pe-iii tax solution mohsin

Prepared By: Md. Mohsin

May-June 2003 OK

Question-1

Resident

Non-resident

(Bangladeshi)

Non-resident (Non

Bangladeshi)

Taka Taka Taka

a Income from Salary (u/s-21): 124,000 124,000 124,000

b Agricutural income 40,000

Less: Cost of production@60% of agricultural income (24,000)

16,000 16,000 16,000

c Debenture interest recived from Nepal* - - 30,000

d Share of partnership firm income due from Pakistan** 70,000 - -

Total Income before setting off business loss excluding house property income 210,000 140,000 170,000

e Loss of business in Bangladesh*** (25,000) (25,000) (25,000)

Total Income after setting off business loss excluding house property income 185,000 115,000 145,000

f Income from house property[u/s-24 & 25] 60,000

Less:Repairs &Maintenance [1/4 for residential purpose] (15,000)

45,000 45,000 45,000

Total income 230,000 160,000 190,000

For being Resident:

Slab Rate Tax

On first Tk. 180,000 @ 0% -

On balance 50,000 @ 10% 5,000

Total 230,000 Gross tax liability 5,000

For being Non-Resident Bangladeshi:

Since the total income of Mr. Suruj Mia is tk. 180,000 which is below taxable limit of tk. 180,000, his tax liability is nil.

For being Non-Resident non-Bangladeshi:

On total income in BD 190,000 @ 25% 47,500

Total 190,000 47,500

* Here we assumed that Mr. Suruz Mia is a Bangladeshi Citizen. And as per SRO-216/2004, irrespective of residential status if any Bangladeshi Citizen

brought money from abroad in proper channel then it would be exempted from tax.

** As per section-17 of the Income Tax Ordinance 1984, Any income of a resident accrue or arise outside Bangladesh during the year, shall be included

in the total income.

*** As per proviso of section-37 of the Income Tax Ordinance 1984, any loss from business or profession shall not be so sett off, or be carried forward to

succeeding assessment year or years for set off, against any income from house property.

Mr. Suruj Miah

Computation of Total Income

Assessment year 2002-2003 (Income year 2001-2002)

Computation of tax liabilities


May-June 2003 OK

Question-3

Taka Taka

Income from business or Profession (u/s-28):

Income Shown in the return for the assessement year 2002-2003 3,000,000

Add: Expenditure to be considered as per provision of law afterwards

Head office expense for separate consideration as per u/s-30(g) 1,100,000

Accounting depreciation for consideration as per 3rd schedule 900,000

2,000,000

Add: Inadmissible expenses as per provision of law:

Director's salary Tk 330,000 330,000

Fine Tk. 11,000 11,000

Commission to local agent Tk 1,000,000 1,000,000

Donation to unrecognised school Tk.15,000 15,000

Miscellaneous expenses Tk 72,000 72,000

Conveyaance expense of Tk 220,000 related to plane fare 220,000

Excess perquisites 42,000

[Excess perquisites to MD as per note-2]

Interest on bank loan Tk 3,350,000 1,196,429

2,886,429

[Fines paid for violation of customs law is fully disallowable.]

[Salaries paid to servant of MD is considered out of contractual obligation

of the Company and hence it would be disallowed fully for being personal

expenses of MD.]

[Donation to unrecognised school is considered as non-business expense

and hence is disallowed fully.]

[ As per section-29(1)(iii) of ITO 1984, interest on bank loan is

proportionately allowable for the loan amount used for the business

purpose. Total interest not for business

purpose=(3,350,000/21,000,000)*7,500,000=Tk 1,196,429.]

[This is personal expenses of the director, not business expense and so

disallowed fully (see note-1).]

[As the Company did not deduct tax @ 10% us/53(E) while making

payment of commssion will be fully disallowable u/s-30(aa).]

John Morris Inc.


Assessment year 2002-2003 (Income year ended 30 June 2002)

[Due to non deduction of tax @25% on salary as well as absence of

infromation that Head Office at Califronia has deducted tax from the said

salary that will be covered under DTAA. As u/s-50, no tax has been

deducted from the salary payment to Director which is fully disallowable

u/s-30(aa)].


Add: Deemed income on sale of motor vehicle(u/s-19(16))

Cost price(A) 525,000

Net proceeds from sale of machine(B) 465,000

Less: Written Down value ( C ) 325,000

Net gain on sale of machine (B-C) 140,000

Deemed income on sale of motor vehicle(u/s-19(16)) 140,000

Profit before charging separate considerable expenses 8,026,429

Less: Admissible expenses as per provision of law:

Fiscal depreciation:

Two Motor vehicle (Nissan Petrol Jeeps) purchased 4,500,000

Cost allowable for two motor vehicles (para-11(6) 3rd Schedule) 4,000,000

Fiscal depreciation @20% onTk 4,000,000 (under para-3(1)(b) 3rd Schedule) (800,000)

Profit before charging head office expenses 7,226,429

Less: Head office expense as per u/s-30(g) 10% on Tk 7,226,429 (722,643)

Income from business or Profession (u/s-28): 6,503,786

Calculation of Tax Liability

Total income tax rate Tax liability

Total income & Tax Liability 6,503,786 37.50% 2,438,920

Total 6,503,786 2,438,920

Gross tax payable 2,438,920

Less: Tax credit:

Tax deducted at source -

Advance tax paid u/s 64 -

-

-

Net Tax payable u/s-74 2,438,920

Note

1 Minimum tax:

2 Foreign travel for holiday recreation Tk 220,000

MD - 220,000 165,000 - - 220,000

3 Excess perquisites u/s-30(e)

DesignationHouse

Rent

Conveyance

/

utilities

Other

allowancesTotal perquisites Allowable limit

Excess

perquisites

MD 220,000 72000 292,000 250,000 42,000

As we are not provided any information related to gross reciept, it would not be possible for us to calculate

minimum tax.

As per Rule-65A(1) expenditure on foreign travel for holiday recreation of employee and his dependants

allowed upto lower one of 3/4 of actual expense and 3 months basic salary. This amount is allowable for

once in every 2 years. The amount is disallowed u/s 65A(2) as the payment exceeding Tk.10,000 has

considered been paid in cash rather than in cross cheque or cross bank draft. This calculation is not sufficient

enough to consider because lack of information. Further this is personal expense so disallowed fully.

Name of

Employee

Basic per

month

Actual

travelling

expenses

3/4th of

actual

expense

3 months Basic

salary

Admissible

expense

Inadmissible

expense


May-June 2003 OK Textile unit

Question-5

Note Taka


Profit before tax as per profit and loss account 2,015,000

Less: Non-business income included in P&L A/c for consideration at appropriate heads of income:

Income from house property m 90,000

1,925,000


Undervaluation of stock a 200,000

Excess amount paid for purchase of goods from relative of a Director b 80,000

Preliminary expenses written off c 25,000

Provision for bad and doubtful debt e 120,000

General charges g 6,000

Salary expenses h 400,000

Insurance premium i 65,000

Miscellaneous expenses j 15,000

Advertising expenses k 400,000

Interest on borrowing l 15,000

Munincipal tax m 30,000

1,356,000

Add: Deemed income u/s-19

Balancing charge(revenue gain) on sale of machine d 200,000

Unclaimed wages f 25,000

Profit before charging separate considerable expenses 225,000


-


Income House Property (u/s-24):

Actual Rental 90,000

Municipal value -

Annual Value (higher one of actual rental and municipal value) 90,000

Less: Admissble expenses(u/s-25)

Repair and maintenance (1/4 of Annual Value) 22500

Municipal tax 30000

52,500

Income House Property (u/s-24): 37,500

Income from Capital Gain(u/s-31):

Capital gain on sale of machine d 200,000

Income from Capital Gain(u/s-31): 200,000

Total income 3,743,500

XYZ LimitedComputation of Total Income



Tax Liability


Total income excluding capital gain 3,543,500 37.50% 1,328,813

Capital gain tax @ 15% (under para-2 Second schedule) 200,000 15% 30,000

Total 3,743,500 1,358,813

Gross tax payable 1,358,813

Less: Tax credit:



-

Tax adjustable from any refund (u/s 152) -

Net Tax Payable 1,358,813

Notes

(a) Minimum tax:

(b) Under valuation of stock

Opening stock as per account 2,700,000

Opening stock under valued by 10% (A) 300,000

Closing stock as per account 4,500,000

Closing stock under valued by 10% (B) 500,000

Net profit understated (B-A) 200,000

(c) Purchase of goods from relative of a Director Tk. 490,000

(d) Preliminary expenses written off Tk. 25,000

(e) Balancing charge(revenue gain) on sale of machine(u/s-19(16))

Cost price(A) 300,000

Net proceeds from sale of machine(B) 500,000

Written Down value (C ) 100,000

Net gain on sale of machine (B-C) 400,000

Capital gain[u/s-32(1) & (2)](B-A) 200,000

Balancing charge(revenue gain) on sale of machine(net gain-capital gain) 200,000

Goods purchased from a relative of a Director at price (Tk 490,000) higher than the market value (410,000).

The profit is reduced by excess amount of Tk 80,000 has been added back with the net profit because this

amount not expended wholly and exclusively for the business purpose u/s-29(1)(xxii).

Preliminary expense written off which is considered incurred for the business purpose and was allowed in the

year when amount paid.

The opening and closing stock of cloths were valued 10% less than their costs. As a result the net profit of

the Company has been understated for charging higher COGS in P/L account for the undervalued closing

stocks. And net profit has been overstated for charging lower COGS in P/L account for undervalued opening

stocks. So total net profit has been understated for net amount Tk. 200,000 which has been add back to the

profit. Here, market price is higher than costs.


minimum tax.


(f) Provision for bad and doubtful debt Tk 120,000

(g) Unclaimed wages Tk. 25,000

(h) General charges Tk. 6,000

(i) Salary expenses Tk 400,000

(J) Insurance premium Tk. 65,000

(k) Miscellaneous expenses Tk. 15,000

(l) Advertising expenses Tk. 500,000

(m) Interest on borrowing Tk 15,000

(n) Municipal tax Tk 30,000

House property A

House property B

Advertising expenses paid for cinema slides assumed been capitalized being deferred revenue expenses and

are distributed within 5 years is allowable expenses.

Interest has been paid to director at free of interest is fully disallowable since in this case the loan assumed to

have been borrowed for non-business purposes.

Assumed house property A has been let out to employees as per contractual obligation with the company and

is considered as business expenses and the municipal taxes will be considered as business expenses (Tk

60,000 and Tk. 25,000 for rental and municipal taxes of A respectively).

House property B has been let out to outsiders for Tk. 90,000 which is considered as income under "Income

form House property" u/s-24. The property is considered as let out for residential purpose.

The Company did not complied with the legal formalities for termination of employee by serving notice as

per job agreement. This is incurred not for the purpose of business and disallowed fully u/s-29(1)(xxii).

