Income From Business Chapter- 09
ICMAP PAST PAPERS THEORECTICAL QUESTIONS
Q. NO. 3(a) Fall 201 6
As per section 21(d) of the Income Tax Ordinance, 2001, any entertainment expenditure in excess of limits or
in violation of conditions prescribed in the Rule 10 of the Income Tax Rules, 2002, are not allowed as
deduction in computing the income of a person chargeable to the tax under the head `Income from Business'.
Required:
Keeping in view the Rule 10 of the Income Tax Rules, 2002, discuss the following:
(i) the term `entertainment expenditure'.
(ii) the condition of admissibility of entertainment expenditure under the above Rule.
(iii) the limitations laid down in the above Rule on the deduction of entertainment expenditure.
Q. NO. 3(c) Spring 2015
(c) Mr. Shah Nawaz has been residing in Karachi for many years. He is a Finance Officer in an
educational institute. Mr. Shah receives salary income from his Institute as well as rent from his lands
situated in Sawat which he has let out for farming purposes. The employer deducts his tax at
prescribed rates on his salary while he does not pay any tax in respect of rent received from his lands.
However, Mr. Shah is of the opinion that his rental income should be treated as agricultural income
while his friend advised him to pay tax on rent under the head of 'income from property' to avoid any
litigation matters.
Required:
Suppose you are a Tax Consultant and Mr. Shah Nawaz is seeking your advice in respect of following
matters:
(i) How the rental income received by Mr. Shah Nawaz from his lands will be treated under the Income
Tax Ordinance, 2001? Also explain sources of agricultural income as per section 41 of the Income
Tax Ordnance, 2001.
(ii) During the discussion with Tax Consultant Mr. Shah further disclosed that he had also received
dividend of Rs.60,000 from Milkshakes Agro Limited (MAL). He claimed dividend should not be
chargeable to tax because the entire income of MAL comes under the head of agricultural income
which are exempt from tax. Explain him about the tax treatment of dividend and limitation of
exemption in the light of the section 55 of the Income Tax Ordinance, 2001.
Q. NO. 3(a) Spring 2015
In the light of section 29 of the Income Tax Ordinance, 2001 answer the following:
(i) Specify the conditions where a person shall be allowed a deduction for a bad debt during a tax year.
(ii) Explain the term consumer loan and discuss the provisions regarding the bad debt arising out of such
loans.
Q. No. 2 (c) Spring 2013 M/s. National Corporation is a non-banking finance company. The main
business of the company is to provide a loan to consumers for small businesses, car financing,
personal and household purposes.
Required: The corporation is seeking your advice in respect of the following under the provision of
the Income Tax Ordinance, 2001:
(i) M/s National Corporation is willing to segregate consumer loan and other loans, therefore,
want to know the clear definition of consumer loan. Define.
(ii) Explain how the provision against consumer loan is allowed as deduction to the corporation.
(iii) Where bad debt in respect of consumer loan cannot be wholly set off against reserve created
for this purpose, then what would be the treatment for setting off the bad debt?