TAXATION (MARKS 100)
Module C (3 hours)
Q.1 (a) Briefly explain the taxability or exemption of the following allowances or
perquisites:
(i) Free passage provided by a transporter to its employees;
(ii) Leased motor vehicle provided to an employee, exclusively for his personal
use. Running and maintenance cost and driver’s salary is also borne by the
employer.
(iii) Medical allowance paid at 10 percent of basic salary. (06)
(b) Explain the principles of taxation and filing of return relating to members of
association of person where the association is:
• a professional firm
• other than a professional firm.
Also discuss the rules relating to set off and carry forward of association’s losses. (08)
Q.2 (a) Explain the correct tax treatment in each of the following situations:
(i) In 1998, Mr. Hamid inherited a rare sculpture of Buddha which had a fair
market value of Rs. 200,000 on the date of inheritance. In February 2007, the
sculpture was sold by him at Rs. 500,000.
(ii) In December 2006, Mr. Yahya entered into an agreement for sale of his
residential plot to Mr. Moosa, who paid an advance of Rs. 500,000. According
to the agreement, Mr. Moosa was required to pay the balance by February 28,
2007. However, instead of paying the balance amount, he terminated the sale
agreement. Mr. Yahya forfeited the advance of Rs. 500,000 in accordance
with the terms of the agreement.
(iii) In September 2006, Mr. Saleem sold his personal car, Toyota Corolla, to one
of his cousins at a price of Rs. 50,000 whereas the fair market value of the car
was Rs. 200,000. The car was purchased by him in the year 2000 at a cost of
Rs. 300,000.
(iv) Mr. Ibrahim was working as a Chief Financial Officer in Dawood Pakistan
(Pvt) Limited, which is a wholly owned subsidiary of Dawood AG, Germany.
According to the Company’s policy, Mr. Ibrahim was sent on secondment to
Germany on January 1, 2007 for a period of five years. During this period,
half of his salary will be credited to his bank account in Pakistan, whereas the
remaining portion will be received by him in Germany.
(v) Mr. Zubair provided consultancy services to a listed company. In
consideration for his services, he received a net amount of Rs. 47,000 after tax
deduction of Rs. 3,000. (12)
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