FINALTERM EXAMINATION
Spring 2009
FIN623 Taxation Management (Session - 1)
M a r k s: 81
FIN623 Taxation Management Question No: 1 ( M a r k s: 1 )
__________ is a type of tax where the tax rate increases as the income to which the rate is applied increases.
Proportional tax
Progressive tax
Regressive tax
Corporate tax
Ref:
™ Progressive Taxes
This is based on the “capacity to pay” principle of taxation. In this type, the rate of tax increase asthe income increase.
FIN623 Taxation Management Question No: 2 ( M a r k s: 1 )
If the accounting year of Mr. Aslam, a rice exporter is started from 01 January 2005 and ending on 31st December 2005. What will be its tax year?
Tax year 2003
Tax year 2004
Tax year 2005
Tax year 2006
FIN623 Taxation Management Question No: 3 ( M a r k s: 1 )
In case of lump sum receipt of income like Golden hand shake the tax payer pays tax in which of the following way?
Average of last 3 years tax rate
Option to choose current or average of last 3 years tax rate
Current tax rate
Previous year tax rate
FIN623 Taxation Management Question No: 4 ( M a r k s: 1
Which of the following methods of accounting is compulsory to adopt for Firm?
Accrual Basis
Cash Basis
Both Accrual and Cash Basis
Free to choose any kind of base
Ref:
For Companies –Accrual basis mandatory.
For Others --- optional, cash or Accrual Basis
FIN623 Taxation Management Question No: 5 ( M a r k s: 1 )
Suppose a Profit acquired by a cultivator from the sale of standing crops or the produce after harvesting. The profit of the cultivator will be treated in which of the following way?
Income from Business
Agriculture Income
Income from Property
Capital Gain
Ref:
Following Income are held to be “Agricultural Income”
•Profit on sale of standing crops or the produce after harvest by a cultivating owner or tenant of land.
FIN623 Taxation Management Question No: 6 ( M a r k s: 1 )
If person supplying water to the land for the purpose of growing rice in the field and he charged money from the cultivator against the water supplied.
What will be the tax treatment of such income?
Exempt as Agriculture Income
Allowed Reduction in tax rate
Allowed reduction in tax liability
Taxable as Non-Agriculture Income
Ref provided by azeemkhan2000: Following Incomes are held to be “Non-Agricultural Income”
Income from sale of agricultural produce received by way of price for water supplied to land.
FIN623 Taxation Management Question No: 7 ( M a r k s: 1 )
Mr. Imran is an employee of Provincial Government of Punjab posted in UK for two years? What will be the residential status of Mr. Imran?
Resident Individual
Non-Resident Individual
Resident HUF
Resident AOP
Ref:
Resident Individual (Section 82)
• Is an employee or official of the Federal Government or a Provincial Government posted abroad in the tax year?
FIN623 Taxation Management Question No: 8 ( M a r k s: 1 )
For a non-resident AOP which of the following condition must be satisfied?
Control and management of affairs of AOP is situated partly in Pakistan
Control and management of affairs of AOP is situated wholly in Pakistan
Control and management of affairs of AOP is situated wholly or partly in Pakistan
None of the given options
Ref:
Residential Status of “Association of Person”
Under the law a Firm, HUF, etc. are placed under the head AOP
Control and management of affairs of AOP is situated wholly or partly in Pakistan
FIN623 Taxation Management Question No: 9 ( M a r k s: 1 )
What is the tax treatment of the reimbursement of expenditure made by the employer?
Wholly Taxable
Wholly exempt
Partly Taxable
Not mentioned in Income Tax Ordinance 2001
Ref:
Reimbursement of expenditure by the employer is Taxable
FIN623 Taxation Management Question No: 10 ( M a r k s: 1 )
What is the tax treatment of the leave encashment of the armed forces of Pakistan on retirement made by the employer?
