Escolar Documentos
Profissional Documentos
Cultura Documentos
TAXATION -1
Courtesy:
Question No. 2
a. Discuss the concept of resident with that of the nationality of a particular individual.
b. Why it is significant to determine the residential status of an assessee?
c. Is it necessary to differentiate between capital and Revenue? If so why?
c. Yes, it is necessary to differentiate between capital and revenue. Because Income Tax is levied on income and
not on capital receipts. While ascertaining the profits of a business or profession, the revenue expenditure and not
the capital expenditure is deductible from the trading receipts.
Question No. 3
a. Define perquisite u/s 2 (45).
b. Mr. Rahman is an employee of publicly listed company who received the facilities under the following heads
as salaries and allowances in a year.
i) Basic Salary
i i ) House Rent Allowance
i i i ) Festival Bonus
i v ) Leave Encashment Salary
v ) Conveyance Allowance
vi ) Contribution to Recognized Provident Fund
vi i ) Servants Wages
vi i i ) Children Educational Allowance
i x ) Leave fare Assistant
x ) Bungalow Utilities
Ascertain the heads of perquisites from the above.
c. What is the limit of allowable perquisite?
d. Does it tantamount to double taxation?
Answer to the Question No. 3
a. As per Section 2(45) “Perquisite” means
Any payment made to an employee by an employer in the form of cash or in any other form excluding basic
salary, festival bonus, incentive bonus not exceeding ten percent of disclosed profit of relevant income
year, arrear salary, advance salary, leave encashment or leave fare assistance and overtime. and
Any benefit, whether convertible into cash or not, provided to an employee by an employer, called by
whatever name, other than contribution to a recognized provident fund, approved pension fund, approved
gratuity fund and approved superannuation fund.
Thus the phrase „perquisite‟ signifies some additional benefit in addition to the amount that may be legally
due by way of contract for service rendered.
b. The following are the heads of Perquisites:
1) House Rent Allowance
2) Conveyance Allowance
3) Servants Wages
4) Children Educational Allowance
5) Bungalow Utilities
c. The limit of allowable perquisites are Tk. 200,000
d. Yes, this clearly tantamounts to double taxation, once in the hands of the employee (excess allowances
received over allowable limit) and again by the employer.
Question No. 4
a.What are the consequences of failure to deduct or to deposit tax to exchequer u/s 57?
b. Mention the Reference Section and Rate of the following heads of TDS:
1) Interest of Securities
2) Indenting Commission
3) Shipping Agency Commission
4) Cigarette Manufacturers
5) Commission of letter of Credit
Answer to the Question No. 4
a. The following are the consequences of failure to deduct and to deposit tax u/s 57:
Where a person required by or under the provision of this Ordinance to deduct, collect or pay to the credit of the
Government tax, and in the cases mentioned in section 54, the principal officers of the company of which he is the
principal officer, fails to pay the tax in accordance with the provisions of this Ordinance, he or it shall -
a) without prejudice to any other consequences to which he or it may be liable, be deemed to be an assessee in
default in respect of the tax; and
b) in addition to such tax, pay an amount at the rate of two percent per month of such tax for the period
commencing on the date following the expiry of the time within which it is to be paid under section 59 and
ending on the date of the actual payment of the tax.
Where the Deputy Commissioner of taxes in the course of any proceeding under the Ordinance finds any
person, required by or under the provisions to deduct, collect or pay to the credit of the Government tax, who
has failed to deduct, collect or pay the tax in accordance with the provisions, shall notwithstanding the
provisions of section 137, take necessary action for realization of such tax along with the additional amount
payable under clause (b) of sub-section (I) from the person deemed to be an assessee in default under clause (a) of
that sub-section.
b. Head of TDS Ref. of Section TDS Rate
Interest on Securities 51(I) 10%
Indenting Commission 52(I) 3.5%
Shipping Agency Commission 52(1) 5%
Cigarette Manufacturers 52B 6%
Commission of Letter of Credit 521 5%
Question No. 5
Write short note on:
a) Best Judgement assessment
b) Universal Self assessment
c) Tax-GDP ratio
d) Tax audit
e) Tax avoidance and Tax evasion
Answer to the Question No. 5
a. Best Judgement Assessment:
If an assessee does not file return voluntarily or against notice issued, the DCT on his own accord take
initiative to assess the tax. This assessment is based on judgement of the DCT. At the time of finalizing such
assessment, the DCT should be guided by justice and concepts of equity and good conscience. Under the
following circumstances, the DCT can apply the system of best judgement assessment:
(i) If the assessee fails to file return as required under Sec.77 or revised return as required under Sec.78 before the
assessment.
(ii) If the assessee fails to appear before the DCT and submit evidence in support to his return as required in
the provisions of sec.79.
(iii) If the assessee fails to produce evidence in support to his return within specified date mentioned in
the notice issued under sec.79.
(iv) If the assessee fails to submit the statement of assets in his own name, in the name of his wife and
minor child as required by a notice issued sec.80.
It is to be mentioned here that misuse of the “Best Judgement” power by the DCT, in the consideration of
NBR, will be treated as professional misconduct. Inclusion of such provision in the Ordinance will have an
influencing effect on the DCT‟s to be rational and unbiased in exercising their power.
b. Universal Self Assessment
Universal Self Assessment (Sec-82BB):- Where an assessee an individual, firm or company furnishes a
correct & complete return; other than under proviso of Sec.82, under Sec.83A or 83 AA; along with tax
calculated on the basis of return; then DCT or his authorized person shall receive the return & issue a receipt
thereof. Such return shall be deemed to be an order of assessment. However, NBR will select for audit any
such return as it deems fit and DCT will proceed to audit these return. The DCT without order of NBR cannot
himself audit any such return. Such audit must be done within 15 months of submission of return. Further,
a return should be taken as complete if it is filed in accordance with Sec.75 (2) and tax has been paid
in accordance with Sec.74.
c. Tax-GDP ratio
To mobilize internal resources for the socio-economic development of the country the Govt. must
raise sufficient revenue through various taxation measures. Tax-GDP ratio is a broad measurement criteria
of its ability to raise internal revenue within the frameworks of other social objectives. It is an indicator of
Govt. efficiency in generating sufficient internal revenue to meet its administrative and developmental goals
and is generally expressed as total tax as a percentage of gross domestic product (GDP).
d. Tax Audit
Under Scc.35 (2) any company having capital over 5 lakh shall submit audited accounts. Such steps
makes the process easy and simple for tax authority. In such a context auditors need to take into
account the following along with his generally accepted techniques of audit:
(i) Evaluation of accounting systems
(ii) Adequacy of Books of Account
(iii) Valuation of stock
(iv) Variation in profit or loss and the reasons
(v) Nature of depreciation and tax provisions
(vi ) Bad debt and Reserve
(vii) Items of final accounts, etc.
e. Tax Avoidance and Tax Evasion:
Although the main objectives of tax avoidance and tax evasion are the same, yet there are some
differences between their application. In case of tax evasion, tax liability is reduced or tax is not paid
at all. It is illegal. But in case of tax avoidance, tax-liability is minimized by taking the advantage of
existing loopholes in tax rules. Although it is not illegal, but it is undesirable.
Question No.6
a. Who are the Income Tax Authorities for the purpose of Income Tax Ordinance, 1984?
b. What is meant by assessment year?
Answer to the Question No. 6
a. There shall the following classes of income tax authorities for the purpose of this Ordinance, 1984 namely:
The National Board of Revenue
Director General of Inspection (Taxes)
Commissioner of Taxes (Appeals)
Commissioner of Taxes (LTU)
Director General (Training)
Director General, Central Intelligence Cell
Commissioner of Taxes
Additional Commissioner of Taxes who may be either Appellate Additional Commissioner of Taxes or
Inspecting Additional Commissioner of Taxes.
Joint Commissioner of Taxes who may be either Appellate Joint Commissioner of Taxes or Inspecting Joint
Commissioner of Taxes.
Deputy Commissioner of Taxes
Tax Recovery Officers
Assistant Commissioner of Taxes
Extra Assistant Commissioner of Taxes
Inspector of Taxes.
b. The year in which the tax is paid is called the “Assessment Year” or tax year. Accordingly to section 2(9) of ITO Ordinance,
1984 assessment year means that period of twelve months commencing on the first day of July every year. So, it is the year
in which the assessments are made for the income of the assessee of the income year.
Exceptions: There are some exceptions to the above rule. The assessment year may also be any such period. which may
be deemed under the provisions of the Ordinance as the assessment year in respect of any income for any period. The
following are the cases where the assessment and the income years are the same:
a) Discontinued business or profession [Sections 89 and 19(6)1
b) Persons leaving Bangladesh for good (Section 91)
c) Non-resident persons carrying on occasional shipping business (Section 102)
d) Non-resident persons carrying on air transport business (Section 103A)
Question No. 7
a. Define the following:
1. Industrial Undertaking.
2. Physical Infrastructure Facility.
3. Tourism Industry.
b. What are the procedures to apply for Tax Holiday u/s 46A (2) (f) ?
c. When tax holiday facility can be withdrawn or cancelled?
d. Under what circumstance tax Holiday shall not be eligible?
•
Notwithstanding anything contained in section 46A, the Board may, in the public interest, cancel or
suspend fully or partially any exemption allowed under section 46A. [Section 46A (10)].
d. Tax Holiday not Eligible in Certain Cases:
A new industry, wherein investment of any sum by any person during the period between the first day of
January, 1997 and the thirty first day of December, 1999 is exempt from tax without-any question as to the
source of the invested sum under section 19A shall not be eligible for tax holiday.
Such industry may however be considered for tax holiday if the assessee pays tax at the rate of seven and
a half percent on the invested amount before the filing of return for the relevant income year (Sec. 19A).
Question No. 8
a. Mr. Amin has been working as General Manager in ABC ltd. during the income year ended June 30, 2009.
He has the following income:
1) Basic Salary Tk. 25,000 pm
2) Festival Bonus Equivalent 2 months basic salary
3) Free furnished accommodation
4) Employer's and Employees' Contribution to P.F @ 10% of the basic Salary
5) Car used partly for business and partly for personal
6) Life Insurance premium paid for himself and for his wife Tk. 30,000
7) He purchased Bangladesh Sanchaya Patra for Tk. 100,000
8) He earned Interest on Savings Bank Account (Gross) Tk. 100,000
Calculate his Total Income and Tax Liability mentioning the assessment year.
b. What are the income of an assessee to be classified and computed under the head “Salaries”.
Answer to the Question No. 8
a) Mr. Amin
Computation of Total Income and Tax Liability
Assessment year 2009 -2010
Particulars Taka
1. Income from Salary:
Basic - 25,000 x 12 300,000
Festival Bonus -25,000 x 2 50,000
Free Furnished Accommodation 25% of basic salary 75,000
(since no rental information is available)
Employer's Contributory to Provident Fund 30,000
On account of Car 7.5% of basic salary 22,500
477,500
2. Other Income:
Interest on Bank deposit (Gross) 100,000
Total Income 577,500
Calculation of Tax Liability:
On Tk.165,000 Nil
On the next Tk.275,000 @ 10% 27,500
On Balance Tk.137,500 @ 15% 20,625
48,125
Less: Tax Rebate 14,438
TDS on Investment 10,000 24,438
Net Tax Liability 23,687
Notes:
a) Calculation Tax Rebate:
Investment:
Bangladesh Sanchaya Patra 100,000
P.F. Contribution- Employer & Employee 60,000
Insurance Premium 30,000
1,90,000
Investment allowance shall not exceed Tk.10 Lacs or 25% of the total income of the assessee which ever is lower.
So, it comes to Tk.1 44,375 being 25%. Tax rebate comes @ 10% of Tk.144,375 = Tk.14,438.
b. Tax deducted at source @ Tk.10% on Tk.100,000 which comes to Tk.10,000.
b. The following income of an assessee shall be classified and computed under the head “Salaries”
a) Any salary due from an employer to the assessee in the income year whether paid or not,
b) Any salary paid or allowed to him in the income year by or on behalf of an employer through not due
or before it become due to him, and
c) Any arrear of salary paid or allowed to him in the income year by or on behalf of an employer, if not
charged to income tax for any earlier income year. .
Question No. 9
a: Define the following terms relating to VAT:
i) Input
ii) Input Tax
iii) Current Account
iv) Commercial Documents
iv) Zero rated taxable goods or services.
b. When Registration is required for the purposes of VAT?
c. When Registration of VAT may be Cancelled?
Question No. 10
An Electronic Goods importer Mr. Akber purchased electronic pars at the month of December of 2008 and
sold it to Khaer & Co. for Tk. 40,00,000. Using these parts Khaer & Co: assembled 400 Pc of colour TV
and sold it to East-West Electronic Co. for Tk. 56,00,000/- who is a wholesaler. East-West Co. sold that
goods (TV) to retail saler Lemo Int. for Tk. 80,00,000/-. In each case and each stage 15% VAT was
counted. Determine VAT in each case.
(aaa) the Director General of Central intelligence Cell shall perform the following functions, namel y:
i) carry out intelligence works to gather information about tax payers,
ii) analyses information gathered through intelligence work vis-a-vis concerned income tax
records;
iii) detect tax evasions, concealments of income and offences as described in chapter XXI of. income
Tax Ordinance 1984 ;
iv) carry out investigations to prove tax evasion or concealment or any other irregularities relating to
taxes and to collect evidences in support of tax offences or tax frauds for recovery of tax
with penalty and to suggest prosecutions in fit cases ;
v) to carry out functions as authorized by any other law.
(b) the commissioner or the Commissioner (Appeal) and the Appellate Joint Commissioner shall
perform their functions in respect of such areas, or such incomes .or classes of incomes, as the
Board may assign to them [Section 6(I)(b)] ;
(bb) the commissioner (Large Taxpayer Unit) shall perform his functions in respect of such areas, or
such persons, or such cases or classes of cases or such incomes or classes of incomes, as the Board
may assign to him [Section 6(1)(bb))] ;
(c) the Inspecting Joint Commissioner and the Deputy Commissioner of Taxes shall perform
their functions in respect of such areas, or such persons for classes of persons, or such Cases or
classes of cases, or such incomes or classes of incomes as the Commissioners to whom they
are subordinate may assign to them [Section 6( I)(c)] ; and
(d) other incomes tax authorities shall perform such functions as may be assigned to them by the
income tax authority to whom they are subordinate [Section 6(1)(d)] ;
2) a) Any area or other jurisdiction or functions assigned to an income tax authority under section 6(1)
may be modified or varied, may he transferred to any other income tax authority with respect to
areas, persons or classes of persons or cases or classes of case, or proceeding or classes of
proceedings;
h) any such transfer as is referred to in section 6(2)(a) may be made at any stage of the proceedings
and further proceedings may be commenced from the stage at which such transfer takes place.
3) Where more income tax authorities than one have been assigned the same functions in respect of any area,
or persons or classes of persons, or cases or classes of cases, or incomes of classes if incomes, they shall
perform this functions in accordance with such allocation or distribution of work as the authority assigned the
functions may make.
4) The powers of the Board, Commissioners and Deputy Commissioner of Taxes, to assign any case to any
authority, or to transfer any case from one authority to another or to perform any function or functions
under this section, shall include the power in respect of all or any proceedings relating to such case; and
except as provided in section 6(5), no such assignment, transfer or performance of functions shall be called
in question by or before any court or other authority,
5) Any person aggrieved by any other passed under section 6 may, within thirty days of such order;
make a representation-
a) to the inspecting Joint Commissioner (Appeals), if the order was passes by an inspecting / Joint
Commissioner; and
b) to the Commissioner, the Commissioner (Appeals), if the order was passed by an inspecting Joint
C o m m i s si o n e r ; a n d
c) to the Board if the order was passed by a commissioner;
and any order passed on such representation shall be final
Q.6 From the following profit and loss account of Mr. Alam for the year ended June 30, 2009,
ascertain his taxable income from the business and also his total tax liability:
Office salaries 24,890 Gross profit 215,532
General expenses 22,550 Commission 23,205
Bad debts 22,100 Discount 2,751
Reserve for doubtful debts 23,000 Sundry Receipts 252
Fire insurance premium 2,450 Bad debts recovered 2,150
Advertising 22,500 Interest on Govt. Securities 22,640
Income Tax 22,375 Capital gain in sale of shares of
listed company 22,100
Interest on capital 21,000
Interest on Bank loan 21,550
Loss on Building by fire (uninsured) 1,500
Depreciation 1,200
Net Profit 1,03,605
288,630 288,630
Notes:
1. General expenses include Tk. 2,500 given as donation to an unapproved institution and an
amount of Tk. 3,500 being the cost of a permanent signboard fixed on the shop has been
included in advertisement.
2. The allowable depreciation under the law is Tk. 3,000.
Ans:
Mr. Alam
Income Tax Assessment Year 2009 - 2010
Income for year ended June 30, 2009
Taka Taka
Net Profit as per Profit and Loss Account 103,605
Add: Inadmissible Expenses: 2,500
General Expenses (donation to an unapproved institution) 23,000
Reserve for doubtful debts 3,500
Income Tax 22,375
Interest on Capital 21,000
Loss of building by lire (being capital loss) 1,500
Accounting Depreciation 1,200
75,075
178,680
Q.8 Mr. Ali, a retired Government official owns a two storied house in Gulshan, Dhaka. He along with his
family occupies the ground floor while the upper floor has been let out to Mr. Alam from 1st July 2008 for a
monthly rental of Tk. 100,000 and before that it was vacant for about 6 months. He has constructed the house
with a loan of 20 lacs from a commercial bank and paid interest of Tk.225,000 during construction period from
February 2007 to December 2007. During the financial year 2008-2009 he has paid Tk.5 lacs to the bank
including Tk.90,000 as interest. His other expenses in relation to the property are:
a) Repairs & Maintenance 150,000
by Insurance on the building 25,000
c) Municipal tax 50,000
He does not have any other income. Compute the property of Mr. All for the relevant assessment year,
assuring that the municipal value of the property is Tk.350,000 and also compute' his tax liability.
Ans: Mr. Ali
Property Income
Assessment year 2009-2010
Taka Taka
Rent Received. Tk 100,000 x 12 = 1,200,000
Admissible Deduction:
Bank Interest for 2008- 2009 (50%) 45,000
Insurance Premium (50%) 12,500
Municipal Tax (50%) 25,000
Repairs 25% of Annual Value 300,000
382,500
Net Income 817,500
Q.9 ABC Ltd. produces Duplex Board, declaring its price at Tk.100,000 per metric ton. Received an
order on 20 June, 2008 from Lafaz Surma Cement Ltd. to deliver 500 metric tons of duplex board on
25 June, 2008. It intended to deliver the goods on 25 June, 2009 if VAT could be paid by then. The
company had a VAT deposit balance on the morning of 25 June, 2008 in the amount of
Tk.10,00,000. Calculate the amount to be deposited by the c o m p a n y 2 5 J u n e , 2 0 0 8 t o
enable it to dispatch the goods on that date.
Ans:
VAT Chargeable and payable on 500 MTs 100,000 x 500 x 15% 7,500,000
Less VAT deposit balance on the morning of June 25, 2008 1,000,000
Further VAT deposit to made through Treasury Challan on June 25,2008 6,500,000
The turnover tax was payable at 2% of the turnover at the time of its introduction. However, the rate of
Turnover tax has now been re-fixed at 4%.
b)
1. Purchase A/C Dr. 50,000
Input-VAT A/C Dr. (57,500 + 15/115) 7,500
To Accounts Payable A/C 57,000
2. Accounts Receivable A/C Dr. 80,500
To Sales A/C 70,000
To Output-VAT A/C (80,500 + 15/115) 10,500
Income Statement
Sales 80,500
Less VAT 10,500
70,000
Sales Return 4,600
Less VAT 600
(4,000)
66,000
Purchase 57,500
Less VAT 7,500
50,000
Balance Sheet:
Current Assets: VAT-Current A/C 600
Tk. (3000+7,500-9,900)
'7
Q.11 What do you mean by Truncated Value? Give live examples of this system
Truncated or short value system is one where VAT at standard 15% on the deemed or estimated value
addition. Since this is based on a shortened value, input tax rebate cannot be obtained excepting on exports
or deemed exports.
Following are the five services where truncated systems are applied
(b)What documents are to accompany the return of income of an individual under the Income Tax
Ordinance, 1984?
Page 49
The statutory dates for filing of return of income are:
Category of assessee Due dates
i) an individual By the thirtieth day of September next following the
income year
ii) a firm Govt. usually every year extends this date through official
gazette notification.
iii) an association of persons DCT can also extend this date on an application by the assessee
up to 6 months (3 months at his own capacity and further 3
months after taking prior permission from the IJCT)
iv) a company By the fifteenth day of July next following the income year or
where the fifteenth day of July falls before the expiry of 6
months from the end of the income year before the expiry of such
six months.
Question No. 6
Ahmed Ahmed Ltd. filed their income tax return showing income of Tk. 660,090 for the year ended on December 31,
2012. On scrutiny of the documents submitted by the company, the DCT made the following observations while
completed the assessment:
a) Office rent paid Tk.600,000 to the land lord against which no income tax was deducted.
b) Staff salaries paid during the year were Tk.2,550,000 against which required income tax were deducted but no
VAT has been deducted.
c) An amount ofTk.300,000 paid to a director as loan, has been debited as directors remuneration.
d) General expenses include Tk.50,000 being the advertisement expenses as published in the souvenir of a Rotary
Club without any TDS.
e) An amount of Tk. 600,000 paid as employer‟s contribution to Recognized Provident Fund has been debited to
Profit and Loss Account.
f) Bank charges include Tk. 15,000 spent for taking loan for purchase of file cabinet to be used in the residence of
the Managing Director.
g) Accounting depreciation to the amount of Tk.560,000 has been debited in the accounts as against the allowable
depreciation of Tk.650,000.
h) Entertainment expenses claimed Tk.450,000.
From the above compute the total income and tax liability of the company mentioning the assessment year.
Notes:
i) Since tax is deducted from staff salary so it is allowable expense. As VAT is not applicable on salary so no
need to VDS.
ii) Employer's contribution to recognized P.F is an allowable expense.
