TAXATION-I

Time allowed - 3 hours

Total marks - 100

[N.B: The figures in the margin indicate full marks. Questions must be answered in English. Examiner will take
account of the quality of language and the manner in which the answers are presented. Different parts, if
any, of the same question must be answered in one place in order of sequence.]

1. a) Fiscal policy is largely the ways and means of defining the level of government expenditures and tax collection
in a particular year. Briefly describe the main objectives that government considers in setting the tax policy. 7
b) How does income differ from profit? 4

2. Write the fundamental principles for a professional accountant? Explain in brief the term `professional
behaviour’. 4+4=8

3. a) Discuss the provisions relating to the withholding tax against the supply of raw materials that are the part of
cost of goods sold for a purchaser. 5
b) What are the statements and documents that are to be accompanied with the return of income of an
individual and a company?
5
c) Write down the relevant provisions as to how the last date for the submission of return can be extended up
to four months. 4
d) In light with Section 82C of the Income Tax Ordinance 1984, what do you mean by “Gross receipts” and
“Minimum tax”? 5
e) What is the amount of minimum tax applicable for a mobile phone operator, a manufacturer of tobacco and
6
a two years-old pharmaceuticals company.
4. Ms. Sirajum is employed in AB Limited as a Finance Manager. The details of her income for the year ended on
30 June 2018 were as follows:
Monthly basic salary was Taka 60,000. Conveyance allowance was 50% of basic salary. Medical allowance was
25% of basic salary. Entertainment allowance was Taka 15,000 per month. Annual furniture allowance was Taka
2,00,000. She was provided with a free furnished accommodation for which company paid monthly rent Taka
40,000. She was a member of the Provident Fund established by the company where she contributed 10% of
her basic salary. She received Taka 60,000 as leave fare assistance and Taka 19,000 (net of tax) as share of profit
from Workers’ Profit Participation Fund (WPPF). Every month, company deducted Taka 12,000 from her salary
as Tax Deduction at Source (TDS).

She has invested Taka 4,00,000 in the share of a listed company with the money borrowed from a bank. She
paid interest Taka 48,000 but did not receive any dividend during the year. She also received Taka 90,000 as
interest on FDR and Taka 57,000 as interest on BSP.

She sold a land for Taka 6,00,000 in May 2018 that was purchased by her father for Taka 3,00,000 in 2006 and
gifted to her in 2012. The AIT paid was Taka 24,000 at the time of transferring the land to the buyer.

She paid Taka 22,000 as the premium for her Life Insurance Policy. She also spent Taka 25,000 in buying
electronics equipment for her house.

Taking the above information into consideration, calculate her total income, tax liability and tax to be paid
with the return for the income year 2017-18. 16

5. Spark Limited is a private Limited Company which is engaged in manufacturing and marketing of different
chemicals. The following is the Profit or loss statement of Spark Limited for the accounting year ended on 30
June 2018:

Particulars Taka Particulars Taka

Cost of goods sold 4,80,00,000 Revenue 6,50,00,000
Gross profit (c/d) 1,70,00,000
6,50,00,000 6,50,00,000
Gross profit (b/d) 1,70,00,000
Employee cost 42,00,000 Profit from sale of assets 90,000
General Expenses 13,60,000 Interest income (gross) 2,30,000

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 Conveyance 1,15,000 Dividend income (net) 80,000
Rent, rates and taxes 6,50,000 Bad debt recovery 35,000
Legal expenses 166,000
Donation and charity 289,000
Insurance 1,00,800
Sample cost 830,000
Promotion cost 8,10,000
Repair and maintenance 436,000
Traveling expenses 2,45,000
Research cost 9,16,000
Provision for tax 18,00,000
Net profit 5,517,200
1,74,35,000 1,74,35,000
Tax information:
a) The entire research cost has been charged in the current year though the benefits will accrue over
next five years.
b) Employee cost includes Taka 1,05,000 paid in cash.
c) Excess perquisite is Taka 1,50,000.
d) One generator was sold for Taka 2,50,000 which was purchased one year ago at a cost of Taka
2,00,000. The Written down value of the asset was Taka 1,60,000.
e) General expenses include annual subscription paid to MCCI Taka 20,000.
f) No tax was deducted from legal expenses.
g) Repair and maintenance for Taka 80,000 was paid in cash.
h) The company did not deduct any tax under section 52(1) (b) from its suppliers at the time of making
payment.
i) COGS includes depreciation Taka 3,60,000. The tax depreciation is Taka 8,00,000.
Find out the total income and tax liability of the company for the assessment year 2018-19.
20
6. a) The Value Added Tax Act deals with some other taxes alongside the Value Added Tax. Explain briefly the other
taxes that are dealt with by the Value Added Tax Act. 5
b) How to determine the value on which VAT is imposed by a manufacturer as per section 5(2) of the Value Added Tax
Act 1991? Mention the names of two products on which VAT is payable on MRP at manufacturing stage. 3+2=5

7. Recently, an audit has been conducted in your organization by the VAT authorities. The team found a huge gap
between sales reported in the financial statements and sales declared in the VAT return for the FY 2017-18. On
completion of audit, they raised an observation and sought your explanation on this matter. While reviewing
the books and records of both VAT and financial accounting, your findings were as follows:
a) Sales as per financial statements was Taka 7,00,00,000,
b) The cost of samples distributed was Taka 40,00,000 and free goods given to customers was Taka
80,00,000. Both of them were recorded as promotional cost.
c) Goods were used for administrative purpose for Taka 5,00,000.
d) The price at which company sold the goods was lower than the VAT approved price for which a
difference of Taka 8,60,000 was created.
e) The company has transferred goods amounting to Taka 2,00,00,000 from its central warehouse to the
consignment points against which no sales was recognized though the VAT challan has been issued
from central warehouse at the time of transferring goods.
f) Goods sold amounted to Taka 13,60,000 under the approval basis policy in last financial year, but
buyer gave confirmation accepting the goods this year.
Reconcile the sales revenue as per Accounting records with the revenue that should be reported in the VAT 10
return.

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