Tax Book 2023

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

Under the provisions of ITO, 2001 discuss the admissibility of the above amounts for tax purpose.

Solution

1.Itisnotadmissibleasthewithholdingtax@20%undersection152(2)oftheIncometaxOrdinance, 2001

was not deducted by CL Limited.

2. It is an admissible expense as it is incurred for the purpose of business of company.


3. Bad debts in respect of loan to employees shall not be admissible under the Income Tax Ordinance, 2 001
   because the same is not against a trading liability already allowed.

Conceptual Approach to Taxes ___ 539

Q.1 Autumn 2010

6. Amount of rental payment shall be allowed as deduction, however the amount of depreciation and financial
   charges shall not be allowed as deduction.

Mr.ZameerAnsariisworkingasaChiefExecutiveOfficerinWimpy(Private)Limited(WPL).Followingarethe

details of his income / receipts during the tax year 2023:

5. Initial allowance on locally purchased equipment shall not be allowed as the asset is already used in
   Pakistan.

because the same is not against a trading liability already allowed.

4. As the amount is the reimbursement of expenses incurred on behalf of parent company so the same shall
   be adjusted against the receivable balance from parent and has no impact on taxable income.

(a) His monthly cash remuneration in WPL is as follows:

Rupees

Basic salary 200,000

Medical allowance 30,000

Utilities allowance 10,000

(b) In addition to the above, he was also provided the following benefits in accordance with his terms of

employment:

(i) Medical insurance for hospitalization and surgery, limited to Rs. 1,500,000 per annum.

(ii) Payment of his children's school fees of Rs. 15,000 per month. The fee is deposited directly int the

school's bank account.

(iii) Rent free furnished accommodation on 1000 square yards. The accommodation is located

within the municipal limits of Karachi.

(v) Leave encashment amounting to Rs. 100,000 was paid to Mr. Zameer on July 5, 2023.

(vi) An amount equal to one basic salary was paid by WPL to an approved pension fund.

Fair value of the shares were as follows:

· Rs. 35 per share on December 1, 2019

· Rs. 42 per share on January 1, 2022

· Rs. 48 per share on April 1, 2023

(iv) Two company-maintained cars. One of the cars was purchased by WPL for Rs. 3,000,000 and is

exclusively for his business use.The second car was obtained on lease on February 1, 2022 and is used partly

for official and partly for personal purposes.The fair market value of the leased vehicle at the time of lease was

Rs. 1,800,000.

(c) Mr. Zameer had received 15,000 shares of WPL on December 1, 2019 under an employee share

scheme. He had the option to transfer the shares on or after January 1, 2022. However, he sold all the shares

on April 1, 2023.

within the municipal limits of Karachi.

(f) Tax deducted at source from his salary, amounted to Rs. 650,000.

Solution

Mr. Zameer Ansari

Required: Compute the taxable income, tax liability and tax payable by Mr. Zameer Ansari for the tax year

2023.

(d) An apartment owned by Mr. Zameer was rented on July 1, 2022 to Mr. Abdul Ghaffar at a monthly rent

of Rs. 22,000. He received a non-adjustable security deposit of Rs. 150,000 which was partly used to repay

the non-adjustable security deposit amounting to Rs. 90,000 received from the previous tenant in July 2019.

He also incurred Rs. 20,000 on account of repair charges.

(e) He earned profit amounting to Rs. 750,000 on fixed deposit account maintained with a bank. The

bank withheld income tax amounting to Rs. 112,500 and Zakat amounting to Rs. 250,000.

Conceptual Approach to Taxes ___ 539