Question No. 7: Write short notes on the following:
a) Universal Self -Assessment
b) Best Judgment Assessment
c) Assessment of Discontinued Business
d) Tax Avoidance and Tax Evasion
Answer to the question No. 7:
a) Universal Self-Assessment
Every assessee (including company) is eligible to submit return under Universal Self-Assessment system. In this system
assessee has to tick the box universal self assessment at the top of the return form. DCT will issue a receipt of such
return and that receipt will mean that assessment is complete. It is hassle free in the sense that assessment has been done
on the basis of return and without any physical presence. But it should be kept in mind that return must be correct and
complete.
Procedure to submit return under universal self assessment system:
The procedure is very simple. Assessee has to prepare his return either by himself or with the help of authorized
representative and then it is to be signed and verified. Assessee has to tick the box universal self assessment at the top of
the return form and after paying tax (if applicable) submit the return within the last date of submission of return.
However, the assessee should keep in mind the following:
(a) Such return must be submitted within the last date of submission of return or within the extended time
allowed by the DCT.
(b) Tax as per return (if any) is to be paid before submission of return.
(c) No question is to be raised by the DCT as to the source of initial capital investment in case of new
assessee showing new business if at least 25% of initial capital is shown as income. Initial capital formed
in such way is to be kept in business and is not transferable in any manner during the year or within 5
years from the end of the assessment year.
The return submitted at this system may, afterwards, be selected by the NBR or its subordinate authority (if so authorized
by the Board) for audit. The Board will determine the manner of such selection.
If the return is selected for audit, then DCT will proceed to make fresh assessment by issuing notice under section 83(1)
for hearing and he will make assessment within 2 years from the end of the assessment year. Otherwise it will be barred
by time limitation. Assessment can be done under section 83(2) or under section 84 as the situation permits.
If any concealment has been detected in the return submitted by the assessee under universal self assessment scheme within 6
years from the end of the assessment year then the DCT may re-open the case and proceed to assess further.
b) Best Judgment Assessment
Where any assessee fails to file return required by a notice u/s 77/93 and has not filed a return or revised return u/s
78 or to comply with the requirements of notices u/s 79, 80 or 83(I), the D.C.T. shall assess income to the best
of his judgment.
c) Assessment of Discontinued Business
When any business or profession is discontinued, a notice of such discontinuance must be given to the D.C.T.
within 15 days of such discontinuance of the business or profession accompanied by a return of total income for
the broken period. If the person discontinuing such business or profession fails to give such notice, the D.C.T.
may impose penalty a sum not exceeding the amount of tax subsequently assessed on him.
d) Tax Avoidance and Tax Evasion
Tax Avoidance
Tax avoidance is the legal utilization of the tax regime to one‟s own advantage, to reduce the amount of tax that is
payable by means that are within the law. In natural rule of law, it is the legal right of an individual to decrease the
amount of what would otherwise be his taxes or altogether avoid them, by means which the law permits, cannot be
doubted. Example include: country of residence, double taxation, ambiguity in law, investment tax rebate and
compliance of section 30 in advance etc. where tax avoidance can be exercised.
Tax Evasion
By contrast, tax evasion is the general term for efforts by individuals, firms, trusts and other entities to evade taxes
by illegal ways Tax evasion usually entails taxpayers deliberately misrepresenting or concealing the true state of their
affairs to the tax authorities to reduce their tax liability, and includes, in particular, dishonest tax reporting (such as
declaring less income, profits or gains than actually earned; or overstating expenses).
Tax evasion is an activity commonly associated with the underground economy and considered as the amount of
unreported income, namely the difference between the amount of income that should legally be reported to the tax
authorities and the amount reported.
Question No. 8:
Mrs. G. Akhter, General Manager of a Private Limited Company, had the following income for the year
ended on June 30, 2013:
Basic pay Tk. 35,000 p.m
Festival bonus Tk.70,000 p.a.
House rent allowance Tk.15,000 p.m.
Entertainment allowance Tk. 1,000 p.m.
Medical allowance Tk.5,000 p.m.
She has been provided with a car for official and private use. Employer's contribution to the recognized provident fund is
@10% of the basic pay. She is entitled to 2 months basic pay as gratuity at the time of retirement.
a) Income from the trading of share business of a listed company during the year were Tk.525,000
b) She has earned Th.1,500,000 by transferring her share of a private limited company during the year. Mrs. Akhter
purchased 5 years Bangladesh Sanchay Patra for Tk.50,000.
Compute total income and tax liabilities of Mrs. G. Akhter for the assessment year 2013-2014.
'Answer to the question No. 08:
Mrs. G. Akhter
Assessment Year 2013-2014
Income year ended on June 30, 2013
Computation of Total Income and Tax Liability
1. Income from salary (Sec 21)
a) Basic pay Tk.35,000 x 12 420,000
b) House rent allowance Tk.15,000 x12 180,000
Less: 50% of basic pay or Tk.20,000 p.m. whichever is lower 180,000 0
c) Entertainment allowance Tk.1,000 x 12 12,000
d) Medical allowance Tk.5,000 x 12 60,000
Less: Actually spent (assuming) 60,000 0
e) Employer‟s contribution to recognized P.F. 42,000
f) Festival bonus 70,000
g) Notional income for using full time car @7.5% of basic salary 31,500
2. Capital Gain from transferring of shares of a Private Limited Co. 1,500,000
3. Capital Gain from trading of shares in listed company 525,000
Less: Fully exempted as per SRO no: 269 of 2010 525,000 0
Total income 2,075,500
Less: Capital Gain from transfer of shares of Private Limited Co. for separate
consideration for charging income tax 1,500,000
575,500
Tax calculation
On Tk.2,50,000 0% Nil
On Tk.3,00,000 10% 30,000
On Tk.25,500 15% 3,825 33,825
Tax on gain from transfer of shares of Private Limited Company Tk. 1,500,000
@ 15%(assuming it was purchased 5 years before) 225,000
2,58,825
Less: Tax rebate on approved investment
a) Actual investment:
Sanchay Patra 50,000
Contribution to RPF by both employer and employee 84,000
134,000
Tax rebate @ 15% on Tk. 134,000 20,100
Net Tax payable 2,38,725
Note:
1) It is assumed that medical allowance ofTk.60,000 was actually spent by the assessee.
2) Gratuity will be payable on retirement which is exempted from tax.
3) Festival bonus Tk.70,000 was paid for the whole year.
Question No. 9:
a) What are the consequences of failure to deduct and deposit tax to exchequer?
b) Mention the reference sections and applicable TDS rates for the following:
i) Interest on Securities
ii) Indenting Commission
iii) Commission on Letter of Credit
iv) Cigarette Manufacturers
v) Shipping Agency Commission
Answer to the question No. 9: (a)
(1) The deducting authority will be treated as an assessee in default [section 57(1)(a) ].
(2) 2% additional amount per month is collectable from him [section 57(1)(b)]
(3) Expenditure will be treated as income for non deduction/ collection of tax at source [sec 30]
Answer to the question No. 9: (b)
Item Reference Section Applicable Rate
Interest on Securities 51 10%
Indenting Commission 52 7.5%
LC Commission 52(1) 5%
Handmade Cigarette Manufacturers 52(B) 10%
Shipping Agency Commission 52 5%
The chartered accountant takes no responsibility for any information which he passes on to the tax authorities when
acting as an agent. The accountant is not normally liable if any of the information proves to be incorrect.
Acting as an agent is therefore considered to be a low risk activity.
A chartered accountant acts as principal when he provides advice to the client as to the taxation consequences of different
course of action. The accountant takes full responsibility for the advice given and may be liable to the taxpayer in the event
the advice turns out to be incorrect or inappropriate.
Question No. 2
Determine Minimum Tax of a Private Limited Company under section I6CCC of the Income Tax
Ordinance 1984, on the basis of following information
Business Loss 450,000
Bank Interest 250,000
Sales 20,000,000
Answer to the question No. 2
Minimum tax calculated of a private ltd. Co. u/s 16CCC is as follows:
Sales 20,000,000
Bank Interest 250,000
Total Gross Receipt 20,250,000
Minimum Tax @ 0.50% 101,250
Question No. 3
Find out the income year and assessment year of the assessee whose accounting year ends on the following
dates:
a. 30.06.2011
b. 15.09.2010
c. 31.12.2010
d. 15.03.2009
e. 31.07.2009
Answer to the question No. 3
Income year Assessment year
a. 2010-2011 2011-2012
b. 2010-2011 2011-2012
c. 2010-2011 2011-2012
d. 2008-2009 2009-2010
e. 2009.2010 2010-2011
Question No. 4
Mr. Khan aged 66 years has the following house property income for the year ended June 30, 2013. How
much tax he has to pay for his following income?
i) Rent received for the year Tk. 6,00,000;
ii) Annual value of his house Tk. 6,50,000; (Determined by the tax authority)
iii) He spent for repairing his house Tk. 25,000;
iv) Ground rent paid Tk. 5,000;
v) Collection charges on rent 2% of the total rent;
vi) Paid guard’s salary maintained for his house Tk. 24,000;
vii) Liftman was paid salary Tk. 30,000;
viii) Insurance premium paid Tk. 25,000;
ix) He paid bank interest due to mortgage of the house Tk. 10,000;
x) Land development Tax paid to Government Tk. 12,000.
2,14,500
Total Income 4,35,500
Question No. 6
The following information has been extracted from the books of accounts of XYZ ltd. a private limited company, for
the year ended 30 June 2013.Compute total income and tax liabilities for the assessment year 2013-14
i) Profit as per Income Statement 5,000,000/=
ii) Tax deducted at source from the company 937,500/=
iii) Income from Dividend 500,000/=
iv) Payment made by way of commission from which tax has not been
deducted at source 100,000/=
v) Payment of salary made in cash to the employees having gross
monthly salary of Tk.15,000/= 200,000/=
vi) Disclos ed turnover 100,000,000/=
vii) Overseas travelling expenditure 1,050,000/=
viii) Excess perquisit es 150,000/=
ix) Capital gain from sale of fixed assets 500,000/=
x) Tax deducted at source from the dividend income 100,000/=
III=(I-II) Income base for computing investment allowance [u/s 44(3)] 26,80,487
IV. 30% of Income Base (30% of III) 8,04,146
V. Taka 15,000,000 (Maximum Limit of Income base) 15,000,000
VI. Actual investment during the period 1,028,200
VII. Lower of 20% of Income base or Tk.15,000,000 or Actual 8,04,146
VIII. Investment Tax rebate @15% 1,20,622
III. Total Income considered for tax liability under regular tax slab 26,80,487
b) Calculation of Tax Leviable on Total Income under considered for regular tax slab:
Tax Slab Income Rate Tax Liability (Taka)
2,20,000 on the 1st Tk. 2,20,000 @ 0%
3,00,000 on the next Tk. 300,000 @ 10% 30,000
4,00,000 on the next Tk. 400,000 @ 15% 60,000
3,00,000 on the next Tk. 300,000 @ 20% 60,000
14,60,487 on balance Tk. 14,60,487 @ 25% 3,65,122
Total 2,68,10,087 5,15,122
c) Tax Leviable on Income from Govt. prize bond lottery u/s 82C Tk. 2,000
5,17,122
d) Total tax Leviable on Income from all sources:
SL Particulars Amount in taka
I. Tax Leviable on Total Income under considered for regular tax slab 5,15,122
II. Tax Leviable on Income form Govt. prize bond lottery u/s 82C 2,000
III. Total tax Leviable on Income from all sources (I + II) 5,17,122
Question No. 9
Income year of ABC Ltd. ends on 31 March. It purchased a machine for Tk. 20 lacs on March 30, 2006
and sold the same on 1 April 2009 for Tk. 25 lacs.
Find out the capital gain and depreciation charge of the related assessment years.
Answer to the question No. 9
b. The turnover tax shall be paid monthly, quarterly or yearly, as specified by the registered person in his
application @ 4% of the turnover during the month, quarter or year, as the case may be.
The turnover tax is payable in the case of yearly payment, within 30 days of the date of declaration;
and in other cases, in case of first payment, within 30 days of the date of declaration based on declared
turnover: and in the case of subsequent payments, within 15 days of each month or quarter, as the case may
be. In the case of subsequent payment of turnover tax, the Paid Treasury Challan along with Turnover
Form VAT - 4 shall be submitted to the Superintendent of the VAT Circle Office within 15 days of the end of
each month or quarter as the case may be.
c. Turnover lax will be paid to the treasury, Bangladesh Bank or Sonali Bank, as the case may be,
through Challan Form T.R - 6, using 13 digit code; for example, 1/1133/0015/0321 for Dhaka (North)
Commissionrate ; and 1/1133/0015/0321 for Dhaka (South) Commissionrate.
If any tax payer of turnover tax fails to pay tax on due date the Superintendent of the VAT Circle Office may
Impose on that tax payer fine up to Tk. 5,000 and additional Tax @ 2% per month for the delayed or non-
payment period.
No input tax is allowed as credit to the tax payer of turnover tax. No person can also claim credit for payment
of turnover tax through invoices against his turnover tax or VAT.
d..The following books or documents are to be maintained for turnover tax purpose.
1) Daily Purchases and Sales Register in Form VAT -17A;
2) Cash Memos in serial order in self - designed;
3) Paid Treasury Challan;
4) Turnover Tax Return in Form VAT-4; and
5) Declaration of Turnover in Form VAT-28B.
e. Penalty for False Declaration for Turnover Tax
If a tax payer makes false declaration for turnover tax by understating his turnover, he may be penalized
under section 37 of the VAT Act, 1991 to the extent of at least the tax evaded and at best 2.5 times of the tax
evaded; and also required to pay unpaid tax (that is, difference between VAT and turnover tax).
Taxation-I
May-June 2012
[All answers are given below in light with the Finance Act 2013]
Question No. 1 3 x 3=9
Write short notes on the following:
a) Set off of losses as per Section 37;
b) Scope of the total income Under Section 17:
c) Income Tax Authorities as set forth in Section 3.
Compute the tax liability of the company based on the aforementioned information for the assessment year 2011-
2012.
Answer to the Question No: 4.
X Ltd
Computation of Total Income
Income Year 2011-12
Assessment Year 2013-14
Taka Taka
Question No. 8
a)Why VAT is an indirect tax? Give an example showing the VAT payable at different stages.
b)What do you mean by taxable goods and services?
c) Who are required to register for the purposes of VAT? Who are required to pay VAT?
5. Tax payer pays VAT before each Tax payer pays monthly, quarterly
Tax Payment
delivery of goods or rendering of or annually, as the case may be.
service.
6 Books and Tax payer maintains Purchases Register, Tax payer maintains Daily
documents Sales Register, Current Account and Purchases and Sales Register
Invoices
7 Tax payer submits Return in Form VAT- Tax payer submits Return in Form
Return
19 monthly within 15 days from the end VAT-4 monthly or quarterly within
of the month. 15 days of the end of the month or
quarter, as the case may be
Taxation-1
Nov-Dec 2012
Q.1. Elaborate the role of the taxation system in the economic development of a country.
Answer:
Tax is a contribution exacted by the state. It is non-penal but compulsory and unrequited transfer of resources from
the private to the public sector, levied on the basis of predetermined criteria.
The classical economic were in view that the only objective of taxation was to raise government revenue. But with the
changes in circumstances and ideologies, the aim of taxes has also been changed. These days apart from the object of
raising the public revenue, taxes is levied to affect consumption, production and distribution with a view to ensuring the
social welfare through the economic development of a country. For economic development of a country, tax can be
used as an important tool in the following manner:
Thus it can be said that the economic development of a country depends various reasons one of them are on the
presence of an effective and efficient taxation policy.
(b) the residual value received from the lessee in case of an asset leased by financial institution having
license from the Bangladesh Bank on termination of lease agreement on maturity or otherwise subject to
the condition that such residual value plus amount realized during the currency of the lease agreement
towards the cost of the asset is not than the cost of acquisition to the lessor financial institution.
(d)Perquisite: Section: 2(45)
“Perquisite” means:-
(i)any payment made to an employee by an employer in the form of cash or in any other form excluding basic
salary, festival bonus incentive bonus not exceeding ten percent of disclosed profit of relevant income year, arrear
salary, advance salary, leave encashment or leave fare assistance and overtime, and
(ii) any benefit, whether convertible into money or not, provided to an employee by an employer, called by whatever
name, other than contribution to a recognized provident fund, approved pension fund, approved gratuity fund and
approved superannuation fund;
3. (a) What documents are to be accompanied with the return of an individual under the Income tax
ordinance?
As per the stipulation of section 75(2)(d) of the Income Tax Ordinance 1984 the following documents are required
to be submitted by an individual assessee at the time of submission of return: (a) Statement of assets and liabilities
under Section(80) , Rule-25 & From No- IT-10B, & statement of Assets and liabilities for individual having income
from Salary ( Rule - 25AAA & Form -11-10BBB) (b) Statement regarding particulars of lifestyle, Section(80) ,
Rule-25A & From No. IT-10BB (c) documents to substantiate the investments that has been considered for
allowance on investment, (d) certificate of tax deduction at source if any and (e) instrument of residual payment of
tax in accordance with return.
3. (b)Specify the requisite tax to be paid at every stage of First Appeal, Appeal to the Tribunal, Reference
to the High Court Division and Reference to the Appellate Division under the ITO.
First Appeal: No appeal shall lie against any order of assessment under section 153(4), unless the assessee has paid ten
percent of the tax as determined by the Deputy Commissioner of Taxes where return of income was not filed in
accordance with the provisions of his ordinance.
Appeal to the Appellate Tribunal: Under section 158 (2) No appeal shall lie against an order of the Appellate
Joint Commissioner or the Commissioner (Appeals), as the case may be, unless the assessee has paid ten percent of
the amount representing the difference between the tax as determined on the basis of the order of the Appellate Joint
Commissioner or the Commissioner (Appeals), as the case may be, and the tax payable under section 74.
Reference to the High Court Division: Under section 160 (2) Provided that no reference by an assessee shall lie
against the order of the Taxes Appellate Tribunal unless the assessee has paid the following tax at the rate of- (a)
fifteen percent of the different between the tax as determined on the basis of the order of the Taxes Appellate
Tribunal and the tax payable under sec 74 where the tax demand does not exceed one million taka.
(b)Twenty five percent of the difference between the tax as determined on the basis of the order of the Taxes
Appellate Tribunal and the tax payable under sec 74 where the tax demand exceeds one million taka. Reference to
the Appellate Division: An appeal shall lie to the Appellate Division from any judgment of the High Court
Division delivered under section 161 in any case which the High Court Division Certifies to be a fit one for appeal
Division where no additional payment of tax is required.
Q. 4. From the following particulars compute the total income and tax liability of Mr. Akram for the income year
ending 30 June, 2012:-
(a)Salary Income:
Basic salary Tk. 20,000 p.m.
Entertainment allowance-20% of basic salary.
Bonus – equivalent to 2 months’ basic salary.
Free accommodation (out of which 1 room was sub-let by Mr. Akram for Tk.3,000 p.m.).
Medical allowance- Tk. 500 p.m.
Conveyance allowance-Tk. 1,200 p.m.
Subscription to Approved PF-10% (Employer also contributed the same).
Following actual expenditures were incurred by Mr. X for the full house:
Municipal tax Taka 20,000
Repairs and maintenance Taka 60,000
Insurance premium Taka 12,000
Salary of caretaker Taka 30,000
Interest on house building loan Taka 1,47,000 (total loan amount Tk. 32,00,000)
Notes:
1) Interest on SEC approved debenture: It has been assumed that tk 10,000 is net amount after
deduction of tax @10%.
2) Interest on house loan: interest on loan for house property for own use is not allowed as expense.
3) Stock dividend: stock dividend is not a part of dividend as per definition of dividend u/s
4) Life insurance premium: As per Para 1 of sixth schedule part B, life insurance premium in the name
of dependent old father is not allowed.
Q.5. Discuss the following issues with reference to amendments made by the Finance Act, 2012
(a) Voluntary disclosure of income (Section 19E);
(b) Amount received by an individual assessee as loan from any other person (Section 19);
(c) Paid up capital received by a company from any shareholder (Section 19).
Where a company, not listed with any stock exchange, received paid up capital from any shareholder during any
income year in any other mode excepting by crossed cheque or bank transfer, the amount so received as paid up
capital shall be deemed to be the income of such company for that income years and be classified under the head.
“Income from other sources.”
Q.6.You are given the following Profit and Loss Account of ABC Company Ltd. for the year ended 31st December,
2011:
Particulars Taka Particulars Taka
Cost of Goods Sold 35,00,000 Sales 89,80,000
Salaries and Allowances 42,50,000 Dividend 16,000
Rent and Electricity 1,90,000 Interest on Bank Deposit 14,400
Telephone and Postage 30,000 Profit on Sale on Machine 30,000
Interest on Loan 35,000 Interest on Government Securities 10,000
Traveling Allowance 25,000 Sundry Income 5,000
Legal Expenses 14,000 Refund of Income Tax 30,000
Advertisement 31,000 Bad Debt Recovered 71,600
Charity 10,000
Audit Fees 25,000
Income Tax paid in Advance 2,00,000
Fines 20,000
Contribution to Provident Fund 20,000
Entertainment 54,000
Depreciation 1,80,000
Net Profit 5,73,000
Total 91,57,000 Total 91,57,000
Notes;
1. Incentive bonus:
As per sec 30 (j) expenditure by way of incentive bonus exceeding 10% of disclosed net profit is not allowed.
Incentive bonus paid 600,000
Less: Maximum allowable incentive bonus 57,300
(10% of disclosed gross profit)
Disallowable portion of incentive bonus 542,700
2. As per sec 30 (aa) if tax is not deducted on payment of salary it is not admissible as expense.
3. As per sec 30 (m)(iii) payment of interest is disallowable if exceeding taka fifty thousand made otherwise by
crossed cheque or bank transfer.
4.Capital and revenue income on sale of machine:
Sale price 72,000
Less: Cost price 62,000
Capital Gain 10,000
5. Entertainment expenses:
on first taka 10 lacs of profit before entertainment expenses 4% 40,000
on rest taka 20,54,700 of profit before entertainment expenses 2% 41,094
81,094
Q.7. Define the following terms as per Section 2 of the VAT Act, 1991:
(a) Tax;
(b) Invoice;
(c) Person;
(d) Commercial Importer.
(a) Tax:
“tax” means Value Added Tax or Value Added Tax and Supplementary Duty, as the case may be, payable for
supply of goods or services and shall include Value Added Tax and Supplementary Duty, import duty, excise duty
and all other duties and taxes (except Advance Income Tax) paid on inputs in the cases described in Section 13.
