ICAB Professional Level Syllabus Weight Based Tax Planning & Compliance QUESTION & ANSWER BANK

CA Professional Level
QUESTION & ANSWER BANK

(PE-III & APPLICATION LEVEL)
(COVERING FINANCE ACT 2018)
Tax Planning & Compliance
Compiled & Updated by:
Saiful Islam Mozumder

[email protected]
ShirazkhanBasak& Co.
Question Analysis
Syllabus area Weighting
(indicative
%)
1 Critical aspects of income tax and its
administrative functioning 15
2 Tax computation of business entities and
individuals 25
3 Special provisions, recovery, refund and
dispute resolution in Tax Law 20
4 International taxation and ethical
consideration 15
5 Tax Research, planning, compliances,
VAT and other taxes 25
Total 100
Courtesy:
Saiful Islam Mozumder
[email protected]
ShirazkhanBasak& Co.
Tax Planning & Compliance – 100 Marks
Module aim
To develop students’ understanding of the critical aspects of Bangladesh Taxation; application of the
knowledge gained at the Certificate Level study in the areas of tax planning, compliances, tax principles,
management, administration, computation, collections, payments, return preparation, filing, dispute issues
and Value Added Tax (VAT) rules.
On completion of this module, students will be able to:
Critical aspects of income tax and its administrative functioning
LO1: explain the objectives, concepts, characteristics of taxation and describe the basic structure
of tax administration, management in Bangladesh.
Tax computation of business entities and individuals
LO2: apply the knowledge of tax calculation, tax rates, incomes, allowances, exemptions,
credits, accounting of income tax, tax return preparation, payments, collections as per Income
Tax Rules of Bangladesh.
Special provisions, recovery, refund and dispute resolution in Tax Law
LO3: identify liabilities in special cases, avoidance of tax, recovery, refund, penalty,
appeal and dispute resolution provisions in Income Tax Law.
International taxation and ethical consideration
LO4: explain the provisions of double taxation relief, transfer pricing, and solution to ethical
issues.
Tax Research, planning, compliances, VAT and other taxes
LO5: Explain tax research, tax compliances, tax planning and operations of VAT and other taxes
in Bangladesh.
Method of assessment
The module is assessed by a 3.0 hours exam.
Specification Grid
This grid shows the relative weightings of subjects within this module and should guide the relative
study time spent on each. Over time the marks available in the assessment will equate to the weightings
below, while slight variations may occur in individual assessments to enable suitably rigorous questions
to be set.
Syllabus area Weighting

(indicative %)
1 Critical aspects of income tax and its administrative functioning 15
2 Tax computation of business entities and individuals 25
3 Special provisions, recovery, refund and dispute resolution in Tax Law 20
4 International taxation and ethical consideration 15
5 Tax Research, planning, compliances, VAT and other taxes 25
Total 100
The following learning outcomes should be read in conjunction with the relevant sections of the
technical knowledge grids.
Critical aspects of income tax and its administrative functioning: L01

1 Objectives, concepts, characteristics of taxation and describe the basic structure of tax
administration, management in Bangladesh.
Candidates will be able to explain the general principles and administration of taxation in
Bangladesh.
In the examination, candidates may be required to:
Basic concepts of taxation

a)
describe the meaning, importance and characteristics of tax
b)
explain the different types of tax, the tax structure in Bangladesh
c)
define, importance and scope of Bangladesh tax law
d)
define tax incidence, tax impact, tax shifting
Country Fiscal Management & Taxation
e) explain the country Fiscal Management procedures and tax for social welfare issue
f) importance of tax for country's development and relation between tax and economic
development
g) identify the changes made in the Finance Act regarding tax and its relation with
National Budget of Bangladesh
h) why tax is important for citizen social security and how it can have adverse effect
Introduction to Bangladesh income tax

i)
describe the history of taxation system in Sub continent and in Bangladesh
j) explain the tax structure in Bangladesh (Scope of Bangladesh Income Tax) and the
enactment procedures (Amendments, Deletion & Introduction) of tax
Basics of income tax

k) describe the concept of income, income tax, capital or revenue receipts and
expenditures, different income tax rate for individual and business
l) describe the rules for determining residential status of assesse and effects of
residential status of an assesse in income computation
m) scope of income as per Bangladesh Income Tax Law, computation of taxable income
and Tax liability on income
Administration of taxation
n)
explain subordination, control, power, functions of Income Tax authority
o) meaning and formation of Taxes Appellate Tribunal

p)
commencement and application of Alternate Dispute Resolution (ADR)
q) identify the records to be maintained by individuals and companies for the purpose of
tax
r)
determine the periods for which records must be maintained
s)
explain the key features of Bangladesh tax system
t) explain the key features of the self assessment system for companies and individuals
u)
explain the due dates for tax return, tax payments
v) identify and calculate the interest and penalties for late submissions or incorrect return
and payment of tax
Tax computation of business entities and individuals: L02
2 Tax calculation, tax rates, incomes, allowances, exemptions, credits, accounting of

income tax, tax return preparation, payments, and collections as per Income Tax Rules
of Bangladesh.
Candidates should be able to describe how taxation in Bangladesh is applied to the income,
expenditure, assets, liabilities or transactions of business entities and individuals.
Charge of tax
a) describe the provision regarding charge of income tax, charge of surcharge, charge of
additional tax, charge of excess profit tax, charge of minimum tax and scope of total
income
b) explain the income deemed to accrue or arise in Bangladesh
c) describe the provision regarding un-explained investments, income or expenditures and

special tax treatments in respect of some investments
Depreciation allowances
d) explain the written down value (tax base) of assets for the depreciation purpose,
disposal of assets & depreciation allowances
e) describe the difference between accounting & tax depreciation and its accounting
Computation and adjustments of income tax
f) definition of income from salaries, income from interest on securities, income from
house property, agricultural income, income from business or profession, income from
capital gain and income from other sources
g)
explain the adjustment of timing differences under various heads of income
h) define set off losses, carry forward & adjustment of losses, adjustment of depreciation
expenses (unadjusted) in calculation of income tax liability
Tax incentives and exemptions

i) describe the conditions and exemption procedure of Tax Holiday Scheme for various
industry (industrial undertaking, EPZ entity, cooperative society, trust, benevolent
institutes, etc.)
j) describe the eligibility and conditions of tax holiday, application procedures for
tax holiday, withdrawal and cancellation of tax holiday, maintenance/compliance

requirements for tax holiday
k) describe of investment tax credit, fully exempted income, tax at reduced rate and
special tax treatments
Tax collection (Withholding/TDS, Advance Taxation, Tax Payments)
l) brief procedure of deduction or collection of tax at source
m) describe the computation and payment of advance tax, consequences of failure to pay
advance tax, the payment of tax on the basis of return
Tax reporting (Various Returns)

n)
when to file a return and submission of return of withholding tax
o)
identify the obligation to furnish Annual Information Return
Tax assessment of individual (complex) and business entities
p) Tax assessment of individuals, entity (other than corporate) and corporates (complex)
Introduction to accounting of income tax

q)
explain the required & mandatories books & records regarding tax
r)
describe the tax provisioning, current tax, tax liability, tax payable, deferred tax
Special provisions, recovery, refund and dispute resolution in Tax Law LO3
3 Liabilities in special cases, avoidance of tax, recovery, refund, penalty, appeal and dispute
resolution provisions in Income Tax Law.
Candidates should be able to identify liabilities in special cases, avoidance of tax, recovery,
refund, penalty, appeal and dispute resolution provisions in Income Tax Law.
Liabilities in special cases
a) explain the liability of representative in certain cases (u/s 95), the persons to be treated as
agents (u/s 96), the rights of representatives to recover tax paid (u/s 97), the liability of
firm or association for unrecoverable tax due from partners or members (u/s 98), the
liability of partners, etc., for discontinued business of a firm, etc. (u/s 99), the liability of
directors for unrecoverable tax of private companies (u/s 100), the liability of liquidator
for tax of private companies under liquidation (u/s 101), the liability to tax in case of
shipping business of non-resident (u/s 102), the liability to tax in case of air transport
business of non-residents (u/s 103A)
Special provisions relating to avoidance of tax
b) Describe the provision of avoidance of tax through transactions with non-residents (u/s
104), avoidance of tax through transfer of assets (u/s 105), avoidance of tax by transactions in securities
(u/s 106), tax clearance certificate required for persons leaving Bangladesh (u/s 107)
Imposition of penalty
c)
describe the penalty for not maintaining accounts in the prescribed manner
d) describe the penalty for failure to file return, certificate, statement, accounts or
information, penalty for using fake Tax-payer's Identification Number, penalty for
failure to pay advance tax, penalty for non-compliance with notice, penalty for failure
to pay tax on the basis of return, penalty for concealment of income, penalty for default
in payment of tax.
e) describe the previous approval of Inspecting Joint Commissioner for imposing penalty,
the bar to imposition of penalty without hearing and penalty to be
with prejudice to other liability
f) describe the Orders of Appellate Joint Commissioner, Commissioner or Appellate

Tribunal to be sent to Deputy Commissioner of Taxes
Recovery of tax
g)
Explain the notice of demand
h) Describe the penalty for default in payment of tax, certificate for recovery of tax,
method of recovery by Tax Recovery Officer, power of withdrawal of certificate and
stay of proceeding, validity of certificate for recovery not open to dispute, recovery of
tax through Collector of District, recovery of tax through special Magistrates, other
modes of recovery
Refunds
i) explain the requirement to issue refund, entitlement to refund, claim of refund for
deceased or disabled persons, correctness of assessment, etc., not to be questioned,
refund on the basis of orders in appeal, form of claim and limitation, interest on
delayed refund and adjustment of refund against tax
Offences and prosecutions

j)
describe the provision of punishment for non-compliance of certain obligations
k)
explain the rules regarding punishment for false statement
l) explain the punishment for improper use of TIN, for furnishing fake audit report, for
obstructing an income tax authority, for unauthorized employment,
for concealment of income, for disposal of property to prevent attachment
m) describe the provision of sanction for prosecution and the provision of power to
compound offences, the trail by special judge
Appeal and reference

n) describe the procedure of disposal of appeal by the Appellate Tribunal, Reference to the
High Court Division, decision of the High Court Division, appeal to the Appellate
Division
Power of Income Tax Authorities including search & seizure

o)
introduction of Income Tax Authorities
p) describe the power to call for information, to inspect register/records of assesse, the
power of survey, the additional power of enquiry & call for productions of
books/supporting, the power of search & seizure, the power of imposing injunction, the
retention of seized assets/property, power to take evidence under oath
Alternative dispute resolution

q)
what is alternative dispute resolution
r) describe the eligibility for application, the application procedure for ADR, the
procedures of disposal by the ADR, the eligibility for appointment as facilitator, the
decision of the ADR
s) identify the effect of agreement, the limitation for appeal where agreement in not
concluded, the fees to be paid to facilitator
International taxation and ethical consideration LO4
4 Provisions of double taxation relief, transfer pricing, and solution to ethical issues.
Candidate should be able to explain the provisions of double taxation relief, transfer pricing,
and solution to ethical issues.
Double taxation relief
a) explain the basic concepts of double taxation relief, the agreement to avoid Double
Taxation, the methods of avoiding double taxation and how the methods work
b)
describe the relief in respect of income arising outside Bangladesh
c)
describe the Tax Treaty and some other concepts used in DTAA
Miscellaneous
d) describe the proceeding against companies under liquidation, indemnity, the Bar of
suits and prosecution, the ordinance to have effect pending legislative provision for
charge of tax, the requirement of certificate or acknowledgement receipt of return in
certain cases
e) explain the issuance of temporary registration number, displaying of TIN certificate,

the reward for outstanding performance collection and detection of evasion of taxes,
the assistance to income tax authorities, the ordinance to override other laws
International Taxation
Transfer pricing
f)
describe the concepts of transfer pricing
g)
Introduction of transfer pricing regulations in Bangladesh
h) Meaning assigned to certain connotations relating to transfer pricing in tax law (u/s
107A)
i)
describe the arm's length price the basis of determining transfer pricing
j) describe the methods of computation of arm's length price (u/s 107C), the most
appropriate method for determining the arm's length price (Rule 72)
k) describe the factors to be considered in judging uncontrolled international transaction,

the reference to transfer pricing officer (u/s 107D), the reporting of information
relating to international transaction (u/s 107E), the assessment of transfer pricing and
the penalties in transfer pricing regulation
Ethics
l) define five fundamental principles of ethics, the threats and safeguards framework and
ethical conflict resolution
m) explain the conflicts of interest, disclosure of information for taxation, confidentiality

of information regarding tax, new client procedures, money laundering, tax avoidance
and tax evasion and tax professional responsibilities in tax practice
Tax Research, planning, compliances, VAT and other taxes LO5
5 Tax research, tax compliances, tax planning and operations of VAT and other taxes in
Bangladesh
Candidates should be able to explain Tax research, tax compliances, tax planning and should
be able to describe the general knowledge on VAT and other indirect taxes, some relevant
terms, scope, registration, measurement, administration, turnover tax, supplementary duty
and exempt goods and services.
Practical project
a) explain tax research and writing project, volunteer income tax, tax planning project and
tax return project
Tax compliance
b)
explain the taxpayer filling requirements (due dates, extensions etc.)
c)
describe the books of accounts and records to be maintained by the taxpayer
d) describe the meaning of tax audits, tax law sources, tax research, taxpayer and tax
practitioner penalties
Tax planning
e) describe the tax planning measures to minimize tax liabilities, tax strategies to meet
business objectives
f) explain alternative tax strategies relating to corporate transformation, alternative tax

treatments arising from past transactions
g)
explain the limitations to tax planning strategies, tax avoidance vs. tax evasion
h)
explain the ethical and professional issues in giving tax planning advice
Value Added Tax and other taxes:
VAT
i) define the VAT books of accounts & records, VAT provisioning, VAT rates and its
application, vat returns
j) computation and adjustments of VAT collection (Withholding, Advance VAT, VAT

Payments)
k) explain social security & VAT incentives, exemptions and economic developments
l) describe VAT reporting, liabilities in special cases, special provisions relating to

avoidance of VAT, imposition of penalty for non-compliance of VAT rules
m) Explain recovery of VAT, refunds of VAT, offences and prosecutions for non-
compliance of VAT rules, appeal and reference regarding VAT, the provision
regarding alternative dispute resolution
n)
explain value added tax assessment project
Other Taxes
o) Describe the meaning and implementation of Custom Duty, Supplementary Duty, Gift
Tax and Property/Holding Tax
1.Critical aspects of income tax and its administrative functioning (15%)
S.L Question Year
1 .Write short notes on the following in relation to the ITO 1984: Nov Dec
a. Universal self-assessment. 2010
b. Final discharge.
c. Technical know-how
d. Accelerated depreciation.
a. Universal Self Assessment: Sec 82BB
Where an assessee furnishes a correct and complete return of income either manually or electronically, Subject to sub-
section (3), the Deputy Commissioner of Taxes shall received such return himself or cause to be received by any other
official authorized by him and issue a receipt of such return manually or electronically and the said receipt shall be
deemed to be an order of assessment for the assessment year for which the return is filed.
A return shall be taken to be complete, if it is filed in accordance with the provisions of section 75(2) or 75(3) and tax
has been paid as per section 74.
Notwithstanding anything contained in sub-section (1) and section 93, the Board or any authority subordinate to the
Board, if so authorised by the Board in this behalf, may select, in the manner to be determined by the Board, a number
of these returns filed under sub-section (1) and refer the returns so selected to the Deputy Commissioner of Taxes for
the purpose of audit and the Deputy Commissioner of Taxes shall thereupon proceed, if so required, to make the
assessment under section 83 or section 84, as the case may be
Provided that a return of income filed under this section shall not be selected for audit where such return shows at least twenty per
cent higher income than the income assessed or shown in the return of the immediate preceding assessment year and-
(a) does not have any income which is exempted from tax; or
(b) does not have receipt of Gift; or
(c) does not have loan other than from a bank or financial institution; or
(d) sum of accretion of net wealth and shown expenditure is covered by the income.
No question as to the source of investment made by a new assessee deriving income from business or profession shall
be raised, if he shows income at least not less than twenty five percent of the capital invested in business or profession
and pays tax on such income before filing return.
The initial capital investment or any fraction thereof shall not be transferred in any manner or lent out within five years
from the end of the assessment year in respect of which assesse's return of income has been filed under this section.
1 What will be the consequences of failure to deduct income tax and to pay the same to the Nov Dec
credit of the Government in the above cases? 2010
2 Write shorts notes on the following: May June

a. Company. 2013
b. Dividend.
c. Income.
d. Market Value.
e. Principal Officer.
a. ‗Company‘ means a company as defined in the Companies Act, 1913 or Companies Act 1994 and
includes
i) a body corporate established or constituted by or under any law for the time being in force;
ii) any nationalized banking or other financial institution, insurance body and industrial or businessenterprise:
iii) an association or combination of persons. called by whatever name. if any of such persons is a
company as defined in the Companies Act, 1913 or Companies Act 1994.
iv) any association or body incorporated by or under the laws of a country outside Bangladesh; and;
v) anyforeign association or body, not incorporated by or under any law, which the Board may, by general
or special order, declare to be a company for the purposes of this Ordinance;
Courtesy: Saiful Islam Mozumder, ShirazkhanBasak& Co. [email protected] cell-01711-981920
Reference: Section 2(20) of the Income Tax Ordinance 1984 (ITO 1984)
b. Dividend includes —
i) any distribution by a company of accumulated profits, whether capitalized or not, if such

distribution entails the release by the company to its shareholders of all or any part of its assets or
reserves:
ii) any distribution by a company, to the extent to which the company possesses accumulated profits,
whether capitalized or not, to its shareholders of debentures, debenture-stock or deposit certificates
in any form, whether with or without interest;
iii) any distribution made to the shareholders of a company on its liquidation to the extent to which the
distribution is attributable to the accumulated profit of the company immediately before its
liquidation, whether capitalized or not;
iv) any distribution by a company to its shareholders on the reduction of its capital, to the extent to
which the company possesses accumulated profit, whether such accumulated profits have been
capitalized or not:
v) any profit remitted outside Bangladesh by a company not incorporated in Bangladesh under
Companies Act 1994.
vi) any payment by a private company by way of advance or loan to a shareholder or any payment by
any such company for the individual benefit of such shareholder, to the extent to which the
company, in either case, possesses accumulated profit.
Reference: Section 2(26) of the ITO 1984
c. „Income‟ includes —
i) any income, profit or gains, from whatever source derived, chargeable to tax under any provision of
Section 20 of the ITO 1984.
ii) any loss of such income, profits or gains;
iii) the profits and gains of any business of insurance carried on by a mutual insurance association
computed in accordance with paragraph 8 of the fourth Schedule to ITO 1984:
iv) 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 ITO 1984.
d. ‗Market Value‘, in ITO 1984 referred to agricultural produce, which means —
i) where such produce is ordinarily sold in the market in its raw state or after application to it of any
process employed by a cultivator to render it fit to be taken to the market, the value calculated
according to the average price at which it has been sold during the year previous to that in which
the income derived from such produce first becomes assessable; and
ii) where such produce is not ordinarily sold in the market in its raw state,'the aggregate of —
1) t he expenses of cult ivat ion:
2) the land development tax or rent paid for the lands in which it was grown; and
3) such amount as the deputy Commissioner of Taxes finds, having regard to the circumstances of
each case, to represent a reasonable rate of profit on the sale of the produce in question as
agricultural produce;
e.„Principal Officer‟ as per ITO 1984, is applicable to a local authority, a company, any other public
body or any association of persons and includes —
i) managing director, manager, secretary, treasurer, agent or accountant (by whatever designation
known), or any officer responsible for management of the affairs, or of the accounts, of the
authority, company, body or association; and
ii) any person connected with the management or the administration of the local authority, company,
body or association upon whom the Deputy Commissioner of Taxes has served a notice of his
intention to treat him as principal thereof:
Reference: Section 2(48) of theITO 1984
3 Write short notes on the following: May

(a) Royalty June
(b) Speculative Business 2011
(c) Transfer
(d) Amalgamation
(e) Market value.
Answer:
(a) Royalty
As per section 2(56) of the ITO 1984, ―royalty‖ means consideration (including any lump sum
consideration but excluding any consideration which is classifiable as income of the recipient under the
head ―Capital Gains‖) for
(i)transfer of all or any rights, including the granting of a license in respect of a patent, invention,
model, design, secret process or formula, or trade mark or similar property;
(ii) the imparting of any information concerning the working of, or the use of, a patent, invention,
model, design, secret process or formula, or trade mark or similar property;
(iii) the use of any patent, invention, model, design, secret process or formula, or trade mark or
similar property;
(iv) the imparting of any information concerning technical, industrial, commercial, or scientific
knowledge or experience or skill;
(v) the transfer of all or any rights, including granting of a license, in respect of any copyright,
literary, artistic or scientific work, including films or video tapes for use in connection with
television or tapes for use in connection with radio broadcasting, but not including consideration
for sales, distribution or exhibition of cinematograph films; or
(vi) the rendering of any services in connection with any of the aforesaid activities.
(b) Speculative Business

As per Section 2 (61) ―Speculation business‖means business in which a contract for the purchase or sales
of any commodity including stocks and shares, is periodically or ultimately settled otherwise than by the
actual delivery or transfer of the commodity or scripts, but does not include business in which-
(i) a contract in respect of raw materials or merchandise is entered into by a person in the course of his
manufacturing or mercantile business to guard against loss through future price fluctuations;
(ii) a contract in respect of stocks and shares is entered into by a dealer or investor therein to guard
against loss in his holdings of stocks and shares through price fluctuations; and
(iii) a contract is entered into by a member of a forward market or stock exchange in course of any
transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the
ordinary course of business as such members;
(c) Transfer
Section 2(66) defines “Transfer” as under :

