Pakistan Institute of Public Summer Exam-2024

Finance Accountants [07.May.2024] [09:00 – 12:15 pm]

Additional time – 15 min for Paper Reading

Taxation
Corporate Sector
Marks-100 Subjective Duration: 03 hours
[Instructions]
 Ensure that the question paper delivered to you is the same, in which you intend to appear.
 Read the instructions given on the title page of Answer Script.
 Start each question from fresh page.

Attempt all Questions

Q.1. (a) Under the provisions outlined in Article 81 of the Constitution of Pakistan, explain the 05
expenditures that are eligible for charging against the Federate Consolidated Fund?
(b) Under the provisions of Article 160 of the Constitution of Pakistan, briefly describe who is 05
responsible to form the ‘National Finance Commission (NFC)’ and state the duties of NFC?

Q.2. (a) Discuss the provisions to determine fair market value under section 68 of the Income Tax 04
Ordinance, 2001?
(b) Briefly identify the residential status of the following persons for the tax year 2024 with 16
proper justification from the provisions of Income Tax Ordinance 2001:
(i) On 1st March 2024, Ms. Saima arrived in Pakistan for a special official assignment
assigned by her US-based employer. She departed from Pakistan on 9th September
2024.
(ii) Mr. Yasir Gondal is serving as an Assistant Professor in Higher Education
Department, Government of Punjab. On 1st November 2023, he was posted to an
Australian University for a three-year tenure.
(iii) Zubair Technologies, a partnership firm, offers IT training services across UAE,
Bahrain, Saudi Arabia, and Pakistan. Until 31st July 2023, partial management and
control of its operations were situated in Pakistan. However, from 1 st August 2023
onwards, the entire management and control was relocated to Bahrain.
(iv) Tennis Trading Limited is a limited liability company registered in Saudi Arabia, yet its
management and control operations are exclusively conducted in Pakistan.
(v) Mr. Brian, a cricket coach, arrived in Pakistan on 28th February 2024 and departed on
31st August 2024.
(vi) Mr. Rehan, a Pakistani citizen, frequently travels internationally for official
engagements. Throughout the tax year 2024, he spent 90 days in Pakistan, 80 days in
the USA, 75 days in Canada, and 45 days in Saudi Arabia, with the remaining days
allocated to the UK. Additionally, he does not fulfill the criteria for residency in any
other country.
(vii) On 1st December 2023, Jacky Chen was appointed by a Chinese company as a
Technical Director for operations in Pakistan. Details regarding his travel itinerary are
as follows:
Contd….
 2

S. No. Particulars Time Duration

1. Arrival in Pakistan 15th Dec. 2023
2. Joined office in Pakistan 21st Dec. 2023
3. Visited to Bahrain for an official trip 22nd Dec. 2023 to 31st Mar. 2024
4. Visited to China for vacations 12th – 21st April 2024
5. Visited to Swat Valley of Pakistan for personal trip 04th – 09th June 2024
(viii) Mr. James, a Canadian town planner and architect, frequently travels to Pakistan
upon the request of various housing societies and developers. His most recent visit
spanned from 10th July 2023 to 31st March 2024. The Commissioner has granted him
permission to utilize the calendar year as a special tax year, extending from
1st January 2023 to 31st December 2023

Q.3. Mr. Asif Javed recently purchased a well-constructed house for Rs. 10,000,000 with the purpose
of letting out. Following information has been provided for the tax year 2024 for the
computation of income from property:
Rs.
Rent received during the year 2,300,000
Rent due but irrecoverable 100,000
Non-adjustable amount received in relation to house 1,500,000
Property taxes paid 50,000
Lawyer’s fee for suit to recover rent 50,000
Legal charges for drafting the rent agreement 30,000
Salary of caretaker who collects the rent 360,000
Insurance premium 200,000
Repair and maintenance expenses 50,000
Amount received for amenities, utilities and security services 30,000
Profit paid on debt acquired for purchase of house 1.5%
Forfeited deposit for contract of sale of house 50,000
Depreciation expense of house under 3rd schedule of Ordinance 300,000
Required:
Calculate income from property for tax year 2024. 10

Q.4. (a) Define the term capital asset under section 37 (5) of Income Tax Ordinance 2001. 05
(b) Mr. Abdul Rehman disposed of the following assets during tax year 2024:
(i) An antique painting was acquired for Rs. 700,000 on 30th September 2016 and sold
for Rs. 3,000,000 on 29th February 2024 through auction. Mr. Abdul Rehman paid
Rs. 300,000 as a commission to auctioneer. Tax was deducted and paid by Mr. Abdul
Rehman within due date.
(ii) Mr. Abdul Rehman purchased shares of Alpha Limited and Beta Limited on
1st August 2023 and 5 June 2022 at a cost of Rs. 640,000 and Rs. 1,300,000
respectively. Shares of Alpha Limited were sold on 31st March 2024 and shares of
Beta Limited were sold on 15th April 2024 for Rs. 1,200,000 and Rs. 1,400,000
respectively. Commission of 0.5% was paid on the value of each purchase and each
sale transaction.

