Tax Book 2023

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

(i). Detail of trading and speculation businesses (forward purchase and sale) were as follows

Trading Speculation

Q.3 (c) September 2018

Jamil and Company (JC) is the sole trader of a branded tea in Pakistan. In addition to the trading business, JC

is also engaged in forward purchasing and selling of tea to reap the benefits of price fluctuation in local and

international markets. Following information has been extracted from the records of JC for the year ended 30

June 2023.

Rs. in million

Conceptual Approach to Taxes ___ 497

Gross Revenue 400 20

Gross Profit 20 10

(iii). Assessed carried forward losses from previous years are as follows:

Rs. in million

Losses from trading business 12.8

Losses from speculation business 9.6

Capital losses (incurred in 2016) 2

Required:

Rs. in million

(ii). Total administrative and general expenses for the year amounted to Rs. 7.2 million. This amount

includes a penalty of Rs. 0.4 million paid to the custom authorities

Under the Income Tax Ordinance, 2001 and Rules made thereunder, compute JC’s taxable income / (loss)

and the amount of loss to be carried forward, if any, for the tax year 2023.

Answer

Trading business

Speculation

business Total

Gross revenue 400 200 600

Gross profit 20 10 30

Administrative and general expenses

[7.2m–0.4m×400m÷600m] 4.53 2.27 7

Net income 15.47 7.73 23

Brought forward losses 12.8 9.6

Taxable income/(loss) carried forward for

the year 2.67 -1.87

and the amount of loss to be carried forward, if any, for the tax year 2023.

Particulars

-------- Rs. in million --------

the year 2.67 -1.87

(i). Accounting profit before tax amounted to Rs. 2,350,000

Q.5 September 2018

Saleem is a resident taxpayer and runs a fitness centre in DHA Karachi. He files his return of income regularly.

Following information pertains to his business for the tax year 2023.

(ii). Administrative expenses include annual rent of the premises used for fitness centre amounting to Rs.

1,560,000. Withholding tax of Rs. 144,000 was deducted from the rent payment but was not deposited in the

government treasury.

(iii). A passenger transport vehicle used for pick and drop of employees of fitness centre was disposed of

for Rs. 9,500,000. The vehicle was purchased for Rs. 8,500,000 in tax year 2022. No accounting depreciation

was provided during the year 2023. Accounting gain of Rs. 1,000,000 has been recorded in the profit or loss

(v). During the year, Saleem recorded gain of Rs. 50,000 on disposal of shares. Details are as under

Name of investee company Sold on Purchased on Gain/ (Loss) on Disposal (Rs.)

Sun (Private) Limited 01-Aug-22 01-Sep-08 500,000

Moon Limited - a listed company 15-Sep-22 01-Jan-10 (700,000)

Planet Limited - a listed company 01-Feb-23 01-Jan-11 250,000

50,000

Required:

(iv). On 1 July 2022, a car was acquired on finance lease for Rs. 3,000,000. Advance tax paid at the time of

acquisition and registration of vehicle aggregated Rs. 85,000. The vehicle has been used 70% for business

purposes and 30% for Saleem’s personal use.

Accounting depreciation of Rs. 600,000 and financial charges of Rs. 462,000 were recorded in the profit or

loss account. Lease rentals paid during the year amounted to Rs. 857,000

was provided during the year 2023. Accounting gain of Rs. 1,000,000 has been recorded in the profit or loss

account.

Conceptual Approach to Taxes ___ 497