MBHL

80% (1 Jul 2023) 100% (Many years ago)

TBPL GBHL

Question No. of Summer 2024

Terabyte (Pvt) Limited

Tax year 2025

(A) Income from Business

Profit before taxation
Add. WHT tax deducted on sales (20.9 x 5/95) - Not claimable as expense
Add. Sales to associated company [5,000 x (3,600 - 3,000)]
Add. 50% contribution to approved gratuity fund (30M x 50%) - Disallowed
Contribution to recognized provident fund - Allowed
Add. Commission to Non-Active Agent for sale of 3rd Sch item
Actual Commission 0.50
Less. Allowed (15M x 0.2%) (0.03)
Add. Accounting depreciation
Loss on hedge transaction (not a speculation business loss) - Allowed
Add. Accounting loss on sale of vehicle
Less. Tax loss on disposal of vehicle (W2)
Income from business (Before depreciation and losses)
Less. Current year - Tax depreciation
Income from business (Before lossess)
Less. B/f business loss - TY 2022
Less. B/f business loss - TY 2023
Balance Income
Less. Lower of:
- Actual unabsorbed depreciation (TY 2023) -
- 50% of balance income 13.13
Income from Business - Before Group relief
Less. Loss surrendered by parent company (8.5M x 80%)
Income from business

Total / Taxable Income

Tax liability
- Taxable income x 29%
Less. Withholding tax u/s 153
Tax payable
ny years ago)

Rs. in million

18.00 (W1) Tax gain / (loss) on disposal of

1.10 Accounting Error
3.00 - Actual Cost
15.00 - Restricted Cost
- Lower of above
0.47 Tax depreciation - Tax year 2022 @ 15%
WDV at 30 Jun 2022
Tax depreciation - Tax year 2023 @ 15%
13.00 WDV at 30 Jun 2023
- Tax depreciation - Tax year 2024 @ 15%
1.20 WDV at 30 Jun 2024
(0.00)
51.77 Actual Consideration
(16.00) Market Value (6.75/75%)
35.77 Consideration (Sec. 77)
(9.50)
- Adjusted proceeds on sale of vehicle
26.27 Less. Tax WDV
Loss on disposal

-
26.27
(6.80)
19.47

19.47

5.65
(1.10)
4.55
x gain / (loss) on disposal of vehicle (Passenger transport vehicle not plying for hire)

11.00
7.50
7.50 Tax year 2022
ciation - Tax year 2022 @ 15% (1.13)
0 Jun 2022 6.38
ciation - Tax year 2023 @ 15% (0.96)
0 Jun 2023 5.42
ciation - Tax year 2024 @ 15% (0.81)
0 Jun 2024 4.61

nsideration 6.75
alue (6.75/75%) 9.00
tion (Sec. 77) 9.00

proceeds on sale of vehicle 4.60

(4.61)
disposal (0.00)
ying for hire)
Question No. 2 of Summer 2024

Tax payer (Landlord) Faraz - Resident (PSI + FSI)

FSI - Rental Income --> Income from property Immoveable Property in Srilan
Foreign Income Tax --> Foreign Tax credit - Rental Income --> FSI

Tax payer (Employee) Aslam Khan - Non Resident (PSI)

PSI - Salary Taxable Employement excerised (1 Jan

- Salary

Foreign Income Tax on salary of such 4 months

- No Foreign tax credit

Tax Payer UAE Bank - Non Resident (PSI)

FSI Profit on Debt Not Taxable

Profit on debt
Foreign Sources Income
 Payer of Rent (Tenant) Iqbal - Non Resident

eable Property in Srilanka Payment is not subject to withholding of tax u/s 155
al Income --> FSI

Payer (EmployerA&Z

yement excerised (1 Jan 2024 to 30 Apr 2024) in Pakistan No WHT Tax implications wou
PSI

Payer Qalandar Limited

No WHT Tax would apply

--> Debt is used o/s pakistan for foreign branches
n Sources Income
of tax u/s 155

Non-Resident (No have any legal and business presence in Pakistan.

T Tax implications would arise

Resident Person

T Tax would apply

Question No. 4 of Summer 2024
Silai Limited
Tax Year 2025

Comments on tax computation are as follows:

(i) Sales in context of tax regimes:

In the given computation, all sales have been classified under NTR, which is incorrect.

SL’s sales shall be subject to the following taxation regimes:

Description
Export sales of locally manufactured specialized sewing machines of Rs. 200 million.
Local sales of manufactured household sewing machines of Rs. 220 million.
Local sales of imported household sewing machines of Rs. 80 million.

Apportionment of expenses:
After deducting Rs. 60 million from the cost of sales, which was spent on the import of sew
the remaining balance of the cost of sales will be apportioned between the local sales of m
machines (NTR) and export sales (MTR) regimes on the basis of their gross recepits/sales,
allocated directly to the local sales of imported sewing machines (MTR).

