FINALTERM EXAMINATION
Spring 2010 Paper
FIN623- Taxation Management
FIN623 Taxation Management - Question No: 1 ( M a r k s: 1 )
Which of the following is not an employment tax?
► Social Security Tax
► Federal Excise Tax
► Federal unemployment compensation tax
► State unemployment compensation tax
Ref: Excise taxes, also known as manufacturer's excise taxes, are fees imposed by all levels of government on producers, manufacturers and importers of goods and activities.
FIN623 Taxation Management - Question No: 2 ( M a r k s: 1 )
How many Sections are included in the Income Tax Ordinance 2001?
► 340 sections
► 440 sections
► 140 sections
► 240 sections
Ref: Basic Features of Income Tax Ordinance 2001: Parts & divisions ¾There are 240 Sections
FIN623 Taxation Management - Question No: 3 ( M a r k s: 1 )
How many Schedules are contained in the Income Tax Ordinance 2001?
► Three Schedule
► Fifth Schedule
► Seven Schedules
► Nine Schedules
Ref: Basic Features of Income Tax Ordinance 2001: This ordinance comprises of seven Schedules
FIN623 Taxation Management - Question No: 4 ( M a r k s: 1 )
Section 2(13) of Income Tax Ordinance 2001 defined:
“Commissioner” means a person appointed as a Commissioner of Income Tax under section 208, and includes a taxation officer vested with all or any of the powers, and functions of the Commissioner;
In which criteria the above definition falls?
► Exclusive definition
► Inclusive definition
► Both Exclusive and Inclusive definitions
► Statutory definition
Ref: Exclusive or Exhaustive Definition: • It excludes ordinary dictionary meanings of the word. Exclusive definitions start with the expression’ mean’ or ‘means’.
FIN623 Taxation Management - Question No: 5 ( M a r k s: 1 )
Which of the following is the Special Accounting Year of Insurance Companies?
► 1st January to 31st December
► 1st July to 30th June
► 1st October to 30th September
► 1st September to 31st August
Ref: All persons exporting rice and carrying insurance business 1st January to 31st December.
FIN623 Taxation Management - Question No: 6 ( M a r k s: 1 )
Certain incomes those are excluded from tax are called as:
► Perquisites
► Exemptions
► Allowances
► Deductions
FIN623 Taxation Management - Question No: 7 ( 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?
► Taxable as Non-Agriculture Income
► Exempt as Agriculture Income
► Allowed Reduction in tax rate
► Allowed reduction in tax liability
Ref: Income from sale of agricultural produce received by way of price for water supplied to land.
FIN623 Taxation Management - Question No: 8 ( M a r k s: 1 )
The process of clubbing of income results in which of the following?
► Lower Bracket rate of tax is charged
► Higher Bracket rate of tax is charged
► Moderate Bracket rate of tax is charged
► No change occur due to clubbing
As a result of clubbing, higher tax bracket will be charged to "the person, to whom this income is clubbed" . In this mcq, it is not clear whose tax bracket will be affected.
There is counter effect on tax bracket. Let say,
If wife clubbed her income with her husband 's income then her husband's income will be increased and he will definitely fall into higher tax bracket and wife will do it for saving herself from higher tax bracket.
Thus , her tax bracket will be decreased or will not be increased due to that transferred income
FIN623 Taxation Management - Question No: 9 ( M a r k s: 1 )
Date for the exemption limit for Foreign Currency Account (FCA) under Clause 80 of the Part I of Second Schedule is available to which of the following?
► 16 December 1999
► 16 November 1999
► 16 July 2001
► 1st July 2002
Ref: Foreign Currency Accounts [Clause (80), Part I of the Second Schedule]“Any income derived from a private foreign currency account held with an authorized bank in Pakistan, [or certificates of investment issued by Investment Banks,] in accordance with the Foreign Currency Accounts Scheme introduced by the State Bank of Pakistan, by a resident individual who is a citizen of Pakistan. Provided that the exemption under this clause shall not be available in respect of any incremental deposits made in the said accounts on the after the 16th day of December, 1999, or in respect of any accounts opened under the said scheme on or after the said date.”
FIN623 Taxation Management - Question No: 10 ( M a r k s: 1 )
Any amount received under Part 3 of Second Schedule, as flying allowance by pilots etc. and junior commissioned officers or other ranks shall be taxed at the rate of __________ as separate block.
