
Note:
Since the time taken by Masood to complete the book was less than 24 months, the entire
amount of royalty will be taxable in the current year.
W-1: Computation of Capital gain on disposal of shares:
Consideration for shares (2,500 × 32 × 90) 7,200,000
Less: Cost of the shares (2,500 × 2100) (5,250,000)
Commission paid to broker (0.2 × 2,500 × 90) (45,000)
Gain on disposal of shares 1,905,000
Exempt amount – 25% of the gain u/s 37 (476,250)
Taxable gain 1,428,750
26 RM Associates
RM Associates (RMA)
Computation of taxable income and net tax liability
Tax year 2019
Rupees
Fee for
Retainership
technical *Other fees Total
fee
services
Scheme of taxation: NTR/min. tax Exempt Exempt
Net revenue 19,710,000 6,210,000 10,580,000 36,500,000
Sales ratio 54% 17% 29% 100%
Less: common expenses (W-1) (8,608,263) (2,710,010) (4,622,960) (15,941,233)
Total income 11,101,737 3,499,990 5,957,040 20,558,767
Taxable income 11,101,737 - - 11,101,737
Tax on first Rs. 6,000,000 880,000

Tax on balance [(Rs. 11,101,737 – 6,000,000) × 30%] 1,530,521
2,401,521
Less: Paid u/s 154 (105,800)
Paid u/s 153 (Rs. 19,710,000 x 10%) (1,971,000)
Total tax payable for tax year 342,721

SUPPLEMENT
Test of minimum tax on retainership income:

Retainership income 19,710,000
Total tax on retainership income 2,401,521

Withholding tax deducted from gross retainer ship fee 1,971,000
Since the normal tax under NTR is higher than the withholding tax deducted from gross receipt,
normal tax would be payable. However, the withholding tax can be claimed as tax credit.
W-1: Determination of common expenses Rupees

Total expenses 25,150,000
Less: Inadmissible expenses:
Salaries paid to partners [(290,000 × 12) + (355,000 × 12)] (7,740,000)
Rent of premises -
Accounting depreciation / amortization (1,680,000)
Software expense – to be capitalized (650,000)
Interest on finance lease (135,000)
Withholding tax on retainership fee - included in other charges (1,379,700)
Withholding tax on on-line services - included in other charges (105,800)
Add: Admissible expenses:
Tax depreciation on assets:
Leased vehicle (950,000 × 15%) * 142,500
Furniture and fixture (1,700,000 × 15%) 255,000
Computers and laptops (840,000 × 30%) 252,000
Tax amortization–software(5,000,000÷5+650,000÷10x181/365) 1,032,233
Lease rentals 800,000
Common expenses 15,941,233
*Explanation:
An amount of Rs. 10,580,000 received from clients in Iran and Afghanistan on account of provision
of on-line services falls within the ambit of export of ‘IT enabled services’ under clause 133 of Part
I of the Second Schedule to the Ordinance. It is therefore, exempt from tax. Consequently,
withholding tax at the rate of 1% deducted from export proceeds is refundable.
*Depreciation has been claimed on the basis that the amount of security deposited at the inception
of lease against residual value of leased vehicle has not been claimed as lease rentals.

SUPPLEMENT
38 Razi Limited (RL)
RAZI LIMITED (SL)
Computation of Net Sales Tax Liability
For the tax period May 2019
Rs. in ‘000
Gross Taxable
SALES TAX CREDIT (INPUT TAX) Sales Tax
Value Value
Domestic Purchases:
- From registered supplier (8,000,000 – 300,000) 7,700 7,700 1,309
- From un-registered supplier 2,000 - -
Import 900 900 153
Tissue paper used as packing material 675 675 114.75
Waste paper at reduced rate (300,000 x 5%) 300 300 15
(-) Inadmissible / un-adjustable input (W1) (358.316)
1,233.434
SALESTAX DEBIT (OUTPUT TAX)
Domestic Supplies - registered person (7,200–700–650) 5,850 5,850 994.50
Domestic Supplies to un-registered person (3,500 – 400) 3,100 3,100 527
Exempt supplies (650+250+400*)
* Rule 58T (1) and (5) of Sales Tax Special Procedure, 2007 1,300 - -
Exports(700 + 600)
Registered under DTRR serial # 7 of 5th Schedule. 1,300 0 0
1,521.50
Output tax for the month 1,521.50
Admissible credit (90% of 1,521.50 or input tax for the
month excluding fixed assets whichever is lower) 1,233.43
Output tax on local supply of imported foam (1,500 x 17%) 255
Less: Input tax on import of foam from China (1,200 x
20%) 240 15.00
Less: Input tax on fixed assets (W2) (87.32)
Add: Further sales tax on supplies to unregistered persons
@ 3% 3,100 3,100 93.00
Add: RP as WH agent on purchases from un-registered
persons (liable to be registered but not registered) (Rs.
2,000,000 x 1%) 20.00
Sales tax payable with return 328.75
Refund claim (input consumed in export) (W1) 179.158
Refund claim on machinery (input consumed in export)
(W1) (C) 12.683