Similarly, tax of Rs. 4.7 million, collected at the import stage, is incorrectly included in the
amount will be subtracted from the operating expenses, and the balance of common opera
apportioned among all the three classes of income, as mentioned above.

The Rs. 4.7 million will be available as a credit when computing the net tax liability of SL.

(ii) Other income:

Net profit from associate:

Net profit of Rs. 30 million from an associate, recorded using equity method of accounting,
before tax amount.

Furthermore, any income received by a taxpayer from a corporate agricultural enterprise,

its income from agriculture is exempt from tax, and not a FTR income.

Therefore, the dividend of Rs. 4 million received by SL from QL, an agricultural enterprise i

Being an exempt income, it will remain part of SL’s total income. However, it will not form

As such the withholding tax was correctly not deducted by QL from the payment of dividen

Speculation business loss:

The loss of Rs. 2.5 million suffered by SL in the given circumstances is a loss from speculat

This speculation loss of Rs. 2.5 million can only be set off with other speculation gain/incom
 speculation gain during the tax year 2025, it shall be carried forward to following six tax ye
income of speculation business of that respective tax year.

(iii) Cash salaries:

Any salary paid or payable exceeding Rs. 32,000 per month to an individual other than by
transfer of funds to the employee’s bank account or through digital means is an inadmissib

Therefore, the entire amount of Rs. 15 million is incorrectly treated as inadmissible. In fact
Rs. 10 million paid to contractual employees will be treated as inadmissible as it exceeds t
Rs. 32,000 per month.

(iv) Share of profit from AOP:

The share of profit of Rs. 12 million is correctly added to the “Income from business”. Alter
the head "Income from other sources" also.

(v) Depreciation:
Excess of tax depreciation over accounting depreciation is correctly deducted from SL’s bu

(vi) Tax computation:

The entire income of Rs. 209 million is incorrectly treated as NTR income. After assigning e
taxable income will be calculated separately for each. Income subject to NTR will be taxed
to MTR will be taxed at higher of tax on taxable income @ 29% or withholding tax.

(vii) Minimum tax:

The minimum tax is incorrectly computed based on the turnover of Rs. 500 million. The tur
increased by including SL’s share in AOP’s turnover, which is Rs. 27 million (computed as R
Therefore, the minimum tax will be computed on the adjusted turnover at the rate of 1.25%

(viii) Alternative corporate tax:

Alternative corporate tax (ACT) is incorrectly computed based on a taxable income of Rs. 2
assessed at 17% of the accounting income. To determine accounting income, advance tax
at import stage and income from AOP of Rs. 12 million will be included whereas income fro
exempt dividend income of Rs. 4 million and net income from export sales (under MTR) an
imported sewing machines (MTR) will be excluded from profit before tax of Rs. 185 million.

er of tax computed at applicable rates, minimum tax and ACT.

Export Proceeds 1000

WHT u/s 154 @ 2% 20

1% WHT - Min tax 10

1% WHT - Adjustable Tax 10

Tax Liability on Export of goods

Higher of:
- Net taxable income from export of goods x 29% XXX
- WHT @ 1% of the export proceeds 10
Tax Liability XXX

Less. WHT Tax @ 2% -20

Tax payable / (refundable) XX / (XX)

 ich is incorrect.

Tax Regime
s. 200 million. MTR
llion. NTR
MTR

on the import of sewing machines from Germany,

n the local sales of manufactured sewing
ross recepits/sales, while Rs. 60 million will be

ectly included in the operating expenses. So, this

ce of common operating expenses will be

t tax liability of SL.

ethod of accounting, will be deducted from profit

icultural enterprise, distributed as dividend out of

icultural enterprise is exempt income.

ever, it will not form part of SL’s taxable income.

e payment of dividend to SL.

a loss from speculation business.

peculation gain/income. As there is no other

o following six tax years for set off against the

vidual other than by a crossed cheque or direct

eans is an inadmissible deduction.

inadmissible. In fact, only the amount of

ssible as it exceeds the basic threshold of

rom business”. Alternatively, it can be taxed under

educted from SL’s business income.

me. After assigning expenses to each regime,

to NTR will be taxed at 29% and Income subject
holding tax.

. 500 million. The turnover of Rs. 500 million will be

llion (computed as Rs. 108 million × 25%).
r at the rate of 1.25%.

able income of Rs. 209 million. ACT will be

ncome, advance tax of Rs. 4.7 million collected
whereas income from associate of Rs. 30 million,
ales (under MTR) and from local sales of
ax of Rs. 185 million.
Under the new excise law the liability accrues with the clearance whether or not it proceeds sales thus excise duty shall become due at the ti
the factory/manufacturing premises regardless whether or not sale has taken place. Thus, payment o
removed from the factory/manufacturing premises whether for sale or for storage outside such factor
manufactured/produced and stored/stocked within the factory/manufacturing premises prior to their
ise duty shall become due at the time when goods are cleared from
n place. Thus, payment of excise duty shall be accounted for the day when goods are
orage outside such factory or premises. However, no excise liability shall accrue on the goods
g premises prior to their clearance therefrom. [FEDERAL EXCISE GENERAL ORDER NO.2/2005]
Question No. 6 of Summer 2024

