On Wed, Jan 18, 2012 at 9:46 PM, mc100203020 Nousheen Siddiqui <mc100203020@vu.edu.pk> wrote:
ye to ap ne assignment send kr di hai
muje solution chahye stupidOn Thu, Jan 19, 2012 at 10:43 AM, ::::Håttø¿Bãçhõ:::: <mmlk6034@gmail.com> wrote:
Taxation Management (FIN623)
Assignment # 02
Marks: 30
• Last date for submission of Assignment is January 19th, 2012.
Question:
Mr. Haaris (H), a citizen of Pakistan, is a reputed Civil Engineer and the following information is provided by him.
1. On 1 July 2011, (H) returned to Karachi from Italy. In Italy he had been in employment with ABC Associates Inc (Italy) since 1 July 2007. H was present in Pakistan for not more than 30 days in each of the tax years 2008, 2009 and 2010. In the tax year 2011, H availed of his unutilized leave to tour the northern areas of Pakistan. His stay in Pakistan in the tax year 2011 was 183 days.
2. On 1 July 2011, H commenced employment with Paragon Constructions Lahore. H's terms of employment provided for the following:
I. A basic salary of Rs. 400,000 per month.
II. A one time relocation allowance of Rs. 100,000.
III. A medical allowance of 10% of basic salary. H is not entitled to free medical treatment or hospitalization or the reimbursement of such charges.
IV. One month's notice in writing to be given on either side in case of cessation of employment or the payment of one month's basic salary in lieu of the notice period.
3. On 15 July 2011, H was approached by ABC Associates Inc (Italy) to take up employment from 1 August 2011, as the technical director of Bricks Pakistan Limited , a 100% subsidiary of ABC Associates Inc (Italy), on the following terms:
I. A basic salary of Rs. 700,000 per month.
II. A monthly medical allowance paid in cash, of 10% of basic salary.
III. Two company maintained cars – one car for his business and private use and the other car solely for his private use.
IV. Bricks to make an annual payment of Rs. 100,000 to an approved superannuation fund to provide for his retirement.
V. Free medical treatment or hospitalization or the reimbursement of such charges for himself and his wife.
4. On 16 July 2011, H conveyed his acceptance of the offer of employment to Bricks and agreed to commence his employment with Bricks on 1 August 2011.
5. On 31 July 2011, H resigned from Paragon Constructions Lahore. H did not give the one month's notice in writing prior to his resignation as required under his terms of employment and Paragon Constructions, with H's consent, did not pay H his basic salary of Rs. 400,000 for July 2011.
6. The salary of Rs. 400,000 appropriated by Paragon Constructions Lahore in lieu of the one months notice period not given by H is sought to be claimed by H as a deduction.
7. On 29 August 2011, ABC Associates Inc (Italy) transferred the equivalent of Rs. 400,000 in US dollars to H's foreign currency bank account in Italy. ABC Associates informed H in writing that the Rs. 400,000 was a voluntary payment to reimburse H for the salary he had not received from Paragon Constructions. ABC (Italy) further confirmed that the Rs. 400,000 was not a payment on behalf of Bricks Pakistan nor would the amount be borne by Bricks or claimed by Bricks as a deductible charge. H is of the view that the Rs. 400,000 being a reimbursement of the loss suffered by him is not his income chargeable to tax.
8. The basic salary of all employees of Bricks is deposited into each employee's bank account on the first working day of the following month. Any monthly allowances are paid to the employees on the last working day of each month.
9. In addition to his other entitlements (as in (3) above) H also received a special monthly allowance of Rs. 20,000 from Bricks. The allowance which is not an entertainment or a conveyance allowance was specifically granted to meet expenses wholly and necessarily to be incurred in the performance of his duties as technical director.
In order to provide the benefit of the two company maintained cars to H:
– a Honda Civic was taken on lease by Bricks on 1 August 2011 from an approved leasing company on a annual lease rental of Rs. 400,000 payable for five years. The cash price of the car, if purchased outright, would have been Rs. 1,680,000; and
– a Toyota Altis was purchased by Bricks on 1 September 2008, for Rs. 2,400,000.
The Toyota Altis is for the private use of H and the Honda Civic is for his business and private use.
10. On 1 October 2011, H was granted a loan of Rs. 1,000,000 by Bricks, repayable in 10 equal monthly installments. Profit on the loan is payable at the rate of 12% per annum.
11. Other information furnished by H.
I. On 21 March 2012, H received Rs. 1,000,000 as his share as a partner in the firm of BB Associates. The taxable income of the firm for the year ended 31 December 2011 (tax year 2012) was Rs. 2,000,000 and the tax paid by the firm on the Rs. 2,000,000 was Rs. 500,000.
II. On 30 June 2011, H had acquired 5,000 shares in XYZ Ltd from the Privatization Commission of Pakistan for Rs. 500,000 and had been allowed a tax credit thereon of Rs. 50,000 against the tax payable for the tax year 2011. XYZ Ltd is a company listed on the Karachi Stock Exchange. On 26 June 2012, H sold the 5,000 shares in XYZ Ltd for Rs. 600,000 and from the proceeds invested Rs. 400,000 on 29 June 2012 in the purchase of 4,000 new shares in SSS Ltd, a public company listed on the Lahore Stock Exchange. SSS Ltd had offered these new shares to the public and H was an original allottee of the shares.
III. H has foreign interest income for the tax year 2012 of US$ 10,000 (Rs. 800,000) from US Treasury bonds. This foreign income is sought to be claimed as exempt from tax, on the contention that H was in employment outside Pakistan during the last four tax years (2008, 2009, 2010 and 2011) preceding the tax year 2012.
IV. H received Rs. 500,000 from Mr. Ali, a client of Bricks, in appreciation of his extraordinary efforts in meeting the due date of completion of a building project of Mr. Ali. As there was no agreement between H and Ali for the payment of the Rs. 500,000 and the payment made by Ali were voluntary, H contends that the Rs. 500,000 received is in the nature of a windfall and is therefore not taxable.
V. Rs. 360,000 (net of tax deducted) was received by H in the tax year 2012 as a prize on a prize bond.
VI. The tax deducted at source from H's salary by paragon Construction and Bricks Pakistan for the tax year 2012 aggregated to Rs. 1,500,000.
Required:
(a) Compute the taxable income of Haaris for the tax year 2012 under the appropriate heads of income, giving clear reasons/explanations for the Treatment of each item in the computation of taxable income and tax payable of each of the items listed. (18 marks)
The reasons/Justifications for the items not used in the computation of taxable income should be shown separately from the other reasons. (5 marks)
(b) Calculate the tax payable by or refundable to Mr. Haaris for the tax year 2012. (5 marks)
Formatting (2 marks)
On Thu, Jan 19, 2012 at 10:33 AM, mc100203020 Nousheen Siddiqui <mc100203020@vu.edu.pk> wrote:
AOA. if anyone has the assignment solution of FIN623, then plz share.
Today is the last date.
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