MIDTERM EXAMINATION
Spring 2009
FIN623- Taxation Management (Session - 2)
Question No: 1 ( M a r k s: 1 ) http://vuzs.net
Taxes are important instrument of which one of the following policy?
Monetary policy
Fiscal policy
Trade Policy
Economic Policy
Question No: 2 ( M a r k s: 1 ) http://vuzs.net
Removal of deficit in Balance of Payments is one of the objectives of which of the
followingpolicy?
Monetary policy
Fiscal policy
Trade Policy
Economic Policy
Ref:
Objectives of Fiscal Policy
Removal of deficit in Balance of Payments
Question No: 3 ( M a r k s: 1 ) http://vuzs.net
In the canons of taxation, which one of the following statements best describe the
benefitsprinciple?
Persons deriving more income leadsto enjoy less benefits from the state,
shouldbe taxed at the lower rates.
Persons deriving more income leadsto enjoy less benefits from the state,
shouldbe taxed at the higher rates.
Persons deriving less income leadsto enjoy more benefits from the state,
shouldbe taxed at the lower rates.
All persons deriving more or less income should be taxed at the same rates.
Ref:
Benefit principle
This principle suggests that taxes should be levied according to the benefits derived by the person from the state. Since more benefits are derived by lower income groups, hence according to this principle, those who derive more income but enjoy less benefits from the state should be taxed at the lower rates and those persons who derives less income but more benefits from State should be taxed at high rates.
Question No: 4 ( M a r k s: 1 ) http://vuzs.net
Taxation management is a strategy where by a person manages its business in
sucha way so as to maximize the utilization of which of the following?
Tax holidays
Exemption, Rebates & Concession
Tax credits
All of the given options
Ref:
Taxation Management—Explained
Taxation management is a strategy where by a person manages its business and other transactions/activities in such a way so as to make maximum use of tax holidays, exemption, concession, rebates, tax credits, deductible allowances available under law and as a result is able to derive the benefit of minimizing his tax liability.
Question No: 5 ( M a r k s: 1 ) http://vuzs.net
Which of the following was the First law on Income Tax promulgated in
Pakistan?
1st July, 1979
1st July, 1969
1st July, 1949
1st July, 2002
Ref:
Income Tax Ordinance, 1979
First law on Income Tax was promulgated inPakistanfrom 1st
July, 1979.
Question No: 6 ( M a r k s: 1 ) http://vuzs.net
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
Scheme of the Ordinance is given below:
¾ There are thirteen chapters
¾Chapters are divided into:
ƒParts &
ƒDivisions
¾There are 240 Sections
Question No: 7 ( M a r k s: 1 ) http://vuzs.net
Superior judiciary includes which of the following authorities?
City Court
Supreme Court
High Court
Both supreme andHighcourt
Question No: 8 ( M a r k s: 1 ) http://vuzs.net
The _____ year is a period of twelve months arbitrarily chosen for tax purposes.
Economic
Fiscal
Economy
Monetary
Question No: 9 ( M a r k s: 1 ) http://vuzs.net
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.
Question No: 10 ( M a r k s: 1 ) http://vuzs.net
Which of the following is the Special Accounting year of the persons carrying cotton
ginning, rice husking and oil milling?
1st January to 31st December
1st July to 30th June
1st October to 30th September
1st September to 31st August
Ref: All persons carrying on business of cotton ginning, rice husking andoil milling1st September to 31st August.
Question No: 11 ( M a r k s: 1 ) http://vuzs.net
Which one of the following is the example of tax payer?
Salaried Person
LESCO
WAPDA
All of the given options
Question No: 12 ( M a r k s: 1 ) http://vuzs.net
Which of the following is the legal status of theVirtualUniversityunder the
provisionsof section 80 of the ordinance?
Individual
Company
Banking Company
Hindu Undivided Family
Ref:
Page no 16
Question No: 13 ( M a r k s: 1 ) http://vuzs.net
For the purpose of Taxation the total Income includes which of the following?
Income as per Section 11
Income from Capital gain
Only business income
Only Salary income
Ref: HEADS OF INCOME (Section 11)
Following are the heads of income, ascertained in 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)
Question No: 14 ( M a r k s: 1 ) http://vuzs.net
Which of the following section deals with the change of accounting method
adoptedby an entity?