Wholly Taxable
Wholly exempt
Partly Taxable
Not mention in Income Tax Ordinance 2001
Ref:
Leave Salary:
This is taxable whenever received or right to receive is exercised by the employee. Leave encashment on retirement falls in this category. The only exemption available is for the members of the Armed Forces of Pakistan, employees of the Federal Government and Provincial Governments.
FIN623 Taxation Management Question No: 11 ( M a r k s: 1 )
As part of remuneration package, a company provides for reimbursement of telephone costs on actual basis to its employees in case the facility is used for official purposes only, what are the tax consequences of this policy?
Treated as taxable
No tax consequences
Partially taxable
Not discussed in Income Tax Ordinance 2001
Ref:
Reimbursement of expenditure by the employer is Taxable
FIN623 Taxation Management Question No: 12 ( M a r k s: 1 )
MTS stands for which of the following?
Minimum time scale
Minimum transfer Salary
Maximum time scale
Maximum transfer Salary
Ref:
Concept of MTS (Minimum of Time Scale):
This is the starting point or minimum amount which is available to an employee under a time scale
FIN623 Taxation Management Question No: 13 ( M a r k s: 1 )
Condition for the approval of gratuity fund is based on which of the following?
Trust is irrevocable
Trust is revocable
Trust is established by Government
Trust is approved by Officer of Income Tax
Ref:
Condition for Approval
• • Fund established under an irrevocable trust and purposes of gratuity fulfilled.
FIN623 Taxation Management Question No: 14 ( M a r k s: 1 )
Clause (10) and (11) of Part 1 of second schedule related to Pension are omitted by which of the following?
Finance Ordinance 2004
Finance Ordinance 2005
Finance Bill 2006
Finance Bill 2007
Ref;
twenty per cent of the eligible person’s taxable income for the relevant tax year;
Provided that an eligible person (words "a person" substituted by Finance Bill 2006)
FIN623 Taxation Management Question No: 15 ( M a r k s: 1 )
Which of the following is the tax treatment for Income from property received as a rent for the year 2007?
1 /4 of the rent is deduct able as repairs allowance
1 /2 of the rent is deduct able as repairs allowance
1 /5 of the rent is deduct able as repairs allowance
No deduction is allowed
FIN623 Taxation Management Question No: 16 ( M a r k s: 1 )
A non adjustable advance is received from a building as income from property. Such rent will be spread in how many of the following years?
5 years
6years
8 years
10 years
Ref:
Non adjustable advance is spread over ten years.
FIN623 Taxation Management Question No: 17 ( M a r k s: 1 )
Under clause (93 A) of the Part 1 of second schedule of Income Tax Ordinance 2001,which of the following business income is exempted from tax?
Income of a Text-Book Board
University or Educational Institution established not for profit purpose
Recognized Vocational Institute
Income of Recognized Sports Board
Ref:
(93A) Recognized Vocational Institute.
FIN623 Taxation Management Question No: 18 ( M a r k s: 1 )
Head Income from property section 15 defines land as:
Constructed building
Block of brick
Vacant plot
None of the given options
FIN623 Taxation Management Question No: 19 ( M a r k s: 1 )
One of the following options doesn t come under the definition of Business income section 2 (9):
Trade
Commerce
Profession
Employment
Ref:
Business Defined Section 2(9)
“Business includes any trade, commerce, manufacture, profession, vocation but doesn’t include employment”
FIN623 Taxation Management Question No: 20 ( M a r k s: 1 )
Which one of the following section defines Income under the head Income from Business section 18?
Section 2(9)
Section 2(29)
Section 75
Section 2(15)
FIN623 Taxation Management Question No: 21 ( M a r k s: 1 )
Which of the following section deals with the deductions Not allowed to income from business?
Section 2 (9)
Section 20
Section 21
Section 22
Ref:
Deductions not Allowed – Sec. 21
FIN623 Taxation Management Question No: 22 ( M a r k s: 1 )
Gain on sale of depreciable asset, under section 31 of the Income Tax Ordinance 2001, is charged to tax under which of the following head of Income?