SUPPLEMENT
Gross Taxable
W-1: Apportionment of input tax Sales Tax
Value Value
Residual input tax ----- Rs. in ‘000 -----
Domestic Purchases – registered suppliers 7,700 7,700 1,309.00
Import(90% rule applicable wide SRO 647(I)/2007 dated 27
June 2007) 900 900 153.00
Tissue paper used as packing material 675 675 114.75
Waste paper purchased at reduce rate of 5% 300 300 15.00
Residual input tax TOTAL 1,591.75
Residual input tax against Machinery 1,000 1,000 100

Apportionment of residual input tax: Rs. in ‘000
Local supplies 8,950
Exempt supplies 1,300
Export 1,300
11,550
Refundable input tax on Zero rated sales (1,300 / 11,550 x 1,591.75) (A) 179.158
Inadmissible input tax on exempt sales (1,300 / 11,550 x 1,591.75) (B) 179.158
Total inadmissible / adjustable input tax (A) + (B) 358.316
(W-2): Apportionment of input tax on machinery

Adjustable against taxable supplies (8,950 / 10,250 x 100) 87.317
Refundable against export (1,300 / 10,250 x 100) (C) 12.683
Note: Withholding tax is not applicable on 3rd Schedule, Exempt and good covered under special
procedure rules, 2007.
88 Withholding agents
a) Withholding agents: [U/R 1 of Sales Tax Special Procedure (Withholding) Rules,

2007]
Following persons are specified as withholding agents for the purpose of deduction and
deposit of sales tax:
(i) Federal and provincial government departments;
(ii) Autonomous bodies;
(iii) Public sector organizations;
(iv) Companies as defined in the Income Tax Ordinance, 2001, which is registered for
Sales Tax, Federal Excise Duty or income tax;
(v) Recipients of services of advertisement, who are registered for sales tax.
(vi) Persons registered as exporters.
Withholding agent includes the accounting office which is responsible for making payment
against the purchases made by a government department.

SUPPLEMENT
b) Withholding agents: [Rule 1(2) of STSPR, 2007]
Following are the withholding agents under the Sales Tax Special Procedure
(Withholding) Rules, 2007:
 federal and provincial government departments;
 autonomous bodies;
 public sector organizations;
 companies as defined in the Income Tax Ordinance, 2001, which are registered for
sales tax, federal excise duty or income tax;
 recipients of service of advertisement, who are registered for sales tax;
 persons registered as exporters.
 Withholding agent includes the accounting office which is responsible for making
payment against the purchases made by a government department.
93 Recovery of tax Arrears
Recovery of arrears of tax: [U/S 48]

For the purpose of recovery of tax, penalty or any other demand raised under the Sales Tax Act,
1990 the officer of Inland Revenue shall have the same powers which under the Code of Civil
Procedure 1908, a Civil Court has for the purpose of recovery of an amount due under a decree.
Where any amount of tax is due from any person, the officer of Inland Revenue may:-
(i) Deduct the amount from any money owing to person from whom such amount is
recoverable and which may be at the disposal or in the control of such officer or any officer
of Income Tax, Customs or Federal Excise Department;
(ii) Require by a notice in writing any person who holds or may subsequently hold any money
for or on account of the person from whom tax may be recoverable to pay to such officer
the amount specified in the notice;
(iii) Stop removal of any goods from the business premises of such person till such time the
amount of tax is paid or recovered in full;
(iv) Require by a notice in writing any person to stop clearance of imported goods or
manufactured goods or attach bank accounts;
(v) Seal the business premises till such time the amount of tax is paid or recovered in full;
(vi) Attach and sell or sell without attachment any movable or immovable property of the
registered person from whom tax is due; and
(vii) Recover such amount by attachment and sale of any moveable or immovable property of
the guarantor, person, company, bank or financial institution where a guarantor or any
other person, company, bank or financial institution fails to make payment under such
guarantee, bond or instrument.
Provided that the Commissioner Inland Revenue or any officer of Inland Revenue shall not
issue notice under this section or the rules made there under for recovery of any tax due
from a taxpayer if the said taxpayer has filed an appeal under section 45B in respect of
the order under which the tax sought to be recovered has become payable and the appeal
has not been decided by the Commissioner (Appeals), subject to the condition that 10%
of the amount of tax due has been paid by the taxpayer.

