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CMA JUNE, 2020 EXAMINATION MANAGEMENT LEVEL SUBJECT: R2. TAXATION
Time Allocated: Three hours Total Marks: 100
Instructions to Candidates
There are three sections (that is A, B & C) in this paper. You are required to answer ALL questions.
Answers should be properly structured, relevant and computations need to be shown wherever necessary.
You are strongly advised to carefully read ALL the question requirements before attempting the question concerned (that is all parts and/or sub-questions).
ALL answers must be written in the answer book. Answers written on the question paper will not be submitted for marking.
Start answering each question from a fresh sheet. Your answers should be clearly numbered with the sub-question number then ruled off, so that the markers know which sub-question you are answering.
Section No of questions in the Section
No of sub-questions in the Section
Marks allocation
A 01 08 20%
B 01 05 30%
C 02 50%
PLEASE TURN OVER
Page 2 of 7 SECTION A – 20 MARKS
This section consists of 1 question and 8 sub-questions.
You are advised to spend no longer than 36 minutes on this section. Section will carry 20 marks and one sub-question will carry 2.5 marks each.
Question 01
(a) What is the procedure to file application to the ADR?
(b) What is the deference between depreciation allowance and investment allowance?
(c) What are the consequences of failure of deducting taxes in time at prescribed rates or failure of depositing deducted taxes within time?
(d) Distinguish forward and backward shifting of tax with an example.
(e) State the consequence of failure to pay advance tax.
(f) Name any three newly added industries through the Finance Act 2020 that will get tax exemption benefit for setting up new industrial undertakings in Bangladesh within 30th June 2024.
(g) State the contexts government impose countervailing duty and safeguard duty as per section 18 of the Customs Act 1969.
(h) List the persons liable to pay VAT as per Value Added Tax and Supplementary Duty Act, 2012.
(2 ½ Marks × 8 Questions = 20 Marks)
END OF SECTION A SECTION B Starts on page 3
Page 3 of 7 Section B– 30 MARKS
This section consists of 1 question and 5 sub-questions.
You are advised to spend no longer than 9 minutes on each sub-question in this section.
Section will carry 30 marks and one sub-question will carry 6 marks each.
Question 02
(a) Mr. Karim is a regular investor of DSE. In July 2012, he has purchased 5,000 shares of Tk.
1,000 per value of IBBL @ Tk. 1,575. Brokerage charge on that time 1.5% on the gross value of the shares traded. In March 2016, Islami Bank declared a cash dividend of Tk. 10 per share and a 1 for 5 stock dividends when the market value of such shares was Tk.
1,800 each. In December 2018, Mr. Karim sold 2000 shares including all of the shares that he received as bonus shares in 2016 @ tk.2000. On the date of sale, the brokerage charge was 1% on the gross value of share traded. Compute the amount of Capital Gain and tax liability from the sale of shares.
[Marks: 6]
(b) Compute taxable income of Mr. Zaman considering income for the income year 2019-20 as:
1. Dividend from ICB unit fund Tk. 31,500
2. Interest on post office savings bank tk. 36,000
3. Fees for technical service from Government Tk. 18,000 4. Prize of winning prize bond lottery Tk. 20,000
5. Income from talk show Tk. 2,000
6. Interest on fixed deposit from leasing company Tk. 9,000 7. Income from copyright and royalty from a person Tk. 4,000
During the year he has purchased a flat at Tk. 1,000,000. After an investigation by the DCT, it has been found that the fair market value of the flat is Tk. 1,175,000.
[Marks: 6]
(c) Mr. Khondoker’s total income for the year 2019 – 2020 is Tk. 3,000,000 and he made the following gifts in this income year. Identify how much of these gifts are taxable gift.