No tax has been deducted from the salary payment to Engineer which is fully disallowable u/s-30(aa). The

non deduction of employer can not remediable by compliance of the employee.

The insurance premium against the loss of profit during strike is considered non-business expenditure and

hence disallowed u/s-29(1)(xxii)

Salary paid for MD's residence is not a contractual obligation of the company and considered as personal

expenses of MD. So it is fully disallowed.

Disallowed fully being no provision for bad and doubtful debt is allowable u/s-29(xv) unless the debt become

irrecoverable and actually been written-off in the books of accounts. So total provision added back with

profit.

Unclaimed wages Tk. 25,000 not paid within 3 years of expiration of income year in which expenses were

allowed for and legal claim for wages is unavailable. So this trading liability is added back u/s-19(15)(c ).


Nov 2003 Q-3 OK

Note Taka

Income from Salary (u/s-21):

a Basic salary (25,000 *12) 300,000

b Dearness allowance (20% of Basic salary) 60,000

c Bonus (one month Basic salary) 25,000

d House Rent allowance(Rule-33A)[35% of basic] 105,000

Less: Exemption

50% of Basic salary or 150,000

Tk 15,000 per month 180,000

Lower one of the above 150,000

-

e Medical allowance(Tk 500 per month) 6,000

Less: Exemption(Rule-33I):

Actual expense(assumed allowance are expended) 6,000

-

f Conveyance allowance [1,200 per months] 14,400

Less: Exemption( actual expense) 24,000

[Assumed fully expended] -

g Leave travel concession Tk 60,000 60,000

Less: actual expense 51,500

8,500

h Entertainment allowance Tk 1,500 per month 18,000

As u/s-33H total allowance is added with the salary income.

i Employer's Contribution to RPF(10% of Basic) 30,000

j Interest on RPF Para-25 Part-A 6th schedule):

Interest on RPF 96,000

Less: Exemption

120,000

87,000

120,000

-

Total Income from Salary (u/s-21): 441,500

14.5% of cumulative RPF(Tk

96,000/.16)*14.5%

1/3 of salary[(300000+60000)/3]=Tk 206133 (As per

definition of salary under 1st schedule, part-B of ITO

1984, "salary includes dearness allowance if the terms of

employment so provides, but excludes all other

allowance and perquisites.")

[higher one exempted as per high court verdict for

benefit of doubt goes to assessee]

Mr. M




Income from interest on securities (u/s-22 &23):

Interest on 14% debenture (200,000*14%) 28,000

Interest on 12% debenture of PQ Ltd (200,000*12%) 24,000

Less: Commission (4,000/2) (2,000) 22,000

Interest on 8.5% National Bond [200,000*8.5%] 17,000

Income from interest on securities (u/s-22 &23): 67,000

Income from house property (u/s-24):

Annual value(AV):

Rental income (Tk 2,000*12) 24000

Municipal value(not given) -

Higher one of above 24,000

Less: Admissible deduction(u/s-25):

Repair & maintenance[1/4 of AV] u/s-25(1)(h) 6,000

Municipal tax([Tk40,000/2] u/s-25(1)(a)) 10,000

Insurance premium([Tk 12,000/2] u/s-25(1)(b)) 6,000

(22,000)

Total Income from house property 2,000

Income from Agriculture (u/s-26):

Sale of paddy 125,000

Less: Admissible deductions (u/s-27)

Production costs -

125,000

Income from Capital gain[u/s-31&32]

Sale of land property 4,000,000

Income from Other sources (u/s-33):

Dividend income[45000/.9] 50,000

Interest on savings account[5400/.90] 6,000

Sale of tree of spontaneous growth 20,000

76,000

Income from Business or profession (u/s-28):

Share of Income from partnership firm 75,000


[As no books of accounts is maintained 60% of Market value of the produce

allowable as admissible deductions. But land given as adhi system, so no deduction is

allowable u/s-27(1) ( C )(3).]

[ As per section-22 of ITO 1984, interest on securities shall be computed on receivable amount. However there is a case

reference between Lal pat Vai Vs. Dol pat Vai where it was established that interest on securities shall be computed on

cash basis. Here we assumed that interest was paid on yearly basis. That's why interest on 12% debenture and interest on

8.5% national bond computed on yearly basis rather than using 11.5 months and 10 months respectively.]


Calculation of investment allowance(under Part B 6th schedule):

Payment of Life insurance premium(as per para-1 of 6th Schedule, Part-B) 50,000

[Allowed for assessee, spouse, minor child only upto 10% of policy]

Employee and employer's contribution to RPF(10% of salary each) 60,000

(allowable as per para-5 of 6th Schedule, Part-B)

Actual investment 110,000

Allowable investment allowance(u/s-44):


1,189,125

Maximum allowable investment 10,000,000

Allowable investment (lower of the above) 110,000

1 On total income incluing Capital gain

Particulars Amount Rate Tax

On first Tk. 180,000 @ 0% -

On next Tk. 300,000 @ 10% 30,000

On next Tk. 400,000 @ 15% 60,000

On next Tk. 300,000 @ 20% 60,000

On balanceTk. 3,606,500 @ 25% 901,625

Total Income 4,786,500 Gross tax liability (A) 1,051,625

2 Total income excluding capital gain is tk. (4,786,500-4000,000) 786,500

Particulars Amount Rate Tax

On first Tk. 180,000 @ 0% -

On next Tk. 300,000 @ 10% 30,000

On next Tk. 306,500 @ 15% 45,975

T. Income excluding capital gain 786,500 Tax liability excluding capital gain 75,975

Tax on capital gain 4,000,000 @ 15% 600,000

Total Income 4,786,500 Gross Tax Liability (B) 675,975

Gross tax liability [As per 2nd schedule lower between (A) and (B)] 675,975

Less: Average rate tax rebate on firm's share of income [(675,975/4,786,500)*75000]=Tk. 10,592 (10,592)

Less: 10% Rebate on investment Tk. 110,000 (11,000)

Less: Tax deducted at source 654,383

On dividend 5,000

On interest on bank deposit 600

(5,600)

Net tax liability 648,783


25% of total income [excluding employer's contribution to RPF, interest on RPF

(considering the exemption of interest under para-25 of 6th schedule Part-A), income

u/s-82C]. So 25% on Tk. 1,189,125 (4,786,500-30,000).


May 2004 Q-4 OK

Taka Taka

Income from house property(u/s-24):

Annual value(AV):

Rental income [10,000*12] 120,000



Add: Owner's expense(municipal tax) paid by tenant 4,000

Annual Value (AV): 124,000

Less: Admissible deduction (u/s-25):

37,200

Municipal tax 4,000

(41,200)

Total Income from house property (A) 82,800

Income from Business or Profession (u/s-28):

Gross income as per trading account 1,000,000

Less: Operating expenses (depreciaton & other expenses) (400,000)

Net Profit as per profit & loss account 600,000

Less: Non-business income included in P&L A/c for consideration at appropriate heads of income:

Claim received for breach of contract (10,000)

590,000


Understatement of closing stocks

Net stocks in trading account[600,000-500,000] 100,000

Value of net stocks should be shown[100,000/(1-.125)] 114,286

Undervaluation of net stocks =[114,286-100,000] 14,286

Repair to let out portion Tk. 8,000 8,000

Annual Contribution to Cotton Dealers Association Tk. 2,000 -

Contribution to Prime Minister Relief Fund 5,000

-

Repair & maintenance [30% of AV assuming used for commercial

purpose] u/s-25(1)(h)

ABC Firm



[considered not for business purpose. Hence fully disallowable.]

[The business is related to cotton textiles. Hence we assumed the annual contribution to

Cotton Dealers is business expenditure. So nothing shall be added to the income.]

[As per SRO-125/91, contribution to Prime Minister's Relief Fund is exempted from income

tax. So nothing shall be added to the income.]


Salaries to partners Tk 1,44,000 144,000

Interest on loan Tk. 75,000 -

Loss on speculation business Tk.150,000 150,000

Total Inadmissible Expenses 316,286

Income from business or Profession (B) 273,714


Advertisement 30,000

Claim received for breach of contract 10,000

Total Income from Other sources ( C ) 40,000

Total income (A+B+C) 396,514

Computation of firm's tax liabilities

On first Tk. 180,000 @ 0% -

On balanceTk. 216,514 @ 10% 21,651


Allocation of profit to partners:

A B C Total

Salary 24,000 48,000 72,000 144,000

Share of profit[2:2:1] 101,006 101,006 50,503 252,514

Total 125,006 149,006 122,503 396,514

Computation of total income from BCD Firm:

Taka

Net loss allocated to partners (150,000)

Add: Admissible items:

Salary 60,000

Interest 20,000

Total income/(loss) (70,000)

[Loss on speculation business was charged in P7L a/c which should be set off against any

other speculation business of the firm as per section-37& 39. Here it is being non-business

expense disallowed fully.]

[Interest paid on loan for installing accounting system in the firms premises. Since it is

related to business nothing shall be added to the income.]

[Being salaries, commission, interest, remuneration by firms/association to partners/members

is fully disallowable u/s-30(b).]


Allocation of profit to partners:

B C d Total

Salary 60,000 60,000

Interest 20,000 20,000

Share of profit[1:1:1] (50,000) (50,000) (50,000) (150,000)

Total (50,000) (50,000) 30,000 (70,000)

Assessment of partners:

A

B & C Calculation of total income of B & C:

B C

Income from ABC firm 149,006 122,503

Income from BCD firm (50,000) (50,000)

House property income 800,000 -

Other income - 50,000

Total Income 899,006 122,503

Computation of B's tax liabilities

On first Tk. 180,000 @ 0% -

On next Tk. 300,000 @ 10% 30,000

On next Tk. 400,000 @ 15% 60,000

On balanceTk. 19,006 @ 20% 3,801


Average tax rate[(93,801/899,006)*100]= 10.43%

Less:

(83,471)

Less: Tax rebate at average rate for ABC firm's share taxed Income [149,006*10.43%]=Tk 15,547 (15,547)

Net tax refundable (5,217)

Computation of C's tax liabilities

The entire amount of income from partnership is tax free income as firms paid the tax and further tax is not

imposed on his only such sources of income. Partner A can not claim any refund. Minimum tax liability Tk

2,000 for having total income exceeding maximum exemption slab for tax liability.

Double Taxation Avoidance Agreement (DTAA) tax relief [25% or or 10.43% whichever is

lower.So DTAA tax relief for House property income from London=[800,000*10.43%]=Tk

83,471]

Since the total income of C is below the taxable limit, he is not be liable to pay tax.