Head Office-Karachi:
Phone: (92-21) 99251636-39, UAN: 111-000-422, Fax: (92-21) 99251626, e-mail: info@icap.org.pk
Hyderabad Office: 3rd floor, Salman Icon Tower, Main Auto Bhan Road, Near RT Restaurant,
Phone: (022) 3821227, e-mail: hyderabad@icap.org.pk

Sukkur Office: Admin Block Sukkur IBA, Airport Road, Sukkur
Phone: (92-71) 5806109, e-mail: sukkur@icap.org.pk
Phone: (92-81) 2865533, e-mail:

Regional Office-Lahore: 155-156, West Wood Colony, Thokar Niaz Baig, Raiwind Road, Lahore
Phone: (92-42) 37515910-12, UAN: 111-000-422, e-mail: lahore@icap.org.pk
Islamabad Office: Sector G-10/4, Mauve Area, Islamabad
UAN: 111-000-422, Fax: (92-51) 9106095, e-mail: islamabad@icap.org.pk
Faisalabad Office: P- 3/33 East Canal road, Muhammadi Colony, Near Govt. College of Commerce Abdullahpur,
Opposite Nusrat Fateh Ali Khan under pass, Faisalabad
Phone: (92-41) 8531028, Fax: (92-41) 8712626, e-mail: faisalabad@icap.org.pk
Multan Office: 3rd Floor, Parklane Tower, Officers’ Colony, Near Eid Gaah Chowk, Khanewal Road, Multan.
Phone: (92-61) 6510511-6510611, Fax: (92-61) 6510411, e-mail: multan@icap.org.pk
Peshawar Office: House No. 30, Old Jamrud Road, University Town, Peshawar
Phone: (92-91) 5851648, Fax: (92-91) 5851649, e-mail: peshawar@icap.org.pk
Gujranwala Office: 2nd Floor, Gujranwala Business Center, Opp. Chamber of Commerce, Main G.T. Road, Gujranwala.
Phone: (92-55) 3252710, e-mail: gujranwala@icap.org.pk
Mirpur AJK Office: Basic Health Unit (BHU) Building Sector D, New City Mirpur, Azad Jammu and Kashmir
Phone: 05828-205296, e-mail: mirpur@icap.org.pk
Phone: 0992-405515, e-mail:
2018
ADVANCED
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2018

38 RAZI LIMITED (RL) 9 38

93 RECOVERY OF TAX ARREARS 10 25

Basic salary (per month) 350,000

Compensation under the redundancy scheme 4,000,000

Following further information is also available:

2 The Institute of Chartered Accountants of Pakistan

3 The Institute of Chartered Accountants of Pakistan

4 The Institute of Chartered Accountants of Pakistan

5 The Institute of Chartered Accountants of Pakistan

6 The Institute of Chartered Accountants of Pakistan

 Cost of a new non-removable fire protection screen installed to prevent fire

7 The Institute of Chartered Accountants of Pakistan

Net revenue 36,500,000

Depreciation/amortization (accounting) (1,680,000)

Software expense (650,000)

Interest expense (135,000)

Other expenses (1,655,000)

Total expenses (25,150,000)

Income before tax for the year 11,350,000

8 The Institute of Chartered Accountants of Pakistan

38 Razi Limited (RL)

9 The Institute of Chartered Accountants of Pakistan

93 Recovery of tax arrears

10 The Institute of Chartered Accountants of Pakistan

Personal status: Individual

Income from Property as separate Block of Income (SBI) 900

11 The Institute of Chartered Accountants of Pakistan

Computation of tax liability and tax payable: Rs. in ‘000

(a) Tax on Rs. 6,570 [Rs. 290+ 20%x (6,570-4,000)] 804

Personal status: Individual

12 The Institute of Chartered Accountants of Pakistan

Capital Gain: Rs. ‘000

Computation of net tax liability:

13 The Institute of Chartered Accountants of Pakistan

Personal Status: Individual

Basic Salary (300,000 × 12) 3,600,000

Total income under the head salary 7,086,164 A

Income from property: [SBI] No deduction allowed for Individual

Capital Gain: Rupees

14 The Institute of Chartered Accountants of Pakistan

Income from business: Rupees

Income from other sources:

Total income (A+ B + C+ D ) 7,421,164

Taxable income 7,396,164

Computation of net tax liability:

Tax on Rs. 4,800,000 290,000

Less: Tax credit

 Investment in life insurance [500,000 × 969,233 ÷ 7,396,164] (Note-3

 Contribution to an approved pension fund [900,000 × 969,233 ÷

 from salary (1,200,000)

15 The Institute of Chartered Accountants of Pakistan

 The time the restriction is removed; or

 The time the employee actually disposes of the shares.

W-1 Perquisite representing car:

The perquisite shall be computed as below:

FMV of the car 1,800,000

10% of the FMV (1,800,000 × 10%) 180,000

W-2 Perquisite representing accommodation:

The perquisite shall be computed as below:

Annual basic salary 3,600,000

Value of perquisite 45% of the basic salary (3,600,000 × 45%)

Annual FMR (85,000 x 12) 1,020,000