► 2.5%
► 5.5%
► 7.5%
► 9.5%
Ref: Reduction in Tax Liability under Second Schedule Part 3 • Any amount received as flying allowance by pilots etc. and junior commissioned officers or other ranks shall be taxed @2.5% as separate block.
FIN623 Taxation Management - Question No: 11 ( M a r k s: 1 )
Which of the following days shall be counted as whole day for the computation of residential status of an individual?
► A public holiday
► A day of sick leave
► Any strike day
► All of the given options
FIN623 Taxation Management - Question No: 12 ( M a r k s: 1 )
Rental income shall be Pakistan-source income if it is derived from:
► The lease of immovable Property in Pakistan
► The lease of immovable Property outside Pakistan
► The lease of immovable Property both in and out of Pakistan
► None of the given options
Ref: Rental income shall be Pakistan-source income if it is derived from the lease of immovable property in Pakistan whether improved or not, or from any other interest in or over immovable property, including a right to explore for, or exploit, natural resources in Pakistan.
FIN623 Taxation Management - Question No: 13 ( M a r k s: 1 )
Pension received by Mr. John through permanent establishment in Pakistan is belonging to which of the following?
► Pakistani source of Income
► Foreign source of income
► Both Pakistan and foreign source of income
► None of the given option
Ref: A pension or annuity shall be Pakistan-source income if it is paid by a resident or borne by a permanent establishment in Pakistan of a non-resident person.
FIN623 Taxation Management - Question No: 14 ( M a r k s: 1 )
What is the tax treatment of losses from the foreign source under section 104 of the ordinance?
► Wholly taxable
► Partly Taxable
► Deductible expenditure
► None of the given options
Ref: Foreign losses Sec.104: Deductible expenditures incurred by a person in deriving foreign source income chargeable to tax under a head of income shall be deductible only against that income.
FIN623 Taxation Management - Question No: 15 ( M a r k s: 1 )
Rental income earned is taxable on a net income basis that is, after deduction of tax admissible expenditure and allowances from gross rent, for up to Tax year:
► 2007
► 2008
► 2006
► 2005
FIN623 Taxation Management - Question No: 16 ( M a r k s: 1 )
On Building (all types) the depreciation rate specified for the purposes of section 22 shall be:
► 10%
► 12%
► 5%
► 20%
Ref: It means any expenditure incurred before the commencement of the business wholly and exclusively to derive income chargeable to tax, including the cost of feasibility studies, trial production activities but shall not include any expenditure which is incurred in acquiring land, or which is depreciated or amortized under section 22 ( depreciation) or section 24 ( intangibles)
FIN623 Taxation Management - Question No: 17 ( M a r k s: 1 )
Rates of depreciation is prescribed in which of the following part of third schedule of the Income Tax Ordinance:
► Part II
► Part III
► Part I
► None of the given options
Ref: Depreciation (Sec.22) Third Schedule Part 1
FIN623 Taxation Management - Question No: 18 ( M a r k s: 1 )
Which section define this ‘Income tax depreciation is admissible only in respect of depreciable assets'.
► Section 22(15)
► Section 22 (11)
► Section 23 A
► Section 24
FIN623 Taxation Management - Question No: 19 ( M a r k s: 1 )
Profit on debt charged to tax under which of the following heads of Income?
► Income form Property
► Income from Business
► Income from Capital Gain
► Income from Other Sources
FIN623 Taxation Management - Question No: 20 ( 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
► Orphan with age below 25
Ref: Salary certificate from employer sufficient in lieu of return Other Exceptions: Sec-115
- Widow
- Orphan below age of 25 years
- Disabled person or
- In case of ownership of immovable property, a non-resident person
FIN623 Taxation Management - Question No: 21 ( M a r k s: 1 )
Appeal to the collector of sales tax may be filed within which of the following time period?
► 60 days
► 90 days
► 180 days
► 30 days
FIN623 Taxation Management - Question No: 22 ( M a r k s: 1 )
Members of income tax appellate tribunal are appointed by which of the following authorities?
► Income Tax Department
► Provincial Government
► Federal Government
► Judicial Commission
Ref: Appointment of the Appellate Tribunal (Sec. 130)
• Appellant tribunal shall consist of a chair person, judicial members and accountant members as are appointed by the Federal Government.