―Transfer‖ in relation to a capital asset, includes the sale, exchange or relinquishment of the asset, or the
extinguishments of any right therein, but does not include :
(i) Any transfer of the capital asset under a gift, bequest, will or an irrevocable trust;
(ii) Any distribution of the assets of a company to its shareholders on its liquidation; and
(iii) Any distribution of capital assets on the dissolution of a firm or other association of persons or on the
partition of a Hindu undivided family.
(d) Amalgamation.
Section 2 (2) ―amalgamation‖, in relation to companies, means the merger of one or more companies with
another company, or the merger of two or more companies to form one company (the company or companies which
so merged being referred to as the amalgamating company or companies and the company with which they merge or
which is formed as a result of the merger as the amalgamated company) in such a manner that by virtue of, and for
reasons attributable to the merger—
(i) all the property of the amalgamating company or companies immediately before the merger, becomes the
property of the amalgamated company;
(ii) all the liabilities of the amalgamating company or companies immediately before the merger, become the
liabilities of the amalgamated company; and
(iii) the shareholders holding not less than nine-tenths in value of the shares in the amalgamating company or
companies (other than shares already held therein immediately before the merger by, or by a nominee for, the
amalgamated company or its subsidiary) become shareholders of the amalgamated company;
(e) Market Value
As per section 2 (40) for the purpose, ‗market value‘ in respect of agricultural produce, means-
1. where such produce is ordinarily sold in the market in its raw state or after application to it of any process
employed by a cultivator to make it marketable, the value calculated according to the average price at
which it has been sold during the year previous to that in which the income derived from such produce first
becomes assessable; and
2. where such produce is not ordinarily sold in the market in its raw state, the aggregate of-
(i) the expenses of cultivation;
(ii) the land development tax or rent paid for the lands in which it was grown; and
(iii) such amount as the Deputy Commissioner of Taxes finds, having regard to the
circumstances of each case, to represent a reasonable rate of profit on the sale of the produce
in question as agricultural produce.
4 May
.Write short notes on the following:
June
a) Capital Assets. 2012
b) Fair Market Value
c) Fees for Technical Service
d) Agricultural Income
e) Perquisites
a) Capital Assets:
Capital Assets means property of any kind held by an assessee, whether or not connected with business or
profession, but does not include-
1. Any stock-in-trade (not being stocks and shares) consumable stores or raw materials held for the
purposes of business or profession,
2. Personal effects, that is to say, movable property (including wearing apparel, jewelers, furniture,
fixture, equipment and vehicles), which are held exclusively for personal use by, and are not used for
purposes of the business or profession of the assessee or any member of his family dependent on him.
3. Rural agricultural land
b) FairMarket Value:

Fair Market Valuemeans, in relation to capital assets-
1) The price which such 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 Deputy Commissioner of taxes may, with
the approval in writing of the Inspecting Joint Commissioner of Taxes, determine.
2) The residual value received from lessee in case of an asset leased by a 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 less than the cost of acquisition to the lessor financial institution.
c) Fees for Technical Service:
Fees for Technical Service means any consideration (including any lumpsum consideration) for rendering of
any managerial, technical or consultancy services but does not include consideration for any construction,
assembly, mining or like project undertaken by the recipient, or consideration which would be income of the
recipient classifiable under the head ―Salaries‖.
d)Agricultural Income means:
Agricultural Income means-
1) any Income derived from any land in Bangladesh and used for agricultural purposes-
i) by means of agricult ural or

ii) by the performance of any process ordinarily employed by a cultivator torender the produce
ofsuch land fit to be taken to market or
iii) by the sale of the produce raised in theland by the cultivator where no process other than to
rendering the produce marketable has been performed or
iv) by granting a right to any person to use the land for any period.
2) It also includes any income derived from any building which-
i) is occupied by the cultivator of such land where any process is carried on to render the produce of
land marketable;
ii) is on or in the immediate vicinity of such land and
iii) is required by the cultivator for dwelling or storehouse or out house by reason of his connection of
such land.
e)Perquisites:
There is an exclusive definition of perquisite at section 2(45) where perquisite means any payment or benefit made
to an employee in the form of cash or any other form but excluding the following:
i. Basic Salary
ii. Festival bonus
iii. Incentive bonus
iv. Arrear Salary
v. Advance Salary
vi. Leave encashment
vii. Leave Fare Assistance (LFA)
viii. Overtime
ix. Contribution by the employer to-
1) Recognized provident fund.
2) Approved Pension Fund.
3) Approved Gratuity Fund and
4) Approved Superannuation Fund.
5 Nov
Write short notes on the following in relation to Income Tax Ordinance 1984
Dec
a) Double taxation avoidance agreement 2012
b) Best Judgment assessment
c) Refund of tax
d) Capital gain
(a) Double taxation avoidance agreement
According to section 144 of ITO 1984

Double taxation avoidance agreement is usually an agreement between 2 countries seeking to avoid double
taxation by defining the taxing rights of each country with regard to cross border flows of income and providing
tax credits or exemptions to eliminate double taxation. The Govt. of Bangladesh also may enter into an
agreement with the Govt of other countries for the avoidance of double taxation and the prevention of fiscal
evasion. Income tax policy wing of the National Board of Revenue (NBR) is entrusted to negotiate the double
taxation treaty with foreign countries to promote foreign direct investment in Bangladesh. Such agreement will
come into force through notification in the official Gazette. It will be treated as an international law and
accordingly its legislative position would be over and above our Bangladesh tax law. The objectives of such
agreement are:-
a) Relief from the double tax payable;
b) Determining the income accruing or arising, or deemed to be accruing or arising to non-residents from
sourceswithin Bangladesh;
c) Where all the operations of business or profession are not carried on within Bangladesh, determining the
incomeattributable to operations carried on within or outside Bangladesh, or the income chargeable to tax in
Bangladesh in the hands of non- residents, including their agencies, branches or establishments in Bangladesh;
d) Determining the income to be attributable to any person resident in Bangladesh having any special
relationship with a non-resident;
e) Recovery of tax livable:
f) Exchange of information for the prevention of fiscal evasion.
g) To attract FDI in Bangladesh.
(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.
The DCT shall, by an order in writing, assess the total income of the assesse tothe best of his judgment and
determine the sum payable by the assessee on the basis of such assessment and communicate such order to the
assessee within 30 days.
c)Refund of Tax:
A person, who satisfies the DCT or other authority appointed by the Government that the tax paid by him or on his
behalf or treated as paid by him or on his behalf for any year exceeds the amount with which he is properly
chargeable for that year, shall be entitled to a refund of any such excess payment.
In case of death, incapacity, insolvency, liquidation or other cause, person, is unable to claim or receive any refund
due to him, his legal representative, or the trustee, guarding or receiver, can claim or receive such refund for the
benefit of such person.

No questions can be raised by the claimant regarding correctness or validity of any assessment after claiming refund.
(d) Capital Gain:
According to Section 31 of ITO 1984
Tax shall be payable by an assessee under the head ―Capital gains‖ in respect of any profits and gains arising from the
transfer of a capital asset and such profit and gains shall be deemed to be the incomeof the income year in which the
transfer took place. In computing capital gain the following expenditure is deductible from the full value of
consideration receivable or the fair market value of the asset whichever is higher, would be treated as capital profit or
capital gain.
i. Any expenditure incurred solely in connection with the transfer of the capital asset.
ii. The cost of acquisition of the capital asset and any capital expenditure incurred for any improvements
Where a capital gain arises from the transfer of a capital asset being Government Securities and stocks and shares of
public companies listed with a stock exchange in Bangladesh, then no tax shall be charged.
Example:
Cost of a capital asset Tk. 100,000
Written Down Value Tk. 60,000
Sales Value or Consideration Received Tk. 120.000
Here Capital gain = (120,000 -100,000) = 20,000

6 Write short notes on the following in relation to I.T.O 1984: Nov 10
(a) Assessment on the basis of report of a Chartered Accountant: u/s 83 AAA Dec
(b) Carry forward of loss under the head ―Capital Gains‖: u/s 40. 2011
(c) Revisional power of the commissioner of Taxes: u/s 121A.
(d) Interest payable by the government on delayed refund: u/s 151.
(e) Rent free accommodation Rule:33B
(a) Assessment on the basis of report of a Chartered Accountant: u/s 83 AAA
When NBR has reasonable cause to believe that a return submitted by any company assessee is incorrect or
incomplete, then the Board may appoint a chartered accountant to examine the books of accounts of that
company.
He will then exercise the powers and functions of a DCT only relating to section 79 and other than clause
(f) of section 113.After examination of the books of accounts he will submit report to the Board and the Board
will then forward the report to the DCT for consideration. After receiving the report DCT will proceed to
assess the income of the company by issuing notice u/s 83(1)
(b) Carry forward of loss under the head “Capital Gain”: u/s 40.
Loss under the head ―Capital Gain‖ can be set-off against income from the same head during the income year. If
the loss cannot be set-off in the above manner, the loss or portion thereof can be carried forward to the next
assessment year and set-off against income under the same head in that year. The loss can be carried forward
up to 6 successive assessment years.
Loss up to Taka 5.000/- cannot be carried forward. Amount in excess of Taka 5,000/- can only be carried
forward and set-off in the aforesaid manner.

(c) Revisional power of the Commissioner of Taxes: u/s 121A.
An assessee may file revision petition before the Commissioner of Taxes within sixty days of receipt of
Order of the Deputy Commissioner of Taxes or Appellate Joint or Additional Commissioner of Taxes on
payment of fees of Taka 200/- along with payment of admitted tax liability. Revision petition will be deemed to
have been allowed if the commissioner fails to give judgment within sixty days from the date of filing the
revision application.
(d) Interest payable by the government on delayed refund: u/s 151.

Where a refund due to an assessee is not paid within two months of the date of claim of refund, interest @ seven
and a half per cent per annum shall be payable to the assessee on the amount of refund from the month following
the aforesaid two months to the date of issue of the refund.
(e) Rent free accommodation Rule: 33B

(i) Where the employee is provided with rent free accommodation, the rental value of the
accommodation or twenty five per cent of the basic salary of the employee, whichever is less, shall
be included in his income.
(ii) Where the accommodation is provided to the employee at a concessional rate, the difference between
the rent actually paid by him and the amount determined to be includible in an employee's salary
under rule (1) shall be added to his income.
7 Nov
Discuss the tax payment provisions of income tax law with regard to the following: Dec
(i) Income from trading in stocks and shares of public companies listed with 2010
Stock Exchange(s).
(ii) Sale of shares of a company for raising its share capital through public
offering at a premium over face value.
(iii) Trading income of a member of CSE and DSE, engaged in brokerage
business.
8 What are the time limits and relaxation thereof, if any, in respect of filing of an appeal to Nov
the various Income Tax Appellate Authorities and making application for reference to Dec
the High Court Division under the ITO 1984? 2010
6
9 What is the minimum amount of tax, if any, that needs to be paid at each of the Nov
above stages? Dec
2010
10 Nov
Dec
What do you understand by a point of fact and a point of law? 2010
11 Section 30 has been amended to restrict the claim of deduction against income from Nov
business or profession in the following cases: Dec
(i) Perquisites 2014
(ii) H. O. Expenses
(iii) Royalty, Technical know-how fees etc.
(iv) Incentive Bonus
State, with examples, how the above will be determined in computation of Total Income
when net profit is arrived at after charging such expenses.

Section 30 of the Income tax Ordinance, 1984 puts some restriction on extent of admissibility of certain
expenditures in computing ―income from business or profession‖.
(i) Section 30(e) states the limit of amount of admissible perquisite to an employee, in anincome year is
Tk. 350,000. If an employee is given perquisite of Tk. 380,000 in an income year, the excess amount
over Tk 350,000 of Tk 30,000 (380,000 - 350,000) will be added to business income of the
employer.
(ii) Section 30(g) states the limit of amount of admissible ―head office expense‖ of a company not
incorporated in Bangladesh at 10% of net profit disclosed in the statement of account. For example a
company (not incorporated in Bangladesh) states net profit in the Profit &Loss Account at Tk. 500,000
after charging ―head office expenses‖ at Tk. 80,000. In determining income for tax purpose ―head
office expenses‖ will be admissible up to Tk 50,000 (10% of net profit). The remaining Amount of
Tk.30,000(80,000 - 50,000) will be added to net income of Tk. 500,000.
(iii) Section 30(h) states the limit of amount of admissible ―royalty, technical know howfee‖ in computing
business income at 8% of net profit disclosed in the statement of account. For example a business states net
profit in the Profit & Loss Account at Tk.400,000 after charging ―royalty ,technical know how fee‖ at Tk.
60,000. In determining income for tax purpose ―royalty, technical know how fee‖ will be admissible up
to 32,000 (8% of net profit of Tk 400,000) The remaining amount of Tk. 28,000 (60,000 - 32,000)
will be added to net income of Tk. 400,000.
(iv) Section 30(j) states the limit of amount of admissible ―incentive bonus‖ in computing business income at
10% of net profit disclosed in the statement of account. For example a business states net profit in the
Profit &Loss Account at Tk. 600,000 after charging ―incentive bonus‖ paid to all employees at Tk.
80,000. In determining income for tax purpose ―incentive bonus‖ will be admissible up to Tk60,000 (10%
of net profit of Tk. 600,000) .The remaining amount of Tk. 20,000 (80,000 – 60,000) will be added to
net income of Tk. 600,000.
12 Mention the allowable limits for the following expenses under the Income Tax May
Ordinance, 1984: June
i. Perquisites under Section 30 (e) of the Income Tax Ordinance 1984: 2014
ii. H. O. Expenses in the case of a foreign company not incorporated in Bangladesh.
iii. Royalty, Technical Services fees, and technical know how fee.
iv. Entertainment expenses incurred by a company
v. Overseas Travelling Expenses by a director of a company.
The allowable limits for the stated expenses under the ITO 1984 are as follows:
S.L Expenses Allowable limits
(i) Perquisites as defined in Tk. 3.50 lakh in an income year as per Section 30 (e) of the ITO
section2(45) 1984
(ii) H. O. Expenses in the case of 10% of the net profit disclosed in the statement of accounts,
foreigncompany not incorporated Section 30 (g)
inBangladesh
(iii) Payment of Royalty, Technical 8% of the net profit disclosed in the statement of accounts,
Services fees, and Technical Section 30 (h)
know how fee
(iv) Entertainment expenses incurred a) On the first taka 10 lakh of income, profits and gains of the
by a company business or profession computed before making any allowance in
respect of expenditure on entertainment : at the rate of 4%.
b) On the balance of income, profits and gains of the business or
profession computed in the manner aforesaid: at the rate of
2% (Rule 65 of the Income Tax Rules 1984).

(v) Overseas Travelling Expenses by a Limited to 1% of the disclosed turnover 30(k)
director of a company
13 May
Explain the following :- June
i. Undistributed Profit of a listed company under Section 16B of the Income Tax 2014
Ordinance 1984
ii. Excess Profit Tax of a banking company under Section 16C of the Income Tax
Ordinance 1984
iii. Charge of minimum tax on a firm under Section 16CCC of the Income Tax
Ordinance 1984
i)According to Section 16B of the Income Tax Ordinance 1984 (ITO 1984) where a public limited
company, not being a banking or insurance company, listed with any stock exchange in
Bangladesh, has not issued, declared or distributed dividend or bonus share equivalent to at least 15%
of its paid up capital to its shareholders within a period of six months immediately following any
income year, the company shall be charged additional tax at the rate of five percent on the
undistributed profit in addition to tax payable under said Ordinance. Here ―undistributed profit‖ means
accumulated profit including free reserve.
(ii) According to Section 16C of the ITO 1984 where a banking company shows profit in its
return of income for an income year at an amount exceeding fifty percent of its capital together with
reserve, the company, in addition to tax payable under said Ordinance, shall pay an excess profit tax for
that year at the rate of fifteen on so much of profit as it exceeds fifty percent of the aggregate sum of the
capital and reserve as aforesaid.
(iii) According to Section 16CCC of the ITO 1984 every firm having gross receipts of more
than taka fifty lakh or every company shall, irrespective of its profits or loss in an assessment year for
any reason whatsoever, including the sustaining of a loss, the setting off of a loss of earlier year or
years or the claiming of allowances or deductions (including depreciation) allowed under the
Ordinance, be liable to pay minimum tax at the rate of 0.30% (reduced from 0.50% by Finance Act
2014) of the amount representing such firm's or company's gross receipts from all sources for that year.
Here ‗gross receipts‘ means-
 all receipts derived from the sale of goods;
 all fees or charges for rendering services or giving benefits including commissions
ordiscounts;
 all receipts derived from any heads of income.
14 Nov
Dec
Who is liable to pay advance tax? How advance tax is computed and payable? 2013
Advancetax shall be payable by an assessee during each financial year if the total income of the assessee for
the latest income year in respect of which he has been assessed by way of regular assessment, or has been
provisionally assessed exceeds four lakh taka. Income from ―Agricultural Income‖ and ―Capital gains‖
shall not included in computation of income.
A new assessee who has not been assessed to tax previously is also liable to pay advance tax if hisincome
during any financial year likely to exceed four lakh taka.
The amount of advance tax payable by an assessee in a financial year shall be the amount equal to the tax
payable on his total income of the latest income year as assessed on regular basis or provisionally, as the case
may be, as reduced by the amount of tax required to be deducted or collected at source.
The tax shall be calculated at the rates in force in respect of the financial year for whicli income applied.
Advance tax is payable in four equal installmentson 15th September, 15th December, 15th March. and 15th
June. If the estimated income of any financial year is less than the last assessed income, the assessee may
pay the advance tax on the basis of estimates.
In case of new assessee by 15 June of the financial
year.
Additional condition
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 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 revisedbasis as reduced by the amount, if any, paid in
accordance with the original computation.
15 May
Discuss in the form of a Chart showing Income Tax Authorities under the category June
i) Administrative 2011
ii) Judicial
Organization Structure of Income Tax Authorities both Administrative and Judicial Income Tax
Authorities
Organization Structure
NBR
VAT Income Tax Customs
Administrative Judicial
Chief DG- Commissioner DG- DG- Commissioner Commissioner

Commissioner Inspection of Taxes-LTU Training Intelligence of Taxes of Taxes
of Taxes Taxes (Appeals)
Additional Additional Additional Additional Additional Additional

DG Commissioner DG DG Commissioner Commissioner
Inspection (Appeals)
Joint Joint Joint Joint Joint Joint

DG Commissioner DG DG Commissioner Commissioner
Inspection (Appeals)
Deputy Deputy Deputy

DG DCT DG DG DCT
Tax Recovery Tax Recovery

Officer Officer
Asst. Asst.
Commissioner Commissioner
Taxes
Extra. Asst. Extra. Asst.

Commissioner Commissioner

Inspector of Inspector
Taxes of Taxes
16 Explain the aspects relevant to formation, qualification of members and functioning May
of AppellateTribunal June
2011
Formulation, Qualification and Function of Appellate Tribunal [Sec 11]:
(1) For the purpose exercising the functions of the Appellate Tribunal under the Ordinance, the Government shall
establish a Taxes Appellate Tribunal consisting of a President and such other members as the Government may,
from time to time, appoint [Section 11(1)].
(2) A person shall not be appointed as a member of the Taxes Appellate Tribunal unless-
i) he was or is a member of the Board; or
ii) he was Commissioner of Taxes; or
iii) he is commissioner of Taxes; or
iv) he is a chartered accountant and practiced professionally for a period not less than 8 years; or
v) he is a cost and management accountant and practiced professionally for a period not less than 8
years; or
vi) he is an income-tax practitioner within the meaning of section 174(2)(f) and practiced
professionally for a period not less than 20 years; or
vii) he is a professional legislative expert having experience for a period not less than 8 years in the
process of drafting and making financial and tax laws; or
viii) he is an advocate and practiced professionally for not less than 10 years in any income-tax
office. [Section 11(3)]
ix) he is, was or has been a District Judge.
(3)The Government shall appoint a member of the Appellate Tribunal to be the Presidentthereof [Section
11(4)].
Exercise of Power of the Tribunal by Benches [Sec 12]:

(1) Unless the president in any particular case or class of cases otherwise directs, the powers and
functions of the Appellate Tribunal shall be exercised by Benches of the Appellate Tribunal,
hereinafter referred to as Bench, to be constituted by the President.
(2) A Bench shall be so constituted that it has not less than two members.
Decision of Bench [Sec 13]:
(1) Subject to the provisions of sections 13(2) and (3), the decision of bench in any case or on any point
shall be given in accordance with the opinion of the majority of its members.
(2) Any point on which the members of a Bench are equally divided shall be stated in writing and shall be
referred by the president to one or more other members of the Appellate Tribunal for hearing and the point
shall be decided according to the majority of the members of the Appellate Tribunal who have heard it
including those who first heard it.
(3) Where there are only two members of the Appellate Tribunal and they differ in any case, the Government
may appoint an additional member of the Appellate Tribunal for the purpose of hearing of the case and the
decision of the case shall be given in accordance with the opinionof the majority of the members of the
Appellate Tribunal as constituted with such additional member.
(4)Exercise of Power by one Member [Sec 14]:
Notwithstanding anything contained in section 12, the Government may direct that the powers and
functions of the Appellate Tribunal shall be exercised by any one of its member, or members or by two or
more members jointly or severally.
17 May
What are the different types of Depreciation allowances allowed under Income Tax June
Ordinance 1984? Explain ―Unabsorbed Depreciation‖. 2011
a) Different types of Depreciation allowances allowed under Third Schedule of Income Tax
Ordinance 1984:
 Normal depreciation allowance;

 Initial depreciation allowance;
 Accelerated depreciation allowance;
 Special depreciation allowance on ship.
b) When full effect of the depreciation as determined in accordance with provision of the Third Schedule of the
Income Tax Ordinance 1984 cannot be given that part of the depreciation is called ―Unabsorbed
Depreciation‖
In other way, where, in making an assessment for any year, full effect cannot be given to the depreciation allowances
referred to in section 29(1) (viii) owing to there being no profits or gains chargeable for that year or such profits or gains
being less than the allowance then, subject to the provisions of sub-section (7), the allowance or part of the allowance
to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation
for the following year and be deemed to be part of that allowance or if there is no such allowance for that year, be
deemed to be the allowance for that year and so on for succeeding years. Where, under section 42(6), depreciation
allowance is also to be carried forward, effect shall first be given to the provisions of sections 38 and 39(2).
18 Nov
Discuss in details regarding the insertion of new section 82C in place of existing section Dec
82C termed as final discharge of tax liability by the Finance Act 2011. 2011 10
The following new items added through Finance Act,2011:
(1) Tax deducted or collected at source from the sources mentioned in sub-section (2) shall not be adjusted
against refund due for earlier year or years or refund due for the assessment year from any source other
than those mentioned in sub-section (2).
(2) Income from the sources mentioned in sub-section (2) shall be determined on the basis of the tax deducted
or collected at source and the rate or rates of tax applicable for the assessment year.
(3) Income computed in accordance with sub-section (4) shall not be set off with loss computed under
any other source for the assessment year or with loss of earlier year or years.
(4) Any income shown or assessed in excess of the amount determined in sub-section (4) shall be liable to
tax at the rate or rates applicable for the assessment year.
(5) Any amount not admissible as allowances under section 30 shall be added to the income.
(6) Excess Income referred to in sub-section (6) and (7) shall be taxable at the rate or rates applicable
for the year after determining income under sub-section (4).
(7) The assessee shall have to pay surcharge where applicable.
19 .May
th
What are the income that are excluded as per the 6 schedule, part A of ITO 1984 in June
Computing total income of the following assessees: 2012
a)NGO registered under NGO Bureau
b)Trust
c)Religious or Charitable institution
Issues Section/Schedule Income which are excluded

