Md.

Mashiur Rahaman
CA Finalist, Assistant Manager, AKG,
Former Associate, KPMG Bangladesh
The following information is related to computation of tax of XYZ Limited, a listed entity.
Amount in TK
1 Revenue (including export 2400,000,000) 43,179,134,742
2 Net profit before tax of the entity 2,800,000,000
3 The following incomes may be considered separately
- Non operating income (15,000,000)
- Gain on sale of non -current asset (700,000)
- Share of profits of associates (accrual) (100,000,000)
- Income from FDR and STD (32,000,000)
- Foreign currency translation gain unrealized (3,500,000)
- Rental income (15,722,000)
4 The following expenses included in PBT
- Accounting depreciation 697,000,000
- In repair and maintenance included for house property 4,700,000
- Land revenue / municipal tax for house property 500,000
- Entertainment expenses 14,500,000
- Management fee 25,358,593
- Royalty expenses 79,000,000
- Salary included perquisite more than 5,50,000 per employee 78,000,000
- Bad debt expense (Actual +Provision) 2,900,000
- Gratuity expense 63,000,000
- Donation and subscription (unapproved) 3,000,000
- CSR expenses 17,500,000
5 OCI includes
Actuarial gain 70,000,000
7 Tax payments Amount in TK
U/S 52: AIT deducted by customers 88,900,000
U/S 52: AIT deducted by tenant 786,100
U/S 53BBBB: AIT deducted on Export Sales 24,000,000
U/S 53F: AIT deducted on STD and FDR 3,200,000
U/s 54: Dividend 10,000,000
U/S-64: Advance tax 500,000,000
626,886,100

8 Other relevant information 2021 2020

IFRS-carrying value-PPE 7,000,000,000 6,500,000,000
Fiscal WDV-PPE 3,500,000,000 3,300,000,000
Fiscal depreciation 497,273,000
Fiscal loss on sale of non current asset 6,000,000
Sale of disposed assets 5,876,121
Bad debt provision 395,000,000 400,000,000
Provision for gratuity 500,000,000 450,000,000
Carrying value of investment in associate 900,000,000 850,000,000
Investment in associate-at cost 500,000,000 500,000,000
Other reserve-actuarial gain 70,000,000 -
Foreign currency translation gain / (loss) unrealized 3,500,000 (3,000,000)

Assumption and other information 2021 2020

1 Tax rate 22.50% 25%
2 The entity will have the ability to recover deferred tax benefits, if any in future.
3 In this year an audit assessment against the assessment year 2018-19 was completed and the tax authority
demanded tk. 65,000,000and Management agreed and paid the amount as per demanded.
4 Tax authority demanded Tk. 100,000,000 against assessment year 2019-20 and an appeal against that
demand was made by management. Management believe that the entity will win in the appeal.

Requirements
(i) Calculate current tax expenses as per ITO 1984 and IAS 12.
(ii) Calculate deferred tax.
(iii) Provide the Journals related to taxation and describe relevant reporting issues.
 (i) XYZ LTD
TIN- XXXXXXXX
Assessment Year: 2021-2022
Accounting Year Ended on 30.06.2021 (July'20 to June'21)
Computation of income and tax liability Amount in TK
Net profit before income tax as per audited financial statements 2,800,000,000
Less: Items for separate consideration / adjustments
Non operating income (15,000,000)
Gain on sale of non -current asset (700,000)
Share of profits of associates (100,000,000)
Interest income from FDR and STD (32,000,000)
Rental income (15,722,000)
Foreign currency translation gain unrealized (3,500,000)
(166,922,000)
2,633,078,000
Add: Accounting depreciation / amortization for separate consideration 697,000,000
Repair and maintenance of house property income for separate consideration. 4,700,000
Land revenue / municipal tax for house property for separate consideration 500,000
3,335,278,000
Add: Other inadmissible / separate consideration allowances.
Entertainment expenses for separate consideration 14,500,000
Royalty expenses for separate consideration 79,000,000
Perquisite u/s 30 (e) of ITO 1984 78,000,000
Gratuity expense (provision and actual payment) 63,000,000
Bad debt expense (provision and actual) 2,900,000
Donation and subscription 3,000,000
CSR expenses 17,500,000
Management fee 25,358,593
Loss on sale of non-current assets - 283,258,593
3,618,536,593
Less: Allowable expenses
Tax depreciation u/s 29(1) (Viii) of the ITO, 1984 (497,273,000)
Fiscal loss on sale of non current asset (6,000,000)
Bad debt (7,900,000)
Gratuity paid (68,000,000) (579,173,000)
Technical fee: u/s-30(h) of ITO 1984
Actual management fee (25,358,593)
Actual royalty expenses (79,815,365)
(i)Total actual technical fee (management fee and royalty) (105,173,958)
(ii) Allowable limit as per 30(h) of ITO 1984 (210,982,240)
Lower one will be allowable from (i) & (ii) (105,173,958) (684,346,958)
Business income before entertainment expense adjustment 2,934,189,635
Entertainment
(i) Allowable limit as per u/s 30 (f) (i) & Rule 65 of ITO 1984 (40,000)
'=First 10 lac X 4% +(Profit before Ent. -10 Lac) X 2% (58,663,793) (58,703,793)
(ii) Actual entertainment expense u/s 30 (f) (i) & Rule 65 of ITO (14,576,922)

Lower one will be allowable from (i) & (ii) (14,576,922)