May-2004 Q-7

Tax Exempted Taxable Total

Taka Taka Taka


Profit before tax as per profit and loss account 18,000,000 7,000,000 25,000,000

Less: -

-

Dividend income - 3,000,000 3,000,000

Insurance claim received 2,700,000 300,000 3,000,000

Capital gain on sale of land 5,000,000 5,000,000 10,000,000

Other income 1,500,000 - 1,500,000

9,200,000 8,300,000 17,500,000

8,800,000 (1,300,000) 7,500,000

Add: Expenditure to be considered as per provision of law afterwards -

Accounting depreciation 5,535,589 5,535,589 11,071,178

14,335,589 4,235,589 18,571,178


1 Rental expenses Tk 2,400,000 1,200,000 1,200,000 2,400,000


Fiscal depreciation as per 3rd schedule (2,507,500) (2,507,500) (5,015,000)

Income from business or Profession (u/s-28): 13,028,089 2,928,089 15,956,178

Capital gain (u/s32 & 33):

Capital gain on land[TDS=(10,000,000*2%)=200,000/.15=1,333,333] - 1,333,333 1,333,333

Income from Other sources (u/s-33)

Dividend income (3,000,000/.8) - 3,750,000 3,750,000

Interest on FDR [500,000/.1] - 5,000,000 5,000,000

Other income 1,500,000 - 1,500,000

Total income 14,528,089 13,011,422 27,539,511

[ Assumed that Tk50 lac out of Tk 1 crore of capital gain has reivested in his

business or profession within 1 year after or before the transfer of the assets which

is not taxable u/s-32(5). Rest of the capital gain amount is taxable as a capital gain

income]

(Assumed that dividend was received after taxholiday period and wrongly booked

only cash received amount (net of tax) in P & L).

[No tax has been deducted u/s-53A from the rent payment which is fully

disallowable u/s-30(a). Under SRO-205 dated 6 July 2005 any deemed income u/s-

19 or disallowed expense u/s-30 will not be treated as final settlement of income

u/s-82C for exporting RMG & Knit wear producer. But this will not applicable in

this case because for IY from 1 July 2008 to 30 June 2010 it is applicable.]

Non-business income included in P&L A/c for consideration at appropriate

heads of income:

OBL Limited

Assessment year 2004-2005 (Income year ended 31 December 2003)



-

-

Income Tax Total

1 Total export business income: 2,928,089

Less: 50% of export business income to be excluded 1,464,044

Total Taxable export business income 1,464,044 37.5% 549,017

(Being non listed trading Company)

2 On capital gain[u/s-82C] 1,333,333 15% 200,000

3 9,261,422 37.5% 3,473,033

5 On dividend income @ 20% 3,750,000 20% 750,000

Gross tax liability 15,808,800 4,972,050

Less: Tax credit:

TDS on dividend (3,750,000*20%) 750,000

TDS on interest on FDR (5000,000*10%) 500,000

TDS @2% on transfer of land[u/s-53H] for which capital gain arisen. 200,000

(1,450,000)

Net Tax liabilities 3,522,050

Note

1 Calculation of fiscal/tax depreciation:

Assets WDV(TK) Rate Fiscal dep.

Factory building 7,000,000 20% 1,400,000

Plant & machinery 15,750,000 20% 3,150,000

Furnitures & Fixtures 950,000 10% 95,000

Motor vehicles 1,850,000 20% 370,000

Total fiscal depreciation 5,015,000

2 Calculation of accounting depreciation:

Year Particulars

Factory

building

@20%

Plant &

Machinery

@20%

Furniture &

fixture @10%

Motor vehicle

@20%

2003 Tax WDV 7,000,000 15,750,000 950,000 1,850,000

2002

Tax WDV [2003

WDV/.8 & .9 for

FF]

8,750,000 19,687,500 1,055,556 2,312,500

2001

Tax WDV [2002

WDV/.8& .9 for

FF]

10,937,500 24,609,375 1,172,840 2,890,625

2000

Tax WDV [2001

WDV/.8& .9 for

FF]

13,671,875 30,761,719 1,303,155 3,613,281

1999

Tax WDV [2000

WDV/.8 & .9 for

FF]

17,089,844 38,452,148 1,447,950 4,516,602

3,076,172 6,921,387 260,631 812,988

Total accounting depreciation 11,071,178

3 Minimum tax:

As we are not provided any information related to gross reciept, it would not be possible for us to calculate minimum tax.

Assumed that the Company commenced operations from July 1999, acquired all the above assets on

that date and made no addition thereafter.

Assets (Tk.)'000

Accounting dep@18% on

WDV(1999)


[ 50% of export business income to be excluded under para-28 Part-A 6th

schedule for which reduced rate of tax @15% under SRO-207 dated 30.6.2008

will not be applicable]

On Income from other sources excluding dividend income


Nov-2004 Q-4 OK

Note Taka



Less:

Export subsidy 407,687

Sale of waste 121,508

Rent of Bunglows 57,902

Dividend income 17,400

Interest on PSP 15,000

(619,497)

449,842


1 Entertainment (for consideration as per Rule-65) 249,700

3 Rates, insurance & repairs to buildings 11,844

[1800+2500+7544] 261,544

711,386


Replacement of plant & machinery Tk 20,39,000 2,039,000

Purchase of two paintings for MD's Office Tk 30,000 30,000

X-Mass gift to foreign technician Tk 10,000 10,000

Refreshment, food drinks etc. at one of its business meetings -

[Assumed incurred for the business, so allowable fully]

Catering & refreshments for shareholders & guest at AGM 50,600

Donations Tk 10,000 10,000

[Being personal expenditure of MD which is not for business purpose, so

disallowed fully]

[Gift given considered as non-business expense. So disallowed fully.

Full amount for gift is added back .]

[Assumed that Donations amounting Tk 5,000 given to Zakat fund

which is not established under Zakat Fund Ordinance, 1982 and not

approved by NBR. Regarding the rest of the amount i.e. remaining tk.

5,000, we have no information by which we can consider for CSR

rebate.]

[Assume that this expended not for business purpose and might have

been avoided by Company]

M/s Arzoo Textile Mills Limited



Non-business income included in P&L A/c for consideration at appropriate heads of

income:

[Being capital nature expenditure disallowed fully. Depreciation on this

capital expenditure will be allowed as per 3rd schedule]


Trade penalties, legal expenses & professional charges Tk 120,000 20,000

Contribution to Staff provident fund Tk 75,500 -

[PF is recognised, so allowable as Part-B 1st schedule]

Provision for gratity Tk 150,000 150,000

Reserve for meeting contingent liabilities Tk 30,000 30,000

[No such reserve is allowable except those become certain liabilities]

2,339,600

3,050,986


Trading liabilities Tk 350,000 350,000

3,400,986


Garuity paid 100,000

Fiscal depreciation as per 3rd schedule 551,710

(651,710)


Entertainment as per Rule-65

40,000

34,986

Allowable limit 74,986

Actual entertainment expense claimed 249,700

Allowable lower one of actual and allowable limit (74,986)

Income from business or Profession (A) 2,674,290


Annual value(AV):

Rental income from Bunglows 57,902





Rates & Insurance[1800+2500] 4,300

(18,776)

Income from house property(B) 39,127

[Any trading liabilities not paid within 3 years after expiry of the inocme year in which

such liabilities arisen, be deemed to be income during the income year immediately

following the expiry of such 3 income years. So it is deemed income u/s-19(15)(c)]

upto Tk 1,000,000 4% of profit before charging entertainment exp.

2% On rest of balance of profit before charging entertainment exp.

[No provision for gratuity is allowed under ITO, 1984. Only payment

portion of gratuity is allowed which will be consider afterwards. So full

amount is added]

[Trade penalties and legal expenses Tk 20,000 is disallowable for

violation of laws. Amount Tk 50,000 spended for defending the

allegation of black marketing which become succesful. So it is allowable

expense for business purpose. Moreover, ITP paid Tk 20,000 to present

the cases to DCT which is allowable for considering business purpose.

Income taxes paid up to Appellate Tribunal is allowable under omnibus

clause.]



Dividend income 17,400


Export subsidy 407,687

Interest on Paribar Shanchayapatra (PSP) 1,500

Income from other sources ( C ) 548,095

Total income (A+B+C) 3,261,512

Income Rate Tax

1 2,674,290 15.0% 401,144


2 39,127 37.5% 14,672

3 On income from other sources excluding dividend [email protected]% 407,687 37.5% 152,883

4 On dividend income @ 20% 17,400 20.0% 3,480

Gross tax liability 3,138,504 572,179

Less: Tax credit:

TDS on dividend 3,480

-

(3,480)

Net Tax liabilities 568,699

Minimum Tax Calculation:

Gross Reciepts:

Sale of yarn 10,811,956

Sale of textile products 10,926,425

Export subsidy/incentive received in cash 407,687


Rent of bungalows 57,902

Dividend 17,400

Interest on PSP 15,000

22,357,878

Minimum tax @.5% on gross receipts 111,789

Note: Minimum tax of tk. 111,789 is lower than the tax payable of tk. 568,699. Hence no implication of minimum tax.


On income from business of Textile Mills @15% under SRO-207 dated

30.6.2008 [for which exclusion of 50% export income from total

Business income will not applicable as already taken advantage of

reduced rate of tax]

On Income from house property @ 37.5% being non listed trading

company

TDS on cash subsidy[@5% was deducted upto 30 June 2009 and now no

TDS on cash subsidy from 1 july 2009]


May 2005 Q-5 OK

Taka Taka



Less:

Dividend income (5,000,000)

385,000,000


Entertainment expenses 4,000,000

Accounting depreciation for consideration as per 3rd schedule 14,000,000

18,000,000

403,000,000


Excess perquisites u/s-30(e) 4,000,000

Printing & Advertisement expenses 1,000,000

Subscriptions and donations 250,000

Sundry expense 450,000

Provisions for bad and doubtful debts (1,000,000+10,000,000) 11,000,000

Total Inadmissible expenses 16,700,000

419,700,000


Fiscal depreciation as per 3rd schedule (25,000,000)



40,000

7,874,000

Allowable limit 7,914,000

Actual entertainment expense claimed 4,000,000

Allowable lower one of actual and allowable limit (4,000,000)

Total Business income 390,700,000



ABC Bank Limited




income:



Dividend income (assumed gross amount) 5,000,000



Business income:

Total Income excluding dividend income 390,700,000 42.50% 166,047,500

Dividend income 5,000,000 20% 1,000,000

Total income 395,700,000 167,047,500

Add: 15% Excess profit tax [u/s-16C] 15,780,000

182,827,500

Less: Tax credit:

Tax deducted at source on Divedend income@20% (1,000,000)


Net Tax payable 181,827,500

1 Calculation of Excess profit tax [u/s-16C]:

Capital and Reserves

Paid up capital 408,000,000

Statutory reserve 130,000,000

Retained profit-opening 42,000,000

Exchage equilization fund 1,000,000

Total Capital and Reserves 581,000,000

50% of Capital and Reserves [A] 290,500,000

Assessed Profit as per computation [B] 395,700,000

Excess profit [B-A] 105,200,000

15% Tax on excess profit [u/s-16C] 15,780,000

2 Minimum tax:


minimum tax.