Reference
Non Clause 1A of Part - A of
GovernmentOrganisatio 6th schedule Income derived from Micro Credit Operation by a Non
n (NGO) registered with GovernmentOrganisation(NGO) registered with NGO
NGO Affairs Bureau. Affairs Bureau.
Trust Any income from House Property held under trust or other
Clause 1 of Part - legal obligation wholly for religious or charitable
A of 6th schedule purpose
Religious or Charitable
Institution Any income of a religious or charitable institution
Clause 2 of Part -A of 6th
Schedule derived from voluntary contribution and applicable solely
to religious or charitable purpose
20 A refund of tax becomes due to an assessee on reduction of total income in appeal filed Nov
by him, but the Deputy Commissioner of Taxes does not take any action to make the Dec
refund. What are the remedies open to the assessee? 2011
As per section 151, where a refund due to the assessee is not paid within two months from the date of
refund becoming due consequent upon any appeal order, interest @ 7.5% per annum shall be payable to the
assessee on the amount of refund from the end of the said two months upto the date of refund.
On the other hand, as per section 152, the assessee may set off the refundable amount against the tax
payable under Income Tax Ordinance or treated, at the option in writing of the assessee, as payment of tax
payable under section 64 or section 74 as the case may be.
21 Nov
Dec
Discuss on modes of recovery by the Tax recovery Officer. 2011
As per section 139 of Income Tax Ordinance 1984, the Tax Recovery Officer upon receipt of a certificate
forwarded by the DCT, shall take one or more of the following steps to recover the amount as stated in the
certificate:
(1) attachment and sale, or sale without attachment, of any movable or immovable property of the
assessee:
(2) arrest of the assessee and his detention in prison;
(3) Appointment of a receiver for the management of the movable and immovable properties of the
assessee.
If the Tax Recovery Officer is not able to recover entire amount, he may send the certificate to other Tax
Recovery Officer, where he has information that the assessee has property or resides.
22 A Private Limited Company is wound up but tax assessed on the company remains Nov
unpaid. Dec
Discuss the personal liabilities of the Directors of the Company in respect of the unpaid 2011
tax ofthe company.
(1) As per section 100 of Income tax Ordinance, 1984, where any private limited company is wound up
and any tax assessed on the company, whether before, or in the course of. or after its liquidation, in
respect of any income of any income year cannot be recovered, every person who was, at any time
during the relevant income year, a director of that company, shall, notwithstanding anything
contained in the Companies Act, be jointly and severally liable to pay the said tax.
(2) But the liability of the director(s) of a private company shall ceases if he proves to the DCT that non-
recovery of tax from the company cannot be attributed to any gross negligence, misfeasance or breach
of any duty on his part in relation to affairs of the company.
23 Discuss the changes made by Finance Act 2017 with its effect on the following items. Nov 10
a. Charge of Minimum Tax U/S. 16 CCC. Dec
b. Change of Investment Rebate U/S. 44. 2013
c. Deduction at source from salaries : newly added sub-section (2A) of
section – 50.
d. Additional powers to enquiry and production of documents by the
assessee sec.-116(1).
e. Requirements of certificate or acknowledgement receipts of return of
income in certain cases – Sec. 184A.
(a)
Changes : ―every Company‖ is replaced by ―every firm having gross receipts of more than taka fifty lakh or
every company‖.
Effect :
The jurisdiction of charging minimum tax has been widened - incorporating firmhaving gross receipts
exceeding taka 50 lakh.
The provision of this section apparently goes against the fundamental & traditional concept of income-tax
i.e. tax on income only. Income tax should be based on income, not on gross Receipts or Revenue. Rather
income is computed by deducting allowable expenses from Revenue. This basic postulate is obviously
ignored in formulating & applying this section.
(b)Changes :
i) The rate of tax rebate has been extended from 10% to 15%
ii) The aggregate amount of the investment allowance has been increased from Tk. 10 million to Tk. 1
crore 50 lakh
iii) The percentage of total income as maximum allowable limit of investment has been increased from
20% to 30%
Effect :
The changesare encouraging for investment. However, in short term there will be a drop in government
revenue but in long term will accelerate GDP growth and ultimately government revenue.
( c ) Changes : Incorporation of sub-section 2(A) to Section 50 of ITO 1984:
―2A) The payment under sub-section (1) shall be made by such person with or without deduction of tax in
accordance with a certificate, issued by the Deputy Commissioner of Taxes, after being satisfied on an
application made by the payee in this behalf, where such certificate specifies that:
(a) no tax shall be deducted from the payee in a case where the tax payable on the total income of the payee has
already been deducted or collected from such payee under this Ordinance for the rest of the income year; or
(b) tax shall be deducted at a lesser rate for the rest of the income year in a case where the payee may, after
adjusting the tax already deducted or collected from such payee under this Ordinance, be liable to pay a lesser
sum of tax than the tax chargeable on his/her total income."
Effect :
The requirement of certificate from Deputy Commissioner of Taxes in addition to assessment order of
previous income year may cause unnecessary harassment for the assessee.
(d)Changes : “require any such person to produce, or cause to be produced, any accounts or documents which
they may consider necessary‖ is replaced by:
―require any such person or any other person in relation to such enquiry to appear before him at the time and
place as directed for providing any information or to produce or cause to be produced necessary documents,

accounts or records including any electronic records and systems referred to in the Explanation of sub-
section (2) of section 117 (Power of search & seizure) under the possession or control of such person or
such other person‖
In this relation, Punishment for non-compliance of certain obligations-Section # 164(ee) of the ordinance
has been newly added: (ee) failsto comply with the requirement under sub-section (1) of section 116‖.
Effect
Enhancement of the power of relevant authority to ask for information and explanation from any person liable,
or believed by Them to be liable, to assessment under ITO 1984.
(e)Changes : ―either a certificate from the concerned Deputy Commissioner of Taxes or from any other person
authorized by the Board in this behalf, containing the tax payer‘s identification number or an acknowledgement
receipt of the return of income submitted for the immediate preceding assessment year shall be required to be
submitted‖ is replaced by:
―a person shall be required to submit an acknowledgement receipt of the return of income filed for the
immediate preceding assessment year or a certificate from the concerned Deputy Commissioner of Taxes or
a computer generated certificate communicated by a computer system as may be authorized by the Board in
this behalf or, in case of an old assessee, a certificate by the Deputy Commissioner of Taxes containing
Taxpayer‘s identification Number and assessment completion information‖
Effect :
Incorporation of ―computer generated certificate‖ is advancement while for an old assessee ―a certificate by the
Deputy Commissioner of Taxes‖ may cause harassment.
24 State the provision of law for tax clearance certificate required for persons leaving Nov
Bangladesh. Dec 5
2011
A person who is not domiciled in Bangladesh, or a person who being domiciled in Bangladesh at the time of
his departure is not, in the opinion of an income tax authority likely to return to Bangladesh, shall not leave
Bangladesh without obtaining from the Deputy Commissioner of Taxes authorized in this behalf by the Board. -
(a) a tax clearance certificate, or
(b) if he has the intention of returning to Bangladesh, an exemption certificate which shall be
issued only if the Deputy Commissioner of taxes is satisfied that such person has such intention; and such
exemption certificate may be either for a single journey or for all journeys within the period
specified in the certificate.
25 Discuss the provisions of section 93 of ITO 1984 for assessment in case of income May
.escaping assessment. June
2012
If, for any reason, any income chargeable to tax for any assessment year-
 has escaped assessment;
 has been under assessed or;
 has been assessed at too low a rate or;
 has been subject to excessive relief or refund.

The Deputy Commissioner of Taxes may issue a notice to the assessee containing all or any of the requirements
which may be included in a notice under section 77 (notice for filling return) and may proceed to assess or
determine, by an order in writing, the total income of the assessee and the tax payable by him.
Rate of Tax:
The tax shall be charged at the rate or rates applicable to the assessment year for which the assessment is made.
Special Conditions:
(i) Action under section 93 cannot be initiated unless definite information has come into the
possession of the D.C.T.
(ii) Before initiating the proceeding under section 93 previous approval in writing from the IJCT is to be
taken, except in a case where a return has not been filed u/s 75/77
(iii) Notice under section 93 can be issued within 6 years from the end of the assessment year in case it
isescaped assessment or under assessment and within 2 years from the end of the assessment year in case it
is assessed at too low a rate or has been subject to excessive relief or refund.
26 Discuss the conditions relevant to charging tax on house property.What deductions are Novallowed
Dec 2012
for determining taxable amount for charging income tax ?
Conditions of charging tax on house property income according to section 24 of ITO 1984:
Tax shall be payable by an assessee under the head ―Income from house property‖ in respect of the annual
value of any house property whether let out for commercial or residentialpurposes, consisting of any
building and land appurtenant thereto of which he is the owner.
Income tax is levied not upon the actual income from the property but upon the notional income based on
annual value. Annual value is defined in section 2(3) as ―The sum for which the property might
reasonably be expected to let out from year to year‖
Where two or more persons own the property and if their respective shares are definite and ascertainable,
theowners are assessable separately on their respective share of income from the property.
In computing house property income the following allowances are deductible from the annual value:-
(1) Repairs and maintenance:-
The following expenditure relating to repairs, maintenance and provision of basic services is granted as
a deduction even if no evidence for such expenditure is produced. Where the property is let out for
residential purposes the allowable deduction is ¼ th of the annual value and where it is let out for
commercial purpose the allowable deduction is 30% of the annual value:
(a) Repairs;
(b)Expenditure relating to collection of rent;
(c) Water and sewerage;
(d) Common electricity;
(e) Salary of:-
i) Darwan;
ii) Security guard;
iii) Pump-man;
iv) L i f t - m a n ; a n d
v) C a r e t a k e r
(f)Allother expenditure related to maintenance and provision of basic services,
(2) Land development tax;

(3) Municipal tax;
(4) Ground rent;
(5) Insurance Premium;
(6) Vacancy allowance (if the property remain vacant during a part of the year):
(7) Where the let out property is acquired, constructed, repaired, renewed or reconstructed with loan then
the interest payable for the year on such loan;
(8)Where the let out property has been constructed with borrowed capital and there was no house
property income during the period of construction, the interest payable during the period of
construction will be allowable in 3 equal installments from first 3 years of letting out;
27 Define money laundering. Is it a tax related offence? Discuss. Nov Dec 2012
Money laundering is the process of changing large amounts of money obtained from crimes, such as drug
trafficking, into origination from a legitimate source.
Money Laundering is the process by which criminals attempt to conceal the true origin and ownership of the
proceeds of criminal activities. If successful, the money can lose its criminal identity and appear legitimate.
In terms of section 2 (tha) of Money Laundering Prevention Act. 2002, ―Money Laundering means (a) Properties
acquired or earned directly or indirectly through illegal means ; (b) Illegal transfer, conversion, concealment of
location or assistance in the above act of the properties acquired or earned directly or indirectly through legal means.‖
In this Act. ―Properties means movable or immovable properties of any nature and description‖
The terms Money Laundering is used for a number of offences involving the proceeds of crime or terrorist funds.
It now includes possessing or in any way dealing with, or concealing, the proceeds of any crime.
Someone is engaged in money laundering under where they.
 Acquire or earn properties directly or indirectly through illegal means;
 Transfer, convert, conceal location or assist in the above act of the properties acquired or earned directly or
indirectly through legal means.
Where a professional accountant suspects that client is involved in money laundering he should report this to the
authorities.
Tax related offences are not in a special category. The proceeds or monetary advantage arising from tax offences are
treated no differently from the proceeds of theft, drug trafficking or other criminal conduct.
28 Discuss the provision of assessment on the basis of report of a Chartered May June
Accountant Under section 83AAA of Income Tax Ordinance 1984. 2013
83AAA- of ITO 1984 Assessment on the basis of report of Chartered Accountants-
(i) Where a return or revised return is filed under Chapter VIII by an assessee being a company and the
Board has reasonable cause to believe that the return or revised return is incorrect or incomplete, the Board
may appoint a registered chartered accountant to examine the accounts of that assessee.
(ii) The chartered accountant appointed under sub-section (1) shall exercise the powers and functions of the
Deputy Commissioner of Taxes as referred to in section 79 and clauses (a), (b), (c), (d) and (e) of
section 113 of ITO 1984.
(iii) The chartered accountant, after examination of the accounts of that assessee, shall submit a report in
writing to the Board along with findings within a time as may be specified by the Board.
(iv) On receipt of the report referred to in sub-section (3), the Board shall forthwith forward the report to the
concerned Deputy Commissioner of Taxes for consideration.
(v) On receipt of the report under sub-section (4), the Deputy Commissioner of Taxes shall serve a notice
upon the assessee under sub-section (1) of section 8B
(vi) The Deputy Commissioner of Taxes shall, after hearing the person appearing and considering the
evidences produced including the findings stated in the report received under sub-section (5) and also
considering the other evidences, by an order in writing, assess within thirty days after the completion of
hearing or consideration, as the case may be, the total income of an assessee and shall determine the
sum payable by the assessee on the basis of such assessment, and communicate the said order to the
assesse within thirty days from the date of such order.

2 Tax Computation of Business Entities and Individuals (25%)
2a. Tax Computation of Business Entities
S. Question Year
L
1 The following adjusted accounts appeared in the records of ABC Ltd. for the year ended Nov Dec
December 31, 2016. Numbers in brackets refer to the items in Additional Information. 2010
Revenues and Gains
Tk. 000
Net sales 126,500
Interest 1,000 (1)
Gain on sale of shares . 2,500 (2)
Total 1,30,000
Costs and Expenses
Cost of goods sold 65,300
Salaries and wages 26,000 (3)
Security services 300 (4)
Audit and taxation services 500
Office rent 600
Donations 1,800 (5)
Board meeting attendance fee 300 (6)
Other expenses 3,000 (7)
Depreciation 8,000 (8)
Corporate income tax . 4,500 (9)
Total 110,300
Net profit . 19,700
Dividends paid . 9,000 (10)
Additional Information
(1) Interest revenue comprises interest on government bonds issued in 200
and purchased by ABC Ltd. in 2016.
(2) Gain on sale of shares arose from the following purchase and sale of shares of a
company listed with DSE and CSE:
Bought in 2014 cost Tk.12,00,000

Sold in 2016 proceeds of sale Tk.37,00,000
(3) Salaries and wages include inter alia salary of Finance Manager
Tk.6,00,000 (consolidated) paid in cash (not by cheque or bank transfer),
gratuity (unapproved) provision of Tk.15,00,000 and gratuity payment of
Tk.10,00,000.
(4) Security services include payments to a private security company. No
VAT was deducted at source from such payments.
(5) Donations were all paid in 2016 to ICAB, specially designated for the
purchase of library books, computers and training materials.
(6) No income tax or VAT was deducted at source from Board meeting
attendance fee paid to 10 (ten) directors.
(7) Other expenses include inter alia:
(a) Entertainment expenses of Tk.5,00,000 spent on MD‘s birthday party; and
(b) Four foreign travels of MD, each costing Tk.2,00,000. All foreign
trips were for business purposes.
(8) ABC Ltd. has always used written down value depreciation and same
depreciation rates for both accounts and tax purposes.
(9) Corporate income tax is the amount estimated before preparation of the
tax return. 60% of the estimated amount of tax has been paid as advance
tax during the year 2016.
(10) Dividend has been paid at the rate of 25%.
The company has a capital loss of Tk.10,00,000 carried forward from the assessment year
2017-2018.

ABC Ltd. is a publicly traded company.
Required:
Comp Compute the total income and the total income tax liability of ABC Ltd. while
making the above computations, any non-compliances of the relevant provisions of the tax
laws (income tax as well as VAT) by the company are to be considered strictly in
accordance with the legal provisions for such non-compliances. If considered necessary,
you may make assumptions in the light of the relevant tax provisions.
ABC Ltd
Computation of Total Income
Assessment year 2017-2018
Income year 2016-2017
Note Taka Taka
000 000
Income from Interest on Securities (u/s-22):
Interest on govt bond 1,000 1,000
Income from Interest from Securities 1,000

Income from business or Profession (u/s-28):
Profit before tax as per profit and loss account 19,700
Less: Non-business income included in P&L A/c for consideration at appropriate heads of income:
ii Interest income (for consideration at interest on securities) 1,000

ii Capital gain on sale of shares 2,500
(3,500)
Add: Inadmissible expenses:
a Salary to finance manager 1 600
b Gratuity Provision 2 1,500
c Security service disallowed u/s-30(aa) 300
d Audit, accountancy & advisory services disallowed u/s-30(aa) 500
e Office rent disallowed u/s-30(aa) 600
f Donation to ICAB 3 1,800
g Board meeting attendance fee. 4 300
h Entertainment: This is personal expenditure not related to business as per rule -65 500
i Corporate income tax 6 4,500
j Dividend paid (disallowed u/s-30(aa) for non deduction of TDS. 9,000
19,600
Income from business or Profession (u/s-28): 35,800
Income from Capital Gain (u/s-31)

Gain on Sale of Shares 2,500
2,500
Total income 39,300
Break up of total income
Interest on Securities(u/s-22): 1,000

Income from business or Profession (u/s-28): 35,800
Income from Capital Gain(u/s-33) 2,500
Capital loss carry forward from 2014-15 (1,000)

Capital gain after setting off previous loss 1,500
Total income 38,300
Computation of tax liabilities
On total income excluding Capital Gain. (38,300-
1 1,500)=36,800X24.75% 9,108
2 On Capital gain @15% 150
Net tax
liability 9,258
or However, Minimum Tax: 0.50% on gross
receipts 130,000 650
Whichever is higher 9,258
Notes:
1 The total income & tax liability of ABC Ltd are computed in the light of the
provision of Finance Act-2017
2 Salary of finance manager TK. 600,000 disallowed fully as per sect 30(i) as it was
not paid through crossed cheque or balance transfer
3 No such provision either recognized or unrecognized is allowable expenditure so disallowed fully
4 Donation to ICAB is disallowed being unapproved institution
5 VAT deduction is applicable as VAT was not deducted at source it is disallowed U/S 30 (aa)
6 Allowable U/S 30(k) up to 1% of disclosed turnover
7 Corporate Income tax is not an expense rather than appropriation of profit so it is not an item of
P/L account . So disallowed fully.
8 Depreciation To 8,000,000(depreciation claims as per 3rd schedule so nothing to be added back.)
9 As the ABC Ltd is a publicly traded company and declared 25% dividend, hence tax rate would be 24.75%
10 As per SRO 269-2010, the tax rate on the capital gain of selling listed company‘s stock is 10%
2 ABC Ltd. is a publicly traded company carrying on the business of manufacture and sale of May Jun
jute products. Accounts are maintained on mercantile basis. The audited profit and loss 2011
account for the year ended December 31, 2016 disclosed a net profit of Tk.2,510,000.
Examination of the books of accounts revealed the following facts:
a) A preliminary expenses Tk.50,000 was written off to the profit and loss account.
b) One vehicle was purchased during the year for Tk.2,500,000. Depreciation
@20% was charged on the cost of the vehicle.
c) Depreciation claimed at Tk.1,200,000 including depreciation on a leasehold
asset of Tk.1,000,000. The company claimed depreciation on leasehold
assets Tk.200,000. The lease rental for the year was Tk.150,000 in respect
of the leasehold assets.
d) Depreciation in respect of all other assets has been claimed as per Income Tax
Law.
e) Interest on loan aggregating to Tk.400,000 has been waived by IFIC Bank
during the year which has been credited to the profit and loss account.
f) Over provision for certain expenses as well as under provision for certain
expenses in respect of previous year amounting to Tk.500,000 and
Tk.300,000 respectively have been adjusted with the retained earnings
brought forward from previous year.
g) Net profit includes Tk.800,000 representing income from sale of imported
products. The company suffered AIT aggregating to Tk.200,000 at import
stage at the time of import of jute products.
h) Entertainment expenses of Tk.120,000 debited to the profit and loss account.
i) Technical knowhow fee of Tk.300,000 paid to foreign collaborators charged in
the accounts.
j) 50% of sale of manufactured goods is exports.
You are required to compute total income and tax payable by the company for the income
year ended December 31, 2016.
Answer:
ABC Ltd.
(A publicly traded company)
Assessment Year-2017-2018
Income Year-2016-2017
Income from Business or Profession: U/S 28-30

—
Amount (Tk.)
Net profit as per Accounts 2,510,000
Less: Interest waived by the bank wrongly credited to the P/L 400,000
{This is exempted as per section 19 (11)}
Less: Income from imported jute products (shall be considered U/S- 82C) 800,000
Add: Entertainment expenses (to be considered separately) 120,000
Add: Technical knowhow fee (to be considered separately) 300,000
1,730,000
Depreciation over charged on vehicle 100,000
{ As per 3rd sch. Clause 6(a)}
Depreciation charged on leasehold assets 200,000
(As it is assumed to be under operating lease and paid rental on the same)
Income before charging entertainment & technical knowhow fees 2,030,000
Less: Admissible expenses:

Entertainment (As per rule 65)-Note-2 60,600
Technical knowhow fees (As per section 30, clause -h)-Note-3 162,400
Income from manufacturing business including exports 1,807,000

th
Less: 50% exempted on exports (as per 6 sch. Para-28) 903,500
Income from manufacturing business 903,500

Income from imported jute products (U/S- 82C) 727,273
(AIT 200,000/27.5%)
Total Income 1,630,773
Calculation of Tax Payable:

Less: Income U/S 82C 727,273
Income other than 82C 903,500
Tax Payable: 903,500 X 27.5% 248,463
Workings & Necessary Notes: 01

Notes:-1
 The total income and tax liability of ABC Ltd., is computed in the light of the provisions of
Finance Act-2017 i.e. Assessment Year 2017-2018;
 Writing off preliminary expenses is allowed;
 Over provision, under provision for certain expenses and adjusted in opening retained earnings
are not relevant in this income year;
Note:-2
Calculation of Entertainment-Rule 65
On first 10 lac profit@4% Tk. 40,000
On balance profit .i.e Tk. 1,030,000@2% Tk. 20,600
Total Tk. 60,600

