ATAX.pdf - ADVANCED TAXATION Suggested Answers Final Examinations Summer 2010 A.1(a Personal status Residential status Tax Year Income year ending BURQ

ATAX.pdf - ADVANCED TAXATION Suggested Answers Final...

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ADVANCED TAXATION Suggested Answers Final Examinations – Summer 2010 Page 1 of 9 A.1 (a) BURQ ENTERPRISES Personal status: Association of Persons Residential status: Resident Tax Year: 2010 Income year ending: June 30, 2010 Computation of taxable income and tax liability Trading Consultancy Services Rupees in ‘000 Net Sales of generators (574,200 / 1.16) 495,000 0 Receipt from consultancy services 0 55,000 Cost of sales (W-1) (350,000) 0 Gross profit 145,000 55,000 Administrative and selling expenses (W-2) (72,900) (8,100) Finance cost (W-3) (7,800) 0 Other Income (W-4) 450 50 Net Income 64,750 46,950 Scheme of taxation FTR NTR Rate of tax 4% of the value of goods 25% of the net income Tax liability 16,520 11,738 Less: Tax deducted at source (16,520) (3,300) Net tax payable 0 8,438 Rs. in ‘000 W-1: Cost of sales Cost of sales of generators 429,520 Less: Inadmissible expenses Customs duty 0 Sales tax paid at import stage (63,000) Withholding tax paid on commercial imports (413.0 m x 4%) (16,520) 350,000 W-2: Administrative and selling expenses As per profit and loss account 96,300 Less: Inadmissible expenses Withholding tax suffered on receipts from consultancy @6% (3,300) Salaries paid to Mr. and Mrs. Adil (500,000x2x12) (12,000) 81,000 W-3: Finance cost 9,000 Less: Inadmissible expenses Interest paid on capital to Mrs. Adil (1,200) 7,800 W-4: Other Income Fair market value of the equipment at the time of disposal 1,500 Less: WDV of the equipment at the time of disposal (1,000) Gain on disposal of asset 500
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