Computation of Tax Liability:


Nov-Dec 2005 OK

Taka Taka


Profit before tax as per profit and loss account 837,413


Technical fees 210,000

Accounting depreciation for consideration as per 3rd schedule 2,979,211

3,189,211

4,026,624


Excess perquisites u/s-30(e) 145,000

Salary & allowances Tk 176,200 176,200

Registration expenses & fees Tk 215,701 215,701

Fines

Advertisement and Publicity expenses 125,000

Gratuity provision 677,937

Rent, rates & taxes Tk 368,212 214,640


5,581,102

No tax has been deducted from the salary payment Tk 176,200 which is

fully disallowable u/s-30(a).

[Being personal entertainment expenses and not for business purpose

which is disallowed fully u/s-29(1)(xxvii)]

[Doantion to unrecognised local sports club which is disallowed fully]

[No tax has been deducted u/s-53A from the rent payment Tk 214,640

out of Tk 368,212 which is fully disallowable u/s-30(a)]

[No provision for gratuity is allowed under ITO, 1984. Only payment

portion of gratuity is allowed. So full amount is added]

Messers Orion Limited





Gatuity paid 276,434

Fiscal depreciation as per 3rd schedule[assuming same as last years] 3,726,422

(4,002,856)


Less: Fees for Technical now how fee u/s-30(h) (126,260)

Total Business income 1,451,986

Tax Liability


Business income:

72,599 27.50% 19,965

Income from local sale @ 90% 1,306,788 27.50% 359,367

Total income 1,379,387 379,331

Less: (37,933)

341,398

Less: Tax credit:



-

Tax adjustable from any refund (u/s 152) -

Net Tax payable 341,398

Note:

1 Minimum tax:


minimum tax.

Income from export@10%[of which 50% income will be

excluded from this total export income under Part-A 6th

schedule]. So (1,451,986*10%/2)=tk. 72,599 shall be

subject to income tax from export income.

10% tax rebate for declaring more than 20% dividend for the year which

has been paid as per law.

[8% of profit before charging entertainment exp.]


May-June 2006 Q-5 OK

Note Taka



Less: For separate consideration

Profit on sale of imported goods Tk 800,000 (800,000)

1,710,000



2 Accounting Depreciation (for consideration as per 3rd schedule) 1,200,000

3 Fess for technical know how 300,000

1,620,000

3,330,000


1 Preliminary expenses written off Tk 50,000 50,000

2 Over & under provision Net Tk 200,000 -

50,000

3,380,000


Tax depreciation as per 3rd schedule

(900,000)

Interest on loan waived by Sonali Bank [as per proviso of section 19(11)] (400,000)

Lease rental (150,000)


[Assumed that preliminary expenses which has been allowed in the year

of payment. So disallowed fully.]

[Tk 1,200,000-Tk 200,000-Tk 500,000+(Tk 2,000,000*20%)]=Tk

900,000. As per para-11(6)a of 3rd schedule cost is allowed for Nissan

Jeep car (motor vehicle) upto Tk 2,000,000.]

XYZ Limited



[Over provision Tk 500,000 and under provision Tk 300,000 for certain

expenses adjusted in retained earnings during the year. Assuming all the

provisions were disallowed fully in last year, net provision which was

adjusted this year with R/E not in net profit. So nothing added back .]



40,000

18,600



Allowable lower one of actual and allowable limit (58,600)

Fees for Technical now how fee u/s-30(h) (154,400)

Income from business or Profession (u/s-28)[Manufactured Jute goods]: 1,717,000

Income from sale of imported Jute goods which is considered u/s-82C 727,273

[200,000/27.5%]


Income Rate Tax

1 727,273 27.5% 200,000


2 On Income from manufactured Jute goods 1,717,000 15.0% 257,550

Gross tax liability 457,550

Less: Tax credit:

AIT on Import (200,000)


Notes:

1 Income u/s-82C(6) and Income u/s-82C(7):

2 Minimum tax:

[8% of profit before charging entertainment exp.]

As per new requirements in Finace Act 2011, it would not be possible for us to compute income u/s-82C(6) and 82

C(7). The reason behind that is, we donot have enough information related to shown income and disallowances u/s-

30 of Income Tax Ordinance 1984.


minimum tax.

[As per SRO-206/2008 the applicable tax rate for locally manufactured

jute goods is 15%.]




On income from imported Jute goods @27.5% [for which exclusion of

50% export income from total income will not applicable as export of

goods from imported jute products]


Nov-Dec2006 Q-2 OK

Note Taka


Basic salary (10,000 *12) 120,000

Festival Bonus (two month Basic salary) 20,000

Rent free accomodation(Rule-33B)

25% of Basic salary 30,000

or

Rental valueTk 25,000 25,000

Lower one of above 25,000

Less: Concessional rate by [email protected]% of basic 9,000

16,000

Medical allowance(Tk 3600) 3,600


Actual expenseTk 5000 (allowed upto allowance) 3,600

-

Conveyance allowance Tk 500 per month 6,000

Less: Exemption Rule-33C Upto 24,000

-

Employer's Contribution to RPF(10% of Basic) 12,000

Total Income from Salary (u/s-21) 168,000

Total income 168,000


Purchase of ICB certificate(allowed as para-10) 5,000

Payment of insurance premium(as para-1)

Allowed for assessee, spouse, minor child only (5,000+4,000) 9,000

Group Insurance & benevolent fund(allowed as para-17) 200

Allowed for assessee, spouse, child and dependent only


(allowable as per para-5)




31,200



As per Finance Act 2011, if the total income of an individual assesse exceeds 180,000 then he will be liable to

pay tax. Here the total income of Mr. Azgar is below the taxable limit. That’s why he will not be liable to pay

any tax.

20% of total income [excluding employer's contribution to RPF, interest on

RPF (excluding interest para-25, part-A 6th schedule), income u/s-82C]. So

20% on Tk 156,000 (168,000-12,000).


Mr. Azgar




Nov-Dec 2006Q-5 OK

Note Taka



Less:

Dividend (for consideration at income from other source) (760,760)

9,602,164



2 Depreciation (for consideration as per 3rd schedule) 4,681,665

4,806,986

14,409,150


1 Refund of VAT on cost of diesel Tk 8,002,241

8,002,241

2 Salary expense Tk 9,344,035

3,540,000

3 Import duty on packing material & fishing gear Tk 240,500 -

4 WASA bill Tk 30,000 30,000

5 Excess perquisites Tk 360,300 360,300

Excess perquisites disallowed u/s-30(e).

6 Salary & allowances of Crew, captain Tk 360,000 -

7 Insurance expense Tk 218,500 218,500

As VAT Tk 8,002,241 paid for cost of diesel which has been refunded

for export earning Tk 94,446,822 is disallowable because already

refunded for export.

Import duty paid allowed as tax credit as AIT. So nothing to add from

this custom duty.

Marine Fisheries


Assessment year 2006-2007 (Income year ended 31 July 2005)


income:

No tax has been deducted from the salary payment Tk 3,540,000 out of

Tk 9,344,035 which is fully disallowable u/s-30(a).

Disallowed for being not business expense rather personal expense of

Director.

Disallowed for being not business expense rather personal expense of

Director.

Tax paid by company on salary is allowable fully as job agreement and

expended for business. It will be part of perquisites of company.


8 Miscellaneous expense Tk 25,000 25,000

9 Office rent Tk 1,026,647 720,000

60000*12=Tk720,000 disallowed for non tax deduction u/s-53A.

10 Picnic expense Tk 150,000 150,000


27,455,191


Tax depreciation as per 3rd schedule (assumed same as previous year dep) (3,390,000)



40,000

461,304



Allowable lower one of actual and allowable limit 125,321

Income from business or Profession before considering exemption on export income 23,939,870


Dividend income (gross) 760,760

Total income before considering exemption on export income 24,700,630

Calculation of proprtionate income on export:

Total sales 154,283,278

Export sales 94,465,822

Fiscal Income on export sales [94,465,822/154,283,278)*23,939,870]=Tk 14,658,099 14,658,099

50% of export income to be excluded from total income=[14,658,099/2]=Tk 7,329,049 7,329,049

Business Income other than export income[Total incomeTk23,914870-7,321,396] 16,610,821

Total Business Income after considering exemption on export income 23,939,870

Income Rate Tax

1 23,939,870 37.5% 8,977,451


2 On dividend income @ 20% 760,760 20.0% 152,152

Gross tax liability 9,129,603

Less: Rebate on CSR (25,000*10%) (2,500)

Tax liablity 9,127,103

Less: Tax credit:

TDS on dividend Tk 760,760 @15%, but now it is 20%(u/s-54) 114,114

AIT on Import 240,500

(354,614)

Net Tax liabilities 8,772,489


Gross Reciepts:

Sales 154,283,278

Dividend 760,760

155,044,038


Note:

Minimum tax of tk. 775,220 is lower than the tax payable of tk. 9,127,103. Hence no implication of minimum tax.

Business income after considering exemption on export income



As per SRO-229/2011 (which is related to CSR), donation to local

orphanage will be considered for claiming rebate assuming all of the

condition of the above SRO was met by the company.


Incurred for sister concern so disallowed as non business expense u/s-

29(1)(xxvii).

[50% of Export income to be excluded from total income as per para-28 Part-A of 6th schedule.]



Note Taka


a Basic salary (50,000 *12) 600,000

b Festival Bonus(two month Basic salary) 100,000

c Conveyance facilities @7.5% on basic salary 45,000

d Rent free accomodation(Rule-33B)


or

Rental valueTk 25,000 p.m 300,000

Lower one of above 150,000

e Foreign travel expenditure Tk 250000 250,000

f Entertainment allowance Tk 3,000 per month 36,000

As u/s-33H total allowance is added with the salary income.

g Medical allowance(Tk 150,000) 150,000


Actual expense (assumed allowance are expended) 150,000

-

h Other allowance Tk 100,000 100,000

i Employer's Contribution to RPF(10% of Basic) 60,000

Income from Salary (u/s-21) 1,341,000

Mr. Arman



For both official and private purpose. Driver's salary and other expenses of the

car were borned by company. That’s why, nothing shall be added considering

general practice of company for solely business purpose.

Assuming that the passage provided in accordance with terms of service

contract & arranged in yearly trip basis. The money provided by the company

to meet the expenditure in abroad shall be added to the income.

Assuming U/s-33J the allowances has not been expended wholly, necessarily

and exclusively in the performance of the duties of the office paid to him in

cash. So fully disallowed.