Note:-3
Technical Know How Fees: 8% on Tk. 2,030,000 Tk. 162,400
3 RFL Co. Ltd. owns and maintains 10 tea estates in Chittagong. It sells the tea after Nov Dec
processing in its manufacturing plans within the estates. For the financial year ending 2011
December 31, 2016 it has produced the following information:
Taka
Opening stock of tea (Valued at the net sales prices) 80,00,000
Closing stock of tea (Valued at the net sales prices) 90,00,000
Sales (30% domestic,70% export) 12,40,00,000
Sales of bamboos and other bushes 20,00,000
Sales of old shade and other trees 90,00,000
Common expenditure apportioned between agriculture and business on the basis
of workers employed are:
Agriculture Business
Taka Taka
Manufacturing expenses 7,50,00,000 1,60,00,000
Administrative expenses 50,00,000 80,00,000
Besides, selling expenses of Tk.18,60,000 have been incurred during the year.
Depreciation on plant and machinery, furniture, factory and office buildings including
banglows have been included in above manufacturing expenses of Tk.80,00,000 and
Tk.20,00,000 relate to agriculture and business respectively. The company spent
Tk.30,00,000 during the year to bring new areas under its cultivation while nothing has
been spent on replacement of bushes. It is company policy to capitalize those
expenditure. There are no other inadmissible expenses. Tax WDV of fixed assets are as
follows:
Taka Taka
Banglows and other structure 2,30,00,000 1,50,00,000
Plant and machinery 3,50,00,000 6,90,00,000
Furniture, Equipment etc. 30,00,000 60,00,000
Vehicles and Tanks 1,05,00,000 60,00,000
Tubewell 23,00,000 -----
Pucca Irrigation works 8,00,000 ----
Pucca pumping machine 30,00,000 -----

Calculate the taxable income of RFL Co. Ltd. for the relevant assessment year
assuming that it has no brought forward agriculture or business losses but has
unabsorbed depreciation of Tk.2,44,00,000 under the head agriculture.
Taka
Sales 12,40,00,000
Closing stocks 90,00,000
Opening stocks (80,00,000)
Value of produce 12,50,00,000
Apportionment between agriculture and business in the ration 60:40 (Rules 31)
Taka Taka
Sales 7,50,00,000 Taka
5,00,00,000
Sale of Bamboos etc. - 20,00,000
Sale of Shade trees etc. 90,00,000 -
Taka
8,40,00,000 5,20,00,000
80,00,000 20,00,000
9,20,00,000 5,40,00,000
Deduct: Manufacturing expenses 6,70,00,000 1,40,00,000

Administrative expenses 50,00,000 80,00,000
Development expenses 30,00,000 -
Selling expenses - 18,60,000
Depreciation (calculation below) 86,35,000 2,08,00,000
Adjusted profit 83,65,000 93,40,000
Banglows Equipment Tanks Tubewell Irrigation Pumps Total Allowances

Plant
Tk. Tk. Tk. Tk. Tk. Tk. Tk. Tk.
10% 10% 25% 10% 15% 5% 20% -
WDV SF 2,30,00,000 3,50,00,000 30,00,000 1,05,00,0 23,00,000 18,00,000 30,00,000
WDA 23,00,000 35,00,000 7,50,000 00
10,50,000 3,45,000 90,000 6,00,000 86,35,000
WDA 2,07,00,000 3,15,00,000 22,50,000 94,50,000 19,55,000 17,10,000 24,00,000
Carried Forward
Depreciation Allowances-Business
Structures Plant Furniture Vehicles Total Allowances
Tk. Tk. Tk. Tk. Tk.
20% 20% 10% 20%
WDV SF 1,50,00,000 6,90,00,000 60,00,000 1,70,00,000
WDA 30,00,000 1,38,00,000 6,00,000 34,00,000 2,08,00,000
2WDA 1,20,00,000 5,52,00,000 54,00,000 1,36,00,000
Carried Forward
Summary of assessments- Assessment year 2017-2018

Taka
Agricultural income 83,65,000
Unabsorbed depreciation carried forward 83,65 ,000
Agricultural Income 0

Business income 93,40,000
Unabsorbed depreciation Brought Forward 2,44,00,000
Set off (83,65,000)
Remains 1,60,35,000
Notes:
(1) Valuation of closing stock in the case of plantation companies on net realizable basis is an acceptable
method as per IAS-2 (Inventories).
(2) Bamboos and other bushes naturally grown without any agricultural effort or skill employed and the
income thereon being treated as business income.
(3) Shade and other trees in tea garden are systematically planted and nurtured for growth and as such
full agricultural skill is employed.
(4) Expenditure in respect of developing new area for future tea cultivation is fully allowable as per rule 31,
though the company has capitalized this.
(5) Unabsorbed depreciation of previous year‘s agricultural loss can only be carried forward and set off
against this year‘s agricultural income
(6) Rule 31 provide the apportionment mechanism for income but not the expenditure which are generally not
separated in the tea garden between agriculture and business. However, for the sake of convenience
apportionment for these expenditure not on the basis of employees / workers has been made.
4 XYZ Bank Ltd. has shown a net profit before tax amounting to Tk.390 million for the year May Jun
Ended December 31,2016 2012
You are required to compute the tax liability of the bank for the assessment year
2017-2018 considering the following facts:
i) Accounting depreciation charged in the accounts was Tk.14 million whereas tax
depreciation has been calculated as Tk.25 million.
ii) Inadmissible expenses have been found to be as follows:
Particulars Tk. In Million
Perquisites 4.00
Subscriptions and Donations 0.25
Printing, Advertisement etc. 1.00
Sundry Expenses 0.45
iii) Extracted from the Balance Sheet

Paid up capital 408
Statutory Reserve 130
Retained profit-Opening 42
Retained profit- Closing 148
Exchange Equalization fund 1
iv) Classification of Loans and Advances including Bills discounted and purchased.
Unclassified 8,065
Sub-Standard 25
Doubtful 15
Bad 5
v) Unclassified Loans and Advances include staff loan of Tk.45 million.
Other expenses include entertainment expenses of Tk.4 million.
vi) Provision for bad and doubtful debts shown in the profit and loss account
includes.
Specific Provision 1
General Provision 10
vii) Other income includes dividend of Tk. 5 million received from a publicly listed
company.
ABC Bank Ltd.
Income year ended December 31,2016
Assessment year 2017- 2018
Particulars Notes Tk. In Tk. In

Million Million
Net Profit as per Profit and Loss A/C
390.00
Separate Considerable Items:
Dividend (5.00)
Accounting depreciation -fiscal depreciation is allowable 14.00 9.00
399.00
Add: Inadmissible Items:
Excess Perquisites 4.00
Subscriptions and Donations 0.25
Printing, Advertisement etc. 1.00
Sundry Expenses 0.45
Other Expenses Entertainment (for considering as per rule-65) 4.00
Bad and Doubtful debt Provision (General plus specific) 2 11.00 20.70
419.70
Deduct: Allowable or Deductible Items:
Fiscal Depreciation 25.00
Entertainment as per Rule-65 1 4.00
Bad debt 5.00 34.00
Income from Business 385.70
Income from Other Sources

Dividend 4 5.00
Total Income 390.70
Tax thereon
Income Tax @ 42.5% on (390.70-5) = 385.70 163.92
Excess Profit Tax 3 15.03
178.95
On dividend @ 20% on Tk. 5.00 1.00
Tax Payable 179.95
Note-1: Entertainment Allowance:
On First one Million @ 4% .040
On Balance 398.7 Million @ 2% 7.974
8.014
But restricted upto actual claimTk.4 million
Note-2: Bad and Doubtful Debts:
No provision for bad and doubtful debt is allowable as per section 29 other than actual bad debt of
Tk. 5 million
Note-3: Excess Profit Tax
Capital and Reserve:
Paid up Capital 408.00
Statutory Reserve 130.00
Retained Profit - Opening 42.00
Exchange Equalization Fund 1.00
Total 581.00
50% thereof 290.50
Total Income 390.70
Excess Profit (390.70 - 290.50) 100.20
Excess Profit Tax @ 15% 15.03
Note -4 : Dividend :
Rate of tax on divided is 20%
5 Given below is the Profit & Loss A/C of NYZ Textiles Ltd., for the year Nov Dec
ended June 30,2017 2012
Particulars Taka Particulars Taka
Cotton 11,417,950 Sale of Yarn 10,811,956
Stores 1,835,648 Sale of Textile Products 10,926,425
Export Subsidy / Incentive
Mills Salaries & Wages 3,831,984 received in Cash 407,687
General Expenses 29,010 Sale of Waste 121,508
Replacement of Plant & Machinery 2,039,000 Rent of Bungalows 57,902
Stamp Duty, Registration, Legal Fees etc. 250,000 Dividend 17,400
Motor Car Overhauling Expenses 15,000 Interest on PSP 15,000
Purchase of two Paintings for MD’s Office 30,000
X-Mas Gift given to the Foreign Contractor 10,000
Refreshment, Food, Drinks etc., at one of
its Business Meetings 25,400
Expenditure incurred on Catering and
refreshments for shareholders and guests
at general body meeting 50,600
Donation 10,000
Rates & Insurance 40,376
Office Expenses 240,694
Directors’ Fees 9,000
Auditors Fees 30,000
Interest 211,850
Repairs to Building & Machinery 124,556
Trade Penalties, Legal Expenses &
Professional Charges 120,000
Entertainment 249,700
Workmen’s Welfare Expenditure 55,184
Contribution to Staff Provident Fund 75,500
Provision for Gratuity 150,000
Reserve for Meeting Contingent Liability 30,000
Loss for Discarding Ageing Machinery 205,397
Selling Agent’s Commission 201,690
Net Profit (Subject to Depreciation) 1,069,339
22,357,878 22,357,878
22,357, ,878
From the foregoing, compute the company’s taxable income from business, the total
income (computation should include necessary reasons), and tax liability for the
assessment year, 2017 – 2018 taking into account;
i) Sale of textile products includes Tk. 89,249 from export.
ii) Payment of Mills Salaries includes Tk. 75,000 for payment of tax for a foreign
technician engaged by the company;
iii) Expenses for stamp duty, registration, legal fees, etc. amounting 250,000 have
been incurred in raising loans;
iv) Rates Tk. 1,800, insurance Tk. 2,500 and repairs to building Tk.7,544 in respect of
bungalows;
v) The break-up of trade penalties, legal expenses and professional charges for Tk.
120,000 is as follows:
a) Trade penalties and law expenses constitute Tk. 20,000.
b) Assessee company has spent Tk. 50,000 for successfully defending the
allegation of black marketing.

c) Professional charges include Tk. 20,000 paid to an Income tax practitioner
to represent the cases to the Deputy Commissioner of Taxes and Tk.
30,000 to represent an Income tax Appeal before Appellate Tribunal.
vi) Donation includes Tk. 5,000 contribution to Zakat Fund;
vii) The Staff Provident Fund is a recognized one;
viii) It is found that the amount of gratuity actually paid during the year was Tk.
100,000;
ix) Dividend income has been subject to dividend distribution tax;
x) The amount of depreciation allowable for assets used for the company’s
business is worked out at Tk. 551,710;
xi) It is revealed that outstanding trading liabilities amount to Tk. 1,100,000. The
date of origin of the trading liabilities are as follows:
a) Assessment year 2011 – 2012 350,000
b) Assessment year 2012 – 2013 300,000
c) Assessment year 2014 – 2015 150,000
d) Assessment year 2016 – 2017 300,000
1,100,000
NYZ Textiles Ltd.,
Income year 2016 – 2017
Assessment year 2017- 2018
Computation of Taxable Income Taka Taka
Net Profit 1,069,339
Less:
Export Subsidy / Incentive for separate consideration 407,687
Rent of bungalows (income from house property) 57,902
Dividend 17,400
Interest on PSP 15,000
497,989 571,350

X-Mas Gift Given to the Foreign Contractor 10,000
Donation 5,000
Rates, insurance & repairs (1,800 + 2,500 + 7,544) 11,844
Trade penalties law expenses 20,000
Provision for Gratuity 150,000
Reserved for meeting contingent liability 30,000
Entertainment Expenses 249,000
Outstanding Liabilities not paid within 3 years 350,000
Replacement of Plant &Machinery being capital expenditure 2,039,000
2,865,544
3,436,894
Less. :Gratuity Paid: 100,000
Tax depreciation 551,710
651,710
2,785,194
Less:
Entertainment Expenses
First 1,000,000 @ 4% 40,000
Next 1,785,194 @ 2% 35,704 75,704
Business Income 2,709,490
Income from Export Incentive 407,687 / 95x5/0.15 143,047
Total Business Income 2,852,537
Total
Tax on Business income of Tk. 2,709,490 @ 15% 406,424
(SRO : 218 -11/2003 of 19.07.2003)
Tax on cash Subsidy (Final Settlement) 82C 21,457
Other Income:
Income from dividend of Tk. 17,400 tax@ 20% deducted and the tax rate is also 20% 3,480
Interest on PSP (assuming it was purchased before10/06/1999) 15,000
Less: Exemption 15,000
Income from House Property:
Rental income that is annual value 57,902
Less: Rates and insurance 4,300
Less: repairs 25% 14,475 39,127
Notes:
(i) Payment of employee's tax for Tk. 75,000 paid by the employer is allowable expenditure and such tax is exempted
from payment of tax in the hand of employee- SRO: 182-L/99 of 01, July 1999.
(ii) Expense for stamp duty, registration legal fees amounting to Tk. 250,000 is allowable expenses u/s 29 (xvii)
(iii) Professional & legal fees are allowable but fine & penalties for Tk. 20,000 are not considered.
(iv) Donation to Zakat fund is an allowable expense.
(v) Replacement of plant & machinery is capital nature of expenditure.
(vi) Purchase of two paintings for MD's office is a decoration expenses is allowable expenditure u/s 29.
(vii) Since the company is paying tax at reduced rate, tax rebate for export of Tk. 89,249 could not be allowed (clause 28
Part A of 6th schedule).
(viii) Gift is an allowable expenditure if given for business purpose. However, in absence of specific indication regarding
purpose, one given to foreign contractor has been disallowed.
(ix) The trading liability not paid within 3 years of the expiration of income year is being considered as an income u/s 19 (15)
(c) of ITO 1984.
(x) The amount ofTk. 50,000 being spent for defending the allegation of black marketing is allowable expenses.
6 ABC Limited, a Bank in Bangladesh has submitted an income statement showing profit of Nov Dec
st
Tk.2,58,000 for the year ended 31 December 2016. You are required to find out the 2012
amount of-
(a) 1% of unclassified loan
(b) Admissible entertainment allowance
(c) Calculation of excess profits under section 16(C)
(d) Revised Income
On the basis of the additional information as given under:
(i) Loans and Advances
- Unclassified advances Tk. 21,00,000
- Sub-standard advances Tk. 8,50,000
- Bad and Loss Tk. 1,02,50,000
- Doubtful Debts Tk. 11,45,000
(ii) Capital Structure
- Paid-up Capital Tk. 20,00,000
- Statutory Reserve Tk. 7,50,000
- Retained Earnings Tk. 2,50,000
- Dividend Equalization Fund Tk. 2,00,000
(iii) Depreciation
- Accounting depreciation Tk. 50,000
- Tax depreciation Tk. 80,000
(iv) Perquisites and Allowances
- Excess perquisite Tk. 50,000
-Printing and Advertisement Expenses Tk. 40,000 (Capitalized)
- Entertainment Allowances Tk. 65,000
- Other Expenses on which TDS are not applied Tk. 10,000
Compute the Taxable income and tax liability of the above bank for the assessment year
2017-2018.
ABC Bank Ltd.

Computation of Income Tax Liability
Net Profit as per account 258,000

Less: income from Investment 100,000
158.000
Add: Expenses to be considered separately 50,000
( a) Accounting Depreciation 42,000
(b) Provision for Bad & Doubtful Debts 65.000

(c) Entertainment allowance 157,000
315.000
Add: Inadmissible Expenses

(i)Excess perquisites 50,000
(ii) Printing & Advertisement (Capitalized) 40,000
(iii) Other Expenses 10,000
100,000
415,000
Less: Tax depreciation 80,000
335,000
Add: Income from investment 100,000
Less: Entertainment allowance 435,000
Revised Income 17,400
417,600
Working Notes:
(a) Loans and Advances 14,345,000
1% on unclassified Advance 143,450
b) Actual provision for Bad Debts 42,000
(c) Entertainment allowance allowable
@ 4% upto Tk. 10,00.000 and balance
@ 2% on business income Tk. 4,35,000 14.400
(d) Calculation of excess profit under section 16C
(a) Tire-1 Core capital
Paid up Capital 2,000,000
Statutory Reserve 750,000
Retained Earnings 250,000
3,000,000
(b) Tire-2 Supplementary Capital:
General Provision on unclassified loan @ 1% 21, 000
Dividend Equalization fund 200,000
221,000
Total (a+b) 3,221,000
5 0 % of Profit 1,610,500
Actual profit 417, 600
Excess profit Tax Nil
Taxable income is Tk 4,17,600 and tax is @42.5% which is Tk. 1,77,480

7 May Jun
XYZ Limited, a Private Limited Company, is engaged in Deep Sea fishing business for
th 2013
last few years. For the Income year ended on 30 June 2017 the company has
submitted to you a statement of accounts consisting of Trading and Profit and Loss
Account for filing income tax return, As a Manager finance, of the company you
have examined the accounts which are as follows :
XYZ Limited
Trading Account
For the year ended June 30, 2017
Cost of Diesel 59,416,425 Sales :
Crew, Captain Salary and
Export 94,465,822
allowances 20,928,739 Local 59,817,456 154,283,278
Catch Incentive & Festival
Bonus 4,677,749
Carrying and Forwarding 99,254
Packing & Processing 4,204,789
Fishing Gear 2,947,474
Vessel Operational Expenses 5,601,743
Loading & Unloading
Expenses 373,350
Export Expenses 7,656,229
Fee & Taxes 319,400
Insurance 7,724,583
Repairs & Maintenance
Expenses 6,810,438
Gross Profit 33,523,105
154,283,278 154,283,278
XYZ Limited
Profit and Loss Account
For the year ended June 30, 2017

Directors Remuneration 300,000 Gross Profit 33,523,105
Income from
Staff Salary 9,344,035 Dividend 646,646
Staff Bonus 1,530,965 Add : AIT 114,114 760,760
Staff Overtime 121,974
Contribution to recognized P.F 286,547
License & Renewal 672,787
Traveling Expenses 427,548
Conveyance 125,321
Entertainment 125,321
Advertisement 54,875
Telephone Expenses 494,637
Car Maintenance 311,458
Electricity Expenses 401,578
Printing & Stationery 161,587
Canteen Subsidy 115,487
Canteen Gas Expenses 45,154
Office Decoration 1,377,903
Office Rent 1,026,647
Postage & Photocopies 135,487
Paper & Periodicals 102,154
Telex & Telegram 120,248
Security Bills 71,125
Agency Commission 2,52,000
WASA 60,548
Deferred Revenue Written off 1,01,879
Bank Interest 8,65,128
Staff Welfare Expenses 4,58,796
Miscellaneous Expenses 1,48,845
Depreciation 4,681,665
Net Profit 10,362,924
34,283,865 34,283,865
(1) The company has paid VAT of Tk. 80,02241 against the payment of cost of
diesel which has been refunded for Export earning of Tk. 9,44,65,822.
(2) There was eleven taxable employees. The company has disbursed total
Tk. 35,40,000 out of Tk. 93,44,035 without complying with the provision
of section 30 (a).
(3) The Company has imported packing materials and fishing gear from Korea.
The custom authority has collected income tax of Tk. 2,40,500 from this
consignment at the time of delivery of goods.
(4) Wasa bill includes Tk. 30,000 for director’s personal residence.
(5) Excess perquisites of Tk. 360,300 paid to technical staff of the company.
(6) Crew, Captain salary and allowance include Tk. 360,300 as Income Tax of 5
Engineers engaged on contract basis paid on behalf of the Company to
Government Account.
(7) Insurance expenses charges in Trading Account include Tk. 2,18,500 found
to be director’s personal yearly premium.
(8) Miscellaneous expenses include Tk. 25,000 as donation to Local Orphanage
Center approved by NBR.
(9) Office Rent Claimed at Tk. 10,26,647 out of which rent @ Tk. 60,000 per
month paid without complying with the provision of section 53A of Income
Tax Ordinance 1984.
(10) Tk. 1,50,000 paid as picnic expenses of sister concern of the Company out
of Tk. 4,58,796 debited to staff welfare expenses.
(11) Export turnover tax rebate will be allowed for the company.
(12) Tax depreciation as calculated with reference to previous year final assessment
is Tk.33,90,000.
You are required to compute total Income, final tax liability allowing credit of
tax paid at Custom stage and tax paid on dividend income after considering
the above fact supplied by the Management.
XYZ Limited
Computation of total income and tax thereon
Income year ended on June 30, 2017
Particulars Note Amount Tk. Amount Tk.
Net profit as per profit and loss account 10,362,924
Less : Gross dividend income to be considered separately
(760,760)
Add : Refund of VAT against export sales Note - 1 8,002,241
Add : Accounting depreciation 4,681,665
Income from business 22,286,070
Add : Inadmissible Expenses :
Salary Note - 2 3,540,000
WASA bill Note - 3 30,000
Excess perquisite Note - 4 360,300
Insurance expenses Note - 5 218,500
Office rent Note - 6 720,000
Staff welfare expenses Note - 7 150,000
Entertainment expenses Note - 8 -
Misc. Expense (donation to orphanage) 25,000
5,043,800
Less : Fiscal depreciation (3,390,000)
Business income 23,939,870
Add : Income from other sources - Dividend 760,760
Total income 24,700,630
Computation of Tax liability
On business income of Tk. 23,939,870 @37.5% 8,977,451
On dividend income of Tk. 760,760 @ 20% 152,152
Total Tax liability 9,129,603
Less : Tax rebate on export earning Note - 9 2,748,394
Less : Tax rebate on donation to orphanage Note -10 2,500
Less : AIT collected by customs authority 240,500
Less : AIT on Dividend Income 114,114 (3,105,508)
Tax Payable u/s 74 of ITO 1984 6,024,095

Note - 1 : Refund of VAT against export sales.
Since the rate of VAT on export is zero, relevant input VAT turned into cost unless drawn back from the
Government. Therefore, the refund of VAT has been added to income.
Note - 2 : Inadmissible Salary.
In pursuance with sec 30 (a) of ITO 1984, payment of salary without deduction of tax at source is an
inadmissible expense.
Note - 3 : Inadmissible WASA bill.
The WASA bill relating to director's personal residence is not a business expenditure and therefore
disallowed.
Note - 4 : Excess perquisites.
The perquisite in excess of the limit prescribed u/s 30(e) is an inadmissible expense and therefore
added back to fiscal income.
Note -5 : Inadmissible insurance expenses.
The personal insurance premium of the director is not a business expenditure and therefore disallowed.
Note -6 : Inadmissible office rent.
In pursuance with Sec 30 (aa) of ITO 1984, payment of rent without deduction of tax at source u/s
53A is an inadmissible expense.
Note -7 : Staff welfare expenses.
The amount spent for the picnic of sister concern is not a business expenses of the assessee and therefore
disallowed.
Note -8 : Computation of allowable entertainment expenses u/s 30(f) of ITO 1984 read with rule 65 ofITR
1984 :
Business profit before entertainment expenses Tk. 23,914,870
st
Allowed on 1 Tk. 1,000,000 @ 4% Tk. 40,000
On the balance Tk. 22,914,870 @ 2% Tk. 458,298
Total Tk. 498,298
But restricted to actual expenditure of Tk. 125,321
Note — 9 : Computation of export turnover tax rebate as per clause 28 part A of the 6th Schedule :
Sales Tk. 154,283,278
Fiscal Profit Tk. 23,939,870
Fiscal profit on export sales Tk. 23,939,870/ 154,283,278 X 94,465,822
Tk. 14,658,099
Tax on the fiscal profit out of export sales 37.5% of 14,658.099= Tk. 5.496,787
Rebate 50% of Tk. 5,496,787= Tk. 2,748,394
Note — 10 In accordance with SRO # 229 of 04.07.2011, donation to an organization approved by