Kaghaz Limited
May 2024

(A) INPUT TAX

Description Value
Purchase of raw materials used in the manufacture of paper
25.50
and various allied products from registered person

Purchase of semi-finished wood pulp acquired for the

1.50
production of newsprint from registered person

Purchase of sanitary fittingsfor the renovation of bathrooms 0.80

Software consultancy service from ICT registered person 1.00

Purchase of tyres, lift cylinders and drive axles for the two fork
1.20
lifters, from registered person

Purchases of cane molasses from unregistered suppliers 5.00

Import of testing equipment (Not falling under chapters 84 and
85 of the First Schedule to the Customs Act, 1969), for in-house 1.40
business use

Import of 2,000 pieces of 4-ply toilet paper 2.30

Purchase of knives and cutting blades from Auzar Limited

(Cottage industry on the assumption that its labour force is less 1.30
than 10)
Input Tax on purchase of Kraft Papers in March 2024,
2.40
subsequently destroyed

Less. Input Tax refundable - Relating to zero rated supplies (W1)

Adjustable Input Tax

(B) OUTPUT TAX

Description Value

Franchise services provided in Hyderabad

Supply of virgin papers to a cup manufacturing unit located in
3.40
Karachi’s Export Processing Zone.

Insurance Claim 1.80

Remaining supply to registered person (28 - 2 - 3.4 - 1.8) 20.80
Supply of printer paper to a cottage industry 2.10
Remaining supply to end consumers 1.90
Sales Tax inadvertenly not charged on promotional giveaways 0.50

Sales Tax on retail price on 3rd Sch item (supplied in Mar

4.00
2024) [(20,000 x 800) - 12,000,000]

(C) SALES TAX LIABILITY

Ouput Tax
Less. Lower of
- 90% of output tax 4.73
- Actual Input tax - IT on P&M 4.22

Less. Input tax on P&M

Sales Tax Liability

Add. Sales tax withheld

Purchases of cane molasses from unregistered suppliers 5.00

Total payable under Sales Tax Act, 1990

Input tax refundable

(W1) Apportionment of Input Tax

Nature of Supply Value of supply
Taxable 24.80
Zero Rated 3.40
28.20
Sindh Sales Tax Law / Punjab Sales Tax Law Services subject to reduced rate/fixe
Islamabad Capital Terrirtory Ordinance Services subject to reduced rate
Sales Tax % Input Tax
18% 4.59

18% -

18% -

5% 0.05

18% 0.22

N/A -

21% 0.29

25% 0.58

N/A -

18% (0.43)
5.29

(0.62)

4.67

Sales Tax % Input Tax

 0% -

N/A -
18% 3.74
18% 0.38
18% 0.34
18/118 0.08

18% 0.72
5.26

5.26

(4.22)

(0.45)

0.59

0.76

1.35

(0.62)

Input Tax on Input Tax on

P&M other
0.45 4.08
0.06 0.56
0.51 4.64
ubject to reduced rate/fixed basis
ubject to reduced rate
 Remarks
Not subject to withholding of sales tax on the assumption that
supplier is active taxpayer
Input Tax not allowed as used for manufacturing of newsprint
(i.e. exempt under 6th Sch).
Not subject to withholding of sales tax on the assumption that
supplier is active taxpayer
Input tax not allowed under section 8
Not subject to withholding of sales tax on the assumption that
supplier is active taxpayer
Input Tax allowed
Input tax on vehicle or part of the vehicle is disallowed under
section 8. But, fork lifter would be considered as plant and
machinery (not vehicle), therefore input tax is allowed.
Not subject to withholding of sales tax on the assumption that
supplier is active taxpayer
Subject to witholding of whole of the sales tax

Subject to value addition tax @ 3%, as such testing

equipments are not covered in chapter 84 and 85 . . .

Subject to sales tax on retail price basis at 25% under SRO 297
of 2023.
Not subject to value addition tax @ 3% at import stage, beign
3rd Sch. Item

Supplies by cottage industry are exempt (6th Sch).

Input tax on goods destroyed is not allowed

Remarks
This would be subject to Sindh Sales Tax and output tax on
such services would be accounted in Sindh Sales Tax Return,
not in Federal Sales Tax Return
Zero Rated Supply under 5th Schedule

Not subject to sales tax, being actionable claim exlcuded from

the defintion of Goods under the Sales Tax Law

Not subject to further tax as cottage industry is not liable to be

registered
Not subject to further tax as supplied to end consumer
Sales tax will be recovered as tax fraction of the value of
supply

Treatment
Admissible
Refundable
Input is disallowed
Input is alllowed