Income from agricuture(u/s-26):

Income from agricuture(nothing prod. Cost as barga u/s-27(1)(c)(iii) 280,000


Income from Lecture 150,000




(allowable as per para-5)




342,200



1 On total income

On first Tk. 180,000 @ 0% -

On next Tk. 300,000 @ 10% 30,000

On next Tk. 400,000 @ 15% 60,000

On next Tk. 300,000 @ 20% 60,000

On balanceTk. 591,000 @ 25% 147,750

Total 1,771,000 Gross tax liability 297,750

Less: 10% Rebate on investment Tk 120,000 12,000

285,750

Less: TDS -


20% of total income [excluding employer's contribution to RPF, interest on

RPF (excluding interest para-25, part-A 6th schedule), income u/s-82C]. So

20% on Tk (1771,000-60,000)=342,200.




Note Taka



Less:

a) Dividend (for consideration at income from other source) 30,000

30,000

c) Sundry income ( for consideration at Income from Other sources) 13,000

(73,000)



2 Depreciation (for consideration as per 3rd schedule) 46,600

54,100

73,400


1 Type writer Tk. 5,948

5,948

2 Bad debt provision Tk 4,400 4,400

10,348

83,748

Less: Allowable deductions as per ITO:

Fiscal depreciation as per 3rd schedule:

Type Writer [5,948*20%] 1,190

Others 46,600

(47,790)


Type writer machine is capital nature expenditure. As it is chareged at

P&L A/c as a revenue expenditure so disallowable fully.

Disallowable fully being no provision other than actual bad debt is

allowable u/s-29(1)(xv).

XYZ Limited


Assessment year: (Income year ended 30 June 2006)


income:

b) Share premium ( for consideration under section 83C.)



Allowable limit upto 4% of profit before charging entertainment exp. (1,438)

Income from business or Profession (u/s-28): 34,520

Income from Share Premium (u/s-82C):

30,000


a Dividend income(gross assumed) 30,000

b Sundry income 13,000

43,000


Income Rate Tax

1 On total income other than share premium and dividend income 47,520 37.50% 17,820


2 On Share Premium account 30,000.0 3% 900

3 On dividend income 30,000 20% 6,000


Less: Tax credit

Tax deducted at source on dividend @ 20%(u/s-54) 6,000

Tax deducted at source on share premium @ 3%(u/s-53L) 900


Note:

Minimum tax:

Tax @ 3% was collected by SEC and it is final settlement of tax

liability. The applicable tax rate is also 3% i.e.tk. (30,000*3%)=900. So

income will be tk. (900/.03)=30,000.



minimum tax.

[Here the actual expenditure is Tk 7,500. As it is higher than the ceiling

of Rule-65 Tk 1,438 (35,958*4%), so the allowable expenditure is

lower one i.e. Tk 1,438.]


Nov-Dec 2007 Q-3 OK

Note Taka


A) Ready mix concrete Batching plant:

Net profit (loss) as per P&L account (174,801)


Accounting depreciation 4,688,318

Entertainment as per Rule -65 30,500

4,718,818


1 Medical Expenses 89,058

2 Excess perquisite Tk 226,500:

Ready mix Real estate Total 46,838

Gross profit 15,019,207 57,611,581 72,630,788

GP ratio 20.68% 79.32% 100.00%

Excess perquisites 46,838 179,662 226,500

135,896

Less: Allowable Deductions as per ITO:

Fiscal Depreciation as per 3rd schedule (5,030,200)

Profit before charging separate considerable expenses (350,287)

a Entertainment as per Rule -65 -

(350,287)

B) Real Estate:

Net profit as per P&L account 819,908

(GP tk. 57,611,581+Int. on short term deposit tk. 705-total debit side of tk. 56,792,378)

Add:

Interest on Short Term Deposit 705

820,613


Accounting depreciation 3,683,514

Entertainment as per Rule -65 (Tk 295,755+Tk 105,000) 400,755

4,084,269

Mr ABC Company Limited


Assessment year 2008--2009 (Income year ended 30 June 2007)

[As medical expenses are given as per desire of the management, so it is disallowed for

not being paid in line with a defined Company policy.]

[Since there is no profit before charging enteratinment expenses, so no entertainment is

allowed as per ITO]

Non-business income included in P&L A/c for consideration at appropriate heads of income:



1 Medical ExpensesTk 280,728 280,728

2 Directors remuneration & allowances Tk 1563,300 1,563,300

3 Excess perquisite Tk 226,500:

Ready mix Real estate Total

Gross profit 15,019,207 57,611,581 72,630,788

Less: GP ratio 20.68% 79.32% 100.00%

Excess perquisites 46,838 179,662 226,500 179,662

4 Membership subscription Tk 25,000 25,000

5 Aduit fee Tk 40,000 40,000

2,088,690

6,993,572

Less: Allowable Deductions as per ITO:

Fiscal Depreciation as per 3rd schedule (4,750,300)


Less: Entertainment as per Rule -65

On first Tk. 1,000,000 @ 4% 40,000

On remaining balance i.e (2,243,272-1,000,000)*2% 24,865 64,865

2,178,407

Set off Losses:

Income from Ready mix concrete Batching plant (350,287)

Income from Real Estate 2,178,407



Interest on Short Term Deposit 705

Total Income 1,828,825

Computation of tax liabilities:

On total income @ 37.5% 685,809


Less: Tax credit

On Interest on Short term deposits[u/s-53F(Tk 705*10%)] (71)


Note:

Minimum tax:

[As it is personal expense of directors not business expense, so disallowed fully]

As we are not provided any information related to gross reciept, it would not be possible for us to calculate minimum tax.

No tax has been deducted from audit fee which is fully disallowable u/s-30(aa).

[As medical expenses are given as per desire of the management, so it is disallowed for

not being paid in line with a defined Company policy.]

No tax has been deducted from directors remuneration which is fully disallowable u/s-

30(aa).


May-June 2008Q-4 OK

Note Taka


Surplus of income over expenditure 193,000

Less:

1 Dividend from pvt. co(for consideration at income from other source) 50,000

2 Interest free govt securities 40,000

3 36,000

(126,000)


Entertainment as per Rule -65 10,000

Purchase of books Tk 12000 12,000

22,000


1 Fines for breaking custom rule Tk 20,000 20,000

2 Loan to client 40,000

3 Loss of investment in shares Tk 18,000 18,000

[As it is not realised on disposal, actual loss, if any treated as u/s-32]

78,000

Less: Allowable Deductions:

Depreciation on books & periodicals [12000*30% as per 3rd schedule] (3,600)


a Entertainment as per Rule -65 @4% on Tk 163,400 (6,536)


[For violation of law it is disallowed fully u/s-30(i)].

Mr Rahman


Assessment year 2008--2009 (Income year ended 30 June 2007)

Non-business income included in income & expenditure A/c for consideration at

appropriate heads of income:

Rent from sub-let of premise

(Being capital nature expenditure as plant defined in ITO disallowed

fully).


Interest on Securities(u/s-22):

Interest free govt securities 40,000

Less:exempted under para-24 Part-A schedule 40,000

-


1 Dividend income from pvt. company 50,000

2 Rent from sub-let 36,000

86,000



On first Tk. 180,000 @ 0% -

On next Tk. 62,864 @ 10% 6,286

Total Income 242,864 Gross tax liability 6,286

Less: Tax credit

On Professional fees[u/s-52A(650,000*10%)] 65,000

On Dividend income[u/s-54(50,000*10%)] 5,000

On rental income from sub-let -

(70,000)

Net tax refundable (63,714)

Here we assumed that tenant is an individual who has no right to deduct

tax at the time of making payment.


May June 2008 Q-3C OK

Note Taka

Income from Agriculture (u/s-26):

Sale of rice(200 maunds*Tk 600) 120,000

Sale of rabi crops 25,000

Lease of agricultural land 40,000

Income from tea garden and sale of tea[60000*60%] 36,000

Income from sale of palm juice 18,000

Income from cattle rearing 40,000

Income from sale of pump machine(Tk 12000-Tk10000) 2,000

281,000

Less: Admissible deductions (u/s-27)

Production costs [ 60% on (120000 +25,000)] 87,000

Interest on agricultural loan(50,000*8%) 4,000

UP tax 2,000

Land revenue 1,000

94,000

Income from Agriculture (u/s-26): 187,000

Income from Business or Profession (u/s-28):

Income from tea garden and sale of tea [60,000*40%] 24,000

Income from other sources(u/s-33):

Income from sale of bamboo(assumed forest bamboo) 20,000



Life insurance premium for son (Tk4,000) 4,000




46,200




On first Tk. 180,000 @ 0% -

On next Tk. 51,000 @ 10% 5,100


Less: 10% Rebate on investment Tk 4,000 (400)

4,700

Less: Tax credit -


(as per para-1 LIP allowable only for assessee, spouse and minor child).


(excluding interest para-25, part-A 6th schedule), income u/s-82C]. So 20% on Tk

231,000=(Tk 231000-0-0-0).

Mr X



[As no books of accounts is maintained 60% of Market value of the produce

allowed as admissible deductions]


Nov-Dec 2008 & Application level OK

Note Taka



Less:

1 Dividend (for consideration at income from other source) 6,000,000

2 Interest income(for consideration at interest on securities) 800,000

3 1,000,000

4 6,000,000

5 25,000,000

6

500,000

(39,300,000)

(19,600,000)


1 Salaries and wages Tk 26,000,00

a Salary to finance manager Tk 600,000

600,000

b Compensation to Voluntary Retirement Scheme Tk 1,500,000

-

c(i) Gratuity provision(unrecognised) Tk 1,500,000

1,500,000

c(ii) Actual gratuity payment disallowed for unrecognised Tk1,000,000 1,000,000

d Incentive bonusTk 2,000,000(for consideration as per u/s-30(j)) 30,000

2,000,000

(no provision either recognized/unrecognised is allowed at tax law. So

disallowed fully).

Oak Limited


Assessment year 2008--2009 (Income year ended 31 December 2007)


income:

(assume govt approved this is not taxable in the hand of recipient as para-

26 part A 6th schedule. So if I assume it is govt. approved, so no need

to TDS. As a part of salary it is allowable u/s-29(1)(xvii) and nothing is

to be added).

(10% of disclosed profit=(19,700,000*10%)=1,970,000 is allowable

limit u/s-30(j). So the excess amount (20,000,000-19,700,000)=Tk

30,000 is disallowable. We see at note-12 that no tax deducted at source.

So as part of salary incentive bonus is fully disallowable u/s-30(a).

Capital gain on sale of listed company's shares(As per SRO-269 dated 1

July 2010, It is taxable income from AY 2011-12)

Keyman life insurance proceeds(for consideration at income from other

source u/s-33(c)).

(being not paid by cheque or bank transfer disallowed fully u/s-30(i).

(Only payment by employees to recognised/approved gratuity fund is

allowable as per para-6 part-C 1st schedule. As it is unrecognised so

fully disallowable).

Tax refund(tax cannot be income or expenses rather it is an

appropriation of profit. So it will not be considered as income and tax

credit taken afterwards)

Share income from partnership firm(it is tax free and for consideration

u/s-43(3), u/s-37 and para-16 part-B 6th schedule).