(i) Gift to the younger brother a motor car costing Tk. 800,000 on the occasion of marriage (his younger brother is independent);
(ii) Gift to a friend a house at Chittagong as a token of love. However, he has received consideration from his friend amounting to Tk. 150,000. The market value of the house is Tk. 900,000;
(iii) Donation to a local charitable institution Tk. 100,000;
(iv) Donation to an institution established and registered for charitable purpose in Bangladesh Tk. 300,000;
(v) Donated a furnished flat to his sister-in-law in Nepal worth Tk. 500,000; and (vi) Cash donation to brother-in-law on the occasion of marriage Tk. 80,000.
[Marks: 6]
SECTION B Continues on page 4
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(d) Identify the excise duty chargeable for the following cases.
(i) Mr. Karim is a fish vendor in the local market. Mr. Karim maintains a bank account and his bank balance does not exceed Tk. 20,000, at any time during the year.
(ii) Mr. Howlader is a farmer who opened a bank account depositing Tk. 10. The balance of the account does not exceed Tk. 100,000 at any time during the year.
(iii) Mr. Shakawat is a sales executive of a private organization. He purchased an air ticket from Novo Air to visit Cox’s Bazar.
(iv) Mr. Belal is an assistant professor of a private university. He purchased an air ticket from Singapore Airlines to visit Melbourne for an annual accounting conference.
(v) Ms. Nowshin is visiting Nepal as a tourist and purchased an air ticket of Bangladesh Biman Limited.
(vi) Mr. Ali is a gazetted wounded freedom fighter. He visited his son in Malaysia purchasing an air ticket of Bangladesh Biman Limited.
[Marks: 6]
(e) State the amount of monetary penalty for non-compliances or irregularities in the following cases as per the Value Added Tax and Supplementary Duty Act, 2012.
(i) Not applying for registration or enlistment within the prescribed time-limit (ii) Not displaying the registration or turnover tax certificate in a visible place (iii) Not making inclusion of the output tax in the return
(iv) Taking more input tax credit than entitlement in the return
(v) Willingly evading/attempting to evade assessment and payment of taxes (vi) Non-submission of Input Output coefficient within the prescribed time
[Marks: 6]
END OF SECTION B
SECTION C Starts on page 5
Page 5 of 7 Section C
This section consists of 2 questions.
You are advised to spend no longer than 45 minutes on each question in this section. Section will carry 25 marks and allocation of marks for each sub-question is indicated next to the sub- question.
Question 03
Mr. Joynul Ahmed worked as an Accounts Manager of SS Tel Enterprises Limited and going to submit his first tax return through online for the assessment year 2020-2021. His Income for the year ended on 30 June 2020 were as follow:
(1) Income from salary;
(a) Basic salary is Tk.40,000 per month
(b) Medical allowance Tk.2,00 per month and he received Tk.25,000 for his eye surgery (c) Mr. Ahmed contributed 10% of his basic salary to a Recognized Provident Fund and
his employer also contributed the same
(d) He received leave encashment Tk.12,000 yearly
(e) Received Tk. 60,000 from Workers’ Participation Fund (WPF), which fund established under The Bangladesh Labor Act, 2006
(f) Mr. Ahmed has been provided with a car for his private use, in addition he received conveyance allowance Tk.2,000 per month
(g) Festival bonus amounting Tk. 80,000 (h) House rent allowance yearly Tk. 300,000 (2) Interest on Security:
(a) Received Tk. 45,000 as interest (net of tax) on 3-monthly profit based Sanchaypatra (b) Interest on Wage Earner’s Bond Tk. 60,000
(c) Investment earlier year Tk. 50,000 on 15% taxable Government Security. The bank charge commission Tk.200 to realized the interest and deduct TDS @5% on interest.