Income from Business
Income from Property
Income from Capital Gain
Income from Other sources
Ref:
Transfer to Participatory Reserve (Sec 31)
Following Incomes are taxable under the head Income from Business even in cases where no business is carried on by taxpayer.
ƒRecovery against any deduction/expenses previously allowed (Add back to income).
ƒGain on sale of depreciable asset.
ƒRecovery of bad debt/or written off loan.
ƒTrading liabilities not paid within expiration of three years.
ƒAmount received after discontinuance of business.
FIN623 Taxation Management Question No: 23 ( M a r k s: 1 )
Amount received after discontinuance of business, under section 31 of the Income Tax Ordinance 2001, is charged to tax under which of the following head of Income?
Income from Business
Income from Property
Income from Capital Gain
Income from Other sources
Ref:
Transfer to Participatory Reserve (Sec 31)
Following Incomes are taxable under the head Income from Business even in cases where no business is carried on by taxpayer.
ƒRecovery against any deduction/expenses previously allowed (Add back to income).
ƒGain on sale of depreciable asset.
ƒRecovery of bad debt/or written off loan.
ƒTrading liabilities not paid within expiration of three years.
ƒAmount received after discontinuance of business.
FIN623 Taxation Management Question No: 24 ( M a r k s: 1 )
Which of the following is the tax rate that a Resident Company is subjected to pay on its turnover for a tax year, even in cases where the company sustains loss?
0.25%
0.50%
0.75%
1.00%
Ref:
Resident Company is subjected to minimum tax @ 0.50% of its turnover for a tax year, even in cases wherethe company sustains loss.
FIN623 Taxation Management Question No: 25 ( M a r k s: 1 )
The amount of minimum tax liability is arrived at as follows:
(A x 0.5%) B
(A x B) 0.5%
(A + B) 0.5%
(A / 0.5%) B
The amount of minimum tax liability is arrived at as follows:
(A x 0.5%) B
FIN623 Taxation Management Question No: 26 ( M a r k s: 1 )
In case of disposal of asset between spouses under an agreement to live apart, what would be the tax treatment of such disposal of asset?
Charged to tax under the head Income from Business
Charged to tax under the head Income from Capital Gain
Exempt from tax under section 79 of the Income Tax Ordinance 2001
Charged to tax under the head Income from Property
Ref:
Disposals Not Chargeable To Tax Under Sec.79 Non Recognition Rules
No gain or loss shall be taken to arise on the disposal of an asset:
ƒBetween spouses under an agreement to live apart;
FIN623 Taxation Management Question No: 27 ( M a r k s: 1 )
Which of the following is NOT required to file the return of Income Tax under section 115?
Every Company
Every Firm
Every person with land 250 sq yards
Salaried individual having salary certificate in lieu
Ref:
Person Not Required to File Tax Return
Section 115 grants immunity to salaried person in lieu of filing a return as outlined below:
ƒSalary certificate from employer sufficient in lieu of return
FIN623 Taxation Management Question No: 28 ( M a r k s: 1 )
A person may furnish Revised Return from the date when the original return was furnished up to which of the following time period?
5 Days
5 Months
5 Years
15 Months
Ref:
Provision of Revised Tax Return:
A person may furnish Revised Return within five years of the date when the original return was furnished.
FIN623 Taxation Management Question No: 29 ( M a r k s: 1 )
A person where taxable income for a tax year exceeds the maximum amount not chargeable to tax is required to file a return of income for the tax year, presently this
amount is:
Rs.100, 000
Rs.300, 000
Rs.250, 000
Rs.500, 000
Ref:
Provided further that where the total income of a taxpayer marginally exceeds the maximum limit of aslab in the table, the income tax payable shall be the tax payable on the maximum of that slab plus anamount equal to –
(i)20% of the amount by which the total income exceeds the said limit where the total income doesnot exceed Rs. 500,000.
FIN623 Taxation Management Question No: 30 ( M a r k s: 1 )
Which of the following is NOT a liquidator under section 141 of the income tax ordinance 2001?
