FINALTERM EXAMINATION
Spring 2009 Paper
FIN623- Taxation Management (Session - 1)
M a r k s: 81
FIN623 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
FIN623 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 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 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
Reference: Adoption rule of accounting methods are as under:
For Companies –Accrual basis mandatory.
For Others --- optional, cash or Accrual Basis
FIN623 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: Profit on sale of standing crops or the produce after harvest by a cultivating owner or tenant of land will be treated as agricultural income. Whereas:
Profit accruing from the purchase of standing crops and resale of it after harvest by a merchant having no interest in land except a mere license to enter upon the land and gather upon the produce, land is not direct, immediate or effective source of income will be treated as non agriculture income.
FIN623 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: Income from sale of agricultural produce received by way of price for water supplied to land will be treated as non agricultural income.
FIN623 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: According to section82 of income tax ordinance, resident individual is an employee or official of the Federal Government or a Provincial Government posted abroad in the tax year?
FIN623 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: Control and management of affairs of resident AOP is situated wholly or partly in Pakistan.
FIN623 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
FIN623 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 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
FIN623 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
FIN623 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 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 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 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
Reference: Treatment of Non-Adjustable Amounts Received in Relation to Buildings
These amounts shall be treated as rent and chargeable to tax under the head “income from property”. These amounts are spread over a period of 10 years, It is adjustable as Rent.
FIN623 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: Exemptions on Business income Under Part 1 of second schedule
Clause Exempt Income
(91) Income of a Text-Book Board.
(92) University or Educational Institution established not for profit purpose.
(93) Recognized Computer Training Institution.
(93A) Recognized Vocational Institute.
(98) Income of Recognized Sports Board.
(100) Income of Modaraba Companies.
FIN623 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 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 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)
Ref: Business Defined Section 2(9)
“Business includes any trade, commerce, manufacture, profession, vocation but doesn’t include employment”
FIN623 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 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.
- Recovery against any deduction/expenses previously allowed (Add back to income).
- Gain on sale of depreciable asset.
- Recovery of bad debt/or written off loan.
- Trading liabilities not paid within expiration of three years.
- Amount received after discontinuance of business.
FIN623 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
Reference is same as for previous FIN623 Question.
FIN623 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: According to section 113:
Resident Company is subjected to minimum tax @ 0.50% of its turnover for a tax year, even in cases where the company sustains loss.
FIN623 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
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
Reference is same as for previous FIN623 Question.
FIN623 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: According to section 113:
Resident Company is subjected to minimum tax @ 0.50% of its turnover for a tax year, even in cases where the company sustains loss.
FIN623 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
(A x 0.5%) B
FIN623 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: No gain or loss shall be taken to arise on the disposal of an asset
Between spouses under an agreement to live apart.
FIN623 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: Section 115 grants immunity to salaried person in lieu of filing a return as outlined below:
- Salary certificate from employer sufficient in lieu of return
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: In case of any omission by a tax payer, a revised return can be filed within 5 years of the date that the original return was furnished.
FIN623 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
FIN623 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:
A liquidator of a company
A receiver appointed by a Court or appointed out of court
A trustee for a bankrupt
A mortgagee in possession
FIN623 Question No: 31 ( M a r k s: 1 )
Federal Tax Ombudsman has the same powers as _____________ to punish any person or is 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.(Page no.111)
FIN623 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: “Local Sales Tax Office" means the office of Superintendent of Sales Tax, or such other office as the Board may, by notification in the official Gazette, specify;
FIN623 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. This is payable by every individual, association of persons, firm or a company which acquires by purchase gift, exchange, relinquishment, surrender if rights by the owners (whether effected orally or by deed or obtained through court decree) except by inheritance an asset or a right to the use thereof for more than twenty years. An asset or a right to the use thereof for more than twenty years.
FIN623 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 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 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 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%
FIN623 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%
FIN623 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: Provided that where income of a woman taxpayer is covered by this clause, no tax shall be charged if the taxable income does not exceed Rs. 240,000:
FIN623 Question No: 40 ( M a r k s: 1 )
Mr. A’s 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. 650,000 but does not exceed Rs.
750,000, 6.00% rate will be applied. (600000*6/100=36000).
FIN623 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 for tax year 2009.
FIN623 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 Question No: 43 ( M a r k s: 3 )
What is the main purpose of Gratuity?
FIN623 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 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 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 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 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 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
