Chapter 21 ___ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2022)
Profit before tax 2,468Additional information:
(i) Cost of goods sold includes:
(a) raw materials of Rs. 7,800,000. No withholding tax was deducted at the time of payment.
(b) accounting depreciation of Rs. 2,100,000 on plant and machinery.
© provision for slow moving inventory of Rs. 1,800,000.(ii) Administrative and distribution expenses include:
(a) Rs. 676,500 paid to a local hotel for holding annual Eid-Milan party for the employees and their families.(^478) ____ ___ _Conceptual Approach to Taxes
(c) Rs. 2,300,000 paid as donation to a hospital established by the local government.
(iv) Other income includes:
(b) gain of Rs. 660,000 on sale of shares in Akash (Pvt) Limited (APL) in November 2022. 60% of the shares in
(b) Rs. 1,235,000 paid as penalty to a customer in settlement of his claim for damages under a contract for the
supply of a batch of vaccines. Laboratory tests and in-house investigations revealed that the level of impurities
in the vaccines exceeded the acceptable level as agreed in the contract.
(iii) Marketing expenses include a reward of Rs 500,000. The reward was paid in cash to one of the salesmen
for exceeding his sales target.
(a) dividend of Rs. 174,000. This amount was received from a listed company after deduction of income tax at
the rate of 15% and Zakat of Rs. 30,000 deducted
under the Zakat and Usher Ordinance, 1980.
Other information:
(b) gain of Rs. 660,000 on sale of shares in Akash (Pvt) Limited (APL) in November 2022. 60% of the shares in
APL are owned by the Federal Government. AC purchased these shares in June 2021.
(i) A second hand plant was imported from France at a cost of Rs. 2,500,000. Withholding tax of Rs. 150,000
was deducted at import stage. The plant was installed in the month of September 2022. AC incurred Rs.
375,000 on the installation of plant which is included in administrative and distribution expenses.
(ii) Pre-commencement expenditures of Rs. 3,400,000 were charged to accounting profit and loss for the year
ended 31 December 2021. However, for tax purposes, it has to be amortized over the period of five years.
(iii) Tax depreciation other than imported plant amounted to Rs. 1,900,000.
(iv) Income tax deducted by the customers u/s 153 and advance income tax paid u/s 147 during the year
amounted to Rs. 1,400,000 and Rs. 200,000 respectively.
Required:
Note: Your computation should commence with profit before tax figure of Rs. 2,468K.
Ignore minimum tax under section 113.
Show all relevant exemptions, exclusions and disallowances.
Tax rates are given on the last page.
Answer
For tax year 2023
Muhammad Asghar
Computation of total income, taxable income and net tax payable/refundable
amounted to Rs. 1,400,000 and Rs. 200,000 respectively.
Under the provisions of the Income Tax Ordinance, 2001 and Rules made thereunder, compute total income,
taxable income and net income tax payable by or refundable to AC for the tax year 2023.
Rs.
Income from business
Profit before tax 2,468,000
Add: Inadmissible expenses / admissible income
Raw material and finished goods disallowed 20% - u/s 21 7,800,000×20% 1,560,000
Accounting depreciation 2,100,000
Provision for slow moving inventory 1,800,000
Expenditure on Eid-Milan party -
Penalty paid to a customer - Damages not included in the term penalty -
Donation paid to hospital established by local government 2,300,000
Installation charges of imported plant 375,000
Reward paid in cash to salesmen - u/s 21 500,000
8,635,000
Less: Admissible expenses / inadmissible income
Amortization of pre-commencement expenditure 3,400,000×20% (680,000)
Tax depreciation (1,900,000)
(^478) ____ ___ _Conceptual Approach to Taxes