Section 32(1)
Section 32(2)
Section 32(3)
Section 32(4)
Ref: Method of accounting (Section 32)
ƒ Cash Basis or
ƒ Accrual Basis
• For Companies ‘Accrual Basis’ method of accounting is compulsory [Section 32(2)]
• Change of Method of Accounting can be made under [Section 32(4)]
Question No: 15 ( M a r k s: 1 ) http://vuzs.net
What will be the tax treatment of any income chargeable under the headSalary
earnedby an individual outsidePakistanduring that year?
Wholly Taxable
Wholly Exempt
Partly Exempt
Not mention in Ordinance
Ref:
2.Where a citizen of Pakistan leaves Pakistan during a tax year and remains abroad during that tax year, any income chargeable under the head :Salary” earned by him outside Pakistan during that year shall be exempt from tax under the Ordinance
Question No: 16 ( M a r k s: 1 ) http://vuzs.net
Date for the exemption limit for Foreign Currency Account (FCA) under Clause
80 of the Part I of Second Scheduleisavailable 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 the16th day of December, 1999, or in respect of any accounts opened under the said scheme on or after the said date.”
Question No: 17 ( M a r k s: 1 ) http://vuzs.net
Senior citizen-age 60 years & above where taxable income not exceeding
________taxliability reduced by 50% under Part 3 of second schedule.
Rs. 500,000
Rs. 200,000
Rs. 300,000
Rs. 400,000
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.
• Senior citizen-age 60 years &above where taxable income not exceedingRs. 400,000/- tax liability reduced by 50%.
Question No: 18 ( M a r k s: 1 ) http://vuzs.net
M/s ABC & Co. has been incorporated under Pakistan Companies Ordinance 1984.
However it’s most of the branched and control and management of affairs wholly
situatedout ofPakistan? What will be the residential status of M/s ABC & Co.?
Resident Company
Non-Resident Company
Resident Individual
Resident AOP
Question No: 19 ( M a r k s: 1 ) http://vuzs.net
Salary income received by resident person from Federal Government of Pakistan
inUKbelongs to which of the following?
Pakistani source of Income
Foreign source of income
BothPakistanand foreign source of income
None of the given option
Question No: 20 ( M a r k s: 1 ) http://vuzs.net
Rental income shall be Pakistan-source income if it is derived from:
The lease of immovable Property inPakistan
The lease of immovable Property outsidePakistan
The lease of immovable Property both in and out ofPakistan
None of the given options
Ref:
9) Rental income shall be Pakistan-source income if it is derived from the lease of immovable property inPakistanwhether improved or not, or from any other interest in or over immovable property, including a right to explore for, or exploit, natural resources inPakistan.
Question No: 21 ( M a r k s: 1 ) http://vuzs.net
Any gain arising on the disposal of shares in a non-resident company belongs to
whichof the following?
Pakistan-source income
Foreign source of income
BothPakistanand foreign source of income
None of the given option
Ref:
13)Anygain arising on the disposal of shares in a resident company shall bePakistan-source income.
Question No: 22 ( M a r k s: 1 ) http://vuzs.net
Which of the following come under the ambit of Royalty under section 2 (54)?
Right to use any patent
Copy right of a literary
Right to use any industrial or scientific equipment
All of the given options
Ref:
Royalty Defined Sec. 2 (54)
Royalty means any amount paid or payable however described or computed, whether periodical or lump sum as a consideration for:
a)The use of, or right to use any patent, invention, design or model, secret formula or process, trade mark r other like property or right;
b) The use of, or right to use any copy right of a literary, artistic or scientific work, including films or video
Tapes for use in connection with television or tapes in connection with radio broadcasting, but shall not include consideration for the sale, distribution or exhibition of cinematograph films.
c)The receipt of, or right to receive, any visual images or sounds or both, transmitted by satellite, cable, optic fiber or similar technology in connection with television, radio or internet broadcasting;
Question No: 23 ( M a r k s: 1 ) http://vuzs.net
What is the tax treatment of losses from the foreign source under section 104of
theordinance?
Wholly taxable
Partly Taxable
Deductible expenditure
None of the given options
Ref:
Foreign losses Sec.104: Deductibleexpenditures incurredby a person in deriving foreign-source income chargeable to tax under a head of income shall be deductible only against that income.
Question No: 24 ( M a r k s: 1 ) http://vuzs.net
Which of the following section of Income Tax Ordinance 2001 deals with Income
fromSalary and its treatment?