Business income before rebate on export sales 2,919,612,713
Less:50 % of export sales income (para28, 6th schedule-Part
A) 2,919,612,713
0.5 X 240,000,000 (8,113,954)
=(Business income before rebate on export sales / Total 43,179,134,742
revenue) X export X 50%
Business income for current year 2,911,498,759
Less: Loss brought forward u/s 38 & 42(6) of ITO -
Business loss
Unabsorbed depreciation as per u/s 42(6) of ITO 1984 - -
A. Business income / (Loss) 2,911,498,759
B. Other income
Interest income from FDR 32,000,000
Non-operating income. 15,000,000 47,000,000
C. House property income
Rental income 15,722,000
Less: Repair and maintenance u/s 25 (1) (h) of ITO 1984 (4,700,000)
Municipal / Land development tax /s 25 (1) (a) of ITO 1984 (500,000) 10,522,000
D. Dividend income
Cash dividend income received from ABC CO.LTD as per u/s
2(26) & 6th Schedule Para 11A, Part A of ITO 1984 50,000,000
Less: Exempted Para- 11A, 6th Schedule (Part A) of ITO. (50,000) 49,950,000
Computation of taxable income
A. Business income / (Loss) 2,911,498,759
B. Other income 47,000,000
B. House property income 10,522,000
D. Dividend income 49,950,000
E. Capital gain -
Total taxable income 3,018,970,759

1. Tax payable on total taxable income

A. Business income / (loss) 2,911,498,759 X 22.5% 655,087,221
B. Other income 47,000,000 X 22.5% 10,575,000
B. House property income 10,522,000 X 22.5% 2,367,450
D. Dividend income 49,950,000 X 20% 9,990,000
E. Capital gain - X 15% -
678,019,671
Less: Rebate on CSR @ 10% as per SRO229 - dated 04-07-2011, (1,750,000)
SRO 223 dated 27-06-2012, SRO 186 dated 01-07-2014, Para
47 6th Schedule
Tax payable on total income 676,269,671
2. Calculation of minimum tax as per section 82C
Gross receipt (regular rate) Receipts Rate Tax liability
Revenue excluding export 42,939,134,742
Interest income on FDR and STD 32,000,000
Rental income 15,722,000
Sales of non-current asset 5,876,121
Total gross receipt 42,992,732,863 0.60% 257,956,397

Gross receipt (reduced rate) u/s-82C2d(4)

Dividend 50,000,000 0.60%x20% 266,667
/22.5%
Export 240,000,000 0.60%x50% 720,000

Minimum tax payable on Gross receipt 258,943,064

3. Calculation of Minimum Tax as per section 82C 2(b)

U/S 52: AIT deducted by customers 88,900,000
U/S 53BBBB: AIT deducted on Export Sales 24,000,000
U/S 53F: AIT deducted on STD and FDR 3,200,000
Tax payable u/s 82C 2(b) 116,100,000

Tax expense (Higher of 1,2,3) 676,269,671

Less: Tax paid

U/S 52: AIT deducted by customers 88,900,000
U/S 52: AIT deducted by tenant. 786,100
U/S 53BBBB: AIT deducted on export 24,000,000
U/S 53F: AIT deducted on STD and FDR 3,200,000
U/s 54: Dividend 10,000,000
U/S-64: Advance tax 500,000,000 626,886,100
Net tax payable under section-74 49,383,571
(ii) Deferred tax Liability/Assets 2021
Temporary
Particulars Carrying value Tax base
difference Rate DTL/(DTA)
Property plant and equipment 7,000,000,000 3,500,000,000 3,500,000,000 22.50% 787,500,000
Bad debt provision 395,000,000 - (395,000,000) 22.50% (88,875,000)
Provision for gratuity 500,000,000 - (500,000,000) 22.50% (112,500,000)
Foreign currency translation gain / 3,500,000 - 3,500,000 22.50% 787,500
(loss) unrealized
Investment in associate 900,000,000 500,000,000 400,000,000 20% 80,000,000
Other reserve-actuarial gain 70,000,000 - 70,000,000 22.50% 15,750,000
682,662,500
2020
Temporary
Particulars Carrying value Tax base
difference Rate DTL/(DTA)
Property plant and equipment 6,500,000,000 3,300,000,000 3,200,000,000 25.00% 800,000,000
Bad debt provision 400,000,000 - (400,000,000) 25.00% (100,000,000)
Provision for gratuity 450,000,000 - (450,000,000) 25.00% (112,500,000)
Foreign currency translation gain / (3,000,000) - (3,000,000) 25.00% (750,000)
(loss) unrealized
Investment in associate 850,000,000 500,000,000 350,000,000 20% 70,000,000
Other reserve-Actuarial gain - - - 25.00% -
656,750,000

Change in Deferred tax Liability- Deferred tax expense/ (Income) 2021

Property plant and equipment (12,500,000)
Bad debt provision 11,125,000
Provision for gratuity -
Foreign currency translation gain / (loss) unrealized 1,537,500
Investment in associate 10,000,000
Other reserve-actuarial gain 15,750,000
25,912,500

Allocation of deferred tax expense/ (income) 2021

Actuarial gain - OCI Deferred tax expense 70,000,000 22.50% 15,750,000
P/L Deferred tax expense 10,162,500
25,912,500

(iii) Journals and reporing issues

1 Income tax expenses (Current Year) Dr 676,269,671
Tax liability Cr (676,269,671)
[To charge the tax expenses against income year 2020-2021]
2 Income tax expenses (Previous Year) Dr 65,000,000
Tax liability Cr (65,000,000)
[To charge the tax expenses against the demand of Income tax authority for the assessment year 2020-2021]
3 Deferred tax expenses (PL) Dr 10,162,500
Deferred tax expenses (OCI) Dr 15,750,000
Deferred tax liability Cr (25,912,500)
[To charge the deferred tax expenses against income year 2020-2021]
4 A disclosure for the contingent liability (Tk. 100,000,000) is required for the demand notice for assessment year 2019-20
against which an appeal is pending as management believes that they will win in the appeal.