Board is considered as CSR expenses and against such CSR expenses, 10% rebate is allowed.
[25000X10% =2,500]
8 Nov
st
ABC Telecom Ltd. is a listed telecom company Enjoying Tax holiday since 1 Dec
September 2014 declared dividend 10% for the year and no dividend was paid last 2013
year. Statement of Financial position of the company as at June 30, 2017 is given
below:
Particulars 2016-2017 2015-2016
Non Current assets
Property, Plant and Equipment (net of 1,469,055,265 1,745,945,621
accumulated depreciation)
License fees 433,333,333 466,666,667
Investment 45,000,000 -
1,947,388,598 2,212,612,288
Current Assets
Receivables 56,734,179 54,512,957
Advances, Deposits and Prepayments 12,364,972 12,543,768
69,099,151 67,056,725
Total assets 2,016,487,749 2,279,669,013
Equity and Capital
Paid up Capital 500,000,000 500,000,000
Tax Holiday Reserve 424,409,174 137,061,174
Retained Earnings 636,613,761 205,591,761
Total Equity and Capital 1,561,022,935 842,652,935
Non Current liability
Loan (net of current maturity) 102,632,982 442,632,982
Current liability
Loan current portion 340,000,000 978,390,964
Payables, accruals and provisions 12,831,832 15,992,132
Total Current liability 352,831,832 994,383,096
Total Liability 2,016,487,749 2,279,669,013
Month wise income before tax is given below: Figures in million

Month International Access Network Dividend Income
Gate way (IGW) Services (ANS)
July '16 30,250,000 11,340,000
August '16 44,190,000 14,510,000
September '16 34,820,000 15,930,000 3,950,000
October '16 47,000,000 18,100,000
November '16 48,250,000 19,360,000
December '16 44,090,000 14,100,000 3,870,000
January '17 41,020,000 12,130,000
February '17 44,890,000 14,900,000
March '17 45,670,000 15,780,000 3,800,000
April '17 49,440,000 19,550,000
May '17 41,110,000 17,230,000
June '17 40,210,000 19,320,000 3,560,000
Total 510,940,000 192,250,000 15,180,000
Other information:
1. tax deducted at source Tk. 81,236,721 which includes Tk. 1,518,000

deducted from Dividend income and the balance from IGW bill;
2. excess perquisite given by the company Tk. 3,782,925;
3. entertainment expenses Tk. 24,572,890;
4. depreciation charged Tk. 231,890,356 but as per third schedule
depreciation is BDT 312,098,563;
5. amortization of license fees Tk. 33,333,333;
6. provision for gratuity Tk. 1,000,000;
7. provision for bad debts Tk. 5,000,000;
8. business promotion expenses Tk. 1,345,308; and
9. advertisement Tk. 650,000
10. Directors‘ Remuneration Tk. 25,000,000.
11. The company has deducted tax and VAT except on Business promotion
expenses of Tk. 1,345,308, advertisement Tk. 150,000 and Directors‘
remuneration of Tk. 25,000,000. The company paid withhold tax and
VAT with penalty against directors‘ remuneration before submission of
return.
Requirements 5
1. Compute total taxable income and net tax payable.
ABC Limited
Income Year 2016-2017
Month IGW ANS Dividend Total

Income
July' 16 30,250,000 11,340,000 41,590,000
August '16 44,190,000 14,510,000 58,700,000
September' 16 34,820,000 15,930,000 3,950,000 54,700,000
October '16 47,000,000 18,100,000 65,100,000
November 16 48,250,000 19,360,000 67,610,000
December '16 44,090,000 14,100,000 3,870,000 62,060,000
January '17 41,020,000 12,130,000 53,150,000
February '17 44,890,000 14,900,000 59,790,000
March '17 45,670,000 15,780,000 3,800,000 65,250,000
April '17 49,440,000 19,550,000 68,990,000
May '17 41,110,000 17,230,000 58,340,000
June '17 _ 19,320,000 3,560,000 63,090,000
40,210,000
Total 510,940,000 192,2500,000 15,180,000
15,180,000
718,370,000
Less: Income of July '16 & August
100,290,000
'16 being 100% tax holiday u/s-46B 74,440,000 25,850,000 -
436,500,000 166,400,000 15,180,000 618,080,000
Less: On balance 60% tax holiday 261,900,000 2 99,840,000 - 361,740.000
u/s-46B 5
Less: Dividend Income-exempted as per 10,000 10,000
11 A of 6th schedule part A
Taxable Income 174,600,000 66,560,000 15,170,000 256,330,000

Add: Disallowances for separate
consideration -
-Depreciation as per accounts 168,492,240 63,398,116 231,890,356
-Entertainment expenses 17,854,737 6,718,153 - 24,572,890
-Provision for gratuity 726,603 273,397 - 1,000,000
-Provision for bad debts 3,633,015 1.366,985 - 5,000,000
Add: Disallowed expenses
-Excess perquisite 2,748,685 1,034,240 - 3,782,925
-Business promotion expenses 977,505 367,803 - 1,345,308
-Advertisement 108,990 41,010 - 150,000
369,141,775 139,759,704 15,170,000 524,071,479
Less: Allowable expenses separate
consideration

Depreciation as per Third Schedule 226,771,768 85,326,795 - 312,098,563
142,370,007 54,432,909 15,170,000 211,972,916
Entertainment expenses (4% on 1st (2,867,400) (1,108,658) -
1,000,000+2% on balance amount) (3,976,058)
Total Taxable Income 139,502,607 53,324,251 15,170,000 207,996,868

Income tax 79,718,721 14,664,169 3,034,000 97,416,890
Add: Additional Charge U/S 16B 21,489,311 - 21,489,311
Advance tax 79,718,721 - 1,518,000 81,236,721
Net tax payable - 36,153,480 1,516,000 37,669,480
Notes :
1. It is assumed that ABC Telecom is not a Mobile Company.
2. Tax on IGW Tk-79,718,721(Tk-81,236,721-15,18,000) as TDS u/s-82C,related with
Section-52R.
3. Expenses are allocated on the basis of revenue.
4. Tax deducted from IGW considered u/s 82c, tax rate for ANS income 27.5% and
Dividend income 20%
5. Additional tax U/S 16B shall be payable as the Company declared dividend less than 15%.
Accumulated profit as on June 30, 2017 342,652,935

Add: Profit for the year as per accounts 718,370,000
Total Accumulated profit 1,061,022,935
Less: Paid up Capital (500,000,000)
Less: Dividend paid (50,000,000)
Less: Tax paid U/S 74 (81,236,721)
Undistributed profit 429,786,214
Additional Tax 21,489,311
9 May Jun
X Ltd. is engaged in civil construction business. The profit and loss account of the
2014
company for the year ended 30 June, 2017 is given below:
Profit and Loss Account
For the year ended 30 June 2017
(Figures in
Revenues and gains Tk.)
Receipt from Civil Construction 47,60,000
Rent of godown 80,000
Claim against loss of plant & machinery by fire from Insurance Company (1) 2,00,000
Interest on company deposit 25,000
Dividend from Companies(Net) (2) 50,000
51,15,000
Costs and expenses
Opening Stock of building materials 40,000
Less Closing Stock of building materials (25,000)
Salary to Employees (3) 9,90,000
Incentive Bonus 3,00,000
Excess Perquisites 80,000
Purchase of building materials (4) 24,00,000
Donation (5) 90,000

Interest on Loan 3,20,000
Other administrative Expenses 2,47,000
Technical Service fees 13,000
Travelling Expenses (6) 1,40,000
Municipal Tax on godown (7) 12,000
Insurance Premium of Godown 8,000
Directors Remuneration (8) 2,53,000
Depreciation on Plant and Machinery (9) 65,000
Provision for Tax (10) 1,43,000
Total 50,76,000
Net Profit for the year 39,000
51,15,000
The following additional information are also available:-
(1) Claim was received against fire insurance taken for the plant and machinery at
book value of Tk. 4,20,000/-. The written down value was Tk. 1,85,000/-. The
plant and machinery destroyed in the fire was scrapped and disposed of at no
consideration.
(2) Dividend received Tk. 50,000/- net of Tax.
(3) Salary includes Tk. 20,000/= gratuity paid to employees during the year on
cessation of their employment. The company does not have any separate gratuity
fund.
(4) The entire building materials were purchased from a firm in which Managing
Director of the company was a partner. The fair market value of the materials
purchased was Tk. 20,00,000/-.
(5) Donation includes Tk. 50,000/= paid to Bangladesh Cricket Control Board,
Tk. 20,000/= to Zakat Fund and Tk. 20,000/= to ICAB
(6) Travelling expenses include costs incurred for Tk. 1,40,000/- against
overseas travelling by a director.
(7) Municipal Tax on godown includes other tax of Tk. 3,000/- not paid.
(8) Directors remuneration includes board meeting attendance fee of Tk. 50,000/= on
which no VAT has been deducted and deposited to the government treasury.
(9) The rate of depreciation on plant and machinery is 15% under the Third Schedule
of Income Tax Ordinance, 1984. The tax written down value of the plant and
machinery (still in use) brought forward on 1 July 2016 was Tk. 1,60,000/=. In
addition a new plant and machinery was purchased for Tk. 23,333/= during the
year.
(10) Tax provision is to be made as per law, based on the Profit and Loss
Account and the additional information provided here.
(11) The company issued 1,00,000 shares of Tk. 10/ each, at a premium of Tk. 3
each during the year.
Compute the total income of X Ltd. for the assessment year 2017-2018 and Tax liability.
You answer should include explanation of your treatment of various items.
X Limited
Income Year: 2016-17
Assessment Year: 2017-2018
Computation of total taxable Income and tax thereon
Taka Taka
Income from business and professional u/s 28
Net income as per books of accounts 39,000

Less: Income to be considered other heads
- Claim on insurance premium 200,000
- Interest income or deposit 25,000
- Dividend income 50,000
- Rent of godown 80,000
(3,55,000)

Add: Expenses to be considered as per ITO. 1984
- Depreciation 65,000
- Technical service fees 13,000
- Incentive bonus 300,000
- Foreign travelling 140,000
518,000
Add : Expenses to be considered under different head

Municipal tax on godown 12,000
Insurance premium on godown 8,000
20,000
Add : Expenses disallowed as per ITO-
Excess of fair value of building materials (2,400,000-2,000,000) 400,000
Donation Note:1 65,000
Director remuneration on which VAT has not been deducted 50,000
Tax provision as per accounts 143,000
Excess perquisites 80,000
738,000
Income against insurance claim in excess of WDV as deemed income u/s 19
15,000
Income before considering depreciation expense
975,000
Depreciation as per 3rd Schedule (160,000+23,333 @15%) (27,500)
Income after considering depreciation expense
947,500
Incentive bonus 10% of disclosed profit before provision for income tax (3,900)
Foreign travel 1% of total turnover but the actual will be considered as it is lower. (140,000)
Technical service fee @8% of assessed profit after depreciation or actual whichever (13,000) (1,56,900)
is lower
Taxable income from business or profession 790,600
Income from House property u/s 24-
Amount value of godown rent higher of -
(a) Rent received 80,000
(b) Municipal value - 80,000
Less: Allowable deduction u/s 25-
Municipal tax on godown excluding the Tk.3,000 which is other tax payable (9,000)
Insurance Premium paid on godown (8,000)
Repair and maintenance 30% of annual value (24,000) (41,000)
Income from House property 39,000
Income from other sources-
Dividend income exempted up to Tk. 10,000 as per 6th Schedule Part B. So
Grossed up taxable income (50,000/0.80) - 10,000 52,500
Interest on deposit (gross) 25,000/0.9 27,778
Total income from other sources 80,278
Total taxable income 909,878
Computation of tax liability-
Tax liability on income from business or profession @37.5% 296,475
Tax liability on income from house property @ 37.5% 14,625
Tax liability on income from other sources except dividend @ 37.5% 10,417
Tax liability on dividend 52,500 @20% 10,500
Total tax liability 332,017
Less: TDS on dividend (12,500)
TDS on interest on deposit (2,778)
Net tax liability 316,739
Notes:

1. As per SRO # 337/AIN/99 dated 17 November 1999, donation to Bangladesh Cricket Board is exempted up to
50%.
2. As per third schedule of the ITO 1984, depreciation on plant and machinery is allowed @ 20%. However. 15% is
considered in accordance with the question.
3. Payment of gratuity to employee is an allowable expenditure irrespective of having gratuity fund.
10 TWS Ltd. has been in the business of manufacturing office furniture since 2002. For the Nov
year ended December 31, 2017, its profit and loss account is as follows: Dec
Notes Tk. ‘000 Tk. ‘000 2014
Sales 4,800
Less: Cost of sales 1 2,600
Gross profit 2,200
Less: Operating expenditure:
Payroll costs 2 1,500
Directors’ remuneration 3 300
Freight and insurance 4 150
Finance charges 5 100
Donations 6 50
Utilities 7 75
Professional fees and subscriptions 8 85
Training and research 9 60
Entertainment 10 120
Foreign exchange loss 11 40
Provision for doubtful debts (trade) 12 30
2,510
( 310)
Add: Other income 13 400
Profit before taxation 90
Notes:
1. Cost of Sales Tk. ‘000
Included under cost of sales are:
Depreciation of fixed assets 300
Provision for stock obsolescence 74
Damaged stocks written off 26
2. Payroll Costs
Included under payroll costs are:
Provision for retirement benefits 80
Medical expenses of staff and family 46
Contribution to an overseas provident fund (unapproved) for an expatriate employee 16
3. Directors’ Remuneration
The directors’ remuneration comprises:
Directors’ salaries and fees 255
Leave passages 20
Entertainment allowances (utilized to entertain customers and dealers) 25
300
4. Freight and Insurance
Included under the above is an amount of Tk.3,000 paid to Safe Insurance Ltd.,
a company incorporated in Bangladesh, for insuring imported goods.
5. Finance Charges
Included under the above is an interest subsidy of Tk.16,000 paid by the
company in relation to loans taken by the employees from a bank.
6. Donations
The above comprise:
Cash donations to approved institutions 30
Donations of 5 television sets to approved institutions 15
Advertisement in souvenirs 5
50

7. Utilities
Included in the above are deposits of Tk.3,000 for water and electricity in connection
with the expatriate employee’s house.
8. Professional Fees and Subscriptions
The above comprise:
Audit and tax fees 35
Registration of trademarks 20
Legal fees in obtaining a term loan 17
Legal fees on recovery of trade debts 13
85
9. Training and Research
Included under the above expenses are:
Routine product testing and quality control expenses 16
Payments to an approved research and development company for the use of its
services. 33
10. Entertainment
The above comprises:
Dinners and lunches provided to suppliers 54
Meals and refreshments provided to employees during promotional campaigns 6
Salesman entertainment allowances (utilized to entertain customers and dealers) 60
120
11. Foreign Exchange Loss
The above comprises:
Foreign exchange loss on settlement of trade debts 27
Foreign exchange loss on purchase of machinery 13
40
12. Provision for Doubtful Debts (trade)
The above provision comprises:
Specific provision for doubtful debts 8
General provision for doubtful debts 15
Bad debts written off 7
30
13. Other Income
This comprises income derived from Bangladesh as follows:
Tax exempt dividend 154
Interest income 86
Dividend income (gross) 160
400
14. Additional Information
(i) The balances of the following provision accounts are as shown below:
December 31
2016 2015
Tk. ‘000 Tk. ‘000
Provision for stock obsolescence 180 120
Provision for retirement benefits 302 254
Provision for doubtful debts (trade)
- Specific 32 25
- General 72 60
(ii) TWS Ltd. has unabsorbed tax losses and unabsorbed depreciation allowances
brought forward from the assessment year 2016-2017 of Tk.162,000 and
Tk.103,000 respectively. The depreciation allowances claim for the assessment
year 2017-2018 is Tk.124,000.
Required:
Compute the total income and tax liability of TWS Ltd. for the assessment year
2017-2018.

TWS Ltd.
Assessment year: 2017-18
Accounting year ending on 31 December 2016.
Particulars Note Taka 000 Taka 000

Net Profit / (Loss) before tax as per audited financial statements 90
Income to be considered separately under appropriate head:
Other income 400
Profit from business as per audited financial statements (310)
Items of expenditure added for later consideration:
Depreciation of fixed assets as per audited financial statements 300
Provision for stock obsolescence 1 74
Provision for retirement benefit 2 80
Director's remuneration (entertainment allowance) 3 25
Donation to approved institutions 4 45
Entertainment allowance 3 120
Provision for doubtful debts (trade) 5 23 667
Inadmissible expenses:
Contribution to unapproved overseas provident fund 6 16
Interest expense of staff loan borne by the company 7 16
Deposit for water and electricity with expatriate employee house 8 3 35
392
Admissible income/ (expenses):
Written off provision for doubtful debts 5 (4)
Written off provision for obsolescence of stock 1 (14)
Retirement benefit paid 2 (32) (50)
Income from business or profession before considering depreciation, 342
Entertainment allowance, unabsorbed tax loss and unabsorbed depreciation
Tax depreciation for the assessment year 2017 - 18 (124)
Profit after depreciation 218
Entertainment allowance On Tk. 218,000 @4% 3 (8.72)
Business income after entertainment allowance 209.28
Set off unabsorbed tax loss 9 (162)
Set off unabsorbed fiscal depreciation 10 (47.28)
Income from business or profession -
Income from other sources

Dividend income 154 -
Exempted in full (since as per question it is tax exempt) (154)
Interest income 86
Dividend income (gross) 160
Income from other sources 246
Total taxable income 246
Income Tax Payable on Total Income Note Taka’000
Tax payable on dividend income of Tk.86,000@20% 17.20
Tax payable on other income of Tk.160,000@35% 56.00
73.20
Investment tax credit 4 (6.75)
66.45
Advance income tax paid -

Net tax payable 66.45
Notes:
1. Provision for stock obsolescence is disallowed in income tax assessment and direct write off of
stock is allowed as deduction. Further write off of provision for stock obsolescence tantamount to
actual write off and as such is considered as deductible expenses as determined below:
Particulars Taka
Opening provision for stock obsolescence 120

Provision made during the year 74
Provision written off (balancing figure) (14)
Closing provision ( 180
14)
2. Provision for retirement benefit is disallowed in income tax assessment and actual payment
is allowed as deduction as determined below:
Particulars Taka
Opening provision for retirement benefit 254
Payment made (balancing figure) (32)
Closing provision for retirement benefit 302
3. Entertainment allowance is separately considered as per rule 65 of the Income Tax Rules ,1984;
4. Donation to approved institutions (30+ 15) is considered for investment tax credit as per
paragraph 22 of Part B of the Sixth Schedule of the income Tax Ordinance, 1984. 15% on Tk. 45,000
=Tk.6,750;
5. Provision for doubtful debt is disallowed in income tax assessment and direct write off of receivable is
allowed as deduction. Further written off provision for doubtful debt tantamount to actual write
off and as such is considered as allowable deduction as determined below:
Particulars Taka
Opening provision for doubtful debts (specific & general) 85
Provision written off (balancing figure) (4)
Closing provision 104
6. Contribution to unapproved overseas provident fund is disallowed as per section 30(d) of the ITO,
1984;
7. Interest expense of staff loan borne by the company is considered as non business expense;
8. Deposit for water and electricity is considered as security deposit and recoverable at the end of
tenancy;
9. Carry forwarded tax loss is adjusted before unabsorbed depreciation as per section 42(6) and 42 (7)
of the ITO. 1984;
10.Unabsorbed fiscal depreciation up to Tk.47, 280 has been adjusted this year and remaining Tk.55,720 has
been carried forwarded.
11 May
ABC Ltd., a publicly traded company incorporated and operating in Bangladesh, is Jun
70% Bangladeshi owned and is a manufacturer of refrigerators, freezers and air- 2015
conditioners under the brand name ABC which is registered as a trade mark in
Bangladesh. The company is the owner of the brand. The profit and loss account for
the year ended 31 December 2016 is as follows:
Notes Tk.‘000 Tk.‘000

