Tax Book 2023

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

(vi) An option to purchase 20,000 shares in AEL on 1 May 2022 at Rs. 25 per share.

(i) On 1 April 2023, Mukarram sold a diamond ring to his brother Zohaib for Rs. 250,000.

The ring was purchased on 1 January 2023 at a price of Rs. 280,000.

(ii) Mukarram has 65 acres of agricultural land in Badin and a building in immediate vicinity of the

land. Mukarram rented out 30 acres of his land along with the building to Dino who is a

cultivator. Dino uses the building as a store house. Mukarram received annual rents of Rs. 750,000

Thebreak-upvalueofAELonthatdatewasRs. 85 pershare.Otherinformationrelevanttotaxyear 2023 is

as under:

(^516) ____ ___ _Conceptual Approach to Taxes
Required:
Mukarram is also running a small rice husking unit in Badin. He uses entire agricultural produce in the
husking unit which is grown on the remaining portion of his land. During the year he brought 5,000 kilograms
of raw rice from his land to the unit for husking. He would have earned Rs. 2,500 per 40 kilogram of raw rice
had he sold it directly to the market. His sales from rice husking unit stood at Rs. 850,000 whereas other
operating expenses were of Rs. 400,000.
Underthe provisions ofthe IncomeTaxOrdinance, 2001 and Rules madethereunder,computethe
taxable income of Mukarram for tax year 2023.
(iii) On 31 May 2023 a painting was destroyed by heavy rains. Mukarram had purchased the painting on 30
June 2020 for Rs. 100,000. However, due to constant increase in the value of the painting, he had insured it
at a premium of Rs. 15,000. He received insurance claim of Rs. 275,000 on 15 June 2023.
cultivator. Dino uses the building as a store house. Mukarram received annual rents of Rs. 750,000
and Rs. 325,000 in respect of the land and building respectively.
Rupees Rupees
Income from Salary:
Basic Salary (250,000 x 12) 3,000,000
Medical allowance (37,500 x 12 - 250,000 x 10% x 12) 150,000
Housing allowance (25,000 x 12) 300,000
Travel allowance (11,500 x 12) 138,000
50,000
Mukarram
taxable income of Mukarram for tax year 2023.
Note: show all relevant exemptions, exclusions and disallowances.
Computation of Income Tax Liability
For the Year 2023
Perquisite representing car (5% of the FMV of car i.e. 1,000,000 50,000
Benefit on purchase of car ( 400,000 - 0) 400,000
Performance related bonus -
Free buffet lunch coupon (2 x 12 x 2,000) 48,000
16,000
Assets received for use at home (300,000 x 10%) 30,000
Share option scheme -
Total income under the head salary (A) 4,132,000
Capital Gain:

Sale of personal car (the loss on sale of Rs. 50,000 is not

recognized as the car was for personal use and is not covered

under capital assets).

Capital loss of Rs. 30,000 on sale of diamond ring not

Reimbursement of telephone and internet charges (20,000 x

80%)

Perquisite representing car (5% of the FMV of car i.e. 1,000,000

x 5%)

• Consideration received on disposal of painting 275,000
  Less: Cost of acquisition of painting (100,000)
  Insurance premium paid (15,000)
  Gain on disposal of painting 160,000
  (B) 160,000

Income from business:

Sale 850,000

Less: Operating expenses (400,000)

(312,500)

(C) 137,500

Income under all head of income (A + B + C) 4,429,500

Add exempt income:

Capital loss of Rs. 30,000 on sale of diamond ring not

recognized -

Market value of agricultural produce used as raw material (2,500

x 5,000 ÷ 40)

(^516) ____ ___ _Conceptual Approach to Taxes