2 Doubtful accounts Tk 2,000,000

900,000

3 Tax Tk 9000,000

-

4 300,000

5 500,000

6 Office rent [disallowed fully u/s-30(aa) for non deduction of tax] 600,000

7 Car rental [disallowed fully u/s-30(aa) for non deduction of VAT] 100,000

8 Interest on working capital allowed as business exp. u/s-29(1)(xxvii) -

9 Donation to DU (It would be considered as CSR activities.) 1,800,000

10 300,000

11 -

12 Other expenses

a Life insurance premium on LIP of controller 1,500,000

b Entertainment expense Tk 500,000

500,000

c Overseas travelling Tk 800,000 -

13 Corporate income tax Tk 4,500,000 4,500,000

Security service [disallowed fully u/s-30(aa) for non deduction of tax

and VAT]

Audit, accountancy & advisory services [disallowed fully u/s-30(aa) for

non deduction of tax and VAT]

(Income tax is not an expense rather appropriation of profit that is why it

is not a part of P&L a/c. As it is calimed at P&L a/c as expenses, so

disallowed fully).

( as per u/s-29(1)(vii) insurance premium is only allowable against risk

of damage, destruction or loss building, machinery, plant, furniture,

stocks & stores; not any life insurance premium. So disallowable fully

being not business related expenditure. Rather it may be allowed u/s-

34(2) while computing life insurance proceed of Tk 25,000,000 as

income from Other Sources u/s-33(e).

This is personal expense CEO not related to business. So rather allowing

it as business expense u/s-65 disallowed fully being not covered u/s-29.

( It is allowable u/s-30(k) upto 1% of disclosed turnover Tk 90,000,000.

As claims is within the allowable limit Tk 900,000 nothing is added

back from here.)

Depreciation Tk 8,000,000(as it is calimed as per 3rd schedule so

nothing to add back.)

(After allowing only actual bad debt Tk 1,100,000 u/s-29(1)(xv) out of

2,000,000 and the rest is added with profit.

Board meeting attendance fee(only applicable for VAT which is not

deducted, so disallowable fully u/30(aa).

Here taxes was only Payroll taxes. No tax deducted at sources and as

part of salary & assuming employee tax is paid by the employer as terms

of employment. So there is nothing to be disallowed u/s-30(aa).


14 Dividend paid Tk 9,000,000

9,000,000

25,130,000

A) Income from business or Profession (u/s-28): 5,530,000

B) Interest on Securities(u/s-22):

Interest on govt bond 800,000

C) Income from partnership firm:

Income from partnership firm(gross/before tax) 7,900,000

D) Income from Capital Gain

from sale of share 1,000,000

E) Income from Other sources (u/s-33)

1 Dividend Income:

from local company 2,000,000

from Singapore based company(net) 2,000,000

from Russian based company(net) 2,000,000

6,000,000

2 Keyman life insurance proceed Tk 25,000,000 25,000,000

Less: LIP premium Tk 1,500,000 (1,500,000)

23,500,000

3 Share capital raised through cash Tk 1,000,000

1,000,000

30,500,000


Break down of total income


Less: set off previous loss (1,000,000)

Business income after setoff of Carried forward loss 4,530,000

Interest on Securities(u/s-22): 800,000

Income from partnership firm: 7,900,000

Income from capital gain 1,000,000

Income from Other sources (u/s-33) 30,500,000


[Capital loss can not be set off against business income. So ordinary

business income from partnership firm (before tax) is taken as share

income as par section-43(3)].

(disallowed u/s-30(aa) for non deduction of TDS.

Share capital raised through cash not received by cross cheque or bank

transfer disallowed u/s-33(d) & treated as notional income u/s-19(24).



Income Tax

1 On total income excluding dividend income and capital gain @27.5%(listed Company)37,730,000 10,375,750

Less: Rebate @10% on Tk 10,375,750 for declaring more than 20% dividend (1,037,575)

9,338,175

Less: Rebate @10% on Tk 1,800,000 for CSR activities (180,000)

9,158,175

2 On dividend income @ 20% 6,000,000 1,200,000

3 On Capital gain on sale of share @ 10% 1,000,000 100,000

44,730,000 10,458,175

Average rate of tax comes at(10,458,175/44,730,000)*2,000,000=Tk.467,613. 467,613

Foreign tax Tk 200,000. 200,000

Tax Credit restricted upto foreign tax Tk 200,000. 200,000

Average rate of tax comes atTk.467,613. 467,613

Foreign tax amount Tk 400,000 400,000

But restricted upto lower of foreign tax & average rate of tax . 400,000

(600,000)

9,858,175

(1,741,104)

Net tax liability 8,117,071


Gross Reciepts:

Sales 90,000,000

Dividend 6,000,000

Interest 800,000

Gain on sale of shares 1,000,000

Equity earnings of Tech Partnership 6,000,000

Keyman life insurance proceeds 25,000,000

Insurance proceeds from fire loss claim 1,500,000

130,300,000


Note:

Note

1

2

Assume loss on fire Tk 1,000,000 was properly accounted for and allowed as expense last year. So

insurance claim Tk 1500,000 is income of this year. As it is shown at P&L a/c. So nothing to interfere here.

Here there is no treatment of accounts receivables as on accrual basis sale includes both cash and credit

sales.

Less: Tax relief as per section-145 for tax on dividend on Russian based

company (as there is no DTAA):

Less: Tax at average rate on taxed share income of partnership

firm(9,858,175/44,730,000)*7,900,000=Tk 1,741,104.

Less: Credit against tax payable in Bangladesh on dividend from Singapore as

U/s-144(4) and 7th schedule as para-4 appying average rate of tax as there is

DTAA between Bangladesh and Singapore.

Minimum tax of tk. 651,500 is lower than the tax payable of tk. 8,117,071 . Hence no implication of

minimum tax.


Nov-Dec 2008 Q-6 OK

Note Taka


a From XYZ Company:

Basic salary(20,000 *12) 240,000

House rent allowance(11,000*12): 132,000

Less: Exemption(Rule-33A):


or

Tk 15,000 per month 180,000

Lower one exempted 120,000

12,000

Medical allowance(Tk 2000 p.m*12) 24,000


Actual expense(assumed allowance expended fully) 24,000

-

Conveyance allowance(per month Tk1,000*12) 12,000

Less: Exemption(rule-33) 24,000

-

b From ABC Company:

Basic salary(20,000 *12) 240,000

House rent allowance(9000*12): 108,000

Less: Exemption(Rule-33A):


or

Tk 15,000 per month 180,000

Lower one exempted 120,000

-

Conveyance allowance(per month Tk1,000*12 12,000

Less: Exemption(rule-33) 24,000

-

Entertainment allowance (Tk. 2,000 per month*12) 24,000

Bonus(per month Tk 40,000*12) 480,000

Honorarium as BOD from Rupali bank 50,000

Income from Salary (u/s-21) 1,046,000

Interest on Securities(u/s-22): -


Annual value(AV):

Rental income(Tk. 25,000*12) 300000



Mrs Rahim



As per rule 33 there is no bar to allow exemption on house rent allowance twice,

conveyance allowance twice, the only restriction of allowing allowance from

more than one company is in case of share holder director as per rule 33 (2) (b).

So all benefit of rule 33 is applicable for her.




Municipal tax(Tk. 40,000 u/s-25(1)(a)) 40,000

Insurance premium(Tk. 15,000 u/s-25(1)(b)) 15,000

Land revenue 2,000

Vacancy allowance(Tk. 25,000*2 months) 50,000

(182,000)

Income from house property(u/s-24) 118,000

Income from Agriculture (u/s-26);

Sale of crops 25,000

(15,000) 10,000


Consultancy fee from UNDP-BD 400,000

Consultancy fee from World Bank-Bhutan & Nephal) 300,000

700,000

Less: Membership fee to ICAB (4,800)

(3,000)

692,200

Income from partnership firm: -


1 Sale of shares

-

2 Sale of appartment (u/s-82C) 1,333,333

3 Money Received from real estate

2,000,000

Income from Capital Gain(u/s-31): 3,333,333

(Sale of property which is treated u/s-82C i.e. final settlement of tax liability. At

the time of registration in August 2007, TDS @5%(after 1 September 2009

@2%) of sale proceeds. The appartment sold after 7 years(from August 2000 to

August 2007). For person other than Company, capital gain should be taxed

including in total income or 15% on capital gain whichever amount is lower (2nd

schedule). In this problem assessee reached highest slab of total income including

capital gain. So tax 15% on this capital gain will be lower. So the equivalent

income u/s-82C will be as [(10,000,000*5%)=Tk 500,000/.15] = Tk

3,333,333.But in our next exam there has possiblility to mention the date of sale

after 1 September 2009. in that case the gain from sale of asset will be

1000,000*2%=200,000/.15-1333,333.

Money received from the real estate company against a contract which is

relinquishment of right which is defined as transfer in the definition of transfer

u/s-2(66). So here Tk 2,000,000 is treated as part of capital gain.

(Note: UNDP & WB are the organisation of UN. Only the salary categorized

person employee at UN is tax free. As Mrs Rahim is not salaried person of

UNDP & WB, so her income from there is not tax free. Moreover, there is no

DTAA with Bhutan and Nephal. So all income will be taxable in our country).

Gain on sale of share is tax free as per SRO-269 dated, 1 July 2010 and there is

no relation with section 32 (12), so entire gain of tk. 200,000 is exempted.

Less: 60% Cost of production(u/s-27) [as no books of accounts maintained]

Less: Depreciation on professional books(Tk10,000*30%)[as per 3rd schedule]



Dividend received (from which TDS u/s-54)[50,000/.9] 55,556

Interest on post office savings bank account 15,000

Income from part time lecture

Lecture 60,000

Articles publication 25,000

Question settings 12,000

97,000

Less: Actual expense to earn above part time income (3,000)

94,000

Income from Other sources (u/s-33): 164,556



Life insurance premium for son (Tk5,000*4) 20,000




806,151




1 On total income including Capital gain(excluding capital gain ofTk. 3,333,333) 2,030,756

On first Tk. 200,000 @ 0% -

On next Tk. 300,000 @ 10% 30,000

On next Tk. 400,000 @ 15% 60,000

On next Tk. 300,000 @ 20% 60,000

On balanceTk. 830,756 @ 25% 207,689

Total 2,030,756 357,689

500,000


Less: 10% Rebate on investment Tk 20,000 (2,000)

855,689

Less: Tax deducted at source

On dividend income@10% on Tk 55,556 5,556

On sale of apartment@2% on 10,000,000 200,000

On Interest on savings instrument @10% on tk. 15,000 1,500 207,056


On Capital gain of Tk 3,333,333 @ 15%


(excluding interest exempted as per para-25, part-A 6th schedule), income u/s-

82C]. So 20% on Tk. 4,030,756 (Tk 5,364,089-0-0-1,333,333).

