Tax Book 2023

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

Q. 1 March 2018

Rupees

Total turnover 28,500,000

Cost of sales (26,155,000)

Gross profit 2,345,000

Mr. Qateel, a resident individual, is engaged in the manufacture of various consumer goods under the name

and style ‘Qateel Enterprises (QE)’. The following information has been extracted from the records of QE for

the financial year ended 30 June 2023.

Conceptual Approach to Taxes ___ 499

Gross profit 2,345,000

Operating expenses (4,500,000)

Operating loss (2,155,000)

Finance charges on lease of machinery (35,703)

Other income 5,000,000

Profit before tax 2,809,297

Additional information:

(ii)            Operating expenses include:

Cash donation to poor families amounting to Rs. 64,600 and Rs. 2,000,000 to Edhi Foundation, which is listed

Rs. 45,000 paid as fine for violation of contract with a customer for delay in supply of goods.

Accounting depreciation of Rs. 1,900,000 (including depreciation on leased assets).

Rs. 450,000 paid for renewal of a manufacturing licence for fifteen years. vehicle tax paid in cash amounting to

Rs. 55,000

Rs. 200,000 paid as security deposit to K-Electric (KE) for replacement of transformer at the factory.

Rs. 300,000 collected by KE as advance tax through monthly electricity bills.

dividend of Rs. 580,000 received from listed companies. The amount is net of income tax at the rate of 15%

and Zakat of Rs. 100,000 deducted under the Zakat and Usher Ordinance, 1980.

Capital gain of Rs. 1,200,000 from sale of shares of a private limited company. Shares were acquired on 1

August 2017.

(iii)        Other income includes:

Cash donation to poor families amounting to Rs. 64,600 and Rs. 2,000,000 to Edhi Foundation, which is listed

in Thirteenth Schedule of the Income Tax Ordinance, 2001.

Penalty of Rs. 25,000 imposed by the Commissioner Inland Revenue for late filing of annual return of income

for the tax year 2020.

(iv)  On 30 June 2023, leased machinery was transferred to Qateel on maturity of lease. The leasing company 

was asked to adjust the amount of security deposit against the residual value of Rs. 100,000. The date of

commencement of lease was 1 July 2017.

Entertainment expenditure of Rs. 128,000 incurred on arrival of foreign customers for business purposes.

Rs. 300,000 collected by KE as advance tax through monthly electricity bills.

(v)  During the year, a warehouse was constructed for storage of goods at a cost of Rs. 1,040,000. No 

accounting depreciation has been recorded on it.

(vi) Tax depreciation for the tax year 2023 without considering the effect of para (iv) and (v) above, amounted 

to Rs. 1,560,000.

commencement of lease was 1 July 2017.

Lease rentals paid during the year amounted to Rs. 270,000.

On the date of maturity, the accounting written down value and market value of the machinery was Rs.

590,490 and Rs. 800,000 respectively.

Conceptual Approach to Taxes ___ 499