FIN623 Taxation Management - Question No: 23 ( M a r k s: 1 )
Federal Tax Ombudsman has the same powers as _____________ to punish any person for its contempt.
► Supreme Court
► High court
► City court
► Provincial Government
Ref: The Federal Tax Ombudsman has the same powers as the Supreme Court has to punish any person for its contempt.
FIN623 Taxation Management - Question No: 24 ( M a r k s: 1 )
In relation to any registered person means the tax charged under the Sales tax Act in respect of a supply of goods made by that person and shall include duties of excise chargeable under section 3 of the Central Excises Act, 1944 (I of 1944) is known as;
► Output tax
► Input tax
► Income tax
► Wealth tax
Ref: output tax" in relation to any registered person means the tax charged under this Act in respect of a supply of goods made by that person and shall include duties of excise chargeable under section 3 of the Central Excises Act, 1944 (I of 1944) on such excisable goods or services as are notified by the Federal
Government under the third proviso to sub-section (1) thereof and on which such duties are charged, levied and paid as if it were a tax payable under section 3 of this Act;
FIN623 Taxation Management - Question No: 25 ( M a r k s: 1 )
In Sales Tax Act "Zero - rated supply" means a taxable supply which is ► Section 4
► Section 5
► Section 6
► Section 22
48) "Zero - rated supply" means a taxable supply which is charged to tax at the rate of zero per cent under section 4
FIN623 Taxation Management - Question No: 26 ( M a r k s: 1 )
Capital value tax is levied on which of the following? ► Capital gain
► Gross profits
► Capital value of asset
► Intangible assets
Capital Value Tax was levied with effect from 1st July, 1989 on the capital value of assets.
FIN623 Taxation Management - Question No: 27 ( M a r k s: 1 )
What will be the tax liability of an individual who has received an income of Rs. 470,000 under the head income from property?
►Rs.17,750
►Rs. 23,500
► Rs. 47,000
►Rs. 70,500
FIN623 Taxation Management - Question No: 28 ( M a r k s: 1 )
A retailer whose value of supplies in any period during the last twelve months ending any tax period exceeds_______ are required to be registered under the Sales Tax Act 1990;
► Forty million rupees
►Twenty million rupees
►Ten million rupees
►Five million rupees
FIN623 Taxation Management - Question No: 29 ( M a r k s: 1 )
Mr. Amjad (employed by Federal Government) received a basic salary of Rs. 100,000 during the year ended 30.06.2009. He received leave encashment amounting to Rs. 12,000 per month and the special allowance @ 25% which is Rs. 8,400 per month. What would be his taxable income?
►Rs. 50,000
► Rs. 100,000
►Rs. 200,800
►Rs. 244,000
FIN623 Taxation Management - Question No: 30 ( M a r k s: 1 )
Mr. Shahmeer has a gross tax of Rs. 97,200 and taxable income of Rs. 972,000 during the year ended 30.06.2009. He has invested shares in public company of Rs. 120,000 and donated to Mayo Hospital Rs. 30,180. What would be the amount of average relief?
►Rs. 12,738
►Rs. 3,018
►Rs. 9,720
►Rs. 12,000
FIN623 Taxation Management - Question No: 31 ( M a r k s: 1 )
Which of the following is the general formula for calculating tax credits?
►(A+B) x C
►(A-B) x C
►(A/B) x C
►(A/B) + C
FIN623 Taxation Management - Question No: 32 ( M a r k s: 1 )
Salary is the first head or source of income mentioned in which of the following sections of the Income Tax Ordinance 2001?
►Section 12
►Section 34
►Section 20
►Section 85
HEADS OF INCOME (Section 11)
• Salary (Section 12)
• Income from Property (Section 15)
• Income from Business (Section 18)
• Capital Gains (Section 37)
• Income from other Sources (Section 39)
FIN623 Taxation Management - Question No: 33 ( M a r k s: 1 )
Mr. Zahoor received a basic salary of Rs. 10,000 per month during the year ended 30.06.2009. He has received rent free unfurnished accommodation by his employer. He was entitled to receive rent @ Rs. 4,000, per month, if this accommodation was not provided to him. What would be his tax payable?