Contd…..
 3

(iii) A depreciable flat was purchased on 1st January 2018 in Clifton Karachi and sold at a
profit of Rs. 5 million.
(iv) An open plot of Rs. 10 million was purchased on 1st June 2022 and sold for Rs. 15
million on 15th February 2024.
(v) He also earned income from business amounting Rs. 2,500,000 during tax year 2024.
Required:
Compute tax liability of Mr. Abdul Rehman for tax year 2024. 11

Q.5. Mr. Azhar was employed on 1st August 2023 at ABC Limited in the monthly pay scale of
Rs.300,000 – 20,000 – 350,000. His monthly emoluments during the year ended 30th June 2024
were as follows:
Rs.
Basic salary 320,000
Dearness allowance 24,000
Medical allowance 36,000

Motor Vehicle:
Mr. Azhar has also been provided with a motor vehicle for official as well as private use. The
vehicle was acquired by ABC Ltd on lease. The fair market value of vehicle was Rs. 3,000,000 at
the inception of lease. However, under the lease agreement, ABC Ltd. was required to pay a total
sum of Rs. 4,000,000 over the lease term.
Accommodation:
Mr. Azhar was offered to either avail a monthly house rent allowance of Rs.100,000 or rent-free
accommodation. He opted for the accommodation.
Utilities:
Mr. Aslam has been provided free utilities with a maximum limit of Rs. 20,000 per month.
However, he generally consumed utilities worth Rs. 30,000 a month.
Medical Facility:
In accordance with the terms of employment, Mr. Azhar is provided a reimbursement of personal
medical expenses, upto 15% of the annual basic salary and Rs.250,000 on account of
hospitalization charges for his daughter were made after procuring hospital bills showing the
national tax number of the hospital. These bills were also attested and certified by ABC Ltd.
Other information:
 Leave encashment of Rs. 10,000 per month received from ABC Limited
 During the month of December 2023, the employer waived a loan of Rs. 200,000 to be
received from Mr. Azhar.
 The employer also reimbursed children education expenses amounting to Rs. 92,000.
 Tax of Rs. 14,000 per month deducted by employer out of salary of Mr. Azhar.
 Mr. Azhar left the job as well as Pakistan on 30th April 2024 and joined a new job at Saudi
Arabia on a monthly salary of SAR 15,000 effective from 1st June, 2024. Conversion rate
Rs. 80/SAR
 During the year, he received dividends of Rs. 37,500 from a listed company. The amount
was net of withholding income tax @15% and Zakat of Rs. 65,000 deducted under the
Zakat and Usher Ordinance, 1980.
 Profit on PLS saving account of bank amounting Rs. 18,000 (net of 10% WHT).
 Lecturing and examination services fees of Rs. 50,000 received from professional institutes.
 Cash gift of Rs. 30,000 received from relatives.
Contd….
 4

Required:
Compute tax payable/(refundable) of Mr. Azhar for tax year 2024. 15

Q.6. Sarmad is registered as a manufacturer under the Sales Tax Act, 1990. Following information
has been provided by Mr. Sarmad for the month of February 2024:
Rs.
Taxable supplies made to registered persons 3,750,000
Taxable supplies made to non-registered persons 650,000
Exempt supplies made to unregistered persons 500,000
Export supplies 250,000
Taxable goods purchased from registered persons 3,700,000
Taxable goods purchased from non-registered persons 550,000
Machine purchased from a registered supplier 1,250,000

Additional information:
(i) Supplies of taxable goods to registered persons include:
 Goods worth Rs. 280,000 sold to a new customer at discount of 20%.
Mr. Sarmad normally allows discount of 10% to its customers.
 An invoice issued to Zeeshan erroneously for Rs. 295,000 whereas the
correct amount of invoice was Rs. 925,000.
(ii) Supplies of taxable goods to non-registered persons include sales of Rs. 14,250 to
end consumers.
(iii) Exempt supplies of Rs. 25,000 were returned by the unregistered customers during
the period.
(iv) A machine costing Rs. 750,000 was acquired and commissioned into operation in
February 2024. This machine has been used for the manufacturing of taxable as well
as exempt supplies.
(v) Input tax on an invoice of Rs. 600,000 was paid on 15th September 2023 but
inadvertently it could not be claimed in the return for September 2023 and
thereafter.
(vi) Electricity bill of Rs. 429,975 was paid in cash. The bill was inclusive of sales tax of
Rs. 62,475.
(vii) Sales tax credit brought forward from previous month amounted to Rs. 212,500.
(viii) Except where otherwise specified, all figures are exclusive of sales tax. Rate of sales
tax is18%. Proper debit/credit notes were issued within the specified time wherever
required.
Required:
In the light of the provisions of the Sales Tax Act, 1990 and Rules made thereunder, compute 15
the amount of sales tax payable by or refundable to Mr. Sarmad and input tax to be carried
forward, if any, for tax period February 2024.

Q.7. (a) According to Section 3 (1) of Federal Excise Act 2005, briefly explain the provisions 04
related to levy of Federal Excise duty.

Contd….
 5

(b) Explain with reason whether the following persons are required to be registered under the 10
provisions of Section 14 of Sales Tax Act 1990?
(i) Mr. Danish is a manufacturer whose total turnover did not exceed Rs. 8 million
during last year.
(ii) Mr. Rashid is a distributor of consumer goods and his annual turnover is Rs. 15
million.
(iii) Mr. Iqbal Chughtai is a commercial exporter. All of his business purchases are either
exempt supplies or from non-registered suppliers so he is unable to obtain refund
of input tax.
(iv) Mr. Yaqoob is a wholesaler and his annual business turnover is Rs. 4.9 million
(v) Mr. Irshad is planning to import raw material for business use amounting
Rs. 3 million per annum.

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