(b) Invoice:
“invoice” means the invoice made out under section 32;
( c )Person:
“Person” shall include any individual, whether of or incorporated, any company or society, proprietorship firm,
other firm, statutory or other organization or establishment or their representatives as well will be included in it;
(d) Commercial Importer:
“Commercial importer” means a person who imports goods, other than those specified in the First Schedule, and
sells or transfers it in exchange of consideration to any other person without changing its shape, nature,
characteristics or quality;
Q.8. (a) What is the time of payment of value added tax on goods in accordance of sec 6 of VAT Act 1991?
(b) Who is required to pay VAT as per sec 3 of VAT Act 1991.
(c ) What are the provisions to get input tax credit under section 9 of the Value Added Tax Act 1991?
Answer to the question no -8(a):
In accordance of sec 6 of VAT Act 1991, the value added tax on goods produced or manufactured by any registered
or registrable person for the purpose of conducting or furthering a business shall be paid at the time of such of the
following operations as occurs first-
a) when the goods are delivered or supplied;
b) when the invoice regarding the supply of the goods is made out;
c) when any goods are used privately or are supplied for any other use;
d) when the price is received in part or in full.
a) Persons claiming rebate must be registered for the purposes of -full-VAT. not turnover tax or not VAT based
on estimated value addition.
b) All books of accounts and records as prescribed under VAT laws should be maintained and preserved at least for 6
years from the expiry of relevant VAT period.
c) Rebate to be taken in each tax period. However, delay on reasonable ground may be accepted up to next two
consecutive tax period. The Tax payer can claim credit against VAT only, not import duty,
supplementary duty and/or income tax at source. However, an exporter can claim credit against import duty and/or
supplementary duty under the provision of Duty Exemption and Drawback (DEDO) system.
d) The Tax payer must have Bills of Entry for imported goods and VAT Invoices (VAT-II) for local purchases of
goods and services and preserve those documents for 6 years from the end of tax period. No credit for input tax
shall be allowed against turnover tax or VAT based on estimated value addition.
e) The input noted in said bill of entry and challan must be taken inside the place of production or services and to be
recorded in purchase account.
f) The name, address and registration number of the registered person should be correctly mentioned in said bill of
entry and challan patra.
g) The rebate should be taken proportionately in case of the production of both taxable and exempted product and
services.
h) The cost of input must be included in the base value of price declared for the fixation of VAT.
i) The cost of input used for the product and service must be paid through banking or electronic system when the amount
is Tk.100,000 or above.
Taxation — I
May-June 2013
Question No. 1:
a) Explain the characteristics of a good tax system.
b) Explain the differences between direct and indirect taxes.
c) Write short notes on-
i) Tax impact
i i ) Tax incidence
iii) Tax shifting
i v ) P r o gr e s s i v e t ax
v) Digressive tax
d) What do you know about Multiple tax system?
Answer to the Question No.1 (a):
Taxation is one of the fundamental components of a country's fiscal base and largely influences the
development of the economy. Taxation is a compulsory payment levied by the government on individuals or
1. To build
companies. a “Good
A good Tax System”
tax system should have following
canons characteristics.
of taxation must be followed.
2. The taxes should be so imposed that they are equitable, convenient & ability to pay, consistent and
adjustable;
3. Tax system should be balanced containing both direct and indirect nature of taxes so that it can
maximize government revenue;
4. Tax should not be discriminatory in any aspect between individuals and also between various
group;
5. The tax authority should be supported by sufficient simple laws and rules, skilled manpower and
efficient administrative tools and techniques;
6. Tax system should have positive effect on both production and distribution of wealth;
7. A good tax system has least collection cost and
8. The tax system of a company must be so devised as to leave no scope for the evasion of tax by the tax
payer.
Above all, the tax system should conform to the principle of maximum social advantage so that the
society as a whole is benefited to the maximum effect possible.
Answer to the Question No.1 (b):
The differences between Direct and Indirect Taxes are as follows:
Point of
SI. No. Direct Taxes Indirect Taxes
Difference
1. Collection of Tax Direct taxes are collected directly by Indirect taxes are collected through
the Government intermediaries
2. Distributive Effect Direct taxes are progressive and they Indirect taxes are regressive and they
help to reduce inequalities. widen the gap of inequalities.
3. Administrative As direct taxes are narrow based and Indirect taxes can be conveniently
Costs has many exemptions, the collected and cost of collection is
administrative costs of direct taxes constant overtime.
4. Flexibility and are more.
Direct taxes are more flexible than Generally indirect taxes are not
Stability indirect taxes. Direct taxes help to flexible and are not stable due to
reduce the inflationary pressure by inflationary nature.
taking away the excess purchasing
power and hence they promote stability.
5. Shifting of tax The burden cannot be shifted in direct The burden can be shifted in
burden tax. indirect tax.
6. Imposition of tax Generally tax is imposed on Tax is imposed on goods and
incomes in direct tax. impersonal services in indirect tax.
From the above it is clear that both the direct tax and indirect tax have advantages and disadvantages for the
Government and tax payers as well. The optimum mix of direct & indirect taxes is fully depends on the entire
economical and fiscal strength of a county.
Answer to the Question No.1 (c) (i):
Tax Impact: The impact of tax is the immediate money burden i.e. where tax falls on the person who pays the
tax in the first instance (i.e, who has legal responsibility to pay). The impact of a tax is on the person on whom
the tax is imposed. The man, who pays the tax to the government, bears its impact. For example, income tax is levied
on the net income/profit of a company who is legally bound to pay it to the government.
Answer to the Question No.1(c) (ii):
Tax Incident: The incidence of tax means the final money burden of a tax i.e. ultimate resting point of tax (i.e.
who ultimately pay it whether it may or may not be levied on him). The incidence of tax is on the person who
cannot shift it to anybody else. For example, the incidence of customs duty /value added tax is on the consumer
as he will ultimately pay tax with the acquisition price.
Answer to the Question No.1 (c) (iii):
Tax Shifting: The process transferring .the direct money burden of a tax to another person is known as the shifting
of tax i.e. if incidence differs from impact, tax is said to have been shifted. In the above example, the custom
duty/value added tax paid by the manufacturer, may be added to its cost and the price of the product will be
increased by the amount of tax and thereby shifts the burden to the consumer. This process of passing on the
burden is called shifting of a tax.
Answer to the Question No.1 (c) (iv):
Progressive Tax: Under this system, the rate of taxation increase as the taxable income increase. The principle
of a progressive tax is “higher the income, higher the rate” It is considered more equitable. For example, tax on
total income of Tk. 1,00,000.00 is 10% but on Tk. 5,00,000.00 is 15%. Here tax will increase more than
proportionately.
Answer to the Question No.1 (c) (v):
Digressive Tax: Taxes which are mildly progressive, hence not very steep so that high income do not make a due
sacrifice, such taxes on the basis of equity are called digressive. In digressive taxation, a tax may be slowly
progressive up to certain limit, after that it may be charged at a flat rate.
Answer to the Question No.1 (d):
Under multiple tax system the same earnings are taxed more than once. For example, multiple taxation may occur
when a publicly-traded company pays corporate taxes on its earnings. It then passes on some of those earnings to
shareholders as dividends, on which they must pay tax on dividend income. On the other hand multiple tax system
also means a tax system comprising several types of taxes. They may include both direct taxes and indirect
taxes. The tax system of Bangladesh consists of various types of taxes which are as follows:
A. Taxes on Income and Profit
1. Income tax — Company
2. Income tax- Other than Company
B. Taxes on Property & Capital transfer
1. Estate Duty
2. Gift Tax
3. Narcotics Duty
4. Land Reserve
5. Stamp Dut y- non judicial
6. Registration
C. Taxes on Goods and Services
1. C u s t om s D ut i e s
2. Excise Duties
3. Value Added Tax (VAT)
4. Supplementary Duty (on luxury items and in addition to VAT)
5. Taxes on Vehi cles
6. El ect ri ci t y Dut y
7. Other Taxes and Duties (travel tax, turnover tax, etc)
Question No. 2:
a) Classify an “Assessee” on the basis of person.
b) Explain the importance/effect of residential status in determining tax liabilities.
c) Mr. Jalal has earned income from various sources in the Income year 2010 -2011 which are as
follows:
i) Salary income earned and payable in Bangladesh Tk. 1,00,000
ii) Profit of Tk. 40,000 from a business in London has been brought in Bangladesh. The
business has been managed and controlled from London.
iii) Profit of Tk. 60,000 from a business in Singapore has not yet been brought in Bangladesh. The
business has been managed and controlled wholly from Singapore.
iv) Fees for professional services of Tk. 70,000 for a consultancy in Dubai has not yet been brought in
Bangladesh.
Compute the amount of total income of Mr. Jalal, assuming that he is a
a) Resident
b ) Non- resident.
Answer to the Question No. 2 (a):
Assessee is a person by whom any tax or other sum is payable the income Tax Ordinance, 1984 or in
respect of whom the proceedings have been initiated under this Ordinance and the term person includes:
(i) Individual: An individual is a natural person including male, female, major, minor or even a lunatic. It
refers to human being. However, the income of a minor or lunatic can only be assessed in the hands of
the legal guardian or manager acting as a deemed assessee.
(ii) Firm: “Firm” has the same meaning as assigned to it in the Section IX of the Partnership Act, 1932.
(iii) Association of Persons (AOP): An association of persons is the one in which two or more persons
join for a common purpose or common action with a view to produce income, profits or gains. It
need not be on the basis of a contract. Therefore, if two or more persons join to carry as a business but
do not constitute a partnership they may be assessed as an AOP.
(iv) Hindu Undivided Family (HUF): The expression-“Hindu Undivided Family” is not defined by the
Income Tax Ordinance, 1984 and is therefore understood in context of the definition of a Joint
Hindu Family under the Hindu Law. A HUF is a tenancy in common consisting of all male persons
descended from a common ancestor of stated degree of lineal proximity. It also includes, for certain
limited purposes, wives and unmarried daughters of all such male members. They are joint in Mess,
Worship and Residence; the family, as a whole is a unit of assessment.
(v) Local Authority: The term “Local Authority” is not defined by the ITO, 1984 Generally it includes
municipal corporation, district board, cantonment board or other authority legally entitled to or
entrusted by the government.
(vi) Company: “Company” means a company as defined in the Companies Act, 1913 or 1994 and
includes any nationalized banking or other financial institution, insurance body and industrial or
business enterprise, any association or body incorporated by or under any law of Bangladesh or
Outside Bangladesh.
(vii) Artificial Judicial Persons: These are entities which are not natural persons but are separate
entities in the eyes of law. It also includes all other artificial persons, with a juristic personality, if they
do not fall within any of the preceding categories of personality. If they do not fall within any of the
preceding categories of persons e.g Dhaka University. BRTC etc.
Answer to the Question No. 2 (b):
Determination of residential status of an assessee has a significance bearing on the tax liability as
incidence of income tax varies according to the residential status of an assessee. The details are given
below:
1 To Determine the Amount of Total Income: Determination of total income is different for
residents and non-residents. A resident considers global income as his total income but a nonresident does
not consider income from other countries in his total income.
2. To Determine Minimum Limit of Taxable Income: A resident and non-resident Bangladeshi has to
pay tax if his taxable income is more than Tk. 2,20,000/- as per the ITO, 1984 (in case of women, clearly
citizens being more than 65 years old the limit is Tk. 2,50,000/- and disable persons the limit Tk. 3,00,000/. But
for a non-resident foreigner such minimum limit is not applicable.
3. Tax Rate: For a resident and non-resident Bangladesh tax is calculated using the rates applicable
for various levels of income. Such as, for first Tk. 2,20,000/- @ 0% for next Tk.3,00,000/- @ 10%. But a
non-resident foreigner has to pay tax at maximum rate i.e. @ 25%.
4. Income Tax Rebate: A resident and non-resident Bangladeshi assessee gets income tax rebate on
investment allowance and on tax exempted income from gross tax liability. But, for a non-resident foreigner no
tax rebate is applicable.
5. Tax Liability: The average tax rate applicable for a resident and non-resident Bangladeshi is less
than that of a non-resident foreigner since tax is calculated using different lower tax rates (such as 10%,
15%, 20% & 25%). But a non-resident foreigner has to pay tax at maximum rate i.e. @ 25%.
Thus, determination of residential status of an assessee has a significant bearing on the tax liability as total
income, taxable income and tax rate are found to vary according to the residential status of an assessee.
Answer to the Question No. 2 (c):
Mr.Jalal
Income Year 2010-2011
Assessment Year 2011-2012
Computation of Total Income
Total Income
Sl. No. Particulars Assuming Mr. Assu min g
Jalal as Resident Mr. Jalal as
1 Income earned in Bangladesh: Non- resident
Salary Income 100,000
2 Foreign income: 100,000
Profit for business in London which has been brought
in Bangladesh 40,000 -
Profit for business in Singapore which has not yet
been brought in Bangladesh 60,000 -
Profit for business in Dubai which has been brought
in Bangladesh 70,000 -
Total Income 270,000 100,000
Question No. 3:
(a) What do you mean by depreciation allowance? Identify the different categories of depreciation
allowable to an assessee, carrying on business or profession.
(b) P Ltd. Bought a machine for Tk.10,00,000 in December 2009; written down value of which is
Tk.3,00,000 in the accounts. It was sold on December 2012 for Tk.2,00,000. What would be the tax
impact?
Answer to the Question No. 3 (a):
Depreciation is a type of tax deductions used in a business entity. Depreciation applies to tangible that is
visible & touchable assets like buildings. Due to the use of those assets, the economic value declines and
such declined amount is charged as depreciation against profit in respective years.
In accordance of the Third Schedule of Income Tax Ordinance 1984, there are four different categories of
depreciation allowance, which are as follows:
(i) Normal Depreciation allowance:
The allowance for normal depreciation under Para 2 shall be computed for building, machinery, plant,
furniture and fittings etc. at the rates specified in Para 3(1) of Third Schedule of Income Tax Ordinance
1984.
(ii) Initial Depreciation allowance:
As per Para 5A of the Third Schedule, where any building has been newly constructed or any machinery or
plant has been installed in Bangladesh after the thirtieth day of June, 2002, an amount by way of initial
depreciation allowance in respect of the year of construction or installation or the year in which such
building, machinery or plant is used by the assessee for the first time for the purpose of his business or
profession or the year in which commercial production is commenced, whichever is the later, shall be
allowed at the following rates, namely:-
( a) in the case of building 10% of the cost
(b) in the case of machinery or plant other than ships or motor vehicles not plying for hire 25%
of the cost
(iii) Accelerated depreciation allowance:
As per Para 7 of the Third Schedule, In the case of any new machinery or plant not used in Bangladesh
earlier (other than office appliances and road transport vehicles) which, has been or is used in an
industrial undertaking set up in Bangladesh between the 1st July 1977 and the 30th June 2012 (both days
inclusive). The rates under this category are as follows:
(a) 1 st year of commercial production 50% of the actual cost
nd
(b) 2 year of commercial production 30% of the actual cost
(c ) 3rd year of commercial production 20% of the actual cost
In addition to the above, there is also a Para-7A for accelerated depreciation allowance which has no use
after 30th June 2005.
(iv) Special depreciation allowance:
As per Para 8 of the Third Schedule, there is a provision of special depreciation allowance for Ship
subject to fulfillment of some conditions. The rates of depreciation are as follows:
(a) For t he 1 s t yea r 40% of the actual cost
(b) For t he 2 n d ye ar 30% of the actual cost
rd
(c ) For the 3 year 30% of the actual cost
The special depreciation allowance has no use after 30th June 1995.
Note:
No depreciation is charged in 2012 (year of disposal) as per provision of Para 10 (a) of 3rd Schedule.
Question No. 4:
Mr. Jashim is an assistant professor of a private college. He is the owner of a house at Mirpur, which has
been let out for residential purpose at Tk.19,000 per month. The municipal value of the house is
Tk.2,40,000 annually.
The following expenses were incurred in the income year 2010-2011 for that house:
1. Repair expense Tk. 44,000;
2. City Corporation tax Tk. 7,000;
3. Rent collection expenses Tk. 12,000;
4. Fire insurance premium Tk. 750 per quarter;
5. Interest on borrowed fund Tk. 2,500.
Compute income from house property for the assessment year 2011-2012.
Note:
1. Since the house is let out for residential purpose and repairs and maintenance expenses is
considered as 1/4th of the annual value. Here actual spending for repair expenses and collection
expenses is not relevant.
2. Annual expenses should be deducted from the annual value of the house. Hence, fire insurance
premium converted to annual figure by multiplying 4 with quarterly premium.
Question No. 5:
Dr. Arup Ratan Chowdhury is a renowned medical practitioner (Dentist) who gives the following receipts
and payments account for the year ending on 30th June 2011. Calculate his income from profession:
Receipt and Payment A/C
For the year ended on 30th June, 2011
Receipts Tk. Payments Tk.
Balance B/D 75,000 Rent to clinic 15,000
Consulting Fees from Patients 45,000 Purchase of professional books 20,000
Visiting fees 20,000 Purchase of medicine 15,000
Sale of medicines 90,000 Purchase of Motor car 75,000
Gifts and presents from clients 10,000 Income tax 3,000
Interest from post office savings 12,000 Purchase of surgical equipments 15,000
Winning from lottery 150,000 Gift to wife 5,000
Dividends 10,000 Balance c/d 264,000
412,000 412,000
Note:
1. As there is no information of tax deducted at source & advance tax paid by the assessee, hence it is assumed
that no tax deducted at source & advance tax paid by the assessee.
Question No. 7:
Identify the penalty in the following cases:
i) For not maintaining the accounts in the prescribed manner.
ii) For failure to file return.
iii) For failure to pay advance tax.
iv) For non-compliance of notices and concealment of income.
v) For failure or for default in payment of tax.
Answer to the Question No.7:
SI. No. Section Ref Nature of defaults Penalty
i) 123 Penalty for not maintaining Amount not exceeding one and a half times
accounts in the prescribed manner the amount of tax payable. If there is no
u/s 35(2) assessable income, maximum penalty is Tk.
ii) 124 failure to file a return of income 100/-.
Penalty amounting to 10% of tax imposed on
required by or under sections 75, last assessed income subject to a minimum of
77, 89(2), 91(3), 93(1) and or 75A Tk. 1,000/- and a further penalty of Tk. 50/-
for every day of continuing default.
iii) 125 Failure to pay advance tax as The amount by which the tax actually paid by
required by section 64 him falls short of the amount that should have
been paid.
iv) 126 Penalty for non-compliance Sum not exceeding the amount of tax
With notice issued u/s 79, 80 and chargeable on the total income of such person.
83(1) & (2)
128 Penalty for concealment of income Penalty of 10% of avoided tax. The amount of
penalty shall increase additional 10% for each
preceding a/y from which the concealment was
first assessable.
v) 127 Failure to pay tax 25% of the whole of the tax due or such portion
of the tax has not been paid.
137 Failure or default in making Amount equal to tax in arrears.
payment of tax
Question No. 8:
a) Define Value Added Tax (VAT). Discuss the advantages and disadvantages of VAT.
b) Discuss some important features of VAT in Bangladesh.
c) What are the different types of value added tax?
d) What do you mean by presumptive/Fixed VAT?
e) What are the services which are exempted from VAT?
Answer to the Question No. 8(a):
VAT is the tax on the value added by a tax payer. It is charged on the value of consumption, applied at each
point of transactions of goods/services from primary production to final consumption. At every stage one has to
pay as well as collect VAT before reaching the stage of final consumption. So, everyone except final consumer,
does not have to bear any VAT from his own account. Bangladesh introduces VAT in 1991 (effective date is
1st July, 1991) by supplementing Sales Tax.
Advantages of VAT:
Value Added tax is becoming popular throughout the world because of its following advantages:
1. VAT system encourages personal savings and investment-principal elements of a healthy economy-by taxing
only consumption.
2. Compared with alternatives in indirect taxation, the VAT has more revenue potential.
3. VAT system acts as a supplementary tax that can help make up for revenue lost due to income tax evasion.
It is generally more broad-based and entails a trail of invoices that helps improves tax compliance and
enforcement.
4. Since VAT is carried through the retail level, it offers all the economic advantages of a tax that includes
the entire retail price within its scope, at the same time the direct payment of the tax is spread out and
over a large number of firms instead of being concentrated on particular groups, such wholesalers or
retailers.
5. One particular advantage is that of the widening of the tax base by bringing all transactions into the tax
net. Specifically, VAT gives the government the opportunity to bring back into the tax system all those
persons and entities who were given tax exemptions in one form or another by the previous regime.
6. VAT may be selectively applied to specific goods or business entities as a control mechanism. It may
also effectively be used to protect local industries
7. It is more equitable and transparent.
Disadvantages of VAT
The main disadvantages which have been identified in connection with the Value Added Tax.
1. The “Value added Tax” has been criticized as the burden of it relies on personal end- consumers of produces
and is thereof a regressive tax (the poor pay more, in comparison, than the rich)
2. Revenues from a value added tax are frequently lower than expected because they are difficult and costly
to administer and collect.
3. VAT increase inflation. In developing countries, some businessman seize almost any opportunity to raise
prices, and the introduction of VAT certainly offers such an opportunity.
Answer to the Question No. 8(b):
The main features of VAT in Bangladesh are as follows:
1. VAT is imposed on goods and services at import stage, manufacturing, wholesale and retails levels;
2. A single stage VAT is applicable for both imports cum manufacturing.
3. A uniform rate is 15 per cent is applicable for both goods & services.
4. VAT is compulsory for whole sales /retailers (for selected items)
5. VAT is applicable for goods and services as mentioned the VAT Act.
6.. Exports are zero rated subject to fulfillment of some conditions.
7. VAT is payable at the time of supply of goods and services.
8. Turnover tax @ 4% is leviable where turnover amount is less than Tk. 60 lac.
9. Some industries like Agro-based, Cottage industries are exempted from VAT.
10. Taxes paid on inputs are creditable against output tax as per provision of Section-9.
11. Tax returns are to be submitted on monthly or quarterly or half yearly basis as notified by the Government.
Answer to the Question No. 8(c):
According to the provision of Value added Tax Act 1991 three different types of tax are charged which are as
follows:
1. Value Added Tax: Importers, manufactures and service providers, having minimum annual turnover
of Tk. 60 lac have to pay 15% tax on their value addition under Section 3 of the VAT.