Section 11
Section 12
Section 13
Section 14
Ref:
MODULE 4
HEADS OF INCOME (Section 11)
Following are the heads of income, ascertained in 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)
Question No: 25 ( M a r k s: 1 ) - Please choose vuzs one
The definition of Employment under Sec. 2(22) of the ordinance is categorized in:
Inclusive Definition
Exclusive Definition
Both Inclusive and Exclusive
None of the given options
Ref:
Inclusive Definition:
Examples of inclusive definitions are given below:
It includes dictionary meanings as well as meanings conveyed by definition.
Question No: 26 ( M a r k s: 1 ) http://vuzs.net
Salary by members of AOP is not treated as Salary but treated as appropriation of
profitand charged under the head:
Income from Salary
Income from Property
Income from Business
Income from Other Sources
Ref:
Salary by members of AOP is not treated as Salary but treated as appropriation of profit and charged under the head “Income from Business”
for more contents visit
Question No: 27 ( M a r k s: 1 ) http://vuzs.net
Tax year for the salaried individuals is called as:
Special Tax Year
Normal Tax Year
Fiscal Year
Financial Year
Ref:
Tax year of a salaried Person shall be Normal Tax year
Question No: 28 ( M a r k s: 1 ) http://vuzs.net
Which of the following is the Tax year available for salaried individual?
1st January to 31st December
1st July to 30th June
1st October to 30th September
1st September to 31st August
Ref:
Tax on salary income for Tax year 2009 (1st July 2008 to 30th July 2009) shall be computed according to amendments as made by Finance Act, 2008.
Question No: 29 ( M a r k s: 1 ) - Please choose vuzs one
Mr. A non-resident ofPakistanreceived interest on Canadian BondsRs. 150,000
(entireamount received inPakistan). What is the treatment of this amountfor
calculatinghis gross total income?
Rs. 150,000 added in his total income
Rs. 150,000 subtracted from his total income
Rs. 75,000 added in his total income
Exempt from tax
Question No: 30 ( M a r k s: 1 ) http://vuzs.net
Mr. X employed inPakistanearned pension from Pakistan Government but
receivedin LondonRs. 100,000. Which one of the following option is rightfor
thisparticular scenario?
Mr. X being resident ofPakistanRs. 100,000 will be added in Gross total
income
Mr. X being resident of PakistanRs. 100,000 will be subtracted in Gross
totalincome
Mr. X being non-resident of PakistanRs. 100,000 will be added in Gross
totalincome
Mr. X being non-resident of PakistanRs. 100,000 will be exempted
Question No: 31 ( M a r k s: 5 )
Define Income that is charged to tax under section 2(9).
Answer:
Business Defined Section 2(9)
“Business includes any trade, commerce, manufacture, profession, vocation but doesn’t include employment”
Following incomes (except exempt income) shall be charged to tax under the head ‘Income from Business’.
a)Profits & Gains from any business in a tax year.
b)Incomederived from any trade, profession, sale of goods or provision of any services.
c)Incomefrom hire or lease of tangible movable property.
d)FMV of Perquisites derived by a person by virtue of business relationships.
e)Management Fee derived by a management company.
Income from Business also includes:
• Any profit on debt derived by a person. (itis only applicable to such person, whose is business is to
derivesuch income. e.g.; a banking company)
• Any amount received by schedule bank from mutual fund, as share of profit.
• Profit earned on debts in course business shall be chargeable to ‘income frombusiness’.
• Income on leasing bylessor, being banks, leasing companies etc.
Income derived from any trade, profession, sale of goods or provision of any services.
• Income from hire or lease of tangible movable property
• FMV of Perquisites derived by a person by virtue of business relationships.
• Management Fee derived by a management company
Question No: 32 ( M a r k s: 10 )
Determine the legal status of the following persons under section 80 of the
ordinance.
1. Virtual University ofPakistan (company)
2. A joint family of Mr.Arun(a Hindu), Comprising Mr. Hamel, His sons
Mr. Kumar & Mr.Deepak (Hinduundivided family)
3 . Government ofPunjab,Pakistan(company)
4. EdhiWelfareTrust (company)
5. FederalGovernment (person)
6 . Mr.Suleman& his wife Joint Owners in aHouse (Association of persons)
7. Alpha Cooperative HousingSociety (company)
8. Mr. Ali &BabarJoint Owners inBuilding (Association of persons)
9. Mr.ImranServing as a Manager in a TextilesCompany (Individual)
10. HabibModaraba (company)