Turnover 161,596
Add: Interest income (1) 308
161,904
Less: Cost of sales (2) 115,416
46,488
Less: Salaries, wages, and bonuses (3) 7,040
Employees Provident fund (4) 1,536
Donation (5) 20
Advertising (6) 7,398
Rental of premises (7) 1,858
Travelling (8) 1,500
Foreign exchange loss (9) 280
Maintenance of plant and
machinery (10) 232
Bad and doubtful debts (11) 2,038
Freight and insurance 3,044
Depreciation 1,880
Motor vehicles expenses 582
27,408
Net profit before taxation 19,080
Notes:
(1) Interest income is from a fixed deposit placed with a bank in
Bangladesh. The interest was received during the year and has been
grossed up in the accounts. Interest income includes Tk.28,000 (gross)
earned but received by ABC Ltd. after 31 December, 2016.
(2) Cost of sales is arrived at after crediting Tk.80,000 in respect of the cost
of goods manufactured by the company, which were withdrawn from
stock for use of fixed assets by the company. The normal selling price
was Tk.120,000.
(3) Salaries, wages, and bonuses include basic salary of Tk.64,000 paid to
CFO in cash for month of January 2016,pension of Tk.20,000 and
contribution to the Gratuity (unapproved) Fund.
(4) The Employees Provident Fund contributionsby the employer and
employee each are at the rate of 10% for staff and 12% for executives.
(5) Donation is in respect of contributions made to a fund-raising campaign
organized by a distributor of the ABC brand of goods.
(6) Advertising:
Included is a sum of Tk.54,000 incurred on advertising the ABC brand
of goods on the internet via a host website located in Dhaka. The goods
are of export quality standard. No income tax and VAT were deducted
from the payment, as the company was not sure about the requirements
of such deduction.
(7) Rental of premises:
Included in the rental is a sum Tk.50,000 paid in respect of the early
termination of the lease of a building which the company vacated in
September 2016. The lease was to haverun for another 5 years. The
building was no longer suitable as a showroom for the company‘s
goods due to the construction of a toll plaza.
(8) Travelling includes:
(i) Vacation airfare and hotel accommodation costing Tk.36,000 for
important overseas customers.
(ii) Reimbursement to the directors of the company of salaries of
Tk.200,000 and Employees Provident Fund contributions of
Tk.25,000 in respect of drivers employed by the directors.
(9) The foreign exchange loss is in respect of the purchase of component
parts for manufacture. The realized loss amounts to Tk.14,000 only.
(10) Maintenance of plant and machinery includes the installation cost of a
machine amounting to Tk.34,000.
(11) Bad and doubtful debts comprise: Tk.
Bad debts recovered (238,000)
Specific provision brought forward (1,902,000)
General provision brought forward (2,410,000)
Bad debts written off 240,000
Specific provision carried forward 2,750,000
General provision carried forward 3,598,000
2,038,000
The specific provision carried forward includes a sum of Tk.26,000,

being the balance of a personal loan granted to a director who has now
resigned from the Board.
(12) Depreciation allowances have been computed at Tk.1,644,000 for the
assessment year 2017-18, but without taking into account the following
acquisitions:
Machine:
On 14 August 2016 the company purchased a machine at a cost of
Tk.366,000. The sum of Tk.34,000 mentioned in note (10) was incurred
on preparing the site for installation of this machine. The machine
commenced to be used for the business two weeks after acquisition.
Motor car:
A new car costing Tk.4,400,000 was purchased on 9 July 2016 for the general
manager.
(13) Dividend has been paid at the rate of 30% (20% cash, 10% bonus) for
the year ended 31 December 2015.
(14) The company has a capital loss Tk.1,000,000 carried forward from the
assessment years as follows:
2009-10 Tk. 200,000
2010-11 Tk. 300,000
2011-12 Tk. 400,000
2012-13 Tk. 100,000
Tk. 1,000,000
The loss carried forward from the assessment years includes:
(i) 2009-10: Tk.100,000 depreciation allowance.
(ii) 2012-13: Tk.50,000 loss under the head ―Capital gain‖.
All other losses carried forward relate to business income.
Requirements:
a) To Compute the total income for the Income year ended 31 December 2016
Corresponding to assessment year 2017-2018.
b) To compute total tax liability for the year.
While making the above computations any non-compliance of the relevant provisions
of the tax laws (Income Tax as well as VAT) by the Company are to be considered
strictly in accordance with the legal provisions for such non compliance. Use the
current income tax provisions, ignoring the proposals given in the Finance Bill, 2018.
If considered necessary, you may make assumptions in the light of the relevant tax
provision.
ABC Ltd.
Accounting Year ended on 31 December 2016
Note Taka’000 Taka

Particulars '000
Net Profit before tax as per audited statement of accounts 19,080
Less. Income to be considered separately under appropriate head:
Interest income (308)
Net Profit from business as per audited statement of accounts 18,772

Add: Items of expenditure for separate consideration:
Depreciation as per audited financial statements 1,880.00
Foreign exchange loss 280.00
Inadmissible expenses:
Salary paid in cash 64
Donation to unapproved sector 20
Advertising expense paid without deduction of income tax and vat 54
Contributions
VatVVAT to unrecognized provident fund 4 1,536
Reimbursement of director's driver salary and provident fund
225
contribution
Installation cost of plant and machinery (being capital nature) 34
Provision for bad and doubtful debts 5 2,276
4,209
25,141
Bad debts recovered 238
Admissible income/(expenses): 25,379
Written off provision for doubtful debts (240)
Realized foreign exchange loss (14) (254)
Income from business or profession before considering depreciation,

unabsorbed business loss and unabsorbed tax depreciation loss 25,125
Tax depreciation for the Assessment Year 2017-18 6 (2,224)
Profit after depreciation 22,901
Set off unabsorbed tax depreciation loss 7 (100)
Set off unabsorbed business loss 8 (450)
Income from business or profession 22,351
Income from other sources
Interest income 308
Total income 22,659
Income tax payable on total income @27.5% 6,231.23

Income tax deducted at source 10 (28.00)
Net tax payable L

6,203.23
Notes:
1 Taxable income and income tax payable thereon has been computed considering the provisions of the
Finance Act 2017;
2 It is assumed that no revenue is recognized for cost of goods transferred as fixed assets since there was
no gross inflow of economic benefit.
3 Pension is exempt from income tax in the hand of the recipient by paragraph 8 of the Sixth Schedule Part
A of the ITO, 1984 and hence the provision of Section 30 (d) is not applicable here. Since Gratuity Fund is
un-approved., contribution to such fund will be inadmissible. However, since the question does not
mention about amount of contribution to such Fund, no amount has been disallowed here.
4 Provident Fund
It is assumed that the provident fund is not recognized by the Commissioner of Taxes
5. Provision for bad and doubtful debts: Taka '000
Total provision brought forward (Tk. 1,902+ Tk. 2,410) 4,312

Provision written off during the year (240)

Provision made during the year (balancing figure) 2,276
Total provision carried forward (Tk. 2,750+ Tk. 3,598) 6,348
6. Tax depreciation Taka '000

Depreciation allowance computed 1,644
Normal depreciation on machinery (Tk. 366 + Tk. 34)x20% 80
Initial depreciation on machinery (Tk. 366 + Tk.34)x25% 100
*Normal depreciation on new car (Tk. 2,000)x20% 400
2,224
* As per Para 11 (6) (a) of the Third schedule of the ITO 1984, the actual cost of the motor car, not
plying for hire, shall not exceed Tk.20,00,000/. As the purchase price of the motor car exceeds the
said limit, depreciation has been calculated on deemed purchase price (i.e. twenty lakh taka).
7 As per Section 42 (6) of the ITO, 1984 unabsorbed depreciation loss can be carried forward for set
off with business income for unlimited period of time;
8 Unabsorbed business loss:

Total Loss 1,000
Depreciation allowance carried forward AY 2009-10 (100)
Loss carried forward under the head "Capital Gain" (50)
Business loss not eligible for set off under Section 38 (b) of the ITO, 1984:
For the AY 2009-10 (200-100) (100)
For the AY 2012-13 (300) (400)
450
9 The company did not pay cash dividend of 30% or more and hence not eligible for any income tax
rebate;
10 Income tax deducted at source: Taka ‗000

Gross interest income 308
Accrued interest (28)
Realized interest income 280
Income tax deducted at source @ 10% 28
12 Mr. SMART (Bangladeshi), a civil engineer, is the MD of four operational entities, popularly Nov
nd
called SMART group. His first unit is Smart Constructions Ltd. (SCL) in Dhaka, 2 one is Smart Dec
rd
Re-rolling Mills Ltd.(SRML) in Savar, the 3 unit is Smart Trading Limited(STL) in Dhaka and 2015
4th one is a trading arm(a branch of STL) in Italy engaged in sourcing EU-origin construction
materials for Bangladeshi market including Smart construction projects. His wife, an architect,
holds 10% with him in the limited companies. All units of Smart group follow accounting
periodicity ‗July-June‘.
Key information from SCL financial statements for the period ended 30.06.2017 are (amount
in Taka): Revenue Tk.500,000,000/=, Gross Income Tk.179,500,000/=. Other income
Tk.1,500,000/=, Admin expense Tk.150,000,000/=, Financial expense Tk.11,000,000/=,
Profit before tax Tk.20,000,000/=, Equity (share capital plus accumulated surplus)
Tk.40,000,000/=.
Information gathered from SCL Financials (For consideration when computing total income)
1. Other income includes the following:
i) Two units of Excavator (original cost Tk.1,000,000/=, tax WDV Tk.700,000/=)
sold for Tk.1,200,000/=. Company bought a replacement excavator for
Tk.600,000/= on 25.06.17 under intimation to DCT. The new excavator was
purchased by a bank loan.
ii) Loss of Tk.300,000/= on sale of one unit Loader (Cost Tk.1,000,000/=, tax
WDV Tk.400,000, Sale Tk.100,000/=.
iii) Tk.1,200,000/= on sale of old vehicles (Cost Tk.900,000, tax WDV nil, fully
depreciated)
iv) Drop in market price of the shares (of a listed company) Tk.100,000/= charged.
v) A unit of used bulldozer sold for Tk.1,000,000 (Normal profit Tk.200,000/= tax
WDV in book Tk.800,000). This bulldozer was bought three years ago to replace a
similar asset which was then sold at a capital gain of Tk.300,000/= on which
capital gain tax was not paid u/s 31, 32(5)(b), being the capital gain on that sale
was less than the replacement cost of the present bulldozer.
2. Admin expense include the following:

i) Depreciation on a SUV car depreciated at 20% p.a. on its purchase price of
Tk.4,500,000/=(bought on 01.01.2017).
ii) Salary and allowances paid to Chief Engineer total Tk.7,500,000 (including
Tk.750,000/= as house rent allowance, being less than 50% of the total basic
salary paid). Salary and allowance include basic salary, housing allowance,
festival bonus and leave allowance).
iii) Overseas traveling expense Tk.4,500,000/= including Tk.700,000/= incurred on
a/c of CFO‘s trip to Rome on five-day company business accompanied by his
spouse (BoD approved this on the principle of commercial expediency). Couple
stayed with family of CFO‘s friend when in Rome.
iv) Office common service charge paid to the lessor Tk.1,500,000/= (VAT has not
been paid thereon by SCL as it doesn‘t constitute ‗office rent‘ to the lessor under
Service Code S074).
v) Guest house rent Tk.1,200,000/= (which is rented for providing accommodation to
an expatriate engineering consultant on three-year contract). Expat consultant
holds work permit with disclosed ‗basic and ‗overseas allowance‘ plus tax on
expat salary and allowances payable by company (tax assessed per work permit
disclosure and cleared).
vi) Tk.500,000/= paid as commission to MD‘s spouse for her hands in getting a
Government building project for SCL. Company maintains a policy of paying
broking commission on securing construction projects.
3. Financial expense includes interest paid to a developer company for the defaulted
installment on a/c of purchase of an office floor for the company. Purchase price is
Tk.3,000,000/=, 75% paid off, balance delayed on which an interest paid to the
developer Tk.250,000/= per agreement.
4. Further information on Smart Construction Ltd. for the year ended June 30,
2017:
i) SUV bought for MD for Tk.4,500,000/=. Section 19(27) of the Ordinance
skipped attention.
ii) SCL has significant borrowings from banks. SCL lent interest-free
nd
Tk.2,500,000/= to its sister concern(the 2 unit). Proportionate interest cost
350,000/=.
The Branch in Italy and Smart Trading Ltd. :The trading arm in Italy is a branch of STL,
nd
a PE in Italy. STL investment of Italian branch has regulatory approvals. The 2
company of Smart group (the steel re-rolling unit) was in financial strain a year ago when
the Italian arm had idle funds. Having been approved by Regulators, Mr. Smart managed
a foreign loan from the Italian arm to his re-rolling unit in Savar at 5% p.a on which the
Italian branch received an interest earnings of net Tk.4,000,000/= after deducting tax at
20% (u/s 56(1)). Italian branch closed accounts on 30.06.2015 showing a tax adjusted
‗trading business profit‘ of eqvt Tk.10,000,000 (tax paid in Italy taka equivalent
Tk.2,750,000/= at 27.50%). Bangladesh corporate tax rate is 35%. According to
Bangladesh-Italy DTAA, interest income may also be taxed in the Contracting State in
which it arises and according to the laws of that state, but if the recipient is the beneficial
owner of the interest income, the tax so charged shall not exceed 15% of the gross
amount of the interest. Smart Trading Limited (STL) made a net loss of Tk.3,150,000/= in
Bangladesh business for y/e 30.06.2017.
You Joined Smart Group: You are a newly-qualified ACA. You joined SMART Group as
Group Tax Manager. Smart Construction Ltd. has a pending tax appeal case (first
Appeal). Pending the appeal decision, a new development surfaces before you followed
by a request from Appeal Commissioner for a financial grant and a souvenir advert for a
school in his village that now pops up ethical situation for you to handle. You and
Commissioner come from the same district and know each other very well.
Expansion into new Tiles Factory: Mr. Smart understands industry well and expansion
with core competency is his outlook. His next plan is to operate a ceramic tiles factory.
Smart Trading Ltd. (STL, the 3rd unit of Smart group) is capable to sell tiles and other
building solutions, whereas STL business of imported trading is erratic now due to Govt
fiscal slaps on imported materials. STL has built accumulated loss as on 30.06.17. Mr.
Smart is keen to utilize STL retailing capacity for the tiles factory. An in-operation tiles
factory ‗Trendy Tiles Ltd.‘ (TTL) is on offer for acquisition. Mr. Smart is in the middle of
three options – whether to merge STL with TTL or acquire TTL assets or buy TTL
shares. Before he decides, Mr. Smart wants to listen to a tax-neutral advice on the three
options hinting the (i) ability of STL to carry forward and set off its losses against the
future profit of the acquired and (ii) avoidability of capital gain tax on the transfer and
consideration under the provisions of Income Tax Ordinance 1984.
Requirements:
a) Calculate the total income and tax payable of Smart Construction Ltd. for the income
year ended 30.06.2017. Your answer should include separate computation for Capital
Gain tax. Explanation/appropriate assumptions in support of your adjustment to the
disclosed profit should be given.
rd
b) Compute tax liability of Smart Trading Ltd. (STL, the 3 unit) for the period ended
30.06.2017.Computation should clearly reflect the relief, if any, under DTAA.
c) Evaluate ethical issues and explain how you would take up the Commissioner‘s
request with your MD and how you would conclude on the matter. Your explanation
should cover appropriate threats and safeguards, if any, and your conclusion on the
matter with actions.
d) Brief three options (STL to merge with TTL, STL to acquire TTL assets, STL
to acquire TTL shares) in terms of the pros and cons under the provisions of the
Ordinance so as to address Mr. Smart‘s interests.
(a) Computation of Capital Gain and Gain Tax of Smart Construction Ltd. u/s 31:
Sales - WDV Business income Capital Gain

(i)Sale of Excavator 5,00,000 3,00,000 2,00,000
-------
(ii)Sale of Loader (3,00,000) (3,00,000)
(iii)Sale of old vehicles 12,00,000 9,00,000 3,00,000
(iv)Drop in m/v of shares (100,000) ------ ---

(v)Sale of Bulldozer 2,00,000 2,00,000 3,00,000
Total 15,00,000 11,00,000 8,00,000
Less: Capital gain on sale of excavator not to be taxed as option exercised u/s 32(5)
of ITO,1984 (200,000)
6,00,000
Capital Gain Tax at 15% 90,000
Note:
(i)Sale of Excavator: Sale 12,00,000 - WDV 700,000 = Profit 5,00,000(Business income 300,000,
Capital Gain 200,000). There will be no capital gain tax on taka 200,000/= as the amount is less than the new same
capital asset purchased by the company, even at bank loan. So, taka 300,000/= shall be added to the
business income u/s 28 of the company. Ref sections are: - 19(16), 32(5)(b) & 28.
(ii)Sale of Loader: Sale 1,00,000 -WDV 4,00,000=business Loss 300,000/=. This
loss is fully deductible and chargeable against revenue during the year. Ref section 29(1)(xi) read
with Para 10(c) of 3rd Sch.
(iii) Sale of old vehicles: Sale 12,00,000 - WDV nil = Total gain 12,00,000/= (Business income
9,00,000, Capital Gain 3,00,000).
(iv) Drop in m/v of listed company shares-not to be recognized as loss due to the fact that it was not
sold. So this is not deductible.
(v) Sale of Bulldozer. This was a replacement asset three years ago when a capital gain of taka
3,00,000 was not taxed u/s 31 & 32(5)(b). To compute the profit on present sale of this bulldozer, the WDV
shall be reduced by the earlier capital gain which was not taxed three years ago on the same asset replacement.
So, WDV for the purpose of computing business income u/s 19(16) of this bulldozer shall be 8, 00,000/=
less 3,00,000 = 5,00,000/=. Total gain on present sale of bulldozer should therefore be:
200000+300000=500000/=(Business income 200,000+capital gain 300,000)
Computation of Total Income of Smart Constructions Limited u/s 28:

Taka Taka
Disclosed profit before tax 2,00,00,000
Less: Entire other Income (for separate consideration) 15,00,000
1,85,00,000
Add: Business income on sale of various assets (note above) 11,00,000 1,96,00,000
Add: Inadmissible exp-

(i) Accounting depreciation on SUV 20% on 45,00,000 9,00,000
Less: Tax depreciation on SUV 20% on 25,00,000 5,00,000 4,00,000
(Para 11(6) of 3rd sch. Applied max ceiling as per F.A 2017)
(ii) House rent paid to Chief Engr. Taka 7,50,000/=. This is a perquisite.
Addition for excess perquisite (750000 - 450000= 3,00,000). 3,00,000
(Section 30(e),2(45). F.A. 2017 applied.)
(iii) Overseas Traveling Expenses incurred by CFO taka 700,000/= Admissible. ------
This is incurred on commercial expediency, under BoD approval. Hotel cost saved,
Moreover overseas travelling exp. Tk.45,00,000/ is within the limit of 1%
of turnover u/s 30(k). Tk.500,000,000/ x 1%=50,00,000/
(iv) Office service charge paid to Lessor taka 15,00,000/—.

(This is inadmissible u/s 30(aa) as the payment is not VAT-exempted as per 15,00,000
2nd Sch. or by any specific SRO of VAT. VAT SRO 182 of 2012 for truncated VAT rate
9% on office rent(S074.00). Office service charge paid to the same lessor
under same lease agreement should be assumed to attract same VAT as office rent.)
(v) Guest house rent taka 12,00,000/= for Expat Eng. Consultant.
Consultant's personal tax assessed and cleared only on basic pay
and overseas allowance as per BIDA permission. Therefore, the guest
house rent deduction claimed by the company is inadmissible 12,00,000
(vi) Commission paid to MD's wife in securing business
should be admissible as any other ordinary commission. -----
(Assumed tax deducted).She is 10% shareholder but not the shareholder
director of the company. So the restriction of section 30(L) would not be applicable.
(vii) Interest paid to Developer on defaulted installment payment on a/c of
office floor space. Inadmissible expenditure as no such expenditure is
allowable u/s 29. Moreover it is part of capital expenditure. 2,50,000
(viii) SUV bought for taka 45,00,000/= but section 19(27) missed compliance.
Tax on this shall be considered later at income from other sources u/s 33 (Equity
4,00,00,000/=. 10% of this 40,00,000/=. SUV price 45,00,000/=
Excess of SUV price over 10% of Equity = 5,00,000/x 50% of this 2,50,000/=
(ix) Proportionate interest for lending interest free loan to
Sister concern as per section 29(1)(xxvii) 350,000
- - - - - - - - - -

Income from business as per section 28 2,36,00,000
Computation of Tax Liability of SCL

Amount Tax Rate Tax Amount
Income from business u/s 28 2,36,00,000 35% 81,60,000
Income from other source u/s 33(d)
(tax on SUV purchase, Section 19(27)
50% of 10% Excess of Cost over Equity 2,50,000 35% 87,500
Capital Gain u/s 31 6,00,000 15% 90,000
Total Tax 83,37,500
b)
Branch of Smart Trading Ltd.(STL) in Italy is a tax non-resident assessee but a Permanent Establishment(PE) in
Italy. STL, being a resident assessee in Bangladesh computes its total income and tax liability world-income
basis. The Computation of tax liability of STL shall, therefore, be as follows for the income period ended
30.06.2017 (Assessment Year 2017-18), amount in Bangladesh taka:
Particulars Income Tax Rate Tax Liability

