FIN623 Midterm Solved Paper 2010 -1

MIDTERM EXAMINATION

Spring 2010 Paper

FIN623- Taxation Management (Session - 1)

Time: 60 min

M a r k s: 47

 

Question No: 1 ( M a r k s: 1 ) http://vuzs.net

A tax levied on the financial income of Persons, Corporations, or other legal entities is called as:

► Corporation tax

► Property tax

► Sales Tax

► Income Tax

 

 

Question No: 2 ( M a r k s: 1 ) http://vuzs.net

Which of the following is the main objective of Fiscal Policy?

► Economic Development

► Price stability

► Removal of deficit in Balance of Payments

► All of the given options

 

Question No: 3 ( M a r k s: 1 ) http://vuzs.net

Government Expenditure is one of the instruments of which of the following policy?

 

► Monetary policy

► Fiscal policy

► Trade Policy

► Economic Policy

 

Question No: 4 ( M a r k s: 1 ) - Please choose one

In the canons of taxation, which one of the following statements best describe the benefits principle?

► Persons deriving more income leads to enjoy less benefits from the state, should be taxed at the lower rates.

► Persons deriving more income leads to enjoy less benefits from the state, should be taxed at the higher rates.

► Persons deriving less income leads to enjoy more benefits from the state, should be 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: 5 ( M a r k s: 1 ) http://vuzs.net

Which of the following is not an employment tax?

► Social Security Tax

 

► Federal Excise Tax

► Federal unemployment compensation tax

► State unemployment compensation tax

 

Question No: 6 ( M a r k s: 1 ) http://vuzs.net

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 2001Scheme of the Ordinance is given below:There are thirteen chaptersChapters are divided into:ƒParts &ƒ Divisions.There are 240 SectionsThis ordinance comprises of seven Schedules are integral part of the Ordinance.

 

Question No: 7 ( M a r k s: 1 ) http://vuzs.net

Section 2(6) of Income Tax Ordinance 2001 defined:

“association of persons” means an association of persons as defined in section 80.

In which criteria the above definition falls?

► Exclusive definition

► Inclusive definition

► Both Exclusive and Inclusive definitions

► Statutory definition

 

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 time period of a Normal tax year?

► 1^st January and end on 31^st December

► 1^st June and ends on 31^st May

► 1^st July and ends on 30^th June

► 1^st October and ends on 30^th September

 

Question No: 10 ( M a r k s: 1 ) http://vuzs.net

If the accounting year of a business engaged in cotton ginning is started from 01 September 2003 and ending on 31^st August 2004. What will be its tax year?

► Tax year 2002

 

► Tax year 2003

 

► Tax year 2004

 

► Tax year 2005

 

Question No: 11 ( M a r k s: 1 ) http://vuzs.net

Income Tax is charged on which of the following?

► Income of the current tax year

► Income of the previous year

► Income of the coming year

► Any Receipt of money

 

Question No: 12 ( M a r k s: 1 ) http://vuzs.net

Which part of Income Tax Ordinance 2001 deals with the Exemptions and Tax Concessions?

► Part IV

► Part V

► Part VI

► Part VII

 

Question No: 13 ( M a r k s: 1 ) http://vuzs.net

Which one of the following section deals with the Agriculture Income?

► Section 40

► Section 41

► Section 43

► Section 53

Ref:

.Agricultural Income (Section 41) derived by a person shall be exempt from tax under this ordinance

 

 

Question No: 14 ( M a r k s: 1 ) http://vuzs.net

Which of the following incomes are treated as agriculture income?

► Spontaneous forests

 

► Agro based industry

► Interest received by a farmer on lending

► Income from land in Pakistan used for agriculture

 

Question No: 15 ( M a r k s: 1 ) http://vuzs.net

Any salary received by an employee of a foreign government for services rendered to such government shall be exempt from tax under which section of IT Ordinance 2001?

► Section 40

► Section 43

► Section 47

► Section 53

Ref:

Salary of an employee of foreign government exempt provided:

b.Services performed are similar to services performed by employees of the Federal Government inforeign countries.

Question No: 16 ( M a r k s: 1 ) http://vuzs.net

An Individual will be termed as Short Term Resident under section 50 of the IT Ordinance 2001 on which of the following condition?

► His period of stay in Pakistan equal to 183 days

► The employee of Foreign Government

► The citizen of Pakistan

► His period of stay in Pakistan not exceeding 3 years

Ref:

 

Section 50 Foreign-Source Income of Short-Term Resident Individuals1.Subject to sub-section-2, the foreign-source income of an individual shall be exempt:a.Who is a resident individual solely by reason of the individual’s employment; andb.Who is present in Pakistan for a period or periods not exceeding three years,

Question No: 17 ( M a r k s: 1 ) http://vuzs.net

 

Which of the following section deals with the residential status of Company?

