Tax Book 2023

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

(1) Other income includes:

Rupees

Profit received from bank on saving accounts 300,000

Premium on issue of shares 500,000

Gain on sale of scrap 200,000

1,000,000

(2)

(3)Depreciation allowed as per Income Tax Laws is Rs. 1,650,000.

(4)

Rupees

Legal and professional fees: 120,000

Tax and corporate consultancy fee 100,000

Audit fee 80,000

Provision for doubtful debts has been calculated as 1% of the total

amount receivable from trade debtors.

Additional Information:

OnemonthadvancesalaryofRs.160,000paidtotheManager Financeofthecompany

who left the company. This amount was included in Rs.1,400,000 of salary.

768___ Conceptual Approach to Taxes

Audit fee 80,000

Fee to Lawyer against the suit filed by one of the creditors 300,000

(8) Other expenses amounting to Rs. 50,000 were not vouched and verified.

(7) Donation has been given to the universtty established under a provincial law.

(6) Thecompanyreceived subsidies of Rs. 300,000from Government on import of certain

material which was not recorded in calculating net profit for the year.

(9) FinancechargesofRs.200,000 paidtobankasinterestonloanforimportsofmachinerywhile

remaining amount offinancial charges Rs.100,000 were paid on leased asset.Howevertotal

lease rental paid in respect of such assets were Rs. 400,000 during the year.

(10)ThecompanyhaspaidzakatofRs.57,000aspertheZakatandUshrOrdinance,1980.After

review of the documents, the Tax Consultant found that in the first year of incorporation the

companywasnotsostableandsufferedaloss.SincetheCommissionerInlandRevenueassessed

alossofRs.1,800,000underthe'headofincomefrombusinessfortaxpurposeinthetaxyear

2021.

In ordertoseektheadviceofTaxConsultantinrespectofcertaindecisionsofthecompany,Mr.

lftikhar further discussed that the company is willing to strengthen its position by further

expanding its polypropylene cement bags plants. In this regard second-hand plant and

machinery will beimported fromJapan. Moreover, thecompany hasalsodecided to incur

research and development expenditure to Rs.3,000,000 to develop anew design of craft

paperand polypropylene products. This design will behelpful inimprovingthequality andcost-

cutting of the company's existing products. However,the useful life of the design cannotbe

Required:

cutting of the company's existing products. However,the useful life of the design cannotbe

ascertained.

For thepromotionof theproduct,the management of thecompanyisalsoplanning tohirea

serviceofforeign advertisingagent(amediaperson)formakingand relayingaTVcommercial

from outside Pakistan.

768___ Conceptual Approach to Taxes