final examination Spring 2021

Program: BABS Class: BABS 4 A

2 Hours & 30
Course Name: Law & Taxation Duration: Minutes
Instructor’s Name: Rashid Masood Alam Total Marks: 30
Course Code: Date: 12/06/2021

IMPORTANT instructions:

 Students should not use unfair means while attempting papers i.e., the use of cell
phones for confirming answers or texting/emailing answers to each other is strictly
prohibited. Please avoid plagiarism and if anyone is found copying each other notes or
papers strict action would be taken against them. Please keep your camera open
all the time during the exam. Failure to abide by these rules may result in an 'F'
grade being awarded in the course.
 Read all the questions carefully first and then ask for clarifications.
 Question paper-related queries will not be entertained after 40 minutes for midterm exams
and 60 minutes for the final exam after the start of the exam.
 The marks of each question are mentioned at the end of each question.

Q1. Please reply following questions with a brief answer where possible.
a. According to the income tax ordinance 2001, the residential status of an individual is
determined by his nationality or place of domicile? Please explain the statement
because Mr. Murtaza, a Pakistani national Silicon Valley entrepreneur during the tax
year 2020 lived in Pakistan for 110 days, while during the tax year 2019 he lived in
Pakistan for 100 days, in the tax year 2018 he lived in Pakistan for 110 days and in
the tax year 2017 he remained in Pakistan for 35 days and for the income year 2016
he remained in Pakistan for 45 days.

Explain in light of Income Tax Ordinance 2001 if Mr. Murtaza is a resident Pakistani
during the tax year 2020 according to the Income Tax ordinance 2001? 2 Marks

b. Mr. William, an Englishman, and a tea expert has been hired by M/s Unilever
Pakistan Limited for his tea plant in Pakistan for two years. He has been paid Rs
1,500,000 (approximately US $ 10,000) Per month in addition to his accommodation
and Cost of Living Allowance. He also earns some foreign income in the UK i.e.
dividend income on shares and Rental Income of a house amounting to Pak Rupees
1,000,000 per month (approximately USD 7,500 per month). His Dividend Income
and Rental Income are not being brought to Pakistan and being directly credited to
his Bank account in London. If he falls in the tax slab category of 35%, what amount
of tax is he required to pay on his Foreign Income in Pakistan? 2
Marks
c. M/s TriPack Pakistan Limited (a public Listed Company) has entered into a joint
venture agreement with Mitsubishi Corporation. However; there is some reluctance
on Tripack Limited part with regard to clarity about the Tax rate and some effective
Tax Strategy in Pakistan. Mitsubishi Corp’s control and management of its affairs are
not wholly or partly situated in Pakistan and are situated completed in Osaka Japan.

How much Tax rate ICI Pakistan Limited would attract for the year 2020 on its
income?
Apart from this joint venture, the state with the reasons if Mitsubishi Corp would be
as a resident person or otherwise as per the Income Tax Ordinance 2001? 2
Marks

d. Please state with the reason which agreements are void and which are not.
I. Ali agrees to sell to Ali "all the grain in my godown at Sukkur.
II. Ali agrees to sell to Ali "one thousand mounds of rice at a price to be
fixed by c."
III. Ali agrees to sell to Ali "my white horse for rupees five hundred or
rupees one thousand.
2 Marks

e. Mufti, Suhaib, and Salim have contributed cash in an equal ratio (33.33% each) and
bought 03 Transportation container Truck. They decided to give the Trucks to Rab
Nawaz who had an established business of running a Goods Transport Company.
Monthly payment by Rab Nawaz was being shared in an equal ratio.

In light of Partnership Act 1932, please elaborate if the arrangement between Mufti,
Suhaib, and Salim may be regarded as a Partnership business? 2
Marks

f. What are the Intellectual Property Rights (IPRs)? Please give at least three examples
of Intellectual Property Rights example and why it's important to have the IP Laws in
Pakistan? 2
Marks

g. Nasim, a cloth manufacturer registered with the Sales Tax authorities exports all
garments manufactured at his Plant to Meci's stores in the US. As exports fall in the
zero-rated category, would he be able to claim a refund of sales tax, if any paid-on
purchase of raw material at the rate of 17% of the Purchase price? 1 Mark

h. What is a Zero rating according to the Sales Tax Act 1990? 1

Mark

i. A company that restricts the right to transfer shares, limits the number of members
to 50, and prohibits any invitation to the public to subscribe for the
shares/debentures / redeemable capital is a:
1 Mark
 a. Private company
b. Public Listed Company
c. Public Unlisted Company
d. Company limited by guarantee not having a share capital

j. Please mention at least three steps required for forming a Company according to the
Companies Act 2017? 1 Mark

k. What is the rate of additional Tax under the Sales Tax Act 1990 and why the
additional tax rates are charged? 2
Marks
Q: 2 A manufacturer of Suitcase i.e., Super Luggage Company located in Hub
Industrial area (a registered company according to Sales Tax Act 1990), sells 2000
pieces of Suitcases every month to the Hub Leather Company (buyer is also a
registered person) in Rs 1,000 each unit (this is a sales tax-exclusive prices). Hub
Leather Co sells the luggage suitcases to the customers @ Rs 1500 per pair (exclusive of
Sales tax).
How much would be the selling price of the suitcase inclusive of Sales Tax for Super
Luggage Company?
How much would be the output tax for the Super Luggage company?
What amount would be paid by the Super Luggage Company to the Government
(FBR) as Sales Tax?
How much amount would be paid by the Hub Leather Company to the Government
(FBR) as a sales tax? 04 marks

Q:3 Calculate the Tax Liability of Mr. Jahangir, a CFO of East-West Oil Company
Limited for the tax year 2020.
a) Taxable Salary remained Rs. 2,000,000 Per month during the Tax year 2020.
b) Naeem's Foreign Income (Income from Rental Property in the US) remained Rs
10,000,000 on which Foreign Tax had been paid Rs 4,000,000. For this question
assume that there is No Tax treaty existed between the US and Pakistan.
c) He visited the USA for 182 days in the Tax year and that was his only traveling
outside Pakistan.
d) He paid Zakat to his relatives amounting to Rs. 1,500,000 and Zakat deducted from
his Bank Accounts under Zakat and Usher Ordinance was RS 750,000.
e) Medical reimbursement was provided to a maximum of Rs. 300,000 per annum
according to the term of the employment. However; a medical bill of Rs. 450,000 has
been provided by Mr. Naeem which was later reimbursed to him detailing the Name,
NTN number, etc. of the medical practitioner.
f) He donated his household Furniture to a Civil Hospital in Karachi. Fair Market
Value was estimated to be Rs. 1,200,000.
g) He paid a Markup (interest) of Rs 250,000 during the year on the House Loan he
took to construct the house.
 h) Being an original allottee he bought a share of the listed company amounting to Rs.
2,500,000. 05
Marks

Q: 4 Mr. Inam was provided medical reimbursement of Rs 500,000 per annum in

terms of his employment contract. However; a bill was reimbursed amounting to Rs.
700,000 on employee’s special request with National Taxation number of the medical
practitioner being mentioned on the bill.
According to Income Tax Ordinance 2001, how much of the amount would be allowed
as admissible expenses in calculating the tax liability of Mr. Inam, and how much of the
claim amount would be rejected? 3
Marks

____________________________End of the Paper

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*Best of Luck*
Faculty signature Moderator’s
signature

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