2. Turnover Tax: Turnover tax @ 4% is leviable on those persons and organizations whose turnover amount
is less than Tk. 80 lac under Section 8.
3. Supplementary Duty: Luxurious, non-essential and socially undesirable goods are subject to
supplementary duties at different rates ranging from 20% to 500% under Section 7 of the VAT Act.
Answer to the Question No. 8(d):
Presumptive/ Fixed VAT:
Small traders and retailers are required to be registered and to pay flat rate of VAT, which is known as
presumptive/Fixed VAT. The actual rate depends upon the location, Taxpayer residing in Dhaka & Chittagong
City Corporation area are required to pay an annual VAT of Tk. 11,000/- while in other City Corporation areas
pay Tk. 8,000/-. The corresponding rate for taxpayer residing in District Paurashava areas and other areas Tk.
6,000/- and Tk. 3,000/- respectively.
Answer to the Question No. 8(e): Services
Exempted from VAT:
According to the Schedule Two of the Value Added Tax Act, 1991, certain services classified under seven
heads have been exempted from VAT under seven categories:
1. Basic services essential to life;
2. Social Wel fare S ervi ces;
3. Culture Oriented Service;
4. Finance and Finance Related Services;
5. Transport Services;
6. Personal Services;
7. Other Services.
The detail of the list is updated time to time through Finance Act and different SROs.
Question No. 9:
On January,2011,Rahman International (Pvt.) Limited imported raw materials for school bags
amounting to Tk. 1,00,000 and sold it to Agfa Limited for Tk. 1,20,000. Using these materials, Agfa
Limited made 150 pieces of school bags and sold it to Yousuf & Sons, a wholesaler, for Tk. 1,70,000.
Yousuf & Sons sold the bags to a retail seller Jaman International for Tk. 2,00,000. Jaman
International sold all the bags to various customers for tk. 2,50,000. In each case and at each stage 15%
VAT is to be considered. Compute VAT in each case.
Answer to the Question No. 9:
VAT Paid By Amount Amount of
Value of Value of Value Addition VAT Payment
Input (A) Output (B) C=(A-B) D=(C*I5%)
At Import stage by Rahman 100,000 100,000 15,000
International (Pvt) Ltd.
Sale of Imported Products by 100,000 120,000 20,000 3,000
Rahman International (Pvt)
Producer Agfa Ltd.
Ltd. 120,000 170,000 50,000 7,500
Whole Seller (Yousuf & Sons) 170,000 200,000 30,000 4,500
Retailer (Jaman International) 200,000 250.000 50.000 7,500
Total VAT paid at different Stages 37,500
So, the total value of VAT amount is Tk. 37,500/- which is ultimately borne by the final consumer.
Taxation-I
Nov-Dec 2013
Question No. 1:
a) What is “Income” from the view point of Income tax law?
b) Mention the main characteristics of Income.
c) Give some example of capital receipts.
d) Give some example of revenue receipts.
e) What are the heads of Income under the Income Tax Ordinance 1984?
f) What is total World Income?
Answer to the Question No. 1 (a):
Income means any income, profits or gains, from whatever source derived, chargeable to tax under any head
specified in section 20 including any losses of the aforementioned heads of an assesse including profits or gains
of a mutual insurance association computed in accordance with paragraph 8 of the Fourth Schedule.
Income also includes any sum deemed to be income, or any income accruing or arising or received, or
deemed to accrue or arise or be received in Bangladesh under any provision of this Ordinance except the face
value of any bonus share or the amount of any bonus declared, issued or paid by any compan y registered in
Bangladesh under the companies act 1994; to its shareholders with a view to increase its paid-up share capital
shall not be included as income of that share-holder.
Answer to the Question No. 1 (b):
The Main characteristics of income are described below:
(a) Income should be received in the form of money or money's worth.
(b) Income should be in the form of revenue nature.
(c) It should arise from some definite source or a source with some sort of regularity.
(d) It should be derived from a person other than the recipient.
(e) Income tainted with illegality is also classified as taxable income under tax law.
Answer to the Question No. 1 (c):
Some examples of capital receipts are as follows:
(a) Sale of asset.
( b ) Compensation received from of capital asset.
( c ) Royalty received from transfer of capital rights.
( d ) Receipt to meet capital expenditure,
( e ) Insurance claim received for loss of capital asset.
Answer to the Question No. 1 (d):
Some examples of revenue receipts are as follows:
(a) Salary.
( b ) Interest on securities.
( c ) House rent
( d ) Receipts of annual royalt y.
( e ) Sale proceeds received from sale of goods purchased with a view to re-sale.
Answer to the Question No. 1 (e):
Heads of Income under income tax ordinance are as follows:
(a) Incom e from S alar y
(b ) In com e from S e curi t i es
(c) Income from House Propert y
(d ) Incom e from Agri culture
(e) Income from Business or Profession
(f) C a p i t a l ga i n s &
(g ) Incom e from Other source
Answer to the Question No. 1 (f):
The taxpayer or his income may have connections with more than one country. For example, Mr. Rahamat, a
Bangladeshi citizen, has income from Romania on investments and dividend income from France in addition to
income from Bangladesh. He has to pay tax on his total world income in Bangladesh and also on income earned
in Romania and France.
Question No. 2:
What are the amendments made by Finance Act 2013 in respect of provision of IT Law in the following
sections: a) Section 44, b) Section 52 S, c) Section 160 & d) Section 52AA
Answer to the Question No. 2:
The amendments or insertions made by Finance Act 2013 in respect of provision of IT Law in the following
sections are mentioned below:
(a) Section 44:
1. The words “10%” have been replaced by “15%” in clause (b) of Subsection (2).
2. The words “10 million” have been replaced by “1 crore and 50 lacs” in clause (a) of Subsection (3).
3. The words “20%” have been replaced by “30%” in proviso of clause (a) of Subsection (3).
(b) Section 52S:
This section has been newly introduced and the details are:
Collection of tax from manufacturer of soft drink: The Security Printing Corporation (Bangladesh)
Limited or any other person responsible of delivery of banderoles or stamps, shall collect at the time of
delivery of such banderoles or stamps to any manufacturer of soft drinks, tax at the rate of three per cent of the
value of such soft drinks as determined for the purpose of the Value Added Tax (VAT).
(c) Section 160:
1. The words “20%” have been replaced by “15%” in clause (a).
2. The words “50%” have been replaced by “25%” in clause (b).
(d) Section 52AA
The following proviso has been incorporated in section 52AA:
Provided that when the Board on an application made in this behalf, gives a certificate in writing that the person
rendering such services is not likely to have any assessable income during the year or the income is otherwise
exempted from tax under any provision of this ordinance, the payment referred to in this section shall be made
without any deduction or with deduction at a lesser rate for that income year.
Question No. 3:
a) What is Tax Holiday Scheme? Explain the objectives of the Scheme.
b) Mention the period of Tax Holiday for industrial undertaking.
c) What are the special facilities given to the Industries established in EPZ?
Answer to the Question No. 3 (a):
Tax-holiday Scheme: According to Section 45, 46 and 47 of the ITO, 1984, an industrial enterprise
established within prescribed time limit in the prescribed area shall be exempted from tax for period. This is
known as Tax Holiday Scheme. The main objective of this scheme is to ensure economic development
through industrialization attracting investment in some specific sectors. The objectives of this scheme are as
follows:
(a) To increase the overall level of investment in the industrial sector.
(b) To encourage industry to locate in the less developed regions of the country.
(c) To encourage formation of domestic capital.
(d) To attract direct foreign investment in the desired industrial sectors of the economy.
(e) To maintain sectoral balance in industry.
(f) To have a balanced and equitable development of all areas of the country.
Answer to the Question No. 3 (b):
The period of Tax holiday for industrial undertaking as per Section 46B are as follows:
Areas Tax Holiday Rate of exemption
Years
( a ) Dhaka nd Chittagong division 1st & 2nd year …. . …...100% of income
(excluding Dhaka, Narayangonj, Gazipur, 3rd year ......... . 60% of income
Chittagong, Rangamati, Bandraban and 5 4th year .............. .40% of income
Khagrachari district) 5th year................ 20% of income
(b) Rajshahi, Kulna, Sylhet and Barisal 1st & 2nd year ....100% of income
Division (Including the hill district 3rd year..............70% of income
of Rangamati, Bandarban and 4th year .............55% of income
7
Khagrachari) 5th year............... 40% of income
6th year............... 25% of income
7th year .............. 10% of income
Answer to the Question No. 3 (c):
In order to stimulate rapid economic growth of the country, particularly through industrialization, the
government has adopted an „Open Door Policy‟ to attract foreign investment to Bangladesh. The Bangladesh
Export Processing Zones Authority (BEPZA) is the official organ of the government to promote, attract and
facilitate foreign investment in the Export Processing Zones (EPZ). The primary objective of an EPZ is to
provide special areas where potential investors would find a congenial investment climate, free from
cumbersome procedures. Following special facilities are given to the industries established in EPZ:
Fiscal Incentives:
1. 10 years, in some cases 5 years, tax holiday for the Industries
2. Duty free import of construction materials
3. Duty free import of machineries, office equipment & spare parts etc.
4. Duty free import and export of raw materials and finished goods
5. Relief from double taxation
6. Exemption from dividend tax
7. GSP facilit y available
8. Accelerated depreciation on machinery or plant allowed
9. Remittance of royalty, technical and consultancy fees allowed
10. Duty & quota free access to EU, Canada, Norway, Australia etc.
Non -Fiscal Incentives:
1. 100% foreign ownership permissible
2. Enjoy MFN (most favored nation) status
3. No ceiling on foreign and local investment
4. Full repatriation of capital & dividend
5. Foreign Currency loan from abroad under direct automatic route
6. Non-resident Foreign Currency Deposit (NFCD) Account permitted
7. Operation of FC account by „B‟ and „C‟ type Industries allowed.
Other Facilities:
1. No UD, IRC, ERC and renewal of Bond license
2. Work permits issued by BEPZA
3. Secured and protected bonded area
4. Off-Shore banking available
5. Import on Documentary Acceptance (DA) basic allowed
6. Back to Back L/C
7. Import and Export on CM basis allowed
8. Import from DTA (Domestic Tariff Area)
9. 10% sale to DTA (Domestic Tariff Area)
10. Customs clearance at factory site
11. Simplified sanction procedure
12. Sub-contracting with export oriented Industries inside and outside EPZ allowed
13. Relocation of foreign industries allowed
14. Accords Resident-ship and Citizen-ship
15. One Window same day service and simplified procedure.
Question No. 4:
a) What is TIN? Specify the areas where it is to be furnished.
b) Point out the tax rate prevailing in the assessment year 2013-2014 on the income of an individual.
c) From the following closing dates of accounts of business of a person determine the Income year and
assessment year:
i) 1st March 2009 to 29th February 2010
ii) 1st January 2009 to 31st December 2009
iii) 1st July 2009 to 30th June 2010,
iv) 1st November 2008 to 31st October 2009
d) Income Tax is payable in Income year:
i) for all types of assessee
ii) for discontinued business
iii) for non-resi dent
iv) for lottery income
Mention which one is correct.
Answer to the Question No.4 (a):
Tax Identification Number (TIN): Sec.184A and 184B:
The provision relevant to issue and use of TIN was introduced by the Finance Act, 1993 & made applicable from
July, 1984, According to this provision a tax payer need to apply to tax authority in a prescribed form to get
TIN and the authority will issue the same as soon as possible. Further TIN may be issued by tax authority if a
person is found to have taxable income during income year, without application received from that person.
In the following cases TIN will be required to be furnished:
(a) Opening a letter of credit for the purpose of import; and for submitting an application for the purpose
of obtaining an import registration certificate;
(b) Renewal of trade license in the area of a city corporation or a Pourashava a divisional headquarters or of
a district headquarters.
(c) Submitting tender documents for the purpose of supply of goods, execution of a contract or of rendering
services;
(d) Submitting application for membership of a club registered under Companies Act, 1994.
(e) Issuance or renewal of license or enlistment of a surveyor of general insurance;
(f) Registration for purchase of land, building or an apartment situated within any City Corporation, deed
value of which exceeds one lakh taka;
Provisions of clause (f) shall not apply in case of registration for purchase of land, building or an
apartment situated within any city corporation, by a non resident Bangladeshi.
(g) Registration change of ownership or renewal of fitness of a car, jeep or a microbus.
(h) Sanction of loan exceeding five lakh taka to a person by a commercial bank or a leasing company.
(i) Issue of credit card;
(j) Issue of practicing license to a doctor, a chartered accountant, a cost and management accountant, a
lawyer or an income tax practitioner.
(k) Giving ISD connection to any kinds of telephone.
(l ) Registration of a company under Companies Act, 1994 in respect of sponsor directors.
(m) Submission of application for a license as a Nikah Registrar under the Muslim Marriages and Divorces
(Registration) Act,1974.
Provided that, a person who has already obtained the license of a Nikah Registrar Shall be required to
obtained such certificate within 3 months.
(n) Renewal of membership of any trade body.
(o) Submitting plan for construction of building for obtaining approval of RAJUK, CDA, KDA, and RDA
(p) Is s u i n g o f d r u g l i c e n s e e
Requirement made by NBR for any class of documents as per announcement made by official
Gazette.
(q) Applying for connection of gas for commercial purpose in a city corporation, paurashva or
cantonment board.
(r ) Applying for connection of electricity for commercial purpose in a city corporation, paurashava or
cantonment Board.
(s) Registration, change of ownership or renewal of fitness of bus, truck prime mover lorry etc., plying for
hire.
Answer to the Question No.4 (b):
The tax rate prevailing in the assessment year 2013-2014 on the income of an individual are as follows:
Income Amount Rate of Tax Remarks
on first Tk. 2,20,000 Nil ➢The threshold limit is TK. 2,50,000 for female taxpayers
& senior taxpayers of age 65 years and above.
➢ For retarded taxpayers threshold limitisTK.3,00,000.
on next Tk. 3,00,000 10%
on next Tk. 4,00,000 15%
on next Tk. 3,00,000 20%
on rest Income 25%
3rd Building
Annual Value:
a) Municipal Value= ?
b) Rental Value = 72,000
AV= Higher One 72,000
Less Allowable Expenses :
a) Repair =1/4 of AV 18,000
b) Int . on l oan ½ 2,500
c) Ins. Premiums = 2,000 22,500 49,500
4th Building
Annual Value =
a) Municipal value=
b) Rental value =(5,000x12) 60,000
Plus repair 2,000
Actual Rent = 62,000
Less: Allowable expenses
a ) R epai r =1 / 4 of A V 15,500
b ) Vacancy allowance (62000x2)/12 = 10,334 25,834 36,166
Income from House Property
2,46,566/-
Note:
(i) 1/3rd of 1st house is used for business. It will be separately assessed under business head, Allowable
cost
for the house i.e. municipal cost is computed for 2/3rd part of the house proportionately.
(ii) Repair is allowed @ 1/4th of AV. Whether spent or not or spent much than that. It includes cost of
collection, salary of guard, liftman etc.
(iii) For second house actual municipal tax is 2,000 x 2 = Tk. 4,000/-
(iv) At present owner‟s residential house is exempted from tax. As such for third house income has not been
computed on it and expenses like interest on loan and insurance premium has been allowed
proportionately for ½ of the house.
(v) Vacancy allowance is allowed for vacant period proportionately to its annual value.
(vi) Finance Act, 2009 provides that annual value of house will include building & furniture that is let out
i.e. value of building & furniture fixture will be taken together to determine Annual value.
Question No. 7:
State whether the following are capital or venue expenditures:
1. Sums paid as compensation in the ordinary course of business.
2. Cost incurred in transferring plant from one set of premises to another.
3. Price paid for purchase of patents.
4. Payment for acquiring the right to use secret manufacturing process.
5. Advertisement charges ordinarily incurred.
Answer to the Question No7:
Sl. No. Issues Answer
1. Sums paid as compensation in the ordinary course of business Revenue expenditure
2. Cost incurred in transferring plant from one set of premises to Capital expenditure
3. another
Price paid for purchase of patents Capital expenditure
4. Payment for acquiring the right to use secret manufacturing Capital expenditure
5. process
Advertisement charges ordinarily incurred Revenue expenditure
Question No. 8:
XYZ Ltd. is a private limited company engaged in the business of supply of goods and execution of
contract. The following information has been extracted from the books of account of XYZ Ltd. for the year
ended 30 June 2013: 15
Taka
(i) Profit as per income statement 50,00,000
(ii)Tax deducted at source from the payments made on account of supply of goods and
9,37,500
execution of contract
(iii)Income from dividend 5,00,000
(iv)Payment made by way of commission from which tax has not been deducted at 1,00,000
source
(v) Payment of salary made in cash to the employees having gross monthly salary of
2,00,000
Tk.15,000/= or more
(vi)Disclosed turnover 10,00,00,000
(vii)Overseas travelling expenditure 10,50,000
(viii) Excess perquisites 1,50,000
(ix) Capital gain from sale of fixed assets
5,00,000
(x) Tax deducted at source from the dividend income
1,00,000
Compute the tax liability of the company based on the aforementioned information for the assessment year
2013-2014.
Answer to the Question No. 8:
XYZ LTD.’S
COMPUTATION OF TAXABLE INCOME& TAX LIABILITY THEREON
FOR INCOME YEAR ENDED 30 JUNE 2013
FOR ASSESSMENT YEAR 2013-2014
Income from Business or Profession (U/S 28-30):
Profit as per Income Statement 5,000,000
Less: Dividend 500,000
Less: Capital Gain 500,000 1,000,000
4,000,000
Add: Inadmissible Expenses:
Commission paid without TDS[Sec. 30 (aa)] 100,000
Salary [Sec. 30(i)] 200,000
Excess Overseas Travelling Exp. [Note-1] 50,000
Excess perquisites [Sec. 30(e)] 150,000
500,000
Total Taxable Business Income [Note-2] 4,500,000
Dividend 500,000
Less: Exempted 10,000
Capital Gain 490,000 500,000
5,490,000
Total Taxableof
Computation Income
Tax Liability
On Business Income @37.5% 1,687,500
Tax on Dividend income @ 20% 98,000
Tax on Capital Gain @ 15% 75,000
Tax Liability [Note-3] 1,860,500
Less: Tax deducted at source (9,37,500+1,00,000) 1,037,500
Net Tax Liability 823,000
Note-1:
As per section 30 (k) overseas travelling is allowable upto one per cent of the disclosed turnover which is:
Disclosed turnover 100,000,000
1% on turnover 1,000,000
Less : Actual Overseas Travelling 1,050,000
Balance of in VAT Current Account = 7,500+3,000-9,900= Tk. 600. Details are given below by journalizing
the transactions:
Journal Entries: TK TK
Debit Credit
a) 50,000
Purchase of goods A/C
7,500
Input VAT A/C
Trade Payable A/C 57,500
b) Trade Receivable A/C 80,500
Sales A/C 70,000
Output VAT A/C 10,500
c) VAT Current A/C 3,000
Bank A/C 3,000
d) Sales Return A/C 4,000
Output VAT A/C 600
Trade Receivable A/C 4,600
e) VAT Current A/C 7,500
Input VAT A/C 7,500
f) Output VAT A/C (10,500-600) 9,900
VAT Current A/C 9,900
Question No. 10:
Under what situations, Input Tax Credit is not allowed under the Value Added Tax Act, 1991?
Answer to the Question No 10:
As per section 9 (1) of VAT Act 1991, the supplier and traders of taxable goods or services shall get credit of
input tax against payable of output tax except in the following cases:
a. VAT paid on input to produce exempted goods
b. Turnover tax paid on inputs procured from turnover tax taxpayer
c. Supplementary duty paid on input
d. Value added tax paid on package reusable at any other time except for the first time
e. VAT paid for BMRE or repair purposes of building, infrastructure, establishment, furniture,
stationeries, A.C, fan light and payments for architecture, designing and other products related with
such products or services.
f. various goods and services specified by rules and value added tax in excess of the rate of value
added tax paid on such goods and service
RULE-19
(1A)Notwithstanding anything contained in sub-rule(1),credit may be taken for the following payments in respect
of production or supply of good surrendering of taxable service, namely: -
i)eighty percent of the value-added tax paid on the use of insurance, and supply of gas and electricity; telephone,
teleprompter, fax, Internet, freight forwarders, clearing and forwarding agent, WASA, audit and accounting
firm, surveyor, security service, legal advisor, transport contractor and banking service.
(ii) Break-open the lock of any door, box, locker, safe, almirah or other receptacles for the purpose of said
entry and search if keys thereof are not available
(iii) Search any person who has got out of or is about to get into, or is in the building, place, vehicle or aircraft, if
he has reason to suspect that the person has secreted any such books of accounts, documents, money, bullion,
jewellery or other valuable articles or things.
Seize any such documents, books of accounts, money, bullion, jewellery or other valuable articles or things
(iv)
found as a result of such search.
(v) Place marks of identification on or stamp any books of accounts or other documents or make or cause to
be make extracts or copies thereof.
Power to impose penalty: He can impose penalty as per ITO 1984.
Power to Appeal: He can appeal to the Appellate Tribunal against any order of Appellate Joint commissioner of
Taxes, if the Commissioner of Taxes approves the decision.
DCT is empowered to call for submission of Statement of Assets and Liabilities from the assessee if his income
excessive a certain level.
Answer to the Question No. 2(c):
Who can file Appeal before the appellate Tribunal?
(a) An assessee may appeal to Appellate Tribunal if he is aggrieved by the order of
(i) An Appellate Joint Commissioner of Taxes or the Commissioner of Taxes (Appeals) as the case may be,
under section 128 or 156. [Section 158(1)].
(ii) No appeal under section 158(1) shall lie against an order of the Appellate
Joint Commissioner of Taxes or the Commissioner of Taxes (Appeals), as the case may be, unless the
assessee has paid 10% of the amount representing the difference between the tax as determined on the
basis of the order of the Appellate Joint Commissioner of Taxes or the Commissioner of Taxes
(Appeals), as the case may be, and the tax payable under section 74.
Provided that on an application made in this behalf by the assessee, the Commissioner of Taxes, may
reduce, the requirement of such payment if the grounds of such application appears reasonable to him.
(b) The Deputy Commissioner of Taxes may, with the prior approval of the Board, prefer an appeal to the Appellate
Tribunal against the order of an Appellate Joint Commissioner of Taxes, or the Commissioner (Appeals) under
section 156.
