Tax Book 2023

Chapter 30 Solved Past Papers Income Tax Numericals of ICMAP Stage IV - (2003 to 2018)

Solution Q.5 August 2012

Global International Limited

Computation of taxable income and tax thereon

For the tax year 2023

Rs. Rs.

INCOME FROM BUSINESS U/S 18

Profit before tax as per accounts 6,360,000

Add: Inadmissible items U/S 21

(a) Employee's provident fund (unapproved) 1,320,000

(b) Accounting depreciation on plant and machinery 300,000

(c) Entertainment expenses without supporting evidence 200,000

ComputethetaxableincomeandthetaxliabilityoftheGlobalInternationalLimited.Giveproper

comments where any given information has not been utilized in the computation.

Conceptual Approach to Taxes _____781

(c) Entertainment expenses without supporting evidence 200,000

(d) Prepaid insurance 320,000

2,140,000

Less: (b) Tax depreciation on plant and machinery (N-1) 340,625

Dividend (taxable under the head income from other sources) 300,000

640,625

7,859,375

INCOME FROM OTHER SOURCES U/S 39

Dividend income - Taxable under FTR 300,000

Total taxable income 7,859,375

COMPUTATION OF TAX LIABILITY:

Alternative Corporate tax U/S 113C (A) 1,081,200

[Accounting profit under NTR Rs. 6,360,000 x 17%]

Corporate Tax

Tax on Rs. 7,859,375 x 29% (B) 2,279,219

Minimum tax u/s 113 (55,300,000 x 1.25%)Minimum tax u/s 113 (55,300,000 x 1.25%) (C)(C) 691,250691,250

Tax liability under NTR: Higher of (A), (B) or (C) 2,279,219

Add: Tax on dividend income under FTR (Rs. 300,000 x 15%) 45,000

2,324,219

Less: Tax deducted on gross dividend (N-2) (Rs. 300,000 x 15%) (30,000)

Balance tax payable 2,249,219

Conceptual Approach to Taxes _____781