Tax Book 2023

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

Required: Compute the income, if any, chargeable under the following heads of income:

(i) Salary income; and (ii) Capital gain

Solution

Mr. Habib

Computation of taxable income

INCOME FROM SALARY

FMV of shares under employee shares scheme (1,000 x 45) Note 1 45,000

Less: cost of shares (1,000 x 25) 25,000

20,000

“X”Limitedhasgrantedanoptiontoallofitsemployeesforpurchaseofits1,000sharesataprice

ofRs.25/-pershare.Habib,oneoftheemployeeshasexercisedtheoptionavailabletohim.The

market value of the shares at the time of exercise of option was Rs. 45/- per share.

Conceptual Approach to Taxes _____803

CAPITAL GAIN U/S 37 Note 2 -

Taxable income 20,000

Note 1:

Note 2:

Winter - 2007 Q. 4

(Rupees)

Sales 6,400,000

Cost of sales 3,200,000

Gross profit 3,200,000

Selling and admin expenses 2,400,000

Net profit before tax 800,000

It is assumed that shares were issued to employees without any restriction on their sale

or transfer.

As shares have not been sold by Mr. Habib, hence nothing shall be taxable under head

capital gain.

Mr. Arif, Baqar and Umer are member of an Association of Persons (AOP) "FRIENDSCO" and

share the profit & loss in the ratio of 1:2:3 respectively. They wanted to know their tax liability for the

tax year, 2023. Accountant of M/s FRIENDSCO., has prepared the following profit and loss

account:

Net profit before tax 800,000

Additional Information:

2. Expenses include:


3. It is a wholesale business and sales include supplies of Rs. 800,000 to government departments
   subject to withholding tax.

Conceptual Approach to Taxes _____803