(c) Every appeal under section 158(1) or sub-section (1) or sub- section 2A shall be filed within 60 days of the date
on which the order sought to be appealed against is communicated to the assessee or to the Commissioner of
Taxes, as the case may be.
(d) An appeal to the Appellate Tribunal shall be in prescribed form and verified in prescribed manner and shall be
accompanied by a fee of Tk. 1,000.
Question No. 3:
a) What is meant by withholding Tax? State seven sources along with relevant provisions from which taxes are
withheld.
b) Write down the dates on which the withholders of tax are required to submit return to the tax authority
Answer to the Question No. 3(a):
Tax deducted at source/withholding of Tax:
A withholding tax is called a retention tax which is a government requirement for the payer of an item of income to
withhold or deduct tax from the payment, and deposit that tax to the government exchequer.
Governments use withholding tax as a means to combat tax evasion, and sometimes impose additional withholding tax
requirements if the recipient has been delinquent in filing tax returns, or in industries where tax evasion is perceived to
be common.
Typically the withholding tax is treated as a payment on account of the recipient's final tax liability. As per income Tax
Ordinance 1984, withholding tax is not refunded on the contrary, additional tax may be due if it is determined that the
recipient's tax liability is more than the withholding tax.
Withholding /Deductions/ Collections of tax at source Section 62A
SI. Head of withholding Withholding authority Withholding rate / Limitation
rates of tax
1. Salaries Any person Average of the rates applicable to
(section 50) responsible for the estimate total income under this
[For employees receiving making such head.
salary above taxable limit payment.
2. Discount on the real Any person responsible Maximum rate
value of Bangladesh for making such
Bank bills (section 50A] payment
3. Payment of remuneration Person responsible Average of the rate applicable to
to MPs [Sec. 50B] for making estimate to remuneration for
payment. income year
4. Interest on securities Any person 10% This shall not apply to
[section 51] responsible for the treasury bound or
issuing any Treasury bill issued by
security. the Government or to
any payment on
account interest
payable on debenture
issued by or on behalf
of a local authority or
company.
5. Payment to contractors & Any person Upto TK. 2,00,000/- Nil Tax at source will not be
sub- contractors or Local responsible for From Tk. 2,00,000/- to Tk. withheld for items
Letter of credit Letter of making such 5,00,000/- 1% prescribed in rule 174A
credit [section -52 ] [rule - payment 5,00,000 to Tk. 15,00,000/- 2.5%.
16] From 15,00,000/ to Tk. 25,00,000/
-
3.5%
25,00,000 to Tk.3,00,00,000/-
4% & where the Tk. 3,00,00,000/-
5% in the case of the oil supplied by
oil marketing upto Tk. 2,00,000/-
Nil.
Where he payment exceeds Tk.
2,00,000/- 0.75%.
6 Payment on including Any person On indenting commission -7.5%
commission or shipping responsible for and on shipping agency
agency commission making such commission 5%.
[section 52, rule 17] payment
Iv 15th October July, August & September DCT may extend such return
V 15th January October, November & December submission date maximum up
Vi 15th April January , February & March to 15 days
Vii 15th July April, May & June
Question No. 4:
a) Mr Rahim in his financial statements submitted with tax return disclosed that a machine was purchased at Tk
500,000. But the Deputy Commissioner of Taxes has reason to believe that the machine was purchased at Tk
800,000. How will DCT treat this difference?
b) Mr ABC has cultivated two pieces of land. One is his own land and the other is on a crop sharing basis. During the
financial year 2012-13 Mr ABC received Tk 1,200,000 by selling crops derived from his own land and Tk 600,000
received by selling crops derived from the land under sharing system. Mr ABC does not maintain any books of account.
Calculate Agricultural Income of Mr ABC.
Answer to the Question No. 4(a):
According to section 19(8) of the Income Tax Ordinance 1984, since the Deputy Commissioner of Taxes has reason to
believe that the price paid by the assessee is less than the fair market value thereof, the difference between the price so
paid and the fair market value i.e. Tk. 300,000 (800,000-500,000), shall be deemed to be income of the assessee classifiable
under the head ‘Income from other sources’
Answer to the Question No. 4(b):
Computation of Income of Mr ABC
Particulars Taka
Income from own land 1,200,000
Less: Cost of production @ 60%(note-1) 720,000
480,000
Income from land sharing system(note-2) 600,000
Income from Agriculture 1,080,000
Note-1.
As per section 27 where no books of account have been maintained in respect of agricultural income derived from land,
deduction for cost of production shall be an amount equal to 60% of the market value of the produce of the land.
Note-2.
Where the income is derived according to the borga system no deduction on account of cost of production shall be admissible.
Question No. 5:
PQR Ltd.’s books revealed the following information:
Assessment Business income / (loss) before Depreciation for Income/(loss) from Income / (loss) from
year charging depreciation the year other sources Agriculture
2010-11 (1,200,000) (100,000) 300,000 250,000
2011-12 500,000 (300,000) (600,000) 350,000
2012-13 500,000 (500,000) 250,000 350,000
2013-14 850,000 (300,000) 250,000 (100,000)
Calculate total income of PQR Ltd. for the assessment years 2010-11, 2011-12, 2012-13 and 2013-14.
Answer to the Question No. 5:
Calculation of total income of PQR Ltd
Assessment Year Income from other sources 300,000
2010-11
Income from Agriculture 250,000
Business loss before depreciation (1,200,000)
Business loss (650,000)
Business loss shall be carried forward. In addition to that Unabsorbed depreciation of Tk. 100,000 shall also be carried
forward.
Assessment Year Business loss (carry forwarded) (650,000)
2011-12
Income from business 500,000
Business loss shall be carried forward (150,000)
Unabsorbed depreciation of Tk 400,000 (100,000+300,000) shall be carried forward
Income from Agriculture 350,000
Loss from other sources (600,000)
Loss from other sources (250,000)
This loss shall be Carried forward to set off against income from other sources.
Assessment Year Income from Business 500,000
2012-13 Business loss brought forward (150,000)
350,000
Less- Depreciation (400,000+500,000) but restricted to
Business income 350,000
Question No. 6:
Under which circumstances following expenses may be considered as Revenue Expenditure as well as Capital
Expenditure.
a) Wages
b) Carrying cost
c) Freight expenses
Answer to the Question No. 6:
Question No. 7:
a) Write the consequences as per income tax ordinance if the assessee failed to pay advance tax.
b) Who is required to submit revised return under section 78 of income tax ordinance 1984?
Answer to the Question No. 7(a):
As per Section 69 of ITO 1984, an assessee who is required to pay advance tax if fails to pay any installment of such tax,
as originally computed or as the case may be, estimated, on the due date, he shall be deemed to be an assessee in default in
respect of such installment.
As per section 70 of ITO 1984, where in respect of an assessee who is required to pay advance tax, it is found in the course
of regular assessment that advance tax has not been paid in accordance with the provisions of this Chapter, there shall be
added, without prejudice to the consequences of the assessee being in default under section 69, to the tax as determined on
the basis of such assessment, simple interest thereon calculated at the rate and for the period specified in section 73.
Answer to the Question No. 7(b):
As per Section 78, Income Tax Ordinance 1984, any person who has not filed return as required by section 75 or 77 or
who having filed return, discovers any omission or incorrect statement therein, may, without prejudice to any liability
which he may have incurred on this account, file a return or a revised return, as the case may be, at any time before the
assessment is made.
Question No. 8:
Following is the income statement of Mr. Saroj Shaha for the year ended on 30-06-2013.
Account Title Taka Taka
Sales : 5,00,000
Less: Cost of Sales 1 60 000
Gross Profit 3,40,000
Less Operating Expenses :
Salary 84,000
Office Expenses 41,000
Bad debt 8,000
Bad debt provision 6,000
Depreciation 4,000
Legal expenses 10,000
Loss of stock 12,000
Income tax 15,000
Travelling expenses (Tour to Cox's Bazar) 10,000
Loss on Sale of security 5,000
Entertainment expenses 12,000
Accounting expenses 15,000
Misc. expenses 3,000 2,25,000
1,15,000
Add : Non-operating Income :
Profit on sale of Investment 40,000
Interest on Tax free Govt. Security 20,000
Bank Interest 12,000
Bad debt recovered 3,000 75,000
Net Income before tax 1.90,000
Investigation disclosed the following:
i) Salary & wages include Tk. 25,000 paid to the proprietor as his remuneration for service.
ii) Depreciation as per Income tax rule allowable is Tk. 2,500.
iii) Legal expenses include Tk. 5,000 related with violation of traffic rule and Tk. 5,000 for protecting trade mark.
iv) Stock was not insured.
v) Commission received & paid Tk. 3,000 & 2,000 respectively has not been recorded,
Compute the Taxable Income and Income Tax payable by Mr. Saroj Shaha for the assessment year 2013- 2014.
Answer to the Question No. 8:
Assessee: Mr. Soraj Shaha
Income Year 2012-2013
Assessment Year 2013-2014
Computation of Business Income and Total Income
Particulars Tk. Tk.
Profit as per Income Statement 1,90,000
Add: Inadmissible Expenses :
i) Salary of Proprietor 25,000
i) Bad debt provision 6,000
ii) Depreciation to be considered separately ) 4,000
iii) Legal expenses (for violation of traffic rule) 5,000
iv) Loss of Stock 12,000
v) Income Tax 15,000
vi) Travelling Expenses (tour to Cox’s Bazar)-assumed personal expenditure) 10,000
vii) Loss on sale of security 5,000 82,000
272,000
Add: Income not shown :
(i) Commission received 3,000
275,000
Less: Expenses Allowed
(i) Depreciation as per 3 rd Schedule 2,500
(ii) Commission paid 2,000 4,500
270,500
Less: Non Business Income
(i) Profit on sale of investment being capital receipts 40,000
(ii) Int. on Tax-fee Govt. Security 20,000
(iii) B a n k i n t e r e s t 12,000 72,000
Income from Business or Profession 198,000
Calculation of Total Income:
i) Income from Business or Profession 198,500
ii) Int. On Tax-free Govt. Securities ( non-assessable ) -
Question No. 9:
The Profit and Loss A/C for the year ended 31st Dec. 2011 of Eastern Traders Ltd. (not publicly traded) was as follows:
Dr. Cr.
Particulars Taka Particulars Taka
Office Expenses 90,000 Gross Profit 8,65,000
Salaries 1,27,000 Profit on sale of shares of listed company 6,000
Travelling Expenses 33,000 Profit on Sale of Machinery 24,000
Audit fees 25,000 Share Premium 15,000
Legal Expenses 12,000 Interest on Tax-free Govt. Securities 15,000
Repairs (residence of Employees) 16,500 Sundry Income 45,000
Compensation (families of the Staff) 15,500
Robbery of Cash 23,000
Bad debt Provision 25,000
Commission 13,000
Renewal of Trade Mark Registration 10,000
Bonus to Staff 70,000
Managing Agent’s Commission 50,000
Net Profit 4,60,000
9,70,000 9,70,000
Investigation disclosed the following information:
1) Salaries included Tk. 20,000 paid to the Retired Manager for house rent and Tk. 30,000 contribution to the Pension
Fund.
2) Compensation to the family of a Staff included Tk. 5,000 paid for a peon who was injured in a road accident while
bringing breakfast for the Manager & Tk. 10,500 paid for the termination of a certain employee.
3) Bad debt of Tk. 4,000 and Tk. 3,000 provision for the last year were written off.
4) Commission paid to a certain member of Staff Tk. 3,000.
Determine the Taxable Income & tax to be paid by the company for the assessment year 2013-2014.
Answer to the Question No. 9:
Calculation of Total Income
Eastern Traders Ltd.
Assessment Year 2013-2014
Income Year ended December 31 2012
Source of Income Amount Tk. Amount Tk.
1. Income from Business or Profession:
Net Profit as per Profit & Loss A/C 4,60,000
Add: inadmissible Expenses
a) House rent of retired manager 20,000
b) Bad Debt Provision 25,000
c) Robbery of Cash 23,000 68,000
528,000
Less: Admissible Expenses:
a) Bad Debts 4000
524,000
Less: Non- business Income
a) Profit on sale of share of listed company 6,000
b) Share Premium 15,000
c) Interest on Tax-free Govt. Securities 15,000 36,000
Income from Business or Profession 518,000
2. Calculation of Total Income
a) Income from Business or Profession 518,000
3. Interest on Tax-free Govt. Security (Fully Exempted) -
Total Income 518,000
Tax@35% on 518,000 Tk.181,300
Explanations:
1) House Rent paid to the Retired Manager is not allowable as the cost not associated with business.
2) Contribution to the Pension Fund is admissible expenses for the Company.
3) Compensation paid for the injury of a peon and termination of a certain employee is admissible expenses
assumed it was done as per agreement.
4) Bad debts provision written off Tk. 3,000 has no effect as it was involved with last year assessment.
5) Commission paid to a certain staff is considered as business expenses and as such it is admissible.
6) All other expenses debited to the P/L Account have been assumed as business expenses.
7) Robbery of cash has been assumed as done by the stranger during the office period and as such it is inadmissible.
8) Profit on Sale of Machineries has been considered as business profit as per Sec 19 (16)
9) Tax rate for the Company is 35%. Assumend that the minimum tax is lesser than the flat rate of the company.
Question No. 10:
a) Under what circumstances registration may be cancelled for the purpose of VAT?
b) SOS Company provides the following information about its production and sales:
Purchase of Raw Materials Tk. 20,00,000
Direct wages Tk. 2,50,000
Administrative expenses Tk. 70,000
Selling expenses Tk. 20,000
Depreciation of Machinery Tk. 30,000
The company sells its products by adding 25% margin on cost. The opening and closing stock of Raw Materials
recorded at Tk. 50,000 and Tk. 40,000 respectively.
Determine VAT if the rate is 15% assuming that opening and closing stock of finished goods were Tk.30,000 and
Tk.20,000 respectively.
Answer to the Question No. 10 (a):
According to the VAT Act 1991, the registration may be cancelled for the purposes of VAT if:-
(a) the registered person discontinues businesses;
(b) the registered person’s businesses are exempted for the purposes of VAT;
(c) the turnover of the registered person is below Tk. 80 lac;
(d) the registered person fails to commence business after obtaining certificate of registration;
(e) the turnover of the self-registered person is below Tk. 80 lac.
The registered person shall apply to the VAT Circle Office in VAT Form-10 for cancellation of the registration.
Answer to the Question No. 10 (b):
SOS Company
Determination of VAT
Particulars Tk. Tk.
Opening Stock of Raw Materials 50,000
Purchase of Raw Materials 20,00,000
Sub-total 20,50,000
Less: Closing Stock of Raw Materials 40,000
Raw Materials Consumed 20,10,000
Direct Wages 2,50,000
Depreciation on Machinery 30,000
Factory Cost 22,90,000
Administration Expenses 70,000
Production Cost 23,60,000
Add. Opening Stock of Finished Goods 30,000
Sub-total 23,90,000
Less Closing stock of Finished Goods 20,000
Sub-total 23,70,000
Selling Expenses 20,000
Cost of Goods Sold 23,90,000
Add: profit @ 25% on cost 5,97,500
Selling price 29,87,500
VAT on Selling Price (29,87,500 X 15%) 4,48,125
VAT paid on Raw Material Consumed (20,10,000 X 15%) 301,500
Addition VAT paid on output stage (4,48,125-3,01,500) 146,625
Taxation – I
November-December 2014
Question No. 1.
a) How environmental concern is addressed through taxation?
b)Explain the rule to get tax rebate on investment allowance as per ITO, 1984.
c)Mention tax credit incomes and casual & non-recurring incomes.
Answer to Question no.1 (a)
The taxation system is slowly moving to accommodate environmental concerns such as
sources of energy and global warming. Developed economic policy especially taxation
policy encompass environmental concern. For example Green taxes which is also known as
“environmental taxes” or “pollution taxes” are imposed on environmental pollutants or on
goods which produces such pollutants.
Economic theory suggests that taxes on polluting emissions will reduce environmental
harm in the least costly manner, by encouraging changes in behavior by those firms and
households that can reduce their pollution at the lowest cost. So, it is essential the
government should make sure that such environmental concerns are dealt with through
government policy, including taxation.
Answer to Question no.1 (b)
A resident and non-resident Bangladeshi individual will get tax rebate on allowable
investment which is the lower amount of the following three:
OR
Actual Investments as per 6th
schedule(Part-B)
Answer to question no.1 (c)
(i)Tax credit income: Tax exemption in the form of rebate on investment allowance is given on
certain investments, expenditure & donations. These are called tax credit income. Examples are
(a) Payment of life insurance premium,
(b) Purchase of shares of listed Companies
(c) Contribution to Govt. Or Recognized P.F,
(d) Donation to Govt. Zakat fund
(e) Contribution to Benevolent fund, etc.
(ii )Casual & Non-recurring income: The income which is not pre-determined or income
which is received suddenly is called casual income. The income which arises at an irregular
interval is called non-recurring income for example: capital gain
Question No. 2.
2. a) Explain the role of higher courts (civil) in Income Tax cases.
b) Explain the eligibility and conditions of universal self-assessment under section 82BB
of the Income Tax Ordinance 1984.
c) Can an assessee change the closing date of its annual accounts? If so, under
what circumstances?
Answer to Question no.2 (a)
Role of Higher Courts (Civil) in Income Tax Cases
Both assessee and the Commissioner of Taxes (with prior permission from NBR) can file reference
application to High Court Division of the Supreme Court only against any question of law arising
from the order ( including an order under section 173) of the Taxes Appellate Tribunal. An order of the
Tribunal dismissing an appeal as time barred or refusing to condone delay is obviously an order of the
Tribunal and consequently a reference lies against it. Where assessee is the applicant the
Commissioner of Taxes will be the respondent and where the Commissioner of Taxes is the
applicant, the assessee will be the respondent.
The High Court Division will decide the question of law and deliver its judgment containing the
grounds on which the decision is founded. The judgment of the High Court Division as a whole
is binding between the parties in the particular case.
An appeal shall lie to the Appellate Division against the judgment of the High Court Division
provided the High Court Division certifies the case to be a fit one for appeal to the Appellate
Division of the Supreme Court. The High Court Division would certify the case as a fit one for
appeal and grant leave to appeal to the Appellate Division if a substantial question of law is
involved or if the question is otherwise of great public or private importance.
Answer to question no.2 (b)
Every assessee (including company) is eligible to submit return under this system. In this
system assessee has to tick the box universal self-assessment at the top of the return form.
DCT will issue a receipt of such return and that receipt will mean that assessment is complete.
It is hassle free in the sense that assessment has been done on the basis of return and without any
physical presence. However, the assessee should keep in mind the following:
(a) Such return must be submitted within the last date of submission of return or
within the extended time allowed by the DCT.
(b) Tax as per return (if any) is to be paid before submission of return.
(c) Return must be correct and complete in all respect.
(d) No question is to be raised by the DCT as to the source of initial capital
investment in case of new assessee showing new business if at least 25% of initial
capital is shown as income. Initial capital formed in such way is not transferable
from that business within the year or within 5 years from the end of the
assessment year in any manner.
The return submitted at this system may, afterwards, be selected by the NBR or its subordinate
authority (if so authorized by the Board) for audit. The Board will determine the manner of such
selection. If return filed under universal self-assessment scheme showing at least 20% higher
income than the income assessed or shown in the immediate preceding assessment year, then
it shall not be selected for tax audit by the NBR. But the conditions are:
1. Return is to be accompanied by proper evidences in support of tax free income
(if any).
2. Return is to be accompanied by bank statement in support of taking loan (if any)
exceeding taka 5 lac.
3. Return does not show any receipt of gift
4. Return does not show any income on which reduced tax rate is applicable.
5. Return does not show any refund
If the return is selected for audit, then DCT will proceed to make fresh assessment by issuing
notice under section 83(1) for hearing and he will make assessment within 2 years from the end
of the assessment year. Otherwise it will be barred by time limitation. Assessment can be done
under section 83(2) or under section 84 as the situation permits.
If any concealment has been detected in the return submitted by the assessee under universal self-
assessment scheme within 6 years from the end of the assessment year, then the DCT may re-
open the case and proceed to assess further.
Answer to Question no.2 (c)
Once income year is determined, it cannot be changed without prior consent of the DCT. An assessee
is allowed to change its annual accounts closing date upon taking prior approval. from the
Deputy Commissioner of Taxes. The Deputy Commissioner of Taxes may allow such change if
there is no tax loss and he may impose such condition(s) as he thinks fit.
Question No. 3.
The following items, amongst others, are debited to Profit and Loss Account of SignEx Ltd.
For the year ended June 30, 2013:
i. Commission for placing the shares (brokerage). Tk
(Paid for placing the shares of the company) 100,000
ii. P a ym e n t o f r e t i r i n g o f f i c i a l .
Mr. Abdul Malek was found guilty of improper conduct. 200,000
He had a 5 years’ appointment. The directors agreed to
pay him Tk. 200,000 on retirement to terminate his
appointment.
iii. Trade penalties and law expenses. 200,000
(The company has incurred penalties and legal charges
for infringement of the Customs Act, 1969)
iv. Anticipated loss written off.
(This has been written off assuming that the loss might occur 500,000
on certain contracts)
The directors of the company invite your opinion as to which items are deductible in computing
the total income of the company for the assessment year 2013-2014.
Answer to Question no.3
30 December 2014
The Director,
SignEx Ltd. Dhaka.
Dear Sir,
My opinion is given below as per your query about deductible expense in the light of the Income
Tax Ordinance,1984
Serials Query about deductible expense My opinion
# or not
i Brokerage commission against share Not allowable expenditure under section
issue Tk.1,00,000/ 29 of the ITO,1984 being preliminary
expenditure.
ii One employee Mr. Khalek was Compensation paid for termination of
found guilty of improper conduct. He service of your organization Mr. Khalek
had a 5 years appointment. The is not allowable expenditure as it is not
directors agreed to pay him recurring expenditure like salary.
Tk.2,00,000/ to terminate his
appointment.
iii Trade penalties and law expenses Any sorts of penalty are inadmissible
Tk.2,00,000/ (The company has expenditure as because it was paid for
incurred penal ti es and l egal violation of any existing law of the
charges for infringement of country.