► Nil
►Rs. 133,980
►Rs. 195,000
►Rs. 210,000
FIN623 Taxation Management - Question No: 34 ( M a r k s: 1 )
Mr. Shafqat received a basic salary of Rs. 200,000 during the year ended 30.06.2009. He has received lunch facility, cost of living allowance and adhoc relief of Rs. 6,000, 50,000, and 7,800 respectively. What would be his tax payable?
► Rs. 1,030
►Rs. 1,039
►Rs. 1,069
►Rs. 1,978.5
FIN623 Taxation Management - Question No: 35 ( M a r k s: 1 )
Mr. Asif received a salary of Rs. 200,000 during the year ended 30.06.2009. His MTS is (Rs. 55,000-5,000-70,000). He has received medical allowance and facility of interest free loan from his employer of Rs. 10,000 per month and Rs. 900,000 respectively. What would be his tax payable?
-
► Rs. 1,987.5
► Rs. 2,535
► Rs. 107,500
►Rs. 134,200
FIN623 Taxation Management - Question No: 36 ( M a r k s: 1 )
In case, general provident is approved by Govt. or a local authority or a statutory body under clause 13 (i) of the Income Tax Ordinance 2001 then what will be the treatment of such Gratuity fund?
►Wholly exempt
►Exempt up to Rs. 100,000
►Exempt up to Rs. 200,000 and exceeding amount will be charged as salary
►50% of the amount receivable or Rs. 75,000 whichever is less
FIN623 Taxation Management - Question No: 37 ( M a r k s: 1 )
Mr. Afsar received a basic salary of Rs. 900,000 during the year ended 30.06.2009. He has received dividend income of Rs. 15,000 and verifiable personal medical expenses of Rs. 20,000. What would be his tax payable?
► Rs. 67,500
► Rs. 84,150
►Rs. 82,800
► Rs. 82,350
FIN623 Taxation Management - Question No: 38 ( M a r k s: 1 )
The taxable income of Mr. Sabahat is Rs. 460,400 during the year ended 30.06.2009. He has received an interest free loan of Rs. 100,000 at which the employer charged interest at a rate of 12%. What would be his tax payable?
-
►Rs. 16,534
►Rs. 460,400
►Rs. 472,400
►Rs. 560,400
FIN623 Taxation Management - Question No: 39 ( M a r k s: 1 )
Mr. Sufyan has rented out his house at Rs. 80,000 per month. As per rent deed he has received an amount of Rs. 150,000 as advance, which is non adjustable against rent. What would be the amount of rent chargeable to tax?
-
► Rs. 40,000
►Rs. 975,000
►Rs. 73,000
►Rs. 100,800
FIN623 Taxation Management - Question No: 40 ( M a r k s: 1 )
Mr. Tareen let out a house at the monthly rent of Rs. 150,000 and received a deposit of Rs. 65,000 not adjustable against the rent. What would be his tax payable?
► Rs. 3,250
►Rs. 325
►Rs. 92,400
►Rs. 215,000
FIN623 Taxation Management - Question No: 41 ( M a r k s: 1 )
Mr. Liaqat during the year ended 30th June 2009 received a net profit of Rs. 60,000. He has received profit on sale of investments of Rs. 10,000 and interest on government securities of Rs. 3,000. What will be his income from profession?
► Rs. 53,000
► Rs. 67,000
►Rs. 73,000
►Rs. 47,000
FIN623 Taxation Management - Question No: 42 ( M a r k s: 1 )
Mr. Mohsin during the year ended 30th June 2009 received a net profit of Rs. 250,000. He has maintained a reserve for meeting contingent liability. The maintenance cost him Rs. 25,000 and he has paid for purchase of goodwill Rs. 30,000. What will be his income from profession?
► Rs. 170,000
►Rs. 230,000
►Rs. 255,000
►Rs. 330,000
FIN623 Taxation Management - Question No: 43 ( M a r k s: 1 )
Mr. Jamil an engineer has received consultancy fee of Rs. 385,000. He has paid design and draft related salaries and site supervisors Rs. 45,000 and Rs. 36,000 respectively. What will be his income from profession?
► Rs. 304,000
►Rs. 394,000
►Rs. 376,000
►Rs. 466,000
FIN623 Taxation Management - Question No: 44 ( M a r k s: 1 )
Mrs. Mazhar during the year ended 30th June 2009 received salary of Rs. 80,000 per month. She has received income from fish catching business of Rs. 30,000. What will be her income from profession?
