Tax Book 2023

Chapter 21 ___Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2022)

(i) Tax depreciation for the year amounts to Rs. 680,000.

(ii) Tax deducted at source by customers amounts to Rs. 875,000.

(iii) The unabsorbed tax depreciation brought forward from tax year 2021 amounts to Rs. 568,000.

 capital gain of Rs. 45,000 received, net of withholding tax of Rs. 6,750, on sale of 20,000 shares in Metal Limited (ML)

in November 2022. ML is listed on PSX. On 1 January 2022, Shahid purchased these shares for Rs. 200,000 at initial

public offering. He had claimed a tax credit of Rs. 15,000 on such investment in tax year 2022.

 rent of Rs. 980,000 received from an agriculture land in Badin. No withholding tax was deducted at the time of

receipt.

Conceptual Approach to Taxes ___ 485

(iii) The unabsorbed tax depreciation brought forward from tax year 2021 amounts to Rs. 568,000.

Required:

Note:  Your computation should commence with profit before tax figure.

 Ignore minimum tax under section 113.

 Show all relevant exemptions, exclusions and disallowances.

 Tax rates are given on the last page.

Answer

Shahid

Under the provisions of the Income Tax Ordinance, 2001 and Rules made thereunder, compute total income, taxable

income and net tax payable by or refundable to Shahid for the tax year 2023. (Use accrual basis of accounting)

Computation of total income, taxable income and net tax payable/refundable

For tax year 2023

Rupees

Computation of profit under accrual basis of accounting

Profit as given in the question - on cash basis 6,427,000

. closing stock under absorption cost method 3,200,000
. closing stock under prime cost method (2,800,000)
400,000
Profit under accrual basis of accounting 6,827,000

Income from business

Profit before taxation 6,827,000

Computation of total income, taxable income and net tax payable/refundable

Adjustment on account of: - [without considering opening stock effect as transaction

already past and closed transaction and not affecting current year)

Profit before taxation 6,827,000

Add: Inadmissible expenses/admissible income

Purchases of packing material (440,000×20%) - u/s 21 88,000

Freightchargesongoods-allowedexpenditure-

exceptions u/s 21(l)

Salary allowed as paid for business activities (brother) -

Penalty for late filing of income tax return - u/s 21 15,000

Expenditure on promotion of a product 950,000

1,053,000

Less: Admissible expenses/inadmissible income

Expenditure made for promotion of a product = 950,000/5 (190,000)

Tax depreciation (680,000)

Gain on sale of shares (45,000)

Agriculture income - Exempt incomeAgriculture income - Exempt income (980,000)(980,000)

Profit on debt - covered under the head income from other sources (450,000)

(2,345,000)

5,535,000

Less:

Unabsorbed tax depreciation - brought forward (568,000)

Total business income for the year 4,967,000

Capital gain

Gain on the sale of 20,000 shares -Gross amount 51,750

Income from other sources

Profit on fixed deposit account (FTR income) - Gross amount 450,000

Exempt income

Rent received for the agriculture land - assumed that applicable income tax on agri income 980,000

paid to the respective province

Conceptual Approach to Taxes ___ 485