Amount
Net profit (loss) before tax of STL (31,50,000)
ADD:
Trading profit (tax adjusted) of STL Branch in Italy 1,00,00,000
27,50,000x 100
27.50
Interest income of Branch in Italy 40,00,000 x 100 50,00,000
(100-20)
1,18,50,000 35% 41,47,500
Gross Tax
LESS:
Tax paid at source in Bangladesh on interest income by STL 10,00,000
branch in Italy. 50,00,000 x 20
100
31,47,500
LESS:
Foreign tax credit on tax paid in Italy on the income of the STL 27,50,000
branch in Italy as per provision of section 144(4) read with 7th
Schedule (Para-2).
Balance Tax Payable 3,97,500
Note: Branch in Italy, not being beneficial owner of the interest income, cannot take advantage of the DTAA for lower
tax rate of 15% on interest income.
(c)
I am at a fix what to do. Following circumstances are going through my mind:
(1) Causes of the requested grant and advert are social (school), not for the Commissioner.
(2) MD expects delivery from me on the appeal case that involves huge disputed tax demand.
(3) MD may not deny the request for grant weighing on gravity of the appeal case and social causes.
(4) MD may be upset if the appeal decision is not coming his way.
(5) My commitment in new job is either not less, appeal case may sound an opportunity to prove.
(6) How will MD react if appeal decision coming negative even after making the grants and advert.
(7) If we regret and appeal decision coming negative, MD might take ‗an opportunity slipped away‘.
(8) Commissioner hopes for a positive response from me as closely known and for appeal case.
(9) This may be an inducement which may influence appeal judgment of the Commissioner.
(10) Making grant and favorable appeal decision may sound buying the decision which is unlawful.
(11) Relationship with the Commissioner in future may turn lukewarm, if not sour, if I fail to meet.
(12) This is the first appeal; either party unhappy with the order shall make further appeal.
With the above in my mind. I now identify the various threats as I see in my handling the issue. Commissioner‘s request
for grant and advert for his school may be coined as a form of pressure for ‗inducement‘ to gain a favorable
appeal decision for my company, an element of intimidation threat. Commissioner's request is a commercial
pressure from outside, a sense of intimidation threat. My acquaintance with Commissioner and we both being in
same association may influence my decision to advise MD to agree, a case of familiarity threat. If Commissioner's
request is not met and appeal decision comes negative, MD may get upset this may cost my new job, issue of
self-interest threat.
I am a PAIB. obliged to comply all IESBA fundamental principles including Professional Behavior as it
imposes obligation on me to comply relevant regulations and avoid any action that may discredit my
profession. If I am seen to act ethically, demonstrating my professional obligation, my conduct may rather be
appreciated both by my MD and the Commissioner. I must work ethically above all doubts of identified
threat. In my evaluation, the threats identified are significant. I am in the middle of sensitive issue,
knowing that my MD would seek my advice when I would discuss the issue with him. My connection
for the grant decision (advising MD) and the matter between appeal decision and company benefits are deep
and significant. Nature of the issue is significant. I should not make an inducement which may hint a wrong
intent and may improperly influence the Commissioner in appeal decision. Although school would benefit,
not the Commissioner, both are associated. Smart group doesn’t have any social giveaway policy
to consider to assume as a safeguard for my advice to MD. If the inducement results into influence
to gain appeal decision for the company, it would be an unlawful act. Under the circumstances, I would handle
the situation in the following manner to uphold ethical principles:
I shall pass on Commissioner's request for grant and advert to my MD, brief him about pending appeal
decision with the Commissioner, my position as a PAIB and the ethical principles that apply to my
job. Finally, I shall advise my MD not to give in to Commissioner's request. I shall seek my MD‘s
permission to visit the Commissioner to communicate our decision to him.
I shall personally visit the Appeal Commissioner and shall also brief him about my ethical threats as
PAIB if responding to his requests at this moment. I shall tell him about the discussion me and my
MD have done on this. I shall convey him our wishes for the continued success of his social projects
including his school. Finally, I shall conclude the meeting with Commissioner after my final words
of regrets for not being able to respond to his requests under the circumstances, prominently pushed
by ethical threats.
(d)
Mr. Smart wants brief about tax law provisions with respect to imaginary options of `STL amalgamating with
―TTL‖ and `STL to acquire TTL assets‘ and `STL shareholders to acquire TTL shares‘.
SR to amalgamate with TTL: An amalgamation u/s 2(2) does not involve transfer of capital assets subject to
capital gain tax and also the carry-forward of amalgamating company loss is not legally possible u/s 42(4).
STL is transferor or amalgamating company, TTL is transferee or amalgamated company. Section 2(2) provided three
conditions: (i) all assets of STL shall become assets of merged TTL after merger, all liabilities of STL shall
become liabilities of merged TTL after merger, minimum 90% of the shareholders(in value) of STL shall become
shareholders of merged TTL after merger by issue from TTL. Vesting the STL assets on TTL does not meet the
definition of ‗transfer‘ in the law u/s 2(66) and, so, no capital gain tax arises u/s 31 and 32. There is no sale of
capital assets in amalgamation u/s 2(2). There is no 'price' paid for the assets vested. Amalgamated company
issues shares to shareholders of amalgamating company without any payment for shares: the assets of
amalgamating company vest in amalgamated without any payment.
There is no mutual transfer of ownership of one item for the ownership of another in an amalgamation.
However, if amalgamation scheme conditions for TTL make consideration to the shareholders of STL partly

in shares and partly in cash, the 'cash consideration' shall attract measurement of capital gain for tax u/s 31,
32. Upon the amalgamation is effected under court sanction, the transferor or amalgamating company
stands dissolved, Carry-forward of the loss of amalgamating company for set-off against profit of
amalgamated company is not possible in that a discontinued company (STL) cannot carry forward its loss u/s
42(4).
STL to acquire TTL assets:Acquisition of assets involves tax liability on assets transfer on
Transferor / seller (TTL) and the carry-forward of the loss of the seller(TTL), if any, is not possible u/s
42(4). This is a deal of assets sale (entire TTL) to STL. Capital assets (as per agreement of assets and
consideration) transfer shall attract tax u/s 28, 31 and 32. If the assets consideration is shown lower to avoid
VAT and duties, section 19(8) may be applied for fair market value application. The right to carry forward
loss lies with the company which makes loss. So, TTL loss, if any, cannot be carried forward by STL after
TTL is bought over. Section 42(4) only allows the carry-forward facility in the case when a company is
succeeded by other by inheritance, not on ordinary asset sale.
STL to acquire TTL shares: Taking ownership by shares are two routes subscription from company and
transfer from the shareholders. In share subscription from company, no tax incurs on allotting company on the
receipt of subscription amount. If it is transfer of shares from shareholders (say, TTL shareholders to STL
shareholders), transfer attracts ‗capital gain tax‘ on the transfer u/s 31, 32, tax being on the seller. Re carry-
forward of loss of selling company (say, TTL), if any, the buyer (say, STL) cannot carry forward such loss
u/s 42(4), 38. Its is the right of the company to carry forward loss only which suffers it (here it is TTL)
and ‗continuity of same business in which the loss is incurred‘ is a condition for carry-forward which
practically ceases after TTL is bought by STL by way of share acquisition.
13 You are a Chartered Accountant and working in Y Ltd. (―Company‖) as a tax manager. The May
Company is engaged in the business of export of the goods manufactured by itself. The Jun
bank, through which export proceeds of Y Ltd. is received, deducts tax at the specified rate 2015
from the total export proceeds in accordance with the provisions of section 53BB of the
Income Tax Ordinance (―ITO‖), 1984. The export proceeds net of income tax deducted at
source under Sec.53BB received by Y Ltd. during the income year 2016-17 came to
Tk.100,000,000. Export income of Y Ltd. falls under the scope of section 82C of the ITO,
1984. Generally, the Company does not have additional income from export as referred to
in section 82C (6) of the ITO, 1984.
In the income year 2016-17, a warehouse owned by the Company since 1/7/2016 was
leased out to another company for a term of 3 years from 1/7/2016 at a monthly rent of
Tk.100,000 with an advance rental payment of Tk.900,000 to be adjusted with monthly
rental payments over 3 years. Y Ltd. received rent for the income year 2016-2017, but no
tax was deducted at source from the rent paid by the lessee. Nor any VAT was paid on the
rent. The repair cost of Tk.15,000, municipal tax of Tk.10,000 and insurance premium of
Tk.1,000 were paid for the warehouse during the income year 2016-17.
The net profit before tax for the year as per the draft financial statements for the income
year came to Tk.3,304,000. The net profit as per income tax comes to the same amount,
assuming no penalty/liability (if any) for non-deduction of tax at source by the tenant and
for non-payment of VAT. There is a tax refundable of Tk.150,000 for the last assessment
year 2016-17. The income (including advance) from warehouse and its related expenses
were deposited/paid out in cash into/from an undisclosed bank account of Y Ltd. and have
not been included in the draft financial statements. The purchase money of Tk.50,000,000
(total accumulated undeclared income of Y Ltd. over the last 2 assessment years) for the
warehouse was also paid from the same bank account.
The management of Y Ltd. is thinking of assessment of income of the Company for the
income year 2016-2017 under section 82C of the ITO, 1984, upon considering the tax
collected at source by the bank from the export proceeds as final discharge of tax liability.
In a meeting with the management team of Y Ltd. on tax issues, you have been asked to
consider whether it is possible to ignore income from house property so that no demand for
additional income tax arises. To discuss the issue further, a meeting would be held next
week.
Requirements:
Calculate the total income tax liability and further income tax amount payable after
adjustment of any amount(s) as per income tax law. Assume that the undeclared/
undisclosed income as above will now be declared/disclosed.
14 Wahab& Co. Limited, a listed public limited company with its registered office in Dhaka, has Nov
shown net profit of Tk. 837,413 in the audited accounts for the income year ended June 30, Dec
2017. 2012
You are required to compute total income and tax payable on correct return u/s 82 of the ITO
1984 indicating the assessment year and after considering the following facts :
a) Excess perquisites calculated u/s 30(e) Tk. 145,000
b) Salaries and allowances of Tk. 176,000 paid without complying with the provisions of section
30(a)
c) Registration expenses and fees include Tk. 215,701 found to be personal entertainment in
nature.
d) Advertisement and publicity expenses include Tk. 125,000 as donation to a local sports club.
e) Gratuity provision during the year is Tk. 677,937 but actual payment is 276,434.
f) Rent, rates and taxes claimed at Tk. 368,212 out of which Tk. 214,640 paid as rent without
complying the provision of section 53A of the ITO 1984.
g) Accounting depreciation as per audited accounts is Tk. 2,979,211 and tax depreciation as
calculated with reference to previous year assessment is Tk. 3,727,422.
h) Technical fee of Tk. 210,000 paid to foreign collaborators charged in the accounts.
i) Export turnover was 10% of the total sales of the company.
j) The company declared 60% dividend for the year.
Wahab& Co. Limited: A Listed Public Company.
Income Year ended June 30, 2017
Assessment Year 2017 - 2018
Particulars Notes Taka Taka
Net Profit as per audited Profit & loss A/C 837,413

Add: Items to be considered separately:
Technical fee 1 210,000
Accounting depreciation 2,979,211
Gratuity Provision 677,937 3,867,148
4,704,561
Add: Inadmissible Items:
Excess perquisites u/s 30(e) 145,000
Salaries and allowance – u/s 30(a) 176,200
Donation to a local sports club not allowable u/s 29 125,000
Registration fee included personal entertainment 215,701
Rent payment without TDS disallowed u/s 30(aa) 214,640 876,541
5,581,102
Deduct: Allowable or deductible items:
Gratuity Paid 276,434
Tax depreciation 3,726,422
Technical know how fee allowable @ 8% of profit 126,260 4,129,116
Tax thereon:
Tax @ 24.75% as dividend declared more than 20% of Tk. 1,451,986 359,367
Less: Export rebate of 50% on Export turnover of 10% of Tk. 359,367 17,968
Tax payable 341,399
Note-1: Technical Know how:
Allowable upto 8% of profit of Tk. 1,578,246 u/s 30(h) of ITO 1984
Note-2: Export Tax rebate:

10% of sale of manufactured goods is export so the company will enjoy 50% tax rebate on export business under para
28 of Part A of 6th Schedule of ITO 1984.
15 Silkway Group has two companies, Silkway Toiletries Ltd.(STL), an unlisted public Nov Dec
limited company in toiletries manufacturing business and Silkway Chemicals 2017
Ltd.(subsidiary of STL with 80% equity). The subsidiary operates a factory in old Dhaka,
closed due to Environment Directorate order not to run chemical factory in city area.
Silkway Toiletries Ltd. filed its tax return showing total revenue of taka five crore; profit
taka 5,000,000 for the year ended 30.06.2017 after debits and credits of the items revealed
from the examination of accounts of the company as follows:
DEBITS
1) Depreciation on revaluation of assets Taka100,000/=
2) COGS includes (a) taka 1,000,000 for direct materials bought from supplier on
which tds was not done u/s 52, Rule 16, (b) taka 500,000 paid to an enlisted tailor
for supply of uniforms for production floor workers on which tds was not done.
3) Insurance premium paid to BGIC taka 250,000 on 02.02.2017 without doing tds.
4) Paid taka 200,000 to Grameen phone Ltd. for mobile phone sets without doing tds
5) Provision for loss in subsidiary – Taka 500,000/=
6) Written off taka 50,000 representing the value of machinery missing from physical
verification.
7) Exchange loss linked to the income from foreign agent due to delay in remitting
the income.
8) Interest taka 100,000/= on overdraft to pay interest for failure to pay advance tax.
9) Written off taka 200,000/= long due from a missing party who was advanced this
sum for raw material.
10) Commission paid taka 250,000/= to a bank for forward contract (dated 25.06.17)
to hedge each risk involving settlement of import L/C dues due after a quarter.
11) Taka 500,000/= on a/c of free samples of finished goods given to
distributors(limited 1% of turnover)
12) Trade discounts to customers taka 1,000,000/= and distributors commission paid
taka 500,000/=.
CREDITS
 Dividend taka 100,000/= on investment in an approved Alternative
Investment Fund
 Capital gain on sale of fixed assets taka 100,000/=
 Interest earned on security deposit at bank in Kenya, taka eqvt 100,000/=.
OTHER INFORMATION
 Unabsorbed depreciation brought forward from assessment year 2016-2017
 taka two lacs.
 Return filed for the income y/e 30.06.17 on 30.09.2017; assessment
completed on 30.11.17. Company‘s assessed income in the previous income
 year was taka 6,000,000/=.
 For the reported income year, the opening stock of toiletries was valued at
taka 35 lacs and closing stock of toiletries raw materials at taka 15 lacs.
These opening stock and closing stock were wrongly overvalued and
 undervalued respectively by 5% and 10%.
 Tds done on rent payment of taka 500,000/= but did not deposit to
treasury for about six months.
 A Chinese supplier breached L/C terms to supply toiletries machineries

on order. Company received a liquidated damage for this eqvt taka
1,500,000/= which has not been credited to P&L. This machinery L/C
was done under 50% margin (taka 75 lacs) with a bank, funded by a
separate short term loan for same amount at 10% p.a. Company paid
interest on such loan taka five lacs and charged to revenue.
 Company acquired a delivery van under lease finance from a NBFI.

Registration was done in the name of the Company. Depreciation
charged taka 400,000/=.
 Company made exports of selected item of toiletries to Africa through

an agent in Kenya. Under permission from Bangladesh Bank, company
made an interest bearing security deposit with the agent‘s bank in
Kenya to cover product warranty in which interest earned was taka
100,000/=(tax paid thereon in Kenya, taka eqvt 15,000/= at 15%).
Customers total tds including tds by bank on exports realization taka
700,000/=. 
 Company paid advance tax taka 500,000/= during the income year.


(b)Silkway Toiletries Ltd.(STL) and its Managing Director own Silkway Chemical Ltd.
for 80% and 20% equity respectively. In the attempt to consolidate the business in the
face of closure of the Chemical subsidiary, the shareholders of Silkway Chemical Ltd.
resolved to wind up the subsidiary voluntarily vide EGM dated 31.08.2017. STL and its
MD acquired shares of SCL four years ago at 10% premium over the par value. Factory
land was registered to the shareholders at market value. Liquidator closed his account on
30.11.17 having paid off all liabilities as they are and disposed of all assets. Expenses
incurred during winding up process taka 100,000/= Net assets on EGM date prior to the
distribution to shareholders were as follows:
ASSETS:
Machineries net taka 500,000 (Original cost taka 4,500,000, Sold by Liquidator taka
300,000). Factory land taka 5,000,000 (market value taka 8,500,000/=). Cash and Bank
balance taka 1,500,000. Due from Silkway Toiletries Ltd. taka 1,000,000 against
chemical sale (r/m for toiletries)
LIABILITIES:
Share capital taka 5,000,000 (taka100 share). General Reserve taka 500,000. P&L App
taka 1,500,000. Payables to employees taka 500,000/=. VAT liability taka 500,000.
Requirements:
i)Compute total income and tax liability of Silkway Toiletries Ltd separately
showing computation of excess or shortfall of advance tax and explanation for
consequence.
ii)Show distribution upon liquidation, tax implication on Silkway Chemical Ltd. and
shareholders.
Silkway Toiletries Ltd.

Income y/e 30.06.2017. [AY 2017-18]
Computation of Total Income, Tax Liability and Others
Income from Business: Taka Taka
Shown Net profit
Less: Non-business income for separate consideration 5,000,000
(1)Capital gain 100,000
(2)Dividend from Alternative Investment Fund 100,000
(3)Interest from foreign bank deposit in Kenya 100,000
(300,000)
Add: Inadmissible expenses
(1)Dep. not allowable on revaluated assets 100,000
(2)Paid to enlisted contractual tailor u/s 30(aa) 500,000
(3)Paid to GP for mobile sets supply u/s 30(aa) 200,000
(4)Provision for loss is not allowable exp. u/s 29 500,000
(5)Machinery physically not found is not allowable u/s 29 50,000
(6)Commission for hedging as it is not allowable exp. u/s 29 250,000
(7)Office rent u/s 30(aa) as tds not deposited 500,000
(8)Adjustment for overvaluation of stocks:
Opening stock overvalued by 5% 166,667
Closing stock undervalued by 10% 136,364
2,403,030

Add: Compensation received from a Chinese company not credited 1,500,000
Less: Unabsorbed depreciation - carried forward for set off (200,000)
Business Income 8,403,030
Capital Gain 100,000
Income from Other Sources:
Dividend from AIF [note-11] 100,000
Interest on foreign bank deposit [note-12] 100,000
200,000
TOTAL INCOME 8,703,030
Tax calculation:
i)Tax on Business Income and interest income @35%
35% on 8,503,030 2,976,061
ii)Tax on Capital Gain (15% on 100,000) 15,000
iii)Tax on dividend 20% on 100,000 20,000
GROSS TAX LIABILITY 3,001,061
Less:
i)AIT 500,000
ii)Tds 700,000
total tax paid 1,200,000
NET TAX LIABILITY 1,801,061
Computation of simple interest for short payment of AIT:
Gross Tax 3,001,061
75% of tax comes at 2,250,796
Total AIT 1,200,000
Shortfall 1,050,796
43,783
10% interest on shortfall for 5 months 43,783
TOTAL TAX PLUS SIMPLE INT. DUE 1,844,844
Computation of Minimum Tax on gross receipts:
Gross revenue 50,000,000
Capital gain 100,000
Other source income 200,000
Gross Receipts 50,300,000
Minimum tax @ 0.60% on gross receipts 301,800
Notes:
[1]50% income rebate is applicable on export as per 6th schedule but as the export figure is not given in the
question so it is not possible to workout.
[2]Direct raw material purchase is not subject to tds and that's why not disallowed u/s 30(aa)
[3]Insurance premium paid to Insurance company is not subject to tds and that's why not disallowed u/s
30(aa)
[4]Exchange loss is allowable business loss as per section 29, so not disallowed.
[5]Bad debt Tk.2,00,000/( dues from missing supplier)is in connection with business, so allowed.
[6]Depreciation on leaseholdvehicles is allowable as per Third Schedule as it is finance lease. The
indication is that it was registered in the name of the company.
[7]Free sample exp. is within the limit prescribed at Rule-65, so nothing is disallowed from here.
[8]Interest on overdraft is allowable expenditure as per section 29 as business expenditure
[9]Trade discountTk.10,00,000 and distribution commission Tk.5,00,000/ is allowable expenditure

assuming that source tax was deducted properly from distributorship commission.
[10]Office rent fully disallowed assuming that source tax was not deposited before assessment.
[11] Dividend from Alternative Investment Fund (AIF) is taxable @ 20%. It should be noted here

that income of the fund itself is tax-free as per 6th Schedule (Part-A) Para-54, not dividend income in the
hand of shareholder.
[12] About interest income from Kenya: As there is no DTAA between Bangladesh and Kenya so no
foreign tax credit will be allowed as per section 145 as NBR not yet prescribed any rules in this behalf
b.
Silkway Chemical Limited

Distribution of assets to Shareholders upon Liquidation
Amount in
TAKA
INFLOW:
Machinery sold 300,000
Received from Silkway Toiletries 1,000,000
Cash and Bank Balance 1,500,000
2,800,000
OUTFLOW:
Expense 100,000
VAT paid 500,000
Payable settled 500,000
1,100,000
NET cash Available for Distribution 1,700,000
Distribution to Shareholders:
Total Silkway Toiletries Ltd. MD of STL
Ownership 80% 20%
Net Fund 1,700,000 1,360,000 340,000
Factory land 8,500,000 6,800,000 1,700,000
10,200,000 8,160,000 2,040,000
NOTE:
Machinery sold for 300,000/ against WDV 500,000/. Therefore, revenue loss taka 200,000/ (3rd Sch (
para-10) Factory land transferred at market value of Tk. 85,00,000/= against COA 50,00,000/ =
35,00,000/ is capital gains on Silkway Chemical Limited upon distribution of assets upon liquidation.
Total Silkway Toiletries Ltd. MD of STL
Amount of share capital in the company 5,000,000 4,000,000 1,000,000
No. of shares at taka 100 each 50,000 40,000 10,000
Cost of share to the shareholders at 10% premium 4,400,000 1,100,000
Deemed Dividend u/s 2(26) on the distribution:

Total assets value distributed to the shareholders 10,200,000 8,160,000 2,040,000
Less: Deemed DIV upto the accumulated profits 2,000,000 1,600,000 400,000
Balance after deemed dividend 8,200,000 6,560,000 1,640,000
Less: Share investment value (COA u/s 32(2)(i) 4,400,000 1,100,000
Balance -- Capital Gain u/s 31,32 in the hands 2,160,000 540,000
S/H
SUMMARY OF DISTRIBUTION TO SHAREHOLDERS:

Distribution to the extent of DEEMED DIVIDEND 1,600,000 400,000
Balance Distribution 6,560,000 1,640,000
Of which, Capital Gain 2,160,000 540,000

TDS on Dividend distribution by Silkway Chemical Ltd.
Rate of tds on company and individual 20% 10%

