Semester “Spring 2011”
“Taxation Management (FIN623)”
This is to inform Assignment No.1 (covering video lecture no. 1 to lecture no 19)
will be uploaded on VULMS according to the following schedule
Schedule
Opening Date and Time
2nd May , 2011 At 12:01 A.M. (Mid-Night)
Closing Date and Time
5th May , 2011 At 11:59 P.M. (Mid-Night)
Assignment:
Read the following information carefully and give the answers of the questions given at
the end.
Case # 01:
PSO Ltd is a public company incorporated under the Companies Ordinance, 1984, whose
shares were traded on the Karachi Stock Exchange from 1 January 2008 until 29 June
2009, on which date the company was delisted. PSO closes its accounts on 30 June each
year. 49% of the shares in PSO are held by the Government of the Kingdom of Saudi
Arabia and 51% by the Federal Government of Pakistan. The control and management of
the affairs of PSO was situated partly in Saudi Arabia during the year ended 30 June
20010.
Required:
State, giving reasons, whether for Pakistan tax purposes for the tax year 2010 PSO Ltd:
1. Is a resident or a non-resident company?
Case # 02:
Mr Waqas, a resident of Pakistan, derived the amounts as under in the tax year 2010:
1. Rs. 1,000,000 from crops grown on his agricultural land situated in Canada.
2. Rs. 1,500,000 gross, received from the poultry farm he established in June 2010
in Rawalpindi.
3. Rs. 1,000,000 from the deposit of a prospective buyer of his flat, forfeited by Mr
Waqas when the buyer failed to fulfill the terms of the contract for the sale of the
flat.
Required:
State, giving reasons, whether the amounts received by Mr Waqas will be taxable or
exempt for the tax year 2010, based on the Income Tax Ordinance, 2001.
Solution:
In my opinion the answer of first question is a resident company because according to the resident of association of a person sec.84 if the controll and management of affairs of the association is situated wholly or partly in pakistan at any time in the year.
:::::::::::::::::::::
The amount charge to tax for mr.waqas is
Rs.1000,000
Rs.1500,000
Rs.1000,000
The whole amount is taxable.
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Answer Case#1:
in the case one according to the Control and management of the affairs is resident company because its control is was in pakistan but partly in Saudi Arabia and its more shares are posessed by the federal government of pakistan.
Aswer Case#2:
1. this is exempted from tax because it is foriegn source of income.
2. This is the gross amount but the tax is on the net amount
3. This also taxable.
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1. this is exempted from tax because it is foriegn source of income. (not taxable)
(Foreign Source Salary of Resident Individuals Sec. 102
(1) Any foreign-source salary received by a resident individual shall be exempt from tax if the individual
has paid foreign income tax in respect of the salary.
(2) A resident individual shall be treated as having paid foreign income tax in respect of foreign-source
salary if tax has been withheld from the salary by the individual’s employer and paid to the revenue
authority of the foreign country in which the employment was exercised.)
2. This is the gross amount but the tax is on the net amount(not taxable)
3. This is taxable.
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Soluion 1:
Resident Company.
As PSO Ltd. is incorporated under the Companies Ordinance, 1984 of Pakistan, so it will be considered resident company.
Solution 2:
Agricultural income Canada in Taxable.
Reason:
Any agricultural income from land, situated outside the Pakistan, is taxable.
Poultry Farm income is Taxable.
Reason:
Any income derived from Poultry farming is not considered exempt from tax.
Forfeited deposit against the contract for sale of flat is Taxable.
Reason:
Any forfeited deposits under the sale of land or building is considered as rent. And it is chargeable to tax under the head “Income from Property”.
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