Tax Book 2023

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

Q.2 (b) Autumn 2019

During the tax year 2023, Amjad carried out the following transactions in respect of his properties:

(i) On 1 July 2022, Amjad purchased a factory building in Sukkur along with the installed machinery at the price of Rs. 9

million and Rs. 3 million respectively. To manage the shortage of funds of Rs. 2,000,000, he borrowed the same on 1 July

2022 from his friend Shamshad through a crossed cheque. The loan carries interest at the rate of 18% per annum.

On 1 January 2023, he let out this building along with the machinery to Basit at a monthly rent of Rs. 500,000 payable in

advance.

(ii) On 1 July 2022, Amjad let out his residential property situated in DHA Karachi to Mirza Limited at a monthly rent of

(^490) ____ ___ _Conceptual Approach to Taxes
On 10 April 2023, he finally sold the plot to Jamshed for Rs. 65 million.
Details of expenditures Sukkur Karachi
Repair & maintenance - building 270,000 70,000

• machinery 50,000 -
  Ground rent 50,000 10,000

(iii) On 1 July 2022, Amjad also entered into an agreement with Zeeshan for the sale of his plot situated in Quetta for Rs.

50 million. The plot had been purchased for Rs. 40 million in 2015. Under the terms of sale agreement, he received Rs. 5

million at the time of signing the agreement and the balance was to be received on 30 September 2022. However, due to

financial difficulties, Zeeshan failed to pay the balance amount on the due date and consequently, Amjad forfeited the

advance in accordance with the terms of the agreement.

(iv) Following expenditures were incurred by Amjad in respect of his properties in Sukkur and Karachi:

Property situated in

(ii) On 1 July 2022, Amjad let out his residential property situated in DHA Karachi to Mirza Limited at a monthly rent of

Rs. 300,000. Rent for the two years was received in advance on 1 August 2022.

Ground rent 50,000 10,000

Insurance - building 150,000 20,000

Total 520,000 100,000

Required:

Answer

Rupees

For tax year 2023

In view of the provisions of the Income Tax Ordinance, 2001 compute under appropriate head of income, taxable income of Amjad

for the tax year 2023.

Mr. Amjad

Computation of taxable income

Rupees

Income from property

2,850,000

5,000,000

Income from other sources

950,000

Income from capital gain

Total Taxable income 8,800,000

(i) Sale of plot in Quetta - Jamshed

Although there is capital gain of Rs. 25 million [Rs. 65 million - Rs. 40 million] but the

plot was bought in 2015, therefore no tax is payable under the law as sale of plot was

made after six years from the date of its purchase.

(i) Residential property at DHA - Karachi (W-1)

(ii) Amount forfeited from Zeeshan

(i) Factory building at Sukkur - Basit (W-1)

W-1:

Income from

property Income other sources

DHA - Karachi Sukkur - Factory

3,600,000 3,000,000

720,000 270,000

Repair to machinery - 50,000

Ground rent 10,000 50,000

Insurance - Building 20,000 150,000

• 900,000
  Plant - Normal [Rs. 3m @ 15%] - 450,000
  Interest on loan from Shamshad
  Rs. 2 million @ 18% for 6 months - 180,000

Rental Income (300,000×12), (500,000×6)

Less: Admissible expenses

Repair to DHA building (allowed upto 1/5 of the rental amount) /

Actual repair of Sukkar Factory

Depreciation: Building - Normal [Rs. 9m @ 10%]

(^490) ____ ___ _Conceptual Approach to Taxes