Receiver appointed by a Court
Trustee for a bankrupt
Mortgagee in possession
Tax payer
Ref:
Liquidators (Sec. 141):
Following are referred to as liquidator:
ƒA liquidator of a company
ƒA receiver appointed by a Court or appointed out of court
ƒA trustee for a bankrupt
ƒA mortgagee in possession
FIN623 Taxation Management Question No: 31 ( M a r k s: 1 )
Federal Tax Ombudsman has the same powers as _____________ to punish any person for its contempt..
Supreme
High court
City court
Provincial Government
Ref:
The Federal Tax Ombudsman has the same powers as the Supreme Court has to punish any person forits contempt.
FIN623 Taxation Management Question No: 32 ( M a r k s: 1 )
The office of Superintendent of Sales Tax, or such other office as the Board may, by notification in the official Gazette, specify is called;
Income tax office
Registered office
Local Sales Tax Office
None of the given options
Ref:
(15) "Local Sales Tax Office" means the office of Superintendent of Sales Tax, or such other office as he Board may, by notification in the official Gazette, specify;
FIN623 Taxation Management Question No: 33 ( M a r k s: 1 )
Capital Value Tax was levied on the capital value of assets with effect from;
1st July, 1989
1st June 1990
1st July 2000
1st July 1999
Ref:
Capital Value Tax was levied with effect from 1st July, 1989 on the capital value of assets.
FIN623 Taxation Management Question No: 34 ( M a r k s: 1 )
A directorship or any other office involved in the management of a company under section 2(22) of Income Tax Ordinance, 2001 is termed as:
Employment
Employer
Employee
Business premises
Ref:
2(22) “employment includes:
• a directorship or any other office involved in the management of a company;
• a position entitling the holder to a fixed or ascertainable remuneration; or
• the holding or acting in any public office
FIN623 Taxation Management Question No: 35 ( M a r k s: 1 )
Mr. X resident of Pakistan earned income from Property situated in London Rs. 50,000 but received in India. Which one of the following option is right for this particular scenario?
Mr. X being resident of Pakistan Rs. 50,000 will be added in Gross total income
Mr. X being resident of Pakistan Rs. 50,000 will be subtracted in Gross total income
Mr. X being resident of Pakistan Rs. 50,000 will be claimed as admissible deduction
Mr. X being resident of Pakistan Rs. 50,000 will be exempted
FIN623 Taxation Management Question No: 36 ( M a r k s: 1 )
Mr. X non-resident of Pakistan earned income from property situated in Dubai Rs. 70,000 but received in Pakistan. Which one of the following option is right for this particlar scenario?
Mr. X being non-resident of Pakistan Rs. 70,000 will be added in Gross total income
Mr. X being non-resident of Pakistan Rs. 70,000 will be subtracted in Gross total income
Mr. X being non-resident of Pakistan Rs. 70,000 will be claimed as admissible deduction
Mr. X being non-resident of Pakistan Rs. 70,000 will be exempted
FIN623 Taxation Management Question No: 37 ( M a r k s: 1 )
Which of the following is the rate of tax for salaried Individuals for tax year 2009, where the taxable income exceeds Rs. 250,000 but does not exceed Rs. 350,000?
Nil
0.250%
0.50%
0.75%
Ref:
Page no 45 of handouts
FIN623 Taxation Management Question No: 38 ( M a r k s: 1 )
Which of the following is the rate of tax for salaried Individuals for tax year 2009, where the taxable income exceeds Rs. 400,000 but does not exceed Rs. 450,000?
0.25%
1.50%
2.50%
3.50%
Ref:
Page no 45 of handouts
FIN623 Taxation Management Question No: 39 ( M a r k s: 1 )
Miss Sonia s total taxable income for the year 2009 is Rs. 240,000. Which of the following is the tax liability of Miss Sonia?
Nil
Rs. 500
Rs. 1,000
Rs. 1,500
Ref:
Where the taxable income exceeds Rs. 180,000 but does not exceed Rs 250,000, the tax rate is 0.50%
So the tax amount will be
240000 @ 0.50% = 1200
There is not any correct option
FIN623 Taxation Management Question No: 40 ( M a r k s: 1 )
Mr. As total taxable income for the year 2009 is Rs. 600,000. Which of the following is the tax liability of Mr. A?