► Section 81

► Section 82

► Section 83

► Section 84

Ref:Resident Person (Section 81)

 

a.Resident Individual, Resident Company, or Resident Association of Persons for the year or

 

 

b.The Federal Government

Question No: 18 ( M a r k s: 1 ) http://vuzs.net

 

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    CORRET OPETION

 

Question No: 19 ( M a r k s: 1 ) http://vuzs.net

Which part of income is charged to tax of resident person under the income tax ordinance 2001?

► Pakistani source of income

 

► Foreign source of income

► Both Pakistan and foreign source of income

 

► None of the given option

 

Question No: 20 ( M a r k s: 1 ) http://vuzs.net

Which part of income is charged to tax of non-resident person under the income tax ordinance 2001?

► Pakistan source of income

► Foreign source of income

► Both Pakistan and foreign source of income

► None of the given option

Ref: • Pakistan Source Income & Foreign Source Income Sec.11 (5) whereas, non-resident person charged only on Pakistan Source Income Sec.11 (6)

Question No: 21 ( M a r k s: 1 ) http://vuzs.net

Salary income received by resident person from Federal Government of Pakistan in UK belongs 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

 

Question No: 22 ( M a r k s: 1 ) http://vuzs.net

____________ means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

► Franchise

► Permanent establishment

► Small Business Units SBU

 

► Venture

Ref: Permanent establishment in relation to a person, means a fixed place of business through which the business of the person is wholly or partly carried on, and includes-

Question No: 23 ( M a r k s: 1 ) http://vuzs.net

Which of the following does Not come under the ambit of permanent establishment (PE)?

► Branch office

► Factory or workshop

► Premises for soliciting orders

► Liaison or relationship office

Ref: a)A place of management, branch office, factory or workshop, premises for soliciting orders, warehouse, permanent sales exhibitions or sales outlet, other than a liaison office except where the office engages in the negotiation of contracts (other than contracts of pur chase).

 

 

Question No: 24 ( M a r k s: 1 ) http://vuzs.net

The salary received from the UK Government by Mr. Amir resident of Pakistan. Which section of the income tax ordinance explains his tax treatment of such salary?

 

► Section 110

► Section 101

► Section 102

► Section 50

Ref: Foreign Source Salary of Resident Individuals Sec. 102

(1) Any foreign-source salary received by a resident individual shall be exempt from tax if the individual has paid foreign income tax in respect of the salary.

Question No: 25 ( M a r k s: 1 ) http://vuzs.net

If a business carried on by Non-resident person in Pakistan through permanent establishment what will be the tax treatment of the traveling expenditures born by the non-resident for spending his holidays in his home land?

► Wholly taxable due to PE

► Wholly taxable as no concerned with PE in Pakistan

► Not permissible as deduction from the income of Non-resident

► None of the given options

 

Question No: 26 ( M a r k s: 1 ) http://vuzs.net

Which of the following section of Income Tax Ordinance 2001 deals with Income from Salary and its treatment?

 

► Section 11

► Section 12

► Section 13

► Section 14

Question No: 27 ( M a r k s: 1 ) http://vuzs.net

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

 

Question No: 28 ( M a r k s: 1 ) http://vuzs.net

Mr. X employed in Pakistan received share of profit Rs. 60,000 in India from a business situated in Dubai but controlled through PE in Pakistan. Which of the following is right for the above scenario?

► Mr. X being resident of Pakistan Rs. 60,000 will be added in Gross total income

► Mr. X being resident of Pakistan Rs. 60,000 will be subtracted in Gross total income

► Mr. X being non-resident of Pakistan Rs. 60,000 will be added in Gross total income

► Mr. X being non-resident of Pakistan Rs. 60,000 will be subtracted in Gross total income

Ref: Page no 33

Question No: 29 ( M a r k s: 3 )

 

What is meant by reduction in tax liability? Give an example from Income Tax ordinance 2001?

 

Question No: 30 ( M a r k s: 3 )

If Mr. Kamal resident of Pakistan suffered a foreign loss against the income received from foreign country in tax year. What is the treatment of such foreign loss? Which section deals this kind of loss? Such losses can be carried forward up to how many years?

 

Question No: 31 ( M a r k s: 5 )

Define the following under the Income Tax Ordinance 2001 with their respective sections:

a. Resident Individual

b. Resident Associations of Persons

 

 

Question No: 32 ( M a r k s: 5 )

If Mr. Basit resident of Pakistan suffered a foreign loss against the income received from foreign country in tax year 2008-09. What is the treatment of such loss? Which section deals this kind of loss?