Customs Act,1969.)
iv Anticipated loss written-off Only bad debt written off is allowable
Tk.5,00,000/ (This has been written off expenditure. Any s sort of anticipated loss or
assuming that the loss might occur on Provision for bad or doubtful debt is not
certain contract) allowable expenditure.
Sl. No Accounting Income from salary Profit from Income from other
Year ended on Tk. Business Tk. sources Tk.
1. 30-6-2008 7,000 (14,000) 6,000
2. 30-6-2009 10,000 5,000
3. 30-6-2010 12,000 (26,000)
4. 30-6-2011 12,000 (10,000)
5. 30-6-2012 12,000 10,000
6. 30-6-2013 12,000 20,000
Note:
Figure given in brackets indicate loss.
a.
The income from salary has been determined after deducting allowable exemptions.
b.
Answer to Question no.4
Assessment years Particulars
Total income and at the same time business loss to be carried forward (1,000)
2011-12
Income from salary 12,000
2012-13
Income from salary 12,000
Profit from business 10,000
Less: previous business loss[AY2010-11]b/f and set-off 10,000 0
Total Income: 12,000
Remaining loss of Tk. 4,000(14,000-10,000) relating to the assessment year
2010-11 shall be carried forward.
2013-14 Income from salary 12,000
Profit from business 20,000
Less: previous business loss[AY2010-11]b/f and set-off 4,000 16,000
Total Income: 28,000
Question No. 5.
The sources of Income of Mr. Tinkari for the year ended on 31st December, 2013 were as follows:
A) Income from salary:
1) Monthly salary Tk. 18,500, in the scale of Tk. 18,000-500-22,000.
2) Dearness allowance @ 10%.
3) Yearly Bonus 2 months basic salary.
4) Employer provided a free furnished house to Tinkari, the annual value of which is
Tk. 38,000.
B) Income from Interest on Securities:
1) 8% Commercial Securities Tk. 20,000.
2) 6% tax free Govt. Securities Tk. 30,000.
3) Interest on Commercial Securities Tk. 12,000 and Interest on Govt. Securities Tk.
10,000.
C) Income from House Property:
1) Rental value of lst building Tk. 35,000 & its Municipal value is Tk. 48,000
2) Value of his residential house in which he resides is Tk. 60,000
D) Income from Other Heads of income:
1) Income from Tea Garden Tk. 20,000.
2) Income from ferry ghat Tk. 22,000.
3) Income from vacant agri land Tk.20,000 and Interest on Fixed Deposit Account
with Janata Bank Ltd. Tk.2,500 (Gross).
4) Honorarium from examination Tk. 15,000.
5) Marriage anniversary gift Tk. 9,000.
During the year Mr. Tinkari claims investment allowance for the following:
a) Purchase of 5 years Bangladesh Savings Certificate and 3 years Savings Certificate
of Tk. 12,000 and Tk.5,000 respectively.
b) Life Insurance premium Tk. 6,000
c) Contribution to Benevolent Fund and Group Insurance Tk. 3,600 and Tk. 1,200
respectively.
d) Donation to Govt. Zakat Fund Tk. 2,500
e) Gift to wife Tk. 10,000 and Tk. 20,000 to philanthropic organization.
Find out total income and tax liability of Mr. Tinkari. His total asset as per wealth statement
is Tk. Two crores and fifty lakh.
Answer to Question no. 5
Assessment of Mr. Tinkari
Income year:2013-2014
Assessment year:2014-2015
Part A: Computation of Total Income
Particulars Tk. Tk. Tk.
1. Income from Salary (Sec. 21)
(a) Basis salary 18,500 x 12 2,22,000
(b) Dearness Allowance 10% of B.S. . 22,200
(c) Bonus 2 month's B.S. . 37,000
(d) Free furnished accommodation:
(i) Annual value = 38,000(as lower than 25% of B.S.) 38,000
3,19,200
2. I n c o m e f r o m S e c u r i t i e s ( S e c . 2 2 - 2 3 )
(a) 8% com. Securities 1,600
(b) 6% Tax free Govt. Security 1,800
th
Less: exempted in full as per 6 schedule(part-A) 1,800 --
para-24
(c) Com. Securities 12,000
(d) Govt. Securities 10,000
Income from securities 23,600
3. Income from House Property (Sec. 24-25)
Annual Value
(ii) Rental Value 35,000
( i i i ) Municipal Value 48,000
Higher one 48,000
Less allowable deduction:
(a) Repairs and maintenance (1/4 th of AV) 12,000
Income from House Property 36,000
4. Agricultural Income (Sec. 26-27)
Income from tea-garden (assumed net) as per Rule-31 60% 12,000
Income from Agriculture 12,000
5. Income from Business (Sec. 28-30)
Income from Tea garden(as per Rule-31) 40% 8,000
Income from Business 8,000
6. Income from Other Sources (Sec. 33-34)
(a) Income from Ferry ghat 22,000
(b) Examination Remuneration 15,000
(c) Int. From Janata Bank deposit account 2,500
(d) Income from vacant land 20,000 59,500
Income from other Sources
Total Income 4 58 300
Part — B: Tax-Rebate Income
Particulars Tk.
1. Purchase of 5 years Savings Certificate 12,000
(g) Fines paid to the Customs Authority for violation of law 20,000
rd
(h) Accounting Depreciation (for consideration as per 3 sch.) 1,80,000
(i) C h a r i t y 10,000 5,20,000
10,93,000
Less: Non Business Income:
(a) Dividend 20,000
( b ) Profit on Sale of Machineries 30,000
( c ) Interest on bank deposit 12,000
( d ) Interest on Tax-free Govt. Securities 30,000
( e ) Sundry income 5,000
( f ) Income Tax Refund 30,000
( g ) Interest on Foreign Investment 20,000 1,47,000
9,46,000
Less: Admissible Expenses:
(a) Depreciation as per Income 3rd schedule 1,15,000
8,31,000
Add: revenue profit on Sale of Machineries (Note : 9) 60,000
• Business Income : 9,91,000
2. Non-Business Income :
(a) Dividend Income 20,000 NIL
th
Less: tax free as per 6 schedule(part-A) para-11A 20,000
i. 15th October July, August & September DCT may extend such return submission
date maximum up to 15 days.
ii. 15th January Oct, Nov & December
iii. 15th April January, February & March
th
iv. 15 July April, May & June
(b) Tax on income of certain persons-Settled Tax Liability Scheme: Section 82C
Following classes of incomes/receipts where taxes are deducted/ collected at source are under the settled tax liability
scheme:
1. Contractors and suppliers except gas supply (section 52+Rule 16)
2. Royalty and technical know-how fee (section 52A (2)
3. C&F agency commission (section 52AAA)
4. Band roll in case of Handmade cigarette (section 52B)
5. Compensation against acquisition of property (section 52C)
6. Interest on all type of savings instruments (section 52D)
7. Rental power (section 52N)
8. International gateway service (IGS)on international phone call (section 52R)
9. Import [other than raw-material import] (section 53+Rule 17A)
10. Shipping Agency commission (section 53AA)
11. Manpower export (section-53B+Rule 17C)
12. Export of -
( a) kni t -wear
( b) Woven gar ments
( c) Terry towel
( d) C a r t o n
( e) Garments accessories (Section-53BB)
( f ) Jute goods
( g) Frozen foods
( h) Vegetables
( i ) Leather goods and
(j ) Packed foods
13. Shareholder of Stock Exchange (section-53BBB)
14. Public auction (section 53C+Rule 17D)
15. Export cash subsidy (section 53DDD)
16. Foreign buyer's agent (section 53EE)
17. Salary of foreign technicians serving in a diamond cutting industry (section-52 0)
18. Bank interest of Public University, MPO enlisted educational institution, ICAB, ICMAB and ICSB. (section 53F (1) (c)]
19. Real Estate and Land Development business (section-53FF)
20. Insurance commission (section 53G)
21. Surveyor of General Insurance (section-53GG)
22. Sale of property (section-53H)
23. Travel agent (section-53JJ)
24. Capital gain from transfer of shares by sponsor shareholders (section 53M)
25. Transfer of share of shareholder of stock exchange (section 53N)
26. Income from lottery (section 55)
Question No.4:
a)Who can file appeal before the Taxes Appellate Tribunal ?
b)Explain the procedure of settlement of appeal by the Tribunal.
Answer to Question no. 4(a):
Who can file appeal to the Taxes Appellate Tribunal?
a) Both assessee and DCT (with prior approval of his Commissioner) can prefer 2 nd appeal against the 1st appeal
order (Including an order imposing penalty u/s 128 by the AJCT or Commissioner (Appeals). An order of the
AJCT or Commissioner (Appeals) refusing to condone delay ( if there is any application for condonation) and
refusing to admit, or rejecting after hearing, an appeal as time barred, will be treated as an order passed in the
appeal and a 2nd appeal would lie to the tribunal.
b) Appeal shall be filed at the form prescribed at Rule-28 with duly signed and verified by the appellant.
c) Tribunal fee of TK.1000/- is to be paid before submission of 2nd appeal (this fee is not applicable when appeal is
filed by the DCT).
d) Assessee has to pay tax @ 10% of the difference between the tax as per appeal order and tax as per section 74.
However, authority to reduce such tax has been given to the Commissioner of Taxes if assessee applies for this.
e) Appeal shall be filed to the Taxes Appellate Tribunal within 60 days from the date of receiving appeal
order.
Answer to Question no. 4(b):
The following procedure should be followed by the Taxes Appellate Tribunal to dispose of an appeal:
a) Notice of hearing is to be given to both appellant and the department. Even if the appellant does not appear on the
day fixed for hearing, the Tribunal is bound to decide the appeal on merit and cannot dismiss the appeal for
default.
b) Tribunal may call for such particulars as they may require or can give instruction to the DCT for further inquiry.
c) Tribunal will give judgment as they think fit. The power to pass such order as the Tribunal thinks it can be
exercised only in relation to the matters that arise in the appeal. It is not open to the Tribunal to adjudicate or give
a finding on a question which is not in dispute and which does not form the subject matter of the appeal. The
Tribunal would be entitled to enhance the assessment as it stands after the appeal order in case of appeal by the
department or in case of cross appeal. But when the appeal is filed by the assessee and there is no cross appeal by
the department, it is not open to the Tribunal to give a finding adverse to the assessee.
Since a reference application to the High Court division lies only on a question of law, the Tribunal is the final
fact finding authority.
d) Appeal shall be disposed of by the Appellate Tribunal within 6 months from the end of the
month of filing appeal; otherwise appeal so filed shall be deemed to have been allowed. Such order should be
communicated within 30 days from the date of order.
e) Tribunal has no power to review its own order but they are empowered by section 173 to
rectify any mistake apparent from record.
f) Tribunal has power to permit an appeal to be withdrawn.
g) Decision shall be given in accordance with the opinion of the majority of its members. It is
the duty of the members of the Tribunal who heard the appeal in the first instance to formulate clearly the
point on which they differ and it is only thereafter that a reference can be made to a third member. After the
decision of the third member on the point referred to him the case should go back to the original Bench, since the
third member has not given the jurisdiction to decide and dispose of the appeal. In this way decision will be based
on the opinion of the majority of the members.
Question No. 5:
Mr. Morshed has a house at Nasirbad, Chittagong. The house is let out at Tk.10,000/ - per month. He spent the
following amounts for the house for the income year 2013-2014:
Note:
1. Repair includes collection expense, salary of guard etc. White wash is also included in repair and maintenance.
Altogether statutory deduction is 1/4th of A.V. assuming it was let out for residential purpose
2. Mosaic is a capital expenditure and thus not within the list of allowable deductions.
3. Land revenue is deductible item but restricted up to actual payment.
Question No. 6:
Following are the particulars of the interest on securities received by Mr. Quddus Chowdhury for the year ended on 30th
June, 2014:
a) Interest on Tax Free Govt. Securities Tk. 20,000
b) Interest on Port Trust Debenture Tk. 40,000
c) Interest on securities on a private hospital Tk. 25,000
d) Interest on securities on a Foreign Govt. Tk. 30,000
e) Interest on 15% commercial securities-
Face value of securities, approved by BSEC Tk. 1,20,000
f) Interest on 8% Govt. securities, Value of securities Tk. 1,50,000
g) Interest on 10% commercial securities, payable half yearly on
30th June & 31st December, Value of Securities (Int. receivable
on 30th June yet to be received) Tk. 1,00,000
h) Interest on Treasury bill Tk. 5,000
10% commercial securities were purchased by bank loan
carrying 8% interest.
Bank charge for collection of interest on securities amounted to Tk. 1,000
From the above information compute taxable income on interest on securities.
Answer to question no. 6:
Assessee: Mr. Quddus Chowhury
Income year: 2013-14
Assessment year: 2014-15
Particulars Taka Taka
Interest on Govt. Securities
1. Interest on Tax free Govt. securities (tax free as per 66 schedule(part-a) para-24) 20,000 -
2. Interest on 8% Govt. Securities (8% on 1,50,000) 12,000 12,000
3. Interest on Treasury Bill 5,000 5,000
Interest on Commercial Securities:
4. Interest on port-Trust Debenture 40,000 40,000
5. Interest on securities of Pvt. Hospital 25,000 25,000
6. Interest on 15% commercial securities (15% on 1,20,000) 18,000 18,000
7. Interest on 10% commercial securities (10% on 1,00,000 = 10,000 Half of it) 5,000 5,000
Less: 1,05,000
i. Int. on Bank loan (8% on 1,00,000 = 8,000 (half of it) 4,000
ii. Bank charge (proportionate amount) 840 4,840
Taxable income from interest on securities . 80,160
Note:
1. Interest on Foreign Govt. securities is not considered here either assuming that he is a non-resident or if he is
resident he brought it into Bangladesh through official channel. If he is a non-resident then only Bangladesh income
will be taxable and if he is resident then it will also be t ax free as per 6 th schedule (part-a) para-48
2. Interest on securities is taxable when it is actually received not on due basis as per a court verdict of Lal Bhai
Dolpat Bhai vs. CIT (Bombay) 1954. The amount yet to be received will be taxed in subsequent period when it will
be received.
3. We know that TDS is applicable at up-front system from interest on securities but no such information is available.
4. Bank charge is allowed for interest which comes under the orbit of tax. So here proportionate amount of Tk.1,000 has
been allowed.
Question No. 8:
The following are the particulars of income of Mr. Fazal for the year ended 30th June, 2014.
a) Salary Tk.12,000/- per month (basic)
b) Dearness Allowance -40% of basic pay but maximum of Tk.4,000 per month
c) Entertainment Allowance Tk.400 per month.
d) Bonus-equivalent to basic salary of two months.
e) Income from Commercial Securities Tk.6,098/-.
f) Honorarium as part time advisor Tk.20,000/-
g) Income from Partnership Business Tk.50,000/-(taxed).
h) Income from Agricultural Land (sale of product) Tk.10,000/-
i) Royalty from books Tk.7,000.
j) Received birth day presentation Tk.5,000.
k) Interest on pensioner saving certificate Tk.10,000.
Mr. Fazal was provided with a free-furnished quarter. He also owns a house which is let out at Tk.10,000 per month. The
Municipal Value of the house is Tk.1,00,000. He spent Tk.7,500/- for repair and Tk.30,000 for alternation. He also paid
Tk.4,000 for Municipal Tax, Tk.2,000 for fire insurance premium, Tk.3,000 for collection charges. Other Particulars of
Mr. Fazal are as follows:
i. He contributed 10% of his basic salary to a recognized provident fund to which his employer contributed equal
sums.
ii. He insured his own life for Tk.75,000 and for the life of his wife for Tk.50,000. He paid insurance premiums on
the above policies Tk.6,000 and Tk.4,000 respectively.
iii. Purchased Pratirakhya Sanchay Patra for Tk.20,000.
iv. He spent Tk.8,000 on education for two college going children.
Required to calculate:
i) The total taxable income
ii) Investment tax credit for the year ended 30 th June 2014.
iii) Tax to be paid.
Answer to question no. 8:
Computation of Total income of Mr. Fazal
[Considering it for current assessment year otherwise student will not be benefited]
Assessment Year: 2015-16
Income Year: 2014-15
Wife: 4,000 .
Or, 10% of Policy amount 5,000
(i.e. 10% of Tk. 50,000) (Lower) 4,000
58,800
b) Max Limit of Investment: 30% of T.I. excluding
employer’s contribution to RPF=4,61,798-14,400) X 30% =
4,47,398 X 30% = 1,34,219 or Tk. 1,50,00,000
58,800
or Actual investment Tk.58,400 (Whichever is lower)
Tax calculation:
Total Income Tk. 4, 61,798
Tax on Tk. 2,50,000= Nil
Tax on remaining Tk. 2, 11,7 8@ 10% 21,180
21,180
Less: Investment tax rebate 8,820
12,360
Less: Rebate on income from partnership firm at average rate
as per 6th schedule (part-b) para-16 (50,000X12,360/4,61,798) 1,338
Net tax payable Tk. 11,022
Note:
1) Income from Commercial Securities needs not to be grossed-up as TDS was at upfront system.
2) Rebate would be calculated at the average rate of tax out of the ―Income from Partnership Business‖ (taxed) to
arrive at the Net tax calculation as per 6th schedule (part-b) para-16.
3) Royalty income from books is taxable under Sec.36 of Income Tax Ordinance 1984.
4) Education expense for Children is not an item of investment allowance. So it is not considered for that
5) Interest on pensioner savings certificate is tax free up to investment of Tk. 5 lakh. As the interest income figure
is only Tk.10,000, so I assume that investment was within that limit.
Question No. 9:
The profit and loss account of Star Ltd. is given below for the income year 2013-2014.
Star Ltd.
Profit and Loss Account
For the year ended on June 30, 2014
Particulars Tk. Particulars Tk.
Cost of goods sold 1,500,000 Sales 3,500,000
Salaries 700,000 Dividend 120,000
Rent 150,000 Interest 30,000
Advertisement 200,000 Gain on sale of Asset 40,000
Interest on Loan 80,000 Interest on Tax-Free Securities 15,000
Utility Expenses 60,000 Interest on Foreign Investment 20,000
Donation 150,000
Transportation 110,000
Audit Fee 200,000
Bad Debt 90,000
Contribution to RPF 70,000
Income Tax paid in Advance 30,000
Fines paid to Customs 20,000
Annual Membership 15,000
Legal Expenses 25,000
Insurance Premium 35,000
Sundry Expenses 12,000
Depreciation 65,000
Net Profit 2,13,000
Total 37,25,000 Total 37,25,000
Determine the taxable income of the company and net tax liability thereof. Consider the given data below and assume
that:
Star Ltd. is a Public Limited Company. Salaries are paid in cash without any cheque or bank transfer. Tk.4,50,000 of
salaries from Tk.7,00,000 falls under the category of gross salary more than Tk.15,000; tax depreciation amounts
toTk.50,000; legal expenses are paid due to the infringement of trademarks and the company has sold an asset for
Tk.1,00,000 that the company has purchased 4 years back at a cost of Tk.80,000 with a written down value of
Tk.60,000 to date.
Answer to the Question no 9:
Star Ltd.
Status: Resident Company
[Considering it for current assessment year otherwise student will not be benefited]
Year: 2014-15; Assessment Year: 2015-16
Taka Taka
Income from Business or profession:
Net Profit as per Profit and Loss Account 2,13,000
Less: Non-business income for consideration at respective head:
Dividend 1,20,000
Interest 30,000
Interest on tax-free securities 15,000
Interest on foreign investment 20,000
Gain on sale of asset [as Tk.20,000 is capital gain (1,00,000-80,000)] 20,000 2 05 000
8,000
Add: Inadmissible Expenses
Salaries (for violation of section 30(i) being salary above Tk.15,000 per month paid in cash) 4,50,000
Donation (assuming donation to unapproved institution and condition to get CSR also not
fulfilled) 1,50,000
Income Tax (as income tax is not an expense as per section 29,rather it is an appropriation of
profit. Income tax is always chargeable on net profit before tax) 30,000
Fine paid to customs (as no such fine is admissible expense due to violation of law) 20,000
Legal expense (disallowed being it was paid due to Infringement of other’s trademark) 25,000
Accounting Depreciation 65,000 7,40,000
7,48,000
Less: Tax Depreciation as per 3rd schedule 50,000
Income from business 6,98,000
Capital Gain 20,000
Income from other sources:
Dividend 1,20,000
Interest 30,000
Interest on foreign investment 20,000 1,70,000
Tax calculation:
Tax calculation:
Note:
Tax on total(1) Due to
income lack of information
excluding foreigngain
dividend & capital tax credit is not possible to give on interest on foreign
investment
(25% of Tk. 7,48,000) Tk. 1,87,000
Question No. 10:
Tax on dividend (20% of Taka 1,20,000) 24,000
a) Explain tax base of VAT
Tax on capital gain (15% of Tk.20,000)in Bangladesh. 3,000 4
Grossb)TaxWrite down the names of ten goods and services
Liability which are subject to VAT in Bangladesh.
2,14,000 3
Less: c) As pertax
Advance VATpaidLaw define commercial documents. 30,000 3
Net Tax Liability
Answer to question no. 10: 1,84,000
Stage — 2: Wholesaler
Tk.
Cost from Importer 92,10,465
(-) Input VAT recoverable 12,01,365
Net cost of goods sold 80,09,100
(+) Commission @ 5% 4,00,455
Total cost of goods sold 84,09,555
(+) Margin (Nothing extra) -
Stage — 3: Retailer
Tk.
Cost from Wholesaler (for 90 units) 96,70,988
Cost from wholesaler (for 70 units) 75,21,880
(-) Input VAT recoverable (for 70 units) (12,61,433*70/90) 9,81,115
Net cost of goods sold 65,40,765
(+) Maintenance and selling cost (1000*70) 70,000
Total cost of goods sold 66,10,765
(+) Margin @ 10% 6,61,077
Selling price excluding VAT 72,71,842
(+) Output VAT @ 15% 10,90,776
Selling Price including VAT 83,62,618
Stage — 4: Consumer
Tk.
Cost from Retailer (for 70 units)
83,62,618
VAT to be borne by the consumer
Description Importer Wholesaler Retailer Consumer
(90 units) TK. (90 units) TK. (70 units) Tk. (70 units) Tk.
