Tax Book 2023

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

Additional information:

Opening balances Closing balances

5,200 7,500

5,900 8,800

--------- Rs. in '000 ---------

Stock-in-trade using prime-cost method

Stock-in-trade using absorption-cost method

(ii) Cost of goods sold includes cost of used machinery imported from China on 31 July 2022 amounting to

Rs.2,110,000. The cost includes payment of custom duty of Rs. 90,000 and income tax of Rs. 110,000 to the

Collector of Customs.

(i) The above accounts have been prepared on cash basis and stock-in-trade has been valued on the prime-

(^492) ____ ___ _Conceptual Approach to Taxes
(iii)           Administrative and selling expenses include:
(b) payment of a fixed monthly remuneration of Rs. 150,000 to each partner.
Required:
Note: Show all the relevant exemptions, exclusions and disallowances.
Under the provisions of Income Tax Ordinance, 2001 and Rules made thereunder, compute the total income,
taxable income and tax payable by MAZE using accrual basis of accounting.
Collector of Customs.
(a) payment of Rs. 380,000 to a local hotel for holding annual eid-milan party for the employees, key
customers and their families.
(c) payment of Rs.180,000 for purchase of accounting software on 1 January 2023.The software is expected
to be used for fifteen years.
(iv)  Financial charges are net of interest income of Rs. 360,000 (net of tax @ 10% deducted by the bank), 
Answer
Rupees
Profit before taxation (W-1) (A) 15,170,000
Add: Inadmissible expenses/admissible income
Cost of machinery included in the cost 2,110,000
Payment for holding annual eid-milan party -
Remuneration to each partner (150,000×3×12) 5,400,000
Cost of accounting software 180,000
Interest income - separate block of income (360,000÷0.9) 400,000
(B) 8,090,000
MAZ Enterprises
Computation of total income, taxable income and net tax payable/refundable
For tax year 2023
Less: Admissible expenses/inadmissible income
Cost of machinery as per books 2,110,000
Less: Income tax paid at import stage -110,000
Depreciable value of machinery 2,000,000
Depreciation - Initial allowance (2,000,000 × 25%) 500,000

• Normal [(2,000,000–500,000)×15%] 225,000

Amortization of the Computer software

[From 1 January 2022 to 30 June 2022 (180,000/15×181/364)] 5,967

Increase in financial charges 360,000

(To reserve the impact of netting off of interest income)

(C) 1,090,967

Total income (A + B + C) 22,169,033

Less: Interest income - separate block of incomeLess: Interest income - separate block of income (400,000)(400,000)

Taxable income for the year 21,769,033

Tax liability

Tax on 6,000,000 1,330,000

35% on amount exceeding 6,000,000 5,519,162

Tax on interest income (15%) 60,000

6,909,162

Less :Withholding tax on import of machinery (110,000)

Less :Tax deducted by the bank (40,000)

Balance tax payable 6,759,162

(^492) ____ ___ _Conceptual Approach to Taxes