(as per para-1 LIP allowable only for assessee, spouse and minor child).


May-June 2008 (Q-5) & 2009 (Q-9) OK

Note Taka



Less:

Dividend 20,000

Interest on bank deposit 12,000

Profit on sale of machineries 30,000

Interest on tax free govt securities 10,000

Sundry income 5,000

30,000

Interest on investment outside Bangladesh 20,000

(127,000)

446,000


Depreciation (for consideration as 3rd schedule) 180,000


a Salary & allowance Tk 250,000 50,000

b Excess perquisitess Tk 20000 20,000

c Conveyance allowance Tk 20000 -

d Legal expense Tk 14,000 -

e Charity Tk. 10,000 10,000

Assumed that paid to unapproved institution so disallowed fully.

f Income Tax paid in advanceTk 200,000 200,000

g Fines paid to Customs authorityTk 20,000 20,000

h Contribution to Provident Fund Tk 20000 -

480,000


Fiscal depreciation as per 3rd schedule (115,000)

Disallowed assuming that Company committed offences as Customs

Act, 1969.

Tax is not an expense. So it not chargeable in P/L a/c and disallowable

fully being non business expense.

No tax has been deducted from salary amounting Tk 50,000 which is

fully disallowable u/s-30(aa).

Assume that Provident fund is recognised and allowable fully.

Excess perquisitess Tk 20000 over allowable income tax rate paid fully

added here u/s-30(e).

Income taxes related legal expense Tk 10,000 is allowable upto appeal

to the appellate Tribunal. So as it is allowable expense nothing shall be

added back from here considering rest amount incurred for business

purpose.

ABC Limited


Assessment year 2010-2011(Income year 2009--2010 )

Non-business income included in P&L A/c for consideration at appropriate heads

of income:

Refund of income tax(it is not an income. So only considered for tax

credit afterwards).

Paid to General Manager for overseas travelling as representative of

chamber (who as a trade delegation sponsored by Govt.) which is

allowable u/s-29(1)(xxv). So nothing shall be added back.


Add: Deemed income- Revenue gain U/s-19

Profit on sale of machine Tk 800,000

Sale price(Tk 40,000+profit Tk 30,000) 70,000

Less: Written down value -

Total gain 70,000

Less: Capital gain=(saleTk 70,000-costsTk60,000) (10,000)

Revenue gain (total profit-capital gain) 60,000



Capital gain on sale of machine=(saleTk. 70,000-costsTk. 60,000) 10,000

Interest on Securities(u/s-22):

Interest on tax free govt securities Tk 10,000 10,000

(10,000)

-


Dividend income (gross amount in P&L A/c) 20,000

Interest on bank deposit(gross amount in P&L A/c) 12,000

Sundry income 5,000

Interest on investment outside Bangladesh(gross in P&L A/c) 20,000

57,000


Computation of tax liabilities Income Tax

1 968,000 363,000

2 On capital gain@15%(para-2(a) 2nd schedule 10,000 1,500

3 On dividend income @20% 20,000 4,000

Total 998,000 368,500

Less: (200,000)

TDS on dividend income(Tk 20,000*20%) (4,000)

TDS on interest(12,000*10%) (1,200)

163,300

Less: Refund of income tax(u/s-152) (30,000)



Gross Reciepts:

Sales 4,980,000

Dividend 20,000

Interest on bank deposit 12,000

Profit on sale of machineries 70,000

Interest on tax free govt securities 10,000

Sundry income 5,000

Interest on investment outside Bangladesh 20,000

5,117,000


Note: Minimum tax of tk. 25,585 is lower than the tax payable of tk. 368,500. Hence no implication of minimum

tax.

Income tax paid in Advance (assuming it has paid AIT installment on the basis of last

assessed income u/s-64 & 66. So there is no question of charging simple interest).

(Lack of proper information in the given problem. Assume that interest

received from country which is not under DTAA & company did not

claim for average rate tax rebate).

On total income excluding capital gain and dividend income @ 37.5%

(assuming not publicly traded listed Company)

Less: fully exempted under para-24 part A 6th schedule


Nov-Dec 2009 Question-3 OK

Note Taka




Depreciation(for consideration as 3rd schedule) 4,000,000


a 755,375

b Goods damaged in store Tk 125,000 125,000

OR

c Tax deducted at source from Dividend Tk 1,275,850 1,275,850

d Late fine for renewal of trade license Tk 35,450 35,450

Disallowed fully as incurred for violation of law

e Commission to Abul & Co Tk 2,000,000 -

f Depreciation of leasehold assets Tk 5,00000 -

h Money looted on the way Tk 5,000,0,00 3,500,000

5,691,675

As commission incidental to loan granting, not capital expense &

incurred for business so allowable fully u/s-29(1)(xxvii).

As accounting depreciation was disallowed earlier in which this

depreciation was included no need to diallowed futher. Rather lease rent

tk. 125,000 will be considered as expense afterwards.

Loss of money by theft is allowable expense as it is incurred during the

course of business. Here money looted Tk 5,000,000 & recovered was

Tk 3,500,000. So the net loss Tk 1,500,000 is actual loss. So allowing

actual loss the recovered amount is added with profit as per section

19(15)(a).

Salary to Mr X Tk 755,375

Tax is not an expense. So it not chargeable in P/L a/c and disallowable

fully being non business expense.

Mr Khan & Co Limited


Assessment year 2008--2009 (Income year 2007-2008)

(Salaries for installation of machineries as part of capital expenditure

production of which was not started withihin the year. So it is

disallowed fully u/s-29(1)(xxvii) and depreciation will be allowed from

the year of production.

As normal course of business goods cannot be damaged in store. In case

of accident like flood, it is allowable expenditure because its out of

human comntrol. But as there is no such indication it assumed that it

was damaged due to negligence. So disallowed fully.

it is allowable expenditure because it was occurred in the normal course

of business. It is not essential to ensure everything. Moreover it is not

personal not capital and related to business which was continured at the

time of damage. So nothing to add back from here.



Leased rental(assuming it was operating lease) 125,000

Fiscal depreciation as per 3rd schedule 3,500,000

(3,625,000)

Add: Business gain on sale of car

Profit on sale of motor car Tk 800,000 -

Written down value 1,200,000

Sale= WDV TK1200,000+Total profitTK 800,000 2,000,000

Total Profit 800,000

200,000

Revenue gain(total profit-capital gain) 600,000



Capital gain on sale of motor car 200,000 200,000


Dividend income (gross) 6,379,250

6,379,250



1 12,145,980

(1,214,598)

10,931,382

2 On capital gain@15%(para-2(a) 2nd schedule 30,000

3 On dividend income @20% 1,275,850

12,237,232

Less: (5,000,000)

TDS on dividend income (1,275,850)

Net tax liability 5,961,382

Note

1 Export Income

2 Indenting Commission

3 Minimum tax:

Advance tax paid( assuming it has paid on the basis of last assessed income as per section-

64. So there is no question of charging simple interest).

Total tax deducted at source@20% on dividend income. So total

dividend income=(1275850/0.2)=Tk. 6,379,250

On total income excluding capital gain and dividend income @27.5%

on (listed Company)=Tk50746,450-200000-6,379,250=Tk 44,167,200.

Less: Rebate @10% on Tk 12,145,980 for declaring more than 20%

dividend (assuming this is paid as per ITO).

Less: Capital gain(saleTk 2,000,000-costsTk

1,800,000)

as per 3rd schedule (para-11) cost price of car deemed to have been

taken tlk. 10,00,000 or 20,00,000 depending on the year of purchase

and tax depreciation will be allowable accordingly.


minimum tax.

Export of garments is within the coverage of TDS which is also to be treated as final settlement of tax

liability. Income from garments export are not identfiable from the information given, so 50% rebate as per

para-28 Part-A 6th schedule not allowable. Moreover no information about TDS indicates for equivalent

income for final settlement of tax liability.

No information regarding TDS on indenting commission is given. So Credit @ 3.5% (now7.5%) regarding

such commission has been given.


Nov-Dec 2009 Q-4 OK

Note Taka


Annual value(AV):

Rental income (Tk25,000*12) 300,000

Municipal value (220,000/2) 110,000




Municipal tax(u/s-25(1)(a))[5000/2] 2,500

Insurance premium(u/s-25(1)(b))[4000/2] 2,000

Interest on mortgage[4000/2] 2,000

Land revenue[2000/2] 1,000

(82,500)


Notes

1

2

3 It is assumed that cost of alteration is a capital nature expenditure. So it is not admissible expense.

4

5 Interest on loan Tk 20,000 for alteration and expansion of self occupied house at Uttara is not considered here as

it is deductible from total income not from House property income. It is required in question to calculate House

property income only not total income.

Mr. Azim

Computation of Income from House property

Assessment year -------------- (Income year ended -------)

Half of house used by his son in law who is not dependant on him. Annual value is determinable only in case of

let out property (not for used by assessee) as per u/s-2(3). As the 50% of the house was not let out(to son in law)

rather assessee used it free, so there is no scope of determining annual vaue. If the owner of the house received

token rental, which is lower than reasonable then it was possible to determine annual value considering

reasonable rent.

Repair & maintenance(Statutory deduction) includes water and swerage charge , white wash & repair, service

charges. So there is no scope to consider it again.

As full house was not let out and annual value was determined on 50% of the property. So all related deduction

was allowed proportinately.


May-June 2010 Q-3 (a) OK

Note Taka


Annual value(AV):

Rental income(Tk60,000*12) 720,000




Municipal tax(u/s-25(1)(a))[20000/2] 10,000

Insurance premium(u/s-25(1)(b))[5000/2] 2,500

Interest [50000/2] 25,000

1/3 interest on house building loan during consruction period 53,500

( 321,000/3)/2

Vacancy allownce (60,000*3) 180,000

(451,000)


Notes

1

2

3 As full house was not let out and annual value was determined on 50% of the property. So all related deduction

was allowed proportinately.

( Rental value is taken here as Annual value considering

reasonable as reasonable rent is not given in the question and

municipal value is lower than rental value.)

it was instructed in the question to compute house property income only not to compute total income. So interest

on loan of self occupied portion was not considered.

Mr. Alam

Computation of Income from House property

Assessment year -------------- (Income year ended -------)

as the full house not let out and annual value was determined on part of the property. So all related expenditure

was allowed proportionately.