Output VAT 12,01,365 12,61,433 10,90,776
(-) Input VAT - 12,01,365 9,81,115
Net VAT Payable 12,01,365 60,068 1,09,661
Net VAT Payable (for 70 Units) 12,01,365*70/90 60,068*70/90 1,90,661
=9,34,395 =46,720
VAT to be borne by consumer 9,34,395 +46,720 +1,09,661 =10,90,776
(for 70 units)
1. Each seller will deposit VAT to Treasury but the seller of next stage will deposit VAT after adjustment
of recoverable VAT
2. VAT is an indirect tax shift able to next purchaser & it ultimately passes to consumer who has to bear
ultimate burden.
Taxation-I
Nov-Dec 2015
Question No. 1:
Write down two merits for each of Progressive and Regressive tax principles.
Answer to the question no-1:
Two merits of Progressive tax principles are:
i) It is elastic tax system. Public revenue can be raised at any time by increasing tax rate and vice versa.
ii) It is a powerful instrument for reducing economic inequality.
Two merits of Regressive tax principles are:
i) It encourages people who have capacity to generate more income.
ii) It promotes more savings and investment as high-income earners will have more after tax income.
Question No. 2:
a) Income tax is charged on
the income of the income year in the following year i.e. assessment year. But
there are some exceptions to this principle. Mention two instances where such exceptions can take place.
b) Describe the effect and importance of residential status of an assessee in determination of total income and
tax liability?
Answer to the question no-2(a):
The general principle of charging tax as per section 16(1) of ITO, 1984 is that it shall be charged on the income of the
income year of the assessee in the next corresponding assessment year. But there are some exceptions to this rule where
income year and assessment year may be the same. Two of such situations are as follows:
i) Assessment in case of discontinued business u/s 89 of ITO, 1984.
ii) Assessment in case of persons leaving Bangladesh u/s 91 of ITO, 1984.
Answer to the question no-2(b):
The total income, tax rate and investment tax rebate of an assessee is determined on the basis of his residential status.
The effect and importance of residential status of an assessee are described below:
i) Scope of total income: A resident tax payer considers world income as his total income and a nonresident tax
payer considers only Bangladeshi income as his total income.
ii) Tax rate: For a resident and non-resident Bangladeshi tax is to be calculated using the progressive tax rates
applicable on various slabs of income. Such as, first slab upto Taka 2,50,000 tax rate is 0%; second slab upto Taka
4,00,000 is 10% and so on. But a non-resident foreigner will have to pay tax on his entire Bangladeshi income at
maximum tax rate. Now maximum tax rate is 30%.
iii) Investment tax rebate: A resident tax payer, including non-resident Bangladeshi, is entitled to get investment
tax rebate facility which is not open to a non-resident foreigner tax payer.
Question No. 3:
a) National Board of Revenue is a statutory body which leads the whole income tax department. Write down
five main functions of the National Board of Revenue.
b) Who can provide guidance to the Deputy Commissioner of Taxes under Section 9 of the Income Tax Ordinance
1984?
Answer to the question no-3(a):
The main five functions of National Board of Revenue are stated below:
i) To issue orders, directions or instructions to officers and other persons engaged in the performance of any
functions under the IT Ordinance, 1984 as clearly stated at section 8.
ii) To make rules to carry out the purposes of IT Ordinance, 1984 as empowered u/s 185.
iii) As per P.O. no-76 of 1972 NBR as the highest tax authority will exercise power and perform duties as entrusted
to it by the Govt.
iv) To formulate tax policy.
v) To mobilize domestic resources through collection of 3 major taxes like income tax, VAT and Customs Duty.
Answer to the question no-3(b):
Commissioner of Taxes, Additional Commissioner of Taxes and Joint Commissioner of Taxes to whom DCT is
subordinate or any other person authorized in this behalf by the Board can guide DCT to perform his functions.
Question No. 4:
In the taxation work, the role of accountant can be agent or principal. Which role carries more risk? Why?
Answer to the question no-4:
In the taxation work, an accountant can be engaged by the client in the role of agent or in the role of principal. When
an accountant acts in the capacity of principal, he carries more risk than that of acts in the capacity of agent because of the
nature and scope of the responsibilities related with the engagement. The matter is described below:
An accountant is considered as agent when he merely prepares documents on behalf of a client who retains responsibility for
the accuracy of the document itself. Here the responsibility of an accountant is to prepare and submit a tax return on
behalf of a client. The return would be required to be signed by the client. The accountant takes no responsibility about the
correctness of the information and therefore acting as agent is considered to be low risky.
An accountant is considered as principal when he provides advice to the client as to the taxation consequences of
different courses of action. The accountant takes full responsibility for the advice given and may be liable to the tax
payer in the event the advice turns out to be incorrect or inappropriate. Therefore, acting as a principal is considered to
be more risky than acting as an agent.
Question No. 5:
As per tax law, define:
a) Total income
b) Recognized Provident Fund
c) Fair market value.
Answer to Question No. 5:
“Total Income” means the total taxable income as mentioned in section 17 and includes all income from whatever source
derived.
“Recognized Provident Fund” means a provident fund which has been recognized by the Commissioner of Taxes in
accordance with the provisions of Part B of the First Schedule of IT0,1984.
“Fair Market Value” in relation to capital asset means
The price which an asset would ordinarily fetch on sale in the open market on the relevant day, and, where such price is
not ascertainable, the price which the DCT may, with the approval in writing of the IJCT determine.
Question No.6:
a) To what extent the Deputy Commissioner of Taxes can extend the time limit to file a return?
b) Under what circumstances the Deputy Commissioner of Taxes can serve notice under section 77 of the Income
Tax Ordinance 1984?
Answer to the question no-6 (a):
The Deputy Commissioner of Taxes can extend time to file return up to 2 months at his own capacity and further 2
months after taking prior permission from the IJCT. Thus total 4 months time can be extended to file return.
Answer to the question no-6(b):
The Deputy Commissioner of Taxes may serve notice under section 77 ca lling for return:
a) to any person, other than a company, who in the opinion of the Dep uty Commissioner of Taxes, had taxable
income during the income year but did not file a return of his total income within the date as specified in section
75 and
b) to any com pany that did not file return within the date as specified in section 75.
Question No. 7:
The Trading and Profit & Loss Account of XYZ & Co. for the year ended 30th June 2015 is:
XYZ & Co.
Trading and Profit & Loss Account
For the year ended 30th June 2015
Debit Taka Credit Taka
Opening stock 150,000 Sales 1,500,000
Purchase 550,000 Closing stock 200,000
Wages 52,000
Depreciation on Machinery 13,000
Power and Fuel 15,000
Gross Profit c/d 920,000
1,700,000 1,700,000
Salaries 76,000 Gross Profit b/d 920,000
Rent, Rates and Taxes 21,000 Bad Debt Recovered 26,000
Annual Membership fee 50,000 Interest and Discount Received 26,000
Legal expenses 12,000 Interest on Commercial 75,000
Underwriting Commission 38,000 Securitieson M Ltd’s share
Dividend 66,000
Purchase of Trade marks 118,000 Commission 27,000
Bad Debts 24,000
Accounting Fees 40,000
Depreciation office building 37,000
Fines and penalties 14,000
Donation to Flood Relief Fund 55,000
Gratuity to Employees 85,000
Advance Income Tax 26,000
Loss on sale of office furniture 14,000
Miscellaneous expenses 90,000
Net Profit 440,000
11,40,000 11,40,000
Important Information:
1) Salaries include Tk.21,000 as salaries paid to the owner.
2) Recovered amount of bad debt was previously allowed as bad debt expenses.
3) Legal expenses is incurred for filing and continuing a case against competitor for protecting the interest of the
business.
4) Fines and penalties were due to avoidance of tax payment at an earlier period.
5) Payment to purchase the trade mark is given in cash.
6) Miscellaneous expenses includes Tk.30,000 that was incurred for purchasing assets for the business.
7) Tax depreciation was calculated as: Depreciation on Machinery Tk.26,000 and Depreciation on
Office Building Tk.29,000.
Mr. Rahman is proprietor of XYZ & Co. Compute the income from business or profession and total taxable income
of Mr. Rahman for the year ended 30th June 2015.
Answer to Question No.7:
Assessee: XYZ & Co (Proprietor: Mr. Rahman)
Computation of total income for the year ended 30th June, 2015.
Assessment Year: 2015-16
Income from Business and Profession Tk. Tk.
7,12,000
Note-1
As interest and discount income Tk. 26,000 is mixed-up and break-up of the nature of income is not given, I consider it
as a part of business income. As it is properly shown at P/L a/c so no adjustment is needed.
Note-2
Bad debt recovered is income. As it is properly reflected at P/L a/c, so no need to adjust again u/s 19(15)(a)
Note-3
Gratuity to employees is allowable expenditure if it is approved Gratuity by the NBR. I assume that it is approved gratuity.
Question No. 8:
Mrs. Zara works in a company as a Finance Manager. The particulars of her income during the income year 2014-15
are given below:
Basic pay Taka 100,000 per month
House rent @ 60% of the Basic
Medical allowance @ 20% of the Basic
Employer’s contribution to the Recognized Provident Fund @ 10% of the Basic
Festival bonus- equivalent to 2 months Basic pay
She has been provided a car for her personal and official use.
In addition to the salary income she had the following incomes:
i) Dividend from a listed company Taka 45,000 (net).
ii) Tax deducted from dividend was Taka 5,000.
iii) Interest from FDR Taka 85,000 (net).
iv) Tax deducted from interest was Taka 15,000.
v) Interest on debenture Taka 15,000
vi) Sale proceeds of agricultural crops Taka 1,50,000. She did not maintain any records for cost of production.
Mrs. Zara is the member of the Recognized Provident Fund where she contributed equal amount of the employer. She
invested Taka 3,00,000 in buying the share of a listed company for the purpose of investment tax credit.
Based on the above particulars compute her total income and tax liabilities thereon for the assessment year 2015-16.
Also find out the tax she needs to pay with the return. Assume that no tax was deducted from her salary.
Answer to the question no-8:
Name of Assessee: Mrs. Zara
Computation of total income and tax liability
Assessment year: 2015-16 [Income year-2014-15]
Particulars Taka Taka
1. Income from salary:
a) Basic salary ( Taka 1,00,000 X 12) 1,200,000
b) House Rent @ 60% of the Basic 720,000
Less: Exemption ( 50% of Basic Salary or Taka 25,000 per month-whichever is lower) 300,000
420,000
c) Medical allowance @ 20% of the Basic 240,000
Less: Exemption ( 10% of Basic Salary or Taka 120,000 per year-whichever is lower) 120,000
120,000
d) Festival bonus- equivalent to 2 months Basic pay 200,000
e) Car facility (5% of Basic or Tk.60,000 whichever is higher) 60,000
f)Employer's contribution to RPF-10% of Basic salary 120,000
Taxable income from Salary 2,120,000
3.Income from interest on securities:
Interest on debenture 15,000
4.Income from agriculture:
Sale proceeds of agricultural crops 150,000
Less: Cost of production @ 60% in absence of books of accounts 90,000
60,000
4. Income from other sources:
Dividend income 50,000
th
Less: Exempted [upto Tk.25,000 Ref 6 schedule part-A para-11A] 25,000
25,000
Interest on FDR [converted to gross] 100,000
Total income 2,320,000
B] Calculation of Investment allowance
Investment in share of a listed company 300,000
Employer's and own contribution to Recognized Provident Fund 240,000
Actual Investment 540,000
Allowable Investment allowance:
Actual Investment 540,000
30% of total income excluding employer's contribution to RPF 660,000
Maximum allowable investment 15,000,000
Whichever is less of the above shall be considered as investment
allowance 540,000
C] Calculation of Tax liability and tax to be paid with return
On First Taka 3,00,000 @ 0% -
On next Taka 4,00,000 @ 10% 40,000
On next Taka 5,00,000 @ 15% 75,000
On next Taka 6,00,000 @ 20% 120,000
On remaining Taka 5,20,000 @ 25% 130,000
Gross tax liability 365,000
Less: Tax rebate on investment allowance (Tk. 5,40,000 X 15%) 81,000
Tax liability after considering investment tax rebate 284,000
Less: TDS
Tax deducted from cash dividend 5,000
Tax deducted from interest on FDR 15,000
20,000
Tax to be paid under section 74 264,000
Question No. 9:
Mr. Amin purchases 10 Chairs @Tk.700 per unit and he sold all these Chairs to Mr. PQR at Tk.9,300 where he earns
profit of Tk.2,000. After adding value of Tk.100 per unit Mr. PQR sells these Chairs in the market. If VAT is same on
all these chairs, calculate how much VAT Mr. Amin has to pay and at what price Mr. PQR sells these Chairs in the
market.
Answer to Question No. 9:
Tk.
Price paid by Mr. Amin Tk.(10x700) assuming price is VAT inclusive 7,000
VAT on purchase price (7,000*15/115) 913
Purchase price excluding VAT 6,087
Selling price to PQR 9,300
VAT on sales (9,300*15/115) 1,213
Selling price excluding VAT 8,087
Amount in Taka
2014 - 2015
Particulars
Loss Income
(i) Loss from Business 225,000
Less : Government Subsidy (150,000)
Net Loss from Business C/F to 2015 — 2016 75,000
(ii) Loss from Capital Gain 185,000
Less : Capital Loss upto Tk. 5,000 cannot be C/F as per Law (5,000)
Loss Under Capital Gain C/F to 2015 — 2016 180,000
(iii) Income from House Property (Cannot be set off as per law) 45,000
(iv) Speculative Loss C/F to 2015 — 2016 65,000
(v) Agriculture Loss C/F to 2015 — 2016 28,000
(a) 2015 - 2016
Loss Income -
2014 — 2015
Loss ( i +iii+ iv + v) = 348,000
Income (iii) = 45,000
2015 — 2016
Loss (c + e) = 415,000
Income (a + b + d) = 347,000
Question No. 10
(a) When is “Registration” required for the purpose of VAT? Which “Persons” are required to be registered for the
purpose of VAT?
(b) What “Documents” need to be submitted for VAT registration? When registration may be Cancelled for the purpose
of VAT?
Answer to the Question No. 10 (a):
A person needs to register for the purposes of VAT before commencement of:
(a) production or manufacture of goods;
(b) trading of goods;
(c) rendering of services;
(d) import of goods; and
(e) export of goods.
Once registered, no renewal of registration is required.
The following persons are required to register for the purpose of VAT:
( a) Impor t er ;
( b) Expor t er ;
( c) Pr oducer ;
( d) Trader; and
( e) Service provider.
The persons who are falling under the jurisdiction of “turnover tax” and “cottage industry” are not required to register
for the purposes of VAT. However, producer or service provider having turnover below Tk. 80 lacs, thereby falling
under the jurisdiction of “turnover tax”, and “cottage industry” may voluntarily register for the purposes of VAT.
If any person who ought to register for the purposes of VAT fails to do so, the VAT Divisional Officer registers the
person under Section 15(4) of the Act effective from the date the person ought to have registered; and informs the
person accordingly.
Answer to the Question No. 10 (b):
Application for VAT Registration shall be made to the VAT Divisional Officer in Form VAT-6. The following documents
shall be submitted along with the application form :
(a) Trade License ;
(b) TIN Certificate (if any) ;
(c) IRC / ERC Certificate (if any) ;
(d) List of all related Selling Centers in the case of “central registration ; and
(e) Declaration in Form VAT-7 of the production or business premises, plant, machinery, fittings, finished or tradable
goods, stocks, and inputs.
If the application is complete, the VAT Divisional Officer shall issue the Certificate of Registration in Form VAT-8
within 7 days of the application.
No fee is payable for registration for the purposes of VAT.
If a person caries out business from various premises, he may obtain “central registration” so as to pay VAT; and
complies with the requirements of the VAT laws “centrally”. However, no “group” (that is, various companies/entities
under common management or ownership) registration is permissible under the VAT Act, 1991.
If “central registration” is not obtained, then separate registration for separate premises shall be required for the purposes
of VAT. However, if a registered person changes his premises or businesses, he will file declaration with the VAT Circle
Office in Form VAT-9 at least 14 days prior to such changes in his premises or businesses.
The registration may be cancelled for the purposes of VAT if:
(a) The registered person discontinues businesses;
(b) The registered person‟s businesses are exempted for the purposes of VAT;
(c) The turnover of the registered person is below Tk. 80 lac ;
(d) The registered person fails to commence business after obtaining certificate of registration;
(e) The turnover of the self-registered person is below Tk. 80 lac.
The registered person shall apply to the VAT Circle Office in VAT Form-10 for cancellation of the registration.
Question No. 11
Mannan Traders, an importer, imported 200 of AC at CIF price @Tk.100,000 per piece. The clearing and other incidental
charges amounted to Tk.100,000 for the total consignment. He sold 80 pieces of AC to a whole seller at a markup of 10%
(exclusive of VAT). The whole seller charged 10% markup to sell it to retailers. The retailers incurred a cost @Tk.2,000
for maintenance and other expenses and added 10% markup to the price.
Required:
Compute VAT assuming that the retailers sold 60 pieces of AC in a trade fair among various customers in the month of
June, 2015.
Answer to the Question No. 11:
[14,59,260/80*60] 1,094,445
Net COGS 7,296,300
Add: Maintenance and selling costs (2,000x60) 120,000
Total COGS 7,416,300
Add: Profit 10% 741,630
Selling price excluding VAT 8,157,930
Add: Output VAT @ 15% 1,223,690
Selling price inclusive of VAT 8,381,620
Workings:
Importer Wholesaler Retailer Consumer
(200 units) (80 units) (60 units) (60 units)
Output VAT 13,26,600 14,59,260 12,23,690
Less: Input VAT -----
13 26 600 10,94,445
Gross VAT Payable 13,26,600 1,32,660 1,29,245
Net VAT Payable 13,26,600*60/80 132,660*60/80 1,29,245
=994,950 =99,495
VAT to be borne by the consumer (for 60 units) =994,950 + 99,495 + 129,245 =12,23,690.
TAXATION-I
Nov- Dec 2016
Question No. 1
(a) A professional accountant needs to possess integrity. Explain in brief the term „integrity‟.
(b)Discuss the professional behavior of an accountant.
Answer to Question No. 1
(a) Integrity: Requires all professional accountants to be straight forward and honest in professional and
business relationships. A professional accountant should not be associated with any information where he
believes that the information:
Contains a materially false or misleading statement
Contains statements or information furnished recklessly
Omits or obscured information required to be included where such omission or obscurity would be
misleading
(b) Professional behavior
Professional behavior: Imposes an obligation on a professional accountant to comply with relevant laws and
regulations and avoid any action that may bring discredit to the profession.
This includes actions which a reasonable and informed third party, having knowledge of all relevant
information, would conclude negatively affects the good reputation of the profession.
Professional accountants should be honest and truthful and should not:
Make exaggerated claims for the services they are able to offer, the qualifications they possess, or experience
they have gained
Make disparaging references or unsubstantiated comparisons to the work of others.
Question No. 2
What is NBR? Discuss the main functions of NBR.
Answer to Question No. 2
National Board of Revenue (NBR) is the highest executive authority. It is statutory body and its members are
appointed by the Government to manage, control and supervise the whole income tax Department. The NBR is
empowered to make necessary rules concerning income tax matters and is authorized to give any interpretation
of any provision in any section of the Ordinance. It cannot act by issuing any instructions to be construed as
interference to the authority of judicial personnel like the Commissioner of Taxes (Appeals), Appellate
Additional Commissioner of Taxes, Appellate Joint Commissioner of Taxes and the Commissioner of Taxes
when they exercise their judicial powers.
Main functions of NBR
1. To declare any foreign unincorporated association as a company for the purposes of the Ordinance.
2. To determine a period to be an income year of any person.
3. To delegate powers to the Inspecting Additional Commissioner of Taxes to exercise the powers of a
Commissioner and to the Appellate Additional Commissioner of Taxes to exercise the powers of a
Commissioner (Appeals).
4. To determine the functions of the Director General of Inspection, the Commissioner (Appeals), the
Appellate Joint Commissioner, the Commissioner (LTU), the Inspecting Joint Commissioner and to determine
the jurisdiction of Income Tax authorities.
5. To issue orders, directions or instructions to all officers and other persons engaged in the performance of
any functions under the Ordinance.
6. To determine place of assessment when jurisdiction of an assessee falls more than in one zone.
7. To direct to make payment of tax deducted at source within the time specified.
8. To recognize and authorize Chartered Accountant, Cost and Management accountant, income tax
practitioner and members of other accounting bodies for appearance in income tax matters as authorized
representative of the assessee.
9. To take disciplinary action against any authorized representative in case of professional misconduct.
10. To allow tax holiday or tax exemption to approved undertakings.
11. To accord and withdraw recognition to Super Annuation Fund, Pension Fund and Gratuity Fund.
12. To reward employ of the tax department or any other person for furnishing information leading to tax
evasion.
Question No. 3
(a) What is “Tax Day” as defined in Clause 62A of Section 2 of Income Tax Ordinance 1984 inserted by the
Finance Act 2016?
(b) What is the “Tax Day” of a “Company” for the year ended on 31 December 2015 and 30 June 2016?
Answer to Question No. 3
(a) “Tax Day” means:
(i) in the case of an assessee other than a company, the thirtieth day of November following the end
of the income year;
(ii) in the case of a company, the fifteenth day of the seventh month following the end of the income
year;
(iii) the next working day following the Tax Day if the day mentioned in sub-clauses (i) and (ii) is a
public holiday.
(b) For the year ended 31 December 2015, the tax day of a company is 15 July 2016 and for the year ended
30 June 2016, the tax day of a company is 15 January 2017.
Question No. 4
(a) Discuss the Taxation Implications of Resident and Non-resident?
(b) Mr. Lee, a Taiwanese National first came to Bangladesh on 12 April 2013 and stayed for 7 months on a
contract service. He left Bangladesh thereafter, but again came back on a consulting assignment on 19 January 2014
and after completing the work he left Bangladesh on 10 October 2014.
Determine the “Residential Status” of Mr. Lee and the relevant “Assessment Years” for assessment of
his incomes.
Answer to Question No. 4
(a) Taxation Implications of Resident and Non-resident
Determination of residential status of an assessee has a significance bearing on the tax liability as incidence of
income tax varies according to the residential status of an assessee. In this regard we can consider the
following issues:
(i) To determine the amount of total income:
Determination of total income is different for residents and non-residents. A resident considers global income
as his total income but a non-resident does not consider income from other countries in his total income.
(ii) To determine minimum limit of taxable income:
A resident and non-resident Bangladeshi has to pay tax if his total taxable income is more than Tk. 250,000
as per the Ordinance (in case of women, elderly citizens being more than 65 years old, the limit is Tk.