►Rs. 50,000
►Rs. 110,000
► Rs. 990,000
► Rs. 960,000
FIN623 Taxation Management - Question No: 45 ( M a r k s: 1 )
M/s Junior during the year ended 30th June 2009 received a net profit of Rs. 139,400. The income tax as per P&L account is worth Rs. 2,500 and loss by embezzlement of Rs. 5,000. What will be the tax payable of the company?
►Rs. 785,000
►Rs. 51,415
►Rs. 730,000
► Rs. 725,000
FIN623 Taxation Management - Question No: 46 ( M a r k s: 1 )
Mr. Qasim received income from business of Rs. 107,000. He has received gain on sale of residential house of Rs. 140,000. What will be his taxable income?
►Rs. 50,000
►Rs. 300,000
►Rs. 107,000
► Rs. 100,000
FIN623 Taxation Management - Question No: 47 ( M a r k s: 1 )
Mr. Sabir received income from business of Rs. 107,000. He has received profit on encashment of Defence Saving Certificates of Rs. 10,000. What will be his income from profession?
► Rs. 300,000
► Rs. 200,000
► Rs. 107,000
► Rs. 192,000
FIN623 Taxation Management - Question No: 48 ( M a r k s: 1 )
Mrs. Gilani has received basic salary of Rs. 300,000 during the tax year 2009. She has received matured Defence Saving Certificates of Rs. 80,000 of which 70,000 were encashed. What will be his taxable income?
► Rs. 960,000
►Rs. 110,000
►Rs. 50,000
►Rs. 310,000
FIN623 Taxation Management - Question No: 49 ( M a r k s: 3 )
What is meant by Depreciable asset?
Depreciable asset means a tangible movable or immovable property (not unimproved land) or structural
improvement to immovable property owned by a person that has:
• Normal useful life of one year or more.
• Likely to lose value due to normal wear and tear.
• Used wholly in deriving income from business chargeable to tax.
FIN623 Taxation Management - Question No: 50 ( M a r k s: 3 ) Who is liable to pay Capital Value Tax on capital value of certain assets?
FIN623 Taxation Management - Question No: 51 ( M a r k s: 5 )
Your are required to define in detail the section 21(l) ‘Expenditure paid for in cash’under head Income from Business'.
FIN623 Taxation Management - Question No: 52 ( M a r k s: 5 )
What do you understand by the term ‘mal-administration’ in context with Income tax department? Explain.
The term “mal-administration” includes:
(i) A decision, process, recommendation, act of omission or commission which-
(a) Is contrary to law, rules or regulations or is a departure from established practice or procedure,
unless it is bona fide and for valid reasons;
(b) Is perverse, arbitrary or unreasonable, unjust, biased, oppressive, or discriminatory;
(c) Is based on irrelevant grounds; or
(d) Involves the exercise of powers, or the failure or refusal to do so, for corrupt or improper motives,
such as bribery, jobbery, favouritism, nepotism and administrative excesses;
ii neglect, inattention, delay, incompetence, inefficiency and ineptitude, in the administration or discharge
of duties and responsibilities;
iii Repeated notices, unnecessary attendance or prolonged hearings while deciding cases involving-
(a) Assessment of income or wealth;
(b) Determination of liability of tax or duty;
(c) Classification or valuation of goods;
(d) Settlement of claims or refund, rebate or duty drawback; or
(e) Determination of fiscal and tax concessions or exemptions
iv Wilful errors in the determination of refunds, rebates or duty drawbacks;
v Deliberate withholding or non-payment or refunds, rebates or drawbacks already determined by the
competent authority;
vi Coercive methods of tax recovery in cases where default payment of tax or duty is not apparent from
record; and
vii Avoidance of disciplinary action against an officer or official whose order of assessment or valuation is
held by a competent appellate authority to be vindictive, capricious, biased or patently illegal
FIN623 Taxation Management - Question No: 53 ( M a r k s: 5 ) Mr. Adeel owns a property which he has rented out for Rs.10, 000 per month. The local authority has determined the rental value of the property as Rs.144, 000. He has no other income.
Required:
What will be the fair market value of the property?
How much tax will be payable by Mr.khan for the tax year 2009? 