Rs. 15,000
Rs. 21,000
Rs. 27,000
Rs. 36,000
Ref:
Where the taxable income exceeds Rs. 550,000 but does not exceed Rs.
650,000, the tax rate is 4.50%
So
600,000 @ 4.50% = 27000
FIN623 Taxation Management Question No: 41 ( M a r k s: 1 )
Which of the following is the Tax Treatment of utilities for the year 2009?
Wholly taxable
Wholly exempted
Exempt up to 10% of MTS
Exempt up to 1% of MTS
Ref:
Utilities were exempt up to 10% of MTS or Basic salary till 30th
June, 2006, vide clause 38 of part 1 of Second Schedule. This clause has been omitted by Finance Act, 2006. Hence no exemption is available fortax year 2009.
FIN623 Taxation Management Question No: 42 ( M a r k s: 1 )
A firm ABC maintaining its account in cash basis, at June 27, 2008 it incurred expenses for Rs. 10,000 but actual payments made at 01 August 2008. It would be charge to tax into the tax year:
2006
2007
2008
2009
FIN623 Taxation Management Question No: 43 ( M a r k s: 3 )
What is the main purpose of Gratuity?
FIN623 Taxation Management Question No: 44 ( M a r k s: 3 )
Mr. Farooq s salary is Rs.22, 000 per month. He received commission during the year amounting to Rs.33, 000. He is provided a jeep by his employer for personal as well as official use. The employer took this jeep from a leasing company at an annual lease of Rs.80, 000. The fair market value of the jeep at commencement of lease was Rs.800, 000.Calculate the taxable income of Mr.Farooq.
FIN623 Taxation Management Question No: 45 ( M a r k s: 3 )
Briefly explain the unexplained income or assets under section 111 of Income Tax Ordinance 2001.
FIN623 Taxation Management Question No: 46 ( M a r k s: 5 )
Under what conditions a commissioner of Income Tax may ask for the filing of returns by notice?
FIN623 Taxation Management Question No: 47 ( M a r k s: 5 )
Mr. Ghaus is employed in a company after his retirement from army. Details of his income for the year ended 30th
June 2009 are as under;
Basic salary from company Rs.20, 000 per month
Entertainment allowance Rs. 1,000 per month
Pension received from army Rs. 48,000 per annum
Calculate the total taxable income of Mr.Ghaus.
FIN623 Taxation Management Question No: 48 ( M a r k s: 10 )
Mr. Irfan is 62 years of age. At present he is working as General Manager of a private organization. His particulars for the year ended 30th
June 2009 are as follows.
Rs
Basic salary (40,000-1,000-55,000) 50,000p.m.
Traveling allowance 112,000
Conveyance allowance 48,000
Pension from Government 12,000 p.m.
Bonus 50,000
Zakat paid under zakat ordinance 20,000
Medical expenses 27,000
Further information provided:
1. Mr. Irfan has been provided a car for personal purposes. The cost of the car is Rs.
780,000.
2. He has been provided a rent - free accommodation. He was entitled to a house
allowance of Rs. 8,000 per month.
3. The medical expenditures incurred during the year are verifiable.
4. Tax rate prevail 9%.
Compute the taxable income and tax payable on it.
FIN623 Taxation Management Question No: 49 ( M a r k s: 10 )
From the following particulars, calculate the tax payable by Mr.Gauhar employed in a private limited company for the year ended 30th June 2009 @ 0.5 %. Mr Gauhar is 62 years of age;
Salary (in scale 14,000-200-16,000) Rs.15, 000 p.m.
Cost of living allowance 20,000 p.a.
Special additional allowance 6,000 p.a.
Medical allowance 21,200 p.a.
Books of religious nature purchased 2,000
Zakat paid under zakat ordinance 3,200
Contribution to approved charitable institute Rs. 19,200