300,000 and disable persons the limit is Tk. 375,000). But for a non-resident foreigner, such minimum limit is
not applicable.
(iii) T a x r a t e s :
For a resident and non-resident Bangladeshi, tax is calculated using the rates applicable for various levels of
income. Such as 0% for the first Tk. 250,000, 10% for the next Tk. 300,000. But a non-resident foreigner has to
pay tax at maximum rate of 30%.
(iv) Income tax rebate:
A resident and non-resident Bangladeshi assessee gets income tax rebate on investment allowance and on tax
exempted income from gross tax liability. But, for a non-resident foreigner, no tax rebate is applicable.
(v) Tax liability:
The average tax rate applicable for a resident and non-resident Bangladeshi is less than that of a non-resident
foreigner since tax is calculated using different lower tax rates (such a 10%, 15%, 20%, 25% & 30%). But a
non-resident foreigner has to pay tax at maximum rate of 30%.
Thus, determination of residential status of an assessee has a significant bearing on the tax liability as total
income, taxable income and tax rate are found to vary according to the residential status of an assessee.
(b) The stay of Mr. Lee in Bangladesh during different periods may be analyzed as under :
Income Period of staying in Assessment Number of
Residential Status
Year Bangladesh year days
12 April 2013 to Non-resident
2012 — 2013 80
30 June 2013 2013-2014 (Note-a)
1 July 2013 to
134
11 November 2013
Resident
2013 — 2014 2014-2015 164 (Note a)
—
19 January 2014 to
30 June 2014
298
1 July 2014 to 10 Resident
2014- 2015 102
October 2014 2015-2016 (Note — b)
Notes:
(a) According to the provisions of Section 2(55) (a), an individual would be resident in Bangladesh in
respect of any income year, if he has been in the country:
for a period of, or periods amounting in all to, one hundred and eighty two days or more in that year ; or
for a period of, or periods amounting in all to, ninety days or more in that year having previously been in
Bangladesh for a period of, or periods amounting in all to, three hundred sixty five days or more during four
years preceding that year.
(b) Analyzing the staying period of Mr. Lee in Bangladesh during the various financial years, it is ascertained
that during the income year relevant for the assessment year 2015 -2016, Mr. Lee stayed for 102 days which is
more than the minimum requirement of 90 days. He was also in the country for periods amounting in all to 378
days (80 + 298) during the four years preceding the income year 2014 -2015. Thus, Mr. Lee would be treated as
a resident for the assessment year 2015-2016.
Question No. 5
M/s. John Morris Inc. is a Multinational Company doing Business in Bangladesh Branch. The Company filed
return of income for the assessment year 2016-2017 showing income of Tk. 3,000,000. Examination of the
audited statement of accounts filed with the return of income revealed the following:
(i) Salary includes Tk.330,000 paid to a Director working at the Head Office at California. He has never
visited Bangladesh and no tax, as such, has been deducted at the time of making the payment.
(ii) Head Office Expenses charged Tk.1,100,000.
(iii) A fine of Tk.11,000 paid for violation of customs law charged to P & L Account.
(iv) One Nissan Car Purchased for Tk.4,500,000 during the year. Depreciation @20% charged on the full cost
of the vehicle.
(v) The Company sold a Motor Vehicle for Tk.465,000. Original Cost of the Vehicle was Tk. 525,000 and the
Written Down Value was Tk.325,000. This has not been reflected in the accounts.
(vi) Tk.15,000 donated to a non-recognized school.
(vii)Royalty paid Tk.300,000.
Required:
From the above information compute the total income of the Company for tax purpose.
Answer to Question No. 5
M/S. John Morris Inc.
Bangladesh Branch
Computation of total income
Assessment Year: 2016-2017
Si. No. Particulars Taka
(Assumed that this is not included with the Value of Free Tea, Coffee,
Beverage or the like thereof provided at the office premises during the course 36,000
of work)
Medical Allowance 6,000
Less : Exempted 6,000
-
(10% of the basic i.e., Tk. 48,000 or Tk. 120,000
annually, whichever is less is exempted)
Festival Bonus (2 x 40,000) 80,000
48,000
Employers' Contribution to RPF (10% x 480,000)
Sub-Total 644,000
b Income from House Property
Annual Value (1/2 let out) (12 x 20,000) 240,000
Less : Repairs etc. (1/4 of 240,000) (60,000)
Less : Municipal Tax (1/2 of Tk. 15,000) (Only for let out part) (7,500)
Less : Insurance (1/2 of Tk. 4,000) (Only for let out part) (2,000)
170,500
Deemed income u/s 19(30) (Tk. 60,000- Tk. 20,000)
: 40,000
Sub- total 210,500
c Income from Agriculture
Sale of Agri Products 40,000
Less : Cost of Production 60% (24,000)
(Assumed that no Books of Accounts were maintained) 16,000
Rentals of Agri Land 20,000
Sub-Total 36,000
d Income from Business
Income from Sole Proprietorship 50,000
Less : Carry Forward of Last Year's Loss (10,000) 40,000
Sub-Total 40,000
E Other Income
Interest on Saving Instruments (Gross) 40,000
Dividend Income From Mutual Fund Less : Exemption 75,000
(25,000) 50,000
Interest on Bank Deposit (23,400/9* 10) (Grossed up for 10% TDS) 26,000
The eligible amount of Investment and Donations for tax rebate would be the lesser of following :
Actual amount of investment i.e. Tk. 163,000.
➢ 25% of the total income (Excluding Income from Winning from Lottery of Tk. 50,000 and Interest from
Saving instruments of Tk. 40,000).
(TDS on Income from Winning from Lottery u/s 55 and TDS on Interest on Saving Instruments u/s 52D is the
Minimum Tax u/s 82C, and therefore, as per the Section 44(2)(c)(ii) as amended by the Finance Act 2016,
the Income on which TDS is minimum tax u/s 82C is not allowable for computation of Eligible Investment)
1,096,500 50,000 — 40,000 = Tk. 1,006,500 25% X1,006,500 = Tk. 25,41,625
—
Advance tax shall be payable in four equal installments on the fifteenth day of Sept ember, December, March
and June of the financial year for which the tax is payable. However, if before the fifteenth day of May of the
year, an assessment of the assessee is completed in respect of an income year, later than that on the basis of
which the tax was computed under Section 65, the assessee shall pay in one installment on the specified date
or in equal installments on the specified dates, if more than one falling after the date of the said assessment,
the tax computed on the revised basis as reduced by the amount, if any, paid in accordance with the original
computation.
b)The latest assessed income is Tk. 500,000 for the Income Year 2013 2014 (Assessment Year 2014 - 2015).
—
What is Input Tax for the purpose of VAT? Discuss the conditions to be met for claiming credit for input tax?
Notes:
(1) Since the house is let out for commercial purpose, repair and maintenance expense is considered as 30% of the
annual value. Here actual spending for such a purpose is not considerable.
(2) 5% TDS is applicable as the building is let out to a commercial bank.
(3) Interest on loan during the construction period, is admissible in three equal proportionate installments for
subsequent first three years as per section 25(1) (gg).
(4) Advance amount may be shown fully in the income year or may be allocated among 5 years at the option of the
assessee.
(5) Installation of Generator is a capital expenditure, so this is not admissible.
(6) As the building is not self-occupied or partially occupied, any amount of interest expense is admissible.
(7) Since, actual spending for repair expenses and collection expenses is less than the allowable limit, the difference
has been considered as income as per Section 19(3).
Question No. 6
As per tax law how does a Deputy Commissioner of Taxes may obtain assistance during the course of his
proceedings?
Answer to Question No. 6
In the course of any proceedings under the Ordinance, the Deputy Commissioner of Taxes may be assisted, guided or
instructed by any income tax authority to whom he is subordinate or any other person authorized in this behalf by the Board.
Question No. 7
Write the name of persons who are responsible to deduct VAT at source
Answer to Question No. 7
The following persons shall be responsible for deduction of VAT at source:
(a) Government;
(b) Semi-Autonomous Bodies;
(c) Autonomous Bodies;
(d) N G O s ;
(e) Banks; Insurance Companies; and
(f) Limited Companies.
Question No. 8
The following information has been taken from the accounting records of MNO Limited for the year 2016:
Raw materials inventory, January 1 Tk.75,000
Raw materials inventory, December 31 Tk.45,000
Work in process inventory, January 1 Tk.160,000
Work in process inventory, December 31, Tk.80,000
Finished goods inventory, January 1, Tk.210,000
Finished goods inventory, December 31, Tk.160,000
Purchase of raw materials Tk.700,000; Wages Tk.120,000; Production overhead Tk.560,000; Marketing expenses
Tk.120,000; and Administrative and other expenses Tk.240,000. The company sells its product by adding 16% profit on
cost. Determine the amount of VAT if the rate is 15%.
Answer to Question No. 8
MNO Limited
Schedule of VAT calculation
For the year ended on December 31, 2016
Taka Taka
Raw materials, January 1 75,000
Add: Purchase of raw materials 700,000 -
Raw materials available for use 775,000
Less: Raw materials, December 31 45,000
Raw materials used in the production 730,000
Wages 120,000
Production overhead 560,000
Total production cost 1,410,000
Add: Work in process, January 1 160,000
1,570,000
Less: Work in process, December 1 80,000
Cost of goods produced 1,490,000
Add: Finished goods inventory, January 1 210,000
Goods available for sale 1,700,000
Less: Finished goods inventory, December 31 160,000
Cost of goods sold 1,540,000
Add: Profit [1,540,000 x 16%] 246,400
Selling price 1,786,000
On the other hand, horizontal equity looks for “equal treatment of equals”. That is, individuals who have the same
wealth, or are in the same income bracket, should come across the same tax effect. In fact, horizontal equity in taxation
underlies the basic principle of equality so that we give the same treatment to people in an identical situation. Therefore,
horizontal equity makes sure we don’t have discrimination on the grounds such as race/gender/different types of work.
Answer to the Question No. 1(b):
The basic framework of charging income tax as laid down in section 16(1) is summarized below:
1. Income tax is charged on taxable income for an income year of any person;
2. Tax shall be charged at the rate or rates prescribed by the Finance Act in every year
3. Tax is chargeable on the income of an income year; not on the income of an assessment year.
4. Tax is chargeable on the total income of a person computed under the purview of the Income Tax Ordinance 1984
Answer to the Question No. 1(c):
The term source of income refers to a place from which the income is originated or obtained. The source of income
indicates the point from which income gets generated or arises. Each and every income of any person has an origination
point and this point is the source of that particular income.
On the other hand, in order to compute the total income of a person, the income of all sources are clubbed or grouped
under certain heads as per the income tax law. Any income to be taxed must come under any of the heads specified in the
law. Therefore, head of income indicates the class under which an income is considered to be taxed. Each head of income
has its own unique features and requires specific treatment for correct computation of taxable income and tax liability.
Under each head of income, there could be several sources of income. Say, Mr. X works in two companies namely X
Limited and Y Limited and he gets compensation from both the companies. In this case, he has two sources of income but
they fall under one head of income which is stated as “Income from Salaries”.
Answer to the Question No. 1(d):
In the recent years, the connectivity of Bangladesh to the world has increased overwhelmingly and thus we are now more
open and dependable to the world economy. The economic growth of this country has also got tremendous pace over the
years. To sustain this growth momentum, Bangladesh needs to attract huge capital inflow and propel trade relations with
the other counties. As the decision of any economic unit across the world is tax sensitive, Double Taxation Avoidance
Agreement (DTAA) has become vital for such transactions and relations. DTAA promotes mutual economic relations, trade
and investment. It encourages cross-boarders transactions and investments, as it ensures certainty on levy of tax disregarding
changes of the tax laws in other countries. In fact, DTAA creates a favourable climate for the inflow of Foreign Direct
Investment (FDI) and foster long term, mutually beneficial economic relationship with other countries. It also helps to
prevent tax evasion by exchanging information. Therefore, in many aspects, Bangladesh can be benefited from DTAA.
Question No. 2:
a) Professional Accountants have role to assist government to collect tax. In this regard the professional Accountants should
maintain integrity. As regards to information what criteria should be followed to maintain integrity by a Professional
Accountant.
b) The Tax practitioners should be competent and should act lawfully for the best interest of the clients. Explain the
statement in light of the Code of Ethics applicable for the professional accountants.
Answer to the Question No. 2 (a):
A professional accountant should not be associated with any information where he believes that the information:
Contains a materially false or misleading statement;
Contains statements or information furnished recklessly;
Omits or obscures information required to be included where such omission or obscurity would be misleading.
Answer to the Question No. 2 (b):
If we observe the statement deeply, we will see that it has two elements; one is competent to work and the other is lawfully
act for the best interest of the clients The tax practitioners must be competent to ensure to provide best delivery to their
clients and the services they provided is provided competently. For that, the practitioners must maintain knowledge
and skills relevant to the services. They should take reasonable care to ensure that taxation laws are applied correctly
to the circumstances in relation to which they are providing service to the clients. They must be always updated about the
changes in the laws.
The tax practitioners must act for the best interest of their clients by complying the relevant laws and regulations
applicable to the extent. Acting in the best interests of clients is not an excuse for a tax practitioner to breach or ignore
the law. To ensure best service to the clients, they must provide quality delivery within the framework of the law. They
can advise clients to take all kinds of benefits like exemptions, deductions and credits available in the law. But they
cannot assist or guide the clients to evade tax by producing wrong evidences or explanations. If the practitioners do not
act lawfully, it will invite troubles for themselves and will damage the reputation of their professions. Thus, in no cases,
the tax practitioners favour their clients beyond the boundary of the laws and regulations.
Question No. 3:
a) When may the Deputy Commissioner of Taxes serve the notice under section 79?
b) Briefly describe- what would be the assessment procedure in case of discontinued business? Do you find any
exception in this assessment procedure? If yes, justify your answer.
c) Write the provisions regarding instructions from National Board of Revenue as to performing the function by the
officers.
Answer to the Question No. 3(a):
The Deputy Commissioner of Taxes (DCT) may issue a notice under section 79 to produce or cause to be produced such
accounts, statements, documents, data or electronic records as he may consider necessary for the purpose of audit or
assessment under this ordinance. This notice can only be served to that assessee who has already filed a return or to
whom a notice has been served to file a return.
Answer to the Question No. 3(b):
When any business is discontinued in any financial year, at the discretion of the DCT, the assessment of that
discontinued business may be completed in the following manner:
-The income of the current incomplete income year (from 1st day of the current income year to the date of discontinuance); plus
- Income of previous completed income year, assessment of which is pending;
shall be assessed together in the year of discontinuation. That is, incomes of the broken period and the incomes of the
previously completed income years whose assessment are still undone shall be progressed together in the discontinued year.
Any discontinuation of a business is to be informed to DCT within 15 days of such discontinuation and the return of total
income shall be submitted for that period.
For example, ABC Limited discontinued its business on 31 December 2016 and its income of the income 2015-16
corresponding to the assessment year 2016-17 is still pending. In this situation, the assessment of the income year 2015-
16 and the assessment for the income of the broken period starting from 1 July 2016 to 31 December 2016 shall be made
together in the Financial year 2016-17.
Yes, there is an exception. The exception is that income year and assessment year for the income of the broken period is
same. As per section 16(1), income of the income year shall be assessed in the assessment year. That is, once
income year ends, assessment year starts. But in this case, income is assessed in the income year, not in the assessment
year
Answer to the Question No. 3(c):
As per Income Tax Ordinance all officers and other persons engaged in the performance of any functions under this
Ordinance shall, in the matter of discharging those functions observe and follow such orders, directions or instructions as
the Board may issue from time to time:
Provided that no order, direction or instruction shall be given so as to interfere with the discretion of the Appellate Joint
Commissioner [or the Commissioners (Appeals)] in the exercise of their appellate functions.
Question No. 4:
The Statement of Comprehensive Income of PQR Ltd. for the year ended 30th June, 2016 was as follows:
Tk. Tk.
Particulars
Sales 2,50,00,000
Less: Cost of Goods Sold 67,00,000
Gross Profit 1,83,00,000
Less: Administrative and Selling Expenses
Office Maintenance 16,00,000
Salary and allowances 23,00,000
Travelling and conveyance 7,50,000
Printing and Stationery 4,00,000
Audit Fee 6,00,000
Legal Expenses 3,50,000
Repairs for residential houses of Employees 4,30,000
Cash shortage 2,60,000
Provision for bad debts 6,00,000
Commission 3,60,000
Renewal of Trade Mark 4,00,000
Bonus to Staff— Bonus Share 11,00,000
Managing Agent’s Commission 12,00,000
1,03,50,000
79,50,000
Add: Profit on Sale of old Machine 5,00,000
Share Premium 3,50,000
Interest on Govt. Securities 4,00,000
Other Income 11,40,000
23,90,000
Net Profit 1,03 40,000
Necessary Information:
i) Required tax has not been deducted from printing and stationery bills.
ii) Salary and allowances included Tk.5,00,000 paid for house rent where a retired Manager of the company lived.
iii) Bad Debt Tk.75,000 and Tk.65,000 provision for the last year were written off.
iv) Commission represents Commission paid to a Staff.
v) The sold machine was purchased six years ago and its book value was Tk.1,00,000 but its book value as per
Income Tax Rule was zero. The cost price of the machine was Tk.10,00,000.
Determine the Taxable Income and calculate the tax to be paid by the Company.
Answer to the Question No. 4:
Assessee: PQR Ltd.
Assessment year: 2016 - 2017; Income year: 2015 -2016
Particulars Tk. Tk.
Net Profit as per Statement of Comprehensive Income 10,340,000
Add: Inadmissible expenses:
Printing and Stationery Expenses 400,000
Bad Debt Provision (6,00,000 + 65,000) 665,000
Retired Manager House rent 500,000
Shortage of Cash 260,000
1,825,000
12,165,000
Less: Non-business income:
Profit on Sale of machine 500,000
Interest on Govt. Security 400,000
Other income 1,140,000
Share Premium 350,000
2,390,000
9,775,000
Less: Admissible expenses: 75,000
Bad Debt Written off 9,700,000
Add: Business Income on sale of Machinery 600,000
Income from Business 10,300,000
Total Income:
Income from Business 10,300,000
Interest on Govt. Security 400,000
Other income (1,140,000+350,000) 1,490,000
Total Income 12,190,000
Tax Liability
Particulars Gross Income Tax Rate Amount of Tax
Tax on Total Income Tk.12,190,000 35% Tk.4,266,500
Notes: (I) Tax has not been deducted at source and therefore it is considered as inadmissible. (2) House Rent paid to
the Retired Manager is not a business expense; hence it is disallowed. (3) Commission paid to a staff is considered as
business expense and as such it is admissible. (4) All other expenses charged as administrative and selling expenses
have been assumed as business expenses. (5) Cash shortage has been assumed as stolen by the stranger during the office
period and as such it is inadmissible. (6) Profit on Sale of Machineries has been considered as business profit. (7) Capital
Gain on Sale of Machine:
Sale Value (1,00,000 + 5,00,000) 600,000
Original Cost 10,00,000
Capital Gain Nil
Question No. 5
Ms. Marium has earned following incomes during the financial year 2016-17.
Salaries income:
Basic Salary Tk.3,00,000, Entertainment allowance Tk.60,000, Servant allowance Tk.36,000, Travelling allowance for
performing office duty Tk. 20,000, Conveyance allowance Tk.48,000 and Furniture allowance Tk.30,000.
House property income:
House-X-total rent Tk.80,000
House -Y -total rent Tk.60,000
Interest income:
Interest on FDR (gross)-Tk.80,000 (applicable withholding tax rate-10%). She borrowed Tk.10,00,000 from bank
for investment in FDR and during the year, she paid interest Tk.1,20,000 against the borrowed money.
Interest on Savings Certificate (net)- Tk.95,000 (applicable withholding tax rate -5%)
Agriculture income:
Ms. Marium grows paddy in her land. This year she earned Tk.1,20,000 by selling paddy. She does not maintain any
books for agricultural activities.
Other information:
Short term capital gain Tk.20,000
Dividend income Tk.50,000(gross).
Donation to Rohingyas’ Welfare Fund-Tk.10,000
Investment in land- Tk.2,00,000 and Investment in Shares — Tk.1,00,000
Investment in Mutual Fund — Tk.60,000
Based on the above information, calculate total income, investment tax credit, tax liability and net tax payable with
return for the assessment year 2017-18. Please make assumptions where necessary information is not available.
25% of total income other than income assessable U/S 82C 1,50,500
Therefore, allowable investment allowance
(Lower of actual investment, 25% of total income and Taka 15 million) 1,50,500
C] Tax liability
Tax on total income other than income assessable U/S- 82C
On initial Taka 3,00,000 @ 0% 0
On next Taka 3,02,000 @ 10% 30,200
Gross tax liability 30,200
Less: Investment tax credit ( 150,500 X 10%) (15,050)
15,150
Add: Tax on income assessable U/S 82C 5,000
Total Tax liability 20,150
Less: Tax already paid ( 5,000+8,000+5,000) (18,000)
Net tax liability 2,150
Note:
i. Ms. Marium is a woman and thus her initial exemption limit will be Taka 3,00,000.
ii. Loss under the head other income can be set off against the income of other heads of income.
Question No. 6:
a) Mention five deficiencies of current VAT system of Bangladesh.
b) Define the terms “Goods” and “Services”. What is the difference between First and Second Schedules of VAT
Act 1991?
Answer to the Question No. 6(a):
The current VAT system of Bangladesh has many deficiencies and limitations. Five of them are described below:
The standard rate of VAT is 15%. Despite that there are multiple tax rates prevail in the current VAT system due
to introduction of “truncated base” for services. This creates limitation on tax neutrality and equality.
The beauty of the VAT system is enjoying input tax credit. But input tax credit cannot be taken in many
occasions. As a result, tax on tax happens significantly.
In addition to the regular books of accounts, separate books of accounts are to be maintained by the VAT
registered persons. This invites duplication of works and increase higher compliance cost.
In the current system, the current account balance must be positive to issue VAT invoice. This implies
that VAT is to pay in advance. This is unusual in the context of good VAT system.
The laws and regulations relating to VAT are very unorganized and scattered. There are many conflicts
and contradictions among different provisions of the law.
iii. So, the total VAT amount is Tk.37,500 which is ultimately borne by the final consumer.