(3) Income from House Property:
Mr. Ahmed own a commercial floor space at Mohakhali C/A with area 5500 square feet which Municipal value yearly Tk.120 per sft. He let out this floor space to a Private Limited company. Tenant paid annual rental value Tk. 570,000 after deducting tax at source at prescribed rate 5%. During the year he spent the following expenses:
(a) Repair expenses Tk.171,000 and salary of night guard Tk.36,000 (b) City corporation tax Tk. 8,000
(c) Fire Insurance premium Tk. 7,000 (d) Water and gas bill of tenant Tk. 24,000 (e) Interest on Mortgage Tk. 12,000 (f) Legal expenses Tk. 10,000 (4) Income from Agriculture:
Mr. Ahmed received Tk. 300,000 from sales of robi crop, Tk. 50,000 from borga, Tk.
20,000 from lease of agricultural land. He paid Local tax Tk. 4,000 crop insurance premium Tk. 6,000 and allowable depreciation is Tk. 3,000
SECTION C Continues on page 6
Page 6 of 7 (5) Income from Business:
Mr. Ahmed solely owned a Software Development firm from where he received Tk. 14,000 as profit
(6) Income from other Sources:
(a) Received Tk.27,000 as interest on Fixed deposit after deducting TDS @10%
(b) Cash Dividend from a Public Limited company, listed in Dhaka stock exchange Tk.72,000 (Net of tax)
(c) Dividend received from ICB Mutual Fund Tk.45,000 (Net of tax) His investment during the year:
(i) Purchases a laptop Tk. 120,000
(ii) Payment of Life Insurance Premium Tk. 60,000 (iii) Donate to CRP, Mirpur Tk. 40,000
(iv) Contribution to monthly deposit pension scheme Tk. 8,000 p.m.
(v) Donate to Asiatic Society, Bangladesh Tk. 50,000 (vi) Purchases Government Treasury Bond Tk. 200,000
Mr. Ahmed’s Net Assets at the end of June 2020 was Tk. 34,000,000
Compute taxable Income and the Net tax liability for the assessment year 2020-2021
[Marks: 25]
Question 04
(a) The following accounts appeared in the XYZ Foods Limited, a non-publicly traded company established in 2010, for the year ended on December 31, 2019. XYZ reported net sales Tk. 100 million and net profit Tk. 5 million for the year. However, after careful scrutiny of the accounts, you have listed the following items (with actual figure of expenses) that are inadmissible expenses as per the provisions of income tax law.
Salaries and wages Tk. 20,000,000
Free sample distribution 550,000
Technical fee 600,000
Donation to Dhaka University 800,000
Travel Expense 3,000,000
Provision for bad debt 500,000
Entertainment 300,000
Sales Promotion 700,000
Additional Information:
* Salaries and allowances include perquisites Tk. 4,000,000 [CEO Tk. 800,000; CFO Tk. 600,000; Chief Research Advisor (person with disability) Tk. 2,600,000], and incentive bonus of Tk. 600,000
* Provision for Bad Debt includes Tk. 100,000 as Bad Debt Written off.
* One-third of the travel expense is related to overseas travel.
SECTION C Continues on page 7
Page 7 of 7 Required:
(i) State the provisions related to the listed items in computing amount of inadmissible portion of these expenses.
(ii) You have identified that one of the listed items could provide rebate as CSR expense. What is the maximum amount on which such rebate is allowed (assume total taxable income of XYZ for the year is Tk. 11,024,000)? How much rebate for the CSR expense would you expect for the year?
(b) The following information has been taken from the accounting records of XYZ Bangladesh Limited for the year 2019:
Raw materials inventory, January 1 Tk. 90,000 Raw materials inventory, December 31 60,000 Work in process inventory, January 1 180,000 Work in process inventory, December 31 100,000 Finished goods inventory, January 1 260,000 Finished goods inventory, December 31 210,000
Purchase of raw materials Tk. 750,000; direct labor Tk. 150,000; manufacturing overhead Tk. 640,000; selling expenses Tk. 140,000; and administrative expenses Tk. 270,000. The company sells its product by adding 15% profit on cost. Determine the amount of VAT if the rate is 15%.
[Marks: (15+10) = 25]
* End of Question Paper *
