Income From Business Chapter- 09
PRACTICE QUESTIONS WITH SOLUTIONS
Q. NO. 1 Net loss for the tax year 20 23 of an AOP (BS and Co.) as per accounts before tax is
Rs.(1,000,000). You are required to compute the taxable income of the AOP from following information:
Administrative expenses include the following:
- Tax deducted on cash withdrawal Rs. 37,000. 2. Salary paid to partners Rs.150,000. 3. Interest on
loan from partner Rs. 20,000. 4. Provision for bad debts 10,000. 5. Charity to beggar Rs.37,000. - Donation in kind to approved institutions worth Rs. 24,000 7. Depreciation as per accounts Rs.195,000
- Property tax on personal property of current year Rs. 55,000. 9. Statutory depreciation is Rs. 237,000
Solution: BS and Co.
Computation of taxable income
For the tax year 20 23
Rs.
Loss as per accounts before tax (1,000,000)
Less:
Tax deducted on cash withdrawal 37,000
Salary paid to partners 150,000
Interest on loan from partner 20,000
Provision for bad debts 10,000
Charity to beggar 37,000
Donation to approved institution 24,000
Depreciation as per accounts 195,000
Property tax on personal property 55,000
528,000
Add:
Tax depreciation 237,000
Loss as per tax (709,000 )
Note: Donation to approved institution is not admissible expense and the firm cannot claim tax credit as
there is loss during the year.
Q NO.2 Explain whether the following are admissible as business expenditure under the Income tax
Ordinance, 2001:
(a) Repayment of principal amount of lease rentals of plant and machinery.
(b) Sales Tax paid on the purchase of raw material to be used in the production of exempt supply
(c) Dividend paid by company
(d) Provision in respect of doubtful debts
(e) Penalty for late filing of sales tax return
Solution:
(a) Repayment of principal amount of lease rentals is admissible.
(b) This is also admissible expense as it cannot be claimed as input tax by the business.
(c) This is not admissible expense.
(d) Provision in respect of doubtful debts is not admissible.
(e) Penalty for the violation of any law or rule is not admissible expense.