May-June 2010 OK

Note Taka

Sources of income:

1 Income from business or Profession (u/s-28):

2 Capital gain (u/s-31)

3 Income from Other sources (u/s-33)



Less:

a) Dividend (for consideration at income from other source) 30,000

30,000

c) Sundry income( for consideration at Income from Other sources) 13,000

40,000

(113,000)

119,300


1 Entertainment(for consideration as per Rule-65) 9,500

2 Depreciation(for consideration as per 3rd schedule) 46,600

56,100

175,400


1 Rent & Taxes Tk 24,500

4,200

2 Repair and operating expense Tk 27,300

6,000

3 Legal expense Tk 14,500

-

4 Compensation for termination of staff Tk 10,000

10,000

5 Type writer Tk. 5,948

5,948

6 Bad debt provision Tk 4,400 4,400

30,548

205,948

Disallowable fully being no provision other than actual bad debt is

allowable u/s-29(1)(xv).

X Limited




income:

Income taxes related legal expense is allowable upto Taxes Appellate

Tribunal. So as it is allowable expense nothing to added back from here.

b) Share premium ( For consideration under section 82C)

d) Capital gain on sale of machine(for consideration at capital gain head)

As VAT Tk 4,200 paid for importing machines is charged at P&L A/C,

so disallowed Tk. 4,200 being part of value of machine(capital

expenditure). As the machine was not used during the year, so no tax

depreciation is allowable.

Tk. 6,000 disallowed for being not business expense rather personal

expense of MD.

Assuming compensation paid for violation of job agreement. So

disallowable fully,

Type writer machine is capital nature expenditure. As it is chareged at

P&L A/c as a revenue expenditure so disallowable fully.



Bad debt recovered is to be treated as business income u/s-19(15)(a) 2,000

207,948


Tax depreciation (58,400)



Allowable limit upto 4% of profit before charging entertainment exp. 5,982

(2,224)


Income from Share Premium (u/s-82C): 30,000


Capital gain on sale of machine 40,000

(Assuming it was calculated as per tax law)


a Dividend income(gross assumed) 30,000

b Sundry income 13,000

43,000


1 37.5% 60,122

2 On Capital gain tax @ 15% (under para-2 Second schedule) 6,000

3 On Share Premium @ 3% (30,000*3%) 900

On dividend income @20% (30,000*20%) 6,000


Less: Tax deducted at source

On dividend @20% (u/s-54) 6,000

Share Premium @ 3% 900 6,900


Note

1 Minimum tax:

Tax @ 3% was collected by SEC and it is final settlement of tax

liability. The applicable tax rate is also 3%. So income will be tk. 30,000


minimum tax.

Total income other than Capital gain, share premium and dividend

income (260,324-40,000-30,000-30,000)*37.5%

Here the actual expenditure is Tk 9,500 out of which Tk 2,000 is

unexplained and Tk 5,276 is personal expnditure. So after deducting

those two, calims remains for Tk 9,500--Tk 2,000-Tk 5276=Tk 2224.

As it is lower than the ceiling of Rule-65 Tk 5982, so it is allowable

expenditure.



Nov-Dec-2010 & May-June 2006 OK

Note Taka


Recognized Unrecognized Government

Basic salary(9,000 *12) 108,000 108,000 108,000

Dearness allowance(20% of Basic salary) 21,600 21,600 21,600

Bonus(Two months Basic salary) 18,000 18,000 18,000

Rent free accommodation(Rule-33B):

Rental value(annual value) or 30,000


Lower one 27,000 27,000 27,000

Medical allowance(Tk 300 p.m) 3,600


Actual expense(assumed wholly expended) 2,500

1,100 1,100 1,100

Conveyance facilities(u/s-33D)[1200*12] 14,400

Less: Actual expenses 14,400

- - -

Employer's Contribution to PF(10% of Basic) 10,800 - -

Interest on Provident Fund:

(for RPF Para-25 Part-A 6th schedule)

Interest on RPF 2,500

Less: Exemption

43,200

2,417

43,200

-

For GPF -

For UPF -

Income from Salary (u/s-21) 186,500 175,700 175,700

Mr. Rahman



Provident Fund

(Since para-4(1) part-A 6th schedule excludes govt PF income for PF registered

only under PF Act, 1925. Employee contribution in RPF exempted in Para-6

Part-B 1st schedule).

14.5% of cumulative RPF(Tk. 2,500/.15)*14.5%

1/3 of salary (here salary means as per definiton

of Part-B of 1st Schedule of ITO 1984)

[(108000+21600)/3]=Tk 43,200

[ All UPF will be taxed at the time of

withdrawal. So nothing to be added back now]

(exempted for income PF which is under PF Act

1925 as per Para-4(1) Part-A 6th schedule)

In para 25 of 6th schedule there has no

indication whether exemption will be higher or

lower one between 1/3 of salary and 14.5% of

accumulated balance. However high court

verdict was benefit of doubt goes in favor of

assesse. So we consider here the higher one as

exemption.



Life insurance premium Tk 5000 5,000 5,000 5,000

Purchase of compnay's share Tk 4000 4,000 4,000 4,000

Employee contribution to PF 10,800 - 10,800

Employer contribution to PF 10,800 - -

Actual investment 30,600 9,000 19,800


Actual investment 30,600 9,000 19,800

43,925 43,925 43,925

Maximum allowable investment 1,000,000 1,000,000 1,000,000

Allowable investment (lower of the above) 30,600 9,000 19,800

Recognized Unrecognized Government Recognized Unrecognized Government

On first Tk. 165000 165000 165000 - - -

On next Tk. 21,500 10,700 10,700 2,150 1,070 1,070

Total income 186,500 175,700 175,700 2,150 1,070 1,070

Less: 10% Rebate on investment 3,060 900 1,980

Net tax liability (910) 170 (910)

2,000 2,000 2,000


(allowable only for RPF as per para-5, but not allowed for GPF as para-4 and for UPF).

(assumed purchased listed company's share which allowed as per para-8) .

25% of total income [excluding employer's contribution to PF, interest on PF]. So 25% on

(Tk 186500-10800);(175700-0);(175700-0).

(as per para-1 LIP allowable upto 10% of policy value for individual assessee,

spouse, minor child).

(allowable for RPF as per para-5, only employee cont. allowable for GPF as

para-4 and nothing allowed for UPF).

Total income for Provident Fund Total tax for Provident Fund

Tax liability[Minimum tax liability for individual for having taxable income above

maximum exemption limit].


APPLICATION LEVEL (NOVEMBER-DECEMBER 2010) OK

QUESTION 2 (B)

Now the question, how SEC will determine the transfer value.

No prime bank share was traded on the day of consent accorded by DSE .

So the closing price will be the closing price of 9 November i.e tk. 840

So tax would be (840-100)*5%= 37

So the closing price will be the closing price of CSE on 8 November i.e tk. 855.

So tax would be (855-100)*5%= 37.75

Here Mr. Ahmed is a director of Prime Bank Limited. So the transfers by way of gift 1,000 shares will

be subject to tax deducted at source under section 53 M of the Income Tax Ordinance 1984.

According to section 53 M of 1984, SEC will collect tax at the rate of five percent on the difference

between transfer value and cost of acquisition of the securities. or mutual fund units.

According to 53 M of ITO 1984, 'transfer value' of a security or a mutual fund units shall be deemed to

be the closing price of securities or mutual fund units prevailing on the day consent according by the

Securities and Exchange Commission or the Stock Exchange, as the case may be, or where such

securities or mutual fund units were not traded on the day such consent was accorded, the closing price

of the day when such securities or mutual fund units were last traded.

If we assume that Mr. Rahim open his BO account with the option of trading in the Dhaka Stock

Exchange then closing price would be the closing price of DSE.

If we assume that Mr. Rahim open his BO account with the option of trading in both the Dhaka

Stock Exchange & Chittagong Stock Exchange or only in CSE then closing price would be the

closing price of CSE since no prime bank shares was traded in DSE on the day of consent

accorded by SEC.


May-June 2010 Application level Question 5(a)

To: Mr. Rahman

From: Mr. X

Date: ……………..

CC: w, y,z

Subject: Advice on different issues related to tax and VAT.

Dear Mr. Rahman

Our considered opinion are as follows:

We have reviewed the invoices forwared to us and appears that the following deduction of tax and VAT would be applicable.

Invoice No.

Date of

Invoice Invoice Amount

Applicable

VAT

amount

Invoice

including VAT

Withholding

Tax

TDS under

section

Withholding

VAT Service Code Net Payment

i. 1-Dec-10 1,000,000 40,000 1,040,000 25,000 52 40,000 S. 037 975,000

ii. 3-Dec-10 150,000 22,500 150,000 7,500 53 A - S. 033 142,500

iii. 5-Dec-10 100,000 4,500 104,500 10,000 52 A (3) 4,500 S. 034 90,000

iv. 14-Dec-10 200,000 30,000 230,000 20,000 52 A (3) 30,000 S. 007 180,000

Total 1,450,000 97,000 1,524,500 62,500 74,500 1,387,500

The following certificates required to be issue:

Mushak-11

Challan:

Certificate

Please let us know if you have any further queries.

yours truly

Mr. X

This is in reference to your e-mail of ……… and further discussion with you regarding the various issues related to tax and VAT. You have asked to us for our

opinion regarding deduction of income tax and VAT and issuance of required certificate, challan, mushak etc. in support of such deductions and deposits.

Please be noted that the rate of VAT on house rent has reduced to 9% from 10 January 2011 and you are responsible for payment of VAT in this case.

Previously it was 15%. The rate of VAT in case of advertising firm is 15% from 1 July 2010. So you should request to your service provider to revise the said

invoice.

After deduction of tax and VAT you have to deposit it to the government treasury. As per Rule-13 of the Income Tax Rules-1984, Withholding

tax shall be paid to the government treasury within three weeks from the date of such deduction or collection and as per Rule-18 Kha(1) of the

VAT Rules-1991, the withholding VAT shall be deposited to the government treasury within 15 working days from the date of such deduction.

As per general order no. 09/Mushak/2011 dated 12 October 2011, you have to withheld VAT whether your suppliers will provide Mushak-11 or

not.

As per section 58 of the Income Tax Ordinance 1984, You have to issue certificates in favor of your suppliers for deduction of tax and as per

Rule-18 kha(2) of VAT Rules-1991, you have to prepare certificates in the form Mushak-12 Kha triplicate. Among those, one copy shall be

submitted to the concerned circle within five working days from the date of deposit, one copy shall be issued to the supplier and another one shall

be documented in your premises for 6 years.


Application level (ques 6(b)) OK

particulars Amount

Purchase of raw materials 2,000,000

Direct wages 250,000

Electricity (rebate 80%) 60,600

Telephone (rebate 60%) 10,600

dep 30,000

other prod 40,000

other adm 70,000

selling 20,000

Add: opening fin 30,000

Less: Closing fin (20,000)

2,491,200

Add: margin 25% on cost 622,800

3,114,000

less: dis@5% (155,700)

2,958,300

Add: VAT @ 15% 443,745

Sales price 3,402,045

VAT current Account

Input stage Tk. Output stage tk.

VAT paid (Bank) 303300 VAT on sales 443,745

Balance 140,445

443,745 443,745

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