TDS amount on deemed dividend 320,000 40,000
Net dividend to shareholders 1,280,000 360,000
16 XYZ Ltd., a private company, is engaged in business segments that cover (i) mfg/trading of ceramic May June
tiles, (ii) mfg/export of leather products and (iii) international trading. Net profit of the company for 2017
the year ended 30.06.2017 is taka 50,00,000 after giving effect of the following items as
appropriate in the books:
i) License fee taka five lacs incurred for obtaining five-year franchise on 15 July 2016
ii) Paid cash Taka 50,000 to transport operator, Taka 150,000 to chemical supplier used in
tiles mfg.
iii) Rent taka five lacs received from letting out a part of its office premises.
Municipal tax in respect of the said part of the building amounting to taka 10,000
remains unpaid.
iv) Taka three lacs, being loss due to destruction of a machinery caused by a fire. The
insurance company compensated taka two lacs against the fire loss claim.
v) Taka 4 lacs and one lac being amounts waived by Janata Bank Ltd. out of principal and
arrear interest respectively in one-time settlement. Loan was obtained for working capital
need five years back.
vi) Dividend of taka 10,000 from Dell Ltd. on 1,000 equity shares of taka 10 each purchased at
taka 100 per share on 10th October, 2016. Dividend declared is 100%, the record date being
01.12.2016. Shares were sold on 1st March 2017 at taka 80 per share. Loss of taka 20,000
has been debited to PL account.
vii) Taka 50,000 paid to vendor of Office supplies on which VAT was not deducted.
viii) Depreciation on tangible fixed assets taka one lac including taka 50,000 on assets
revaluation.
ix) Taka 50,000 compensation paid to UK supplier for cancellation of machinery import
contract from UK.
x) Provision for deferred tax taka 1,00,000.
Additional Information gathered with respect to XYZ Ltd. for accounting year ended on
30.06.2017:
a. Depreciation on tangible fixed assets for the income year(relating to units other
than trading unit) as per income tax rules taka 1.75 lac.
b. Company obtained a loan of taka two lacs from ZXY Pvt Ltd. in which it holds
30% voting rights. Accumulated profits of ZXY Pvt Ltd. on the date of receipt of
loan was taka 50,000.
c. Company exports leather products to Spain. Balance Sheet (General Reserve:
Surplus on Devaluation) shows a credit of taka 1,75,000, amount realized and
brought in the income year from a Spanish customer as surplus on a/c of the
devaluation of BDT in 2015.
d. Company suffered heavy loss in its international trading segment. It was closed
down and the fixed assets linked to this trading unit were sold out. Company
claimed unabsorbed depreciation (on a/c of trading unit assets) of taka 50,000 in
the Return of income. Its not debited to PL a/c.
e. Under a debt restructuring with Agrani bank, the company converted arrears
interest taka 3,00,000 on term loan into a new term loan with a revised repayment
schedule. Company paid taka 50,000 towards such funded interest during the
year. Entire taka 3,00,000 debited to PL account.
f. Provision for bonus for the income year ended 30.06.2016, disallowed in same
income year, paid during the year ended 30.06.2017 taka 1,00,000.
g. Assessed brought-forward losses and unabsorbed depreciation as follows:
Losses Unabsorbed
Income Year Brought Forward Depreciation
2013-14 2 lacs 1 lacs
2014-15 ---- 3 lacs
2015-16 4 lacs 1.5lacs
Total taka 6 lacs taka 5.5 lacs

h. Tannery at Hazaribag: In connection with its leather manufacturing unit, XYZ Pvt Ltd.
operates atannery at Hazaribag. Complying the court decree involving a case with the
Government, Company transferred its tannery unit to Savar in which it incurred an expenditure
approx. taka 25,00,000 for transfer of entire unit that includes sheds, machineries, equipments,
raw material and finished leather.
Company also incurred taka 5,00,000 as legal fees as a member of Tannery association to
contest the court case which it lost. These payments shall hit accounts of the current income
year.
Planned Expansion on a Retailing unit: Company‘s ceramic tiles is not selling that well through
its dealers. Management of XYZ Pvt Ltd. identified the probable causes to such slide in
business. Management considers that a watertight retailing entity with selling focus may make a
turnaround. Being tax manager of XYZ Ltd, you are tasked to bottom up a report to
management on ‗optimum capital structure‘ for a new retailing unit which maximizes the wealth
and minimizes the cost of capital. Your look out is to strike a balance among risk, cost, control
and tax consideration arriving at a most tax-efficient model. Estimated initial fund required is
taka One crore. You are aware that BSEC introduced BSEC (Alternative Investment) Rules
2015 to open up Private Equity and Venture Capital (VC) Firm operations. Management spoke
to a VC firm who agreed to provide equity-linked debt. Available sources are 100% equity, or a
tax-efficient mixture of equity, VC Firm borrowing (interest 8%) and bank loan (interest 10%).
Expected RoI (EBIT basis) is 20%. Dividend trend in the same sector is 15%, assume tax rate
35%.
Requirements:
a) Compute total income of XYZ Ltd. for Assessment Year 2017-18. Show reasons for
treatment
b) With respect to tannery unit transfer, give your comment with explanations on whether
company can claim deductions of taka 25,00,000 and taka 5,00,000 in the current
income year tax return.
c) Suggest as a tax planner most tax-efficient and above-the-dividend-trend alternative for
new retail entity supported by detailed computations. Work out on three given
alternatives
(A : 100% equity,
B: 40% equity+40% VC Debt+20%loan, C: 20% equity+30% VC Debt+50% loan).
Answer:
ASSESSES: XYZ Pvt. Limited
Income Year Ended on 30.06.2017. [Assessment Year: 2017-2018]
in Taka
A. Income from House property u/s 24
Annual Value from premises rental (assumed reasonable) 5,00,000
Less: [ I ] Repairs & maintenance 30% of A.V. (assumed spent) 1,50,000
[2] Municipal tax levied but not paid
[Being permissible allowance without proof of actual payment u/s 25(e)] 10,000
(1,60,000)
Net taxable Income from HP: 3,40,000
B. Income from Business u/s 28:
Net Profit as per PL a/c 50,00,000
LESS: Income for consideration at separate head:
[1] Rental income (for consideration at HP income head) 5,00.000
[2]Interest waiver by bank (as it is not income u/s 19(11) 1,00,000
[3]Cash dividend (for consideration at other income head) 10,000
(6,10,000)

ADD: Inadmissible expenses
[1] 5 year's License fee paid for franchise
(Amortization will be allowed as per 3rd Schedule) 5,00,000
[2]Loss on destruction of machinery (29)(1)(xi) 2,00,000
(Being actual loss Tk.100,000 but claimed Tk.3,00,000)
[3] Accounting dep. (For separate consideration) 1,00,000
[4] Compensation paid to UK suppliers (for violation of contract) 50,000
[5] Provision for deferred tax (no such provision is allowable u/s-29) 1,00,000
[6]Capital expenditure for shifting tannery to Savar 25,00,000
[7]Municipal tax (for consideration at HP income head) 10,000
[8]Capital loss on sale of shares (as not related to business) 20,000
[9]Interest under debt reconstruction of Agrani Bank [note-5] 3,00,000
37,80,000
LESS: Items to be allowed:
[1] Amortization on License Fee (3rd Sch, para 10A) 1,00,000
[2]Tax depreciation as per 3rd schedule 1,75,000
(2,75,000)
Income from Business 78,95,000
Less: Carried forward of business loss and depreciation loss u/s 38 11,50,000
Income from Business [after carry forward and set-off of earlier 67,45,000
year's loss]
C. Capital Gain
Share Transfer:
Proceeds from share sale 80,000
Less: Cost of acquisition (100,000)
Loss on sale of share (not to be set-off as per section 37) (20,000)
Zero
D. Income from other sources:
[I] Cash dividend income from Dell Ltd. 10,000

Less: Exempted up to Tk. 25,000 as per 6 th schedule (Part-A) Pam-11 A (10,000) Zero
[2] Deemed dividend u/s 2(26)(e) for taking loan from ZXY Ltd.
50,000
(Maximum up to accumulated profit of Tk. 50,000).
Note:
[1] There is no violation of section 30(m) of ITO, 1984 for cash payment of Taka 50,000 to transport operator
and Taka 150,000 to chemical (raw material) supplier used in tiles mfg. and accordingly not disallowed u/s
30(m).
[2] There is no violation of section 30(aa) of ITO, 1984 for non-deduction of VAT at source Tk. 50,000 paid
to vendor of office supplies with effect from the assessment year 2017-18 and accordingly not disallowed
u/s 30(aa).
[3] Provision for bonus taka 1,00,000 was disallowed earlier year. This year though paid but not reflected in this
year's accounts as it is earlier year's expense. There is no provision to allow it as this year's expense u/s 29
of ITO,1984. So no tax treatment needed this year.
[4] Company claimed unabsorbed depreciation (on a/c of trading unit assets) of taka 50,000 in the Return of
income but not debited to PL a/c. No action is required as it is not allowable as per 3rd schedule.

[5] Under a debt restructuring with Agrani bank, the company converted arrear interest taka 3,00,000 on term
loan into a new term loan with a revised repayment schedule. Company paid taka 50,000 towards such
funded interest during the year. Entire taka 3,00,000 debited to PL a/c. Nothing will be allowed further as it
was allowed in the relevant income year u/s 29 on payable basis.
[6] Legal fee against Govt. decision to move tannery to Savar is allowable expenditure assuming that the cost
of the case was borne by the tannery association as per verdict of the honorable court. So it will not matter
whether they win or lose. The expenditure is fully related to business and accordingly allowable
expenditure.
[7] No tax treatment is needed in case of loan+interest waived by Janata Bank as per 1stproviso of section
19(11) of IT0,1984.
[8] There is no tax implication of Tk.1,75,000 brought in the income year from a Spanish customer as per
Schedule(Part-A) para-48 assuming that it was brought through official channel.
b)
[1] Expenditure relating to shifting/relocating tannery to Savar is capital in nature. So it is not allowable
expenditure as per section 29 of ITO,1984
[2] Legal fee against Govt. decision to move tannery to Savar is allowable expenditure assuming that the cost
of the case was borne by the tannery association as per verdict of the honorable court. So it will not matter
whether they win or lose. The expenditure is related to business and accordingly allowable expenditure.
c)
PARTICULARS Alternative A Alternative B Alternative C
Taka Taka Taka
Share Capital 10,000,000 4,000,000 2,000,000
Bank Loan 2,000,000 5,000,000
VC Firm Debt 4,000,000 3,000,000
Total investment 10,000,000 10,000,000 10.000,000
Debt-Equity ratio
Return on Investment (EBIT basis) 20% 2,000,000 2.000,000 2,000,000
LESS:
Bank loan interest 10% - 200,000 500,000
VC Firm Debt 8% - 320,000 240,000
Total - 520,000 740,000
Net Income 2,000,000 1,480,000 1,260,000
Income tax 35% 700,000 518,000 441,000
Return on Equity Share Capital 1,300,000 962,000 819,000
Rate of Return on Equity (before
13% 24% 41%
dividend tax)
So, Alternative C is the most tax-beneficial Capital Structure (least tax. highest ROI).

17 AR Ltd. (petitioner# 1) and BA Ltd. (petitioner# 2), both being PLC(non-publicly traded), Nov Dec
and carrying on business as mobile phone operators, obtained court order for a ―horizontal 2016
amalgamation‖. Exhibit 1 for further details on ownership structure and other briefs on
scheme. As per approved amalgamation scheme, petitioner 2 (transferor, BA Ltd.) shall be
amalgamated into petitioner# 1(transferee, AR Ltd.) to enhance scale of operations and
optimize resource utilization. Cut-off for both is Dec 31. Extracts:
AR Ltd. BA Ltd.
Comprehensive Statement of Income Comprehensive Statement of Income
For the year ended 31-12-2016 For the year ended 31-12-2016
BDT(In ‗000) BDT(In ‗000)
Revenue 51,000,000 Revenue 13,000,000
Cost of revenue (29,000,000) Depreciation (network) ( 5,000,000)
Admin expense (4,000,000) Other Network Ops cost (10,000,000)
S&D expense (6,000,000) Gross Profit/(Loss) ( 2,000,000)
Operating expense (4,000,000) Other Income, net 100,000
Profit from Ops 8,000,000 G&A expense (2,000,000)
Net finance expense (100,000) S&D expense (2,000,000)
Non-ops income 400,000 Operating profit/(loss) (5,900,000)
Profit before tax 8,300,000 Finance income 50,000
Finance expense (2,000,000)
Foreign exch gain/(loss) (300,000)
Profit/(Loss) before tax (8,150,000)
Statement of Financial position (31-12-2016) reflect BA Ltd. (in 000) R/E (taka
60,000,000), equity (taka 14,000,000).
Further Findings from the records of the income year of AR LTD.:
i) Operating expense includes taka 500,000 paid to a lawyer for services
involved in acquisition of Khulna office.
ii) Representative of two shareholding companies (AR (Pvt.) Ltd. and DNT)
visited Dhaka when the talk of merger was brewed. Company paid taka
2,500,000 to Radisson on a/c of visitors, charged to admin expense.
iii) Non-ops income includes amount after tds taka 100,000 paid to a Valuer for
valuation of assets disposed.
iv) Admin expense includes taka 150,000 interest levied for late filing of tax
return and non-payment of advance tax.
v) Net finance expense includes taka 500,000 paid as interest on a/c of a
deferred payment scheme for acquiring imported cellular equipments which
are already received and installed.
vi) Cost of revenue includes accrual taka 5,000,000 BTRC annual license fee,
tds undone, payment due by Jan/2017.
vii) Operating expense includes taka 150,000 paid to a stationery goods supplier, tds not
done.
viii) Operating expense includes taka 500,000 paid to a vendor but without
deducting/paying VAT thereon. 30(aa)
ix) Company missed to write off in the books a loss of taka 500,000/= on capital
assets sold during the income year. An amount of depreciation taka
300,000/= was charged in income year on the same capital asset sold.
Further findings from the records of the income year of BA Ltd.:

i) Finance expense includes Tk. 700,000/= interest on O/D taken to pay income tax when
in cash strain.
ii) Foreign exchange loss represents loss due to rate slump between time gap of
approved foreign loan and receipt.
iii) Company changed stock valuation method for mobile set stock. Auditor did not agree
and qualified the report quantifying the resulting missed revenue Tk. 2,500,000.
iv) Tk. 1,000,000 incurred for renovation of rented site offices in the country and
charged to S&D expense.

v) Included in G&A expense, fees Tk. 500,000 paid to auditor for valuation of fixed assets in
connection with the preparation leading to primary meeting of the merger.
vi) G&A expense includes taka 2,500,000 on a/c of transfer of overdue accumulated
contribution to RPF (both employer and employee). Company could not transfer
contribution timely for cash strain overriding the PF Rules.
vii) Other network operating expense includes taka 500,000 forfeited advance paid for
acquiring a new office floor.
viii) Taka 200,000 accrued as car rent for Car rental company reported under S&D
expense, tds not done.
ix) During income year, company disposed a capital asset for taka 2,500,000. Carrying
value and the tax WDV (at 10% rate) of the asset at disposal were taka 1,000,000
and taka 800,000 respectively. A new asset was purchased for taka 5,000,000 to
replace asset in same year. Depreciation on new asset was provided wrongly at 20%.
x) G&A expense includes taka 1,000,000 for directors traveling to Singapore on a new
business negotiation, lump sum payment of taka 1,000,000 as inducement to hunt a
prospective employee from a competitor,
xi) Fees taka 500,000 paid to a lawyer to increase authorized share capital before merger
scheme.
Requirements:
a) Calculate total income and tax payable of AR Ltd. for income year ended
31.12.2016. Explanations/assumptions/relevant sections/case ref, if any, in
support of your adjustments should be given.
b) Calculate total income of BA LTD. for income year ended

31.12.2016. Explanations/ assumptions/relevant sections/case ref, if any, in
support of your adjustments should be given.
c) Consider relevant information above and in Exhibit 2 relating to ‗Slump Sale‘ of

―S‖ unit of BA Ltd. to MP Ltd. Ltd. before the ―Effective Date‖ of
Amalgamation. Compute capital gain and tax liability on ―S‖ unit sale.
Consider Exhibit 1. Write your views in the light of the I.T. Ordinance: (i) Whether
difference shall attract tax if value of shares received from AR Ltd. by shareholders
of BA Ltd. is more than the value of net assets of BA Ltd. amalgamated with AR
Ltd. (ii) Whether AR Ltd. is entitled to carry forward losses/unabsorbed depreciation
of BA Ltd. for set off against taxable profit of the transferee after amalgamation.
EXHIBIT 1 (In connection with Question No. 1)
Court approved a scheme of amalgamation under Companies Act 1994 between
AR Ltd. (Petitioner 1) and BA Ltd. (Petitioner 2). Currently, AR Ltd. (Petitioner
1) is owned by a Singapore-based company, AR (Pvt.) Ltd. (91%) and a Korean
company, DNT (9%). BA Ltd. (Petitioner 2) is owned by AB Singapore (Pvt.)
Ltd. (98%) and Mr. X of UK (2%). Petitioner 2(transferor) shall be merged into
Petitioner 1(transferee). Pre-merger and post-merger ownership structure are as
follows:

Relevant two extracts from approved Amalgamation Scheme:
i) All Assets and liabilities of amalgamating company (Transferor) shall be vested
on amalgamated company (Transferee). As part of capital reorganization,
1,300,000,000 Ordinary BDT 10 shares in transferee company shall be issued to
shareholders of transferor, resulting 25% holding for transferor company‘s
shareholders in transferee company‘s reorganized capital. Assume, shareholders
of transferor company with >9/10th in value of shares in transferor company
become shareholders of the amalgamated company. Difference of net assets of
transferor company and value of agreed issue in transferee company to
shareholders of the transferor company shall be transferred to Capital
Reserve/Goodwill.
ii) Transferee company shall be entitled to claim benefit of brought forward losses
or/and unabsorbed depreciation, as admissible under the provisions of Income
Tax Ordinance to the extent applicable, of the transferor company and to set off
against the taxable profit of the transferee company after official amalgamation.
EXHIBIT 2
SIM Kitting service unit ‘S’ of BA Ltd.:
BA Ltd. (transferor) has a small warehouse SIM kitting unit ―S‖ within its
operation. Amalgamation deal agreed not to carry on such non-core operation with
the merged entity and concluded that the deal steering committee would sell ―S‖
unit and the resulting tax, if any, shall be settled by transferee company. Within BA
Ltd. Balance Sheet, assets and liabilities on a/c of ―S‖ unit are (BDT): Non-current
liability 1,500,000, Fixed Assets 4,000,000 which includes a 1,000 sft warehouse
land space bought for bdt 1,000,000 in January 2014 (revalued bdt 1,500,000 in
Jan/2015), furniture & fixture net 300,000 (gross 500,000), electrical appliance net
320,000 (gross 400,000) and balance is other fixed assets WDV. Current assets:
Inventory of SIM and kitting materials bdt 250,000, Bank balance (150,000).
Merger steering committee has done a slump sale deal (lock, stock & barrel) with
―MP Ltd. Ltd.‖ to sell Unit ―S‖ operations of BA LTD. in April 2017 (before
―Effective Date‖ of Amalgamation). Consideration is BDT 5,000,000/=. ―S‖ unit
capital assets are depreciated u/s 29(1)(viii). Committee paid a lawyer net-of-tax fee
bdt 50,000 for deal advice.
Computation of total income and tax liability

AR Ltd.
Income year ended 3 1.12.2017. A/Y: 2017-18
BDT(`000) BDT(`000)
Net profit before tax 8,300,000
ADD Inadmissible expenses:
:
i) Lawyer payment for acquisition of Khulna office -----
[Legal exp. is allowable exp. as per sec.29 of ITO, 1984]
ii) Payments to Radisson for Shareholders' reps -------
[Allowable as the exp. is not personal, not capital rather related to
business]
iii) Payment to valuer of assets disposal 100 100
[Payments linked to capital assets sold]
iv) Interest for late return filing and default in advance tax payment 150 150
[Any exp. for violation of law is not allowable exp.]
v) Interest on assets acquired under deferred scheme 500 500
[To be disallowed being capital exp.]
vi) BTRC annual license fee [Cannot be disallowed on the ground -----
that tax was notdeducted as it would be deducted at the time of
payment]

vii) Stationery purchase through supply 150 150
[To be disallowed u/s 30(aa) for non TDS]
viii) Vendor payment without VAT deduction -----
[Not to be disallowed u/s 30(aa) for non VDS wef the AY: 17-18]
ix) Depreciation of sold assets 300 300
[Depreciation not allowed in the year of disposal]
1,200
8,301,200
Note:
There is no scope to consider loss on sale of assets Tk. 500,000 due to lack of information relating
to written down value and sales price of assets already sold.
Tax calculation
Tax @ 45% (non-listed mobile phone Operator Company) = Tk.3,735,540 ('000)
Computation of total income and tax liability

BA Ltd
Income year ended 31.12.2016. A/Y: 2017-18
BDT(`000) BDT(`000)
Net profit before tax (8,150,000)
ADD Inadmissible expenses:
:
i) Inter es t on O /D -----
[In case of cash shortage, company can borrow money to run
business including tax payment etc. As it is business related
exp. so it is allowable. Tax is not allowable exp. but interest
on loan to pay tax is allowable exp.]
ii) Exchange loss [Bonafide and actual and as such allowable -------
as
per sec.29]
iii) Missed revenue for stock valuation method change ------
[Assumed that stock valuation method has been
changed&recognized as per BAS]
iv) Renovation of site office 1000 1,000
[To be added as it is capital exp.]
v) Valuation fee paid to auditor in connection with 500
merger
[Not connected with day to day business of the company]
vi) RPF overdue contribution payment -----
[Action of overdue payment lies under separate PF Rules, Actual
amount whenever paid is admissible]
vii) Forfeited advance for cancellation of agreement 500
[Not to be allowed as business exp. as it was incurredfor
violation of terms and conditions]
viii) Car rent payment accrued [To be allowed as business exp. -----
because tax to be deductedat the time of payment not on the
basis of accrual]
ix) Depreciation on new asset 100
[Dep. Claimed Tk.50,00,000 x 20% = 10,00,000.
Assumed that purchased price of the old machine was
Tk.20,00,000 as it was not given in the question).
So actual tax dep. to be allowed
(Tk.50,00,000 - 5,00,000 = 45,00,000 x 20% = 9,00,000).
So excess claim Tk.10,00,000 - 9,00,000 =1,00,000 to be
disallowed.
x) Inducement payment to hunt staff [Illegal exp. not allowable 1000
at legal business]
3,100
3,100
Total Income (8,153,100)
c)
Computation of Gain and Tax Liability on 'S' Unit Slump Sale to MP Ltd.
Sales proceeds 5,000,000
Less: Net worth of ‗S' unit
Floor space value (ignoring revaluation) 1,000,000
WD V of other assets:
Furniture & Fixture (gross 500,000) 300,000
Electric appliance (gross 400,000) 320,000
Other fixed assets (40,00,000-15,00,000-3,00,000-3,20,000) 1,880,000
Inventory 250,000
Bank balance (150,000)
Value of total assets 3,600,000
Less: Liabilities
Liability of ‗S' unit 1,500,000
Legal expense gross [50,000x100/90] 55,555 1,555,555 2,044,445
I think it is goodwill money not capital gain

(as because not only capital assets are sold here) which is taxable
u/s19(10) 33 as income from other sources 2,955,555
Tax @35% 1,034,444
(as because not only capital assets are sold here) which
(d) is taxable u/s
19(10) 33 as income from other sources
Amalgamation of BA Ltd. with AR Ltd. under the approved scheme meets condition of
amalgamation as per section 2(2) of IT Ordinance. Although all assets and liabilities of BA Ltd. get
vested on the AR Ltd., such amalgamation does not meet definition of 'transfer' u/s 2(66) of the law.
There is no sale of assets in amalgamation, nor any price paid by AR Ltd. for the assets vested. So,
7.955.555
there will be no capital gain tax on such transfer or even if the value of the shares issued to the
Tax @ 35% 1,,
shareholders of BA Ltd. is more than the net value of assets vested in the merged transferee.
AR Ltd. is not entitled to carry forward the losses and unabsorbed depreciation of BA Ltd. Such
amalgamation does not meet the conditions of Section 42(4) of the Ordinance to do carry-forward
and set-off. Upon amalgamation gets effective, BA Ltd. becomes dissolved and discontinued. Section
42(4) allows the carry-forward facility in the case when a company is succeeded by inheritance.
Although this amalgamation scheme (court approved) describes the carry-forward entitlement of AR
Ltd. to claim benefit of the brought forward losses or/and unabsorbed depreciation, it made subject to
admissibility of the same under the provisions of IT Ordinance, 1984. Section 42(4) limits such carry-
forward benefit by person, if not by inheritance.
(d)
Amalgamation of BA Ltd. with AR Ltd. under the approved scheme meets condition of
amalgamation as per section 2(2) of IT Ordinance. Although all assets and liabilities of BA Ltd. get
vested on the AR Ltd., such amalgamation does not meet definition of 'transfer' u/s 2(66) of the law.
There is no sale of assets in amalgamation, nor any price paid by AR Ltd. for the assets vested. So,
there will be no capital gain tax on such transfer or even if the value of the shares issued to the
shareholders of BA Ltd. is more than the net value of assets vested in the merged transferee,
AR Ltd. is not entitled to carry forward the losses and unabsorbed depreciation of BA Ltd. Such
The Taxation of Individuals
S.L. Question Year
1 Mr. Rahim works as a General Manager in a company. He is 70 years of age. During the twelve Nov
months ended 30 June 2017 he received the following income: Dec
(a) Salary Income: 2010
Basic salary Tk.30,000 per month Bonus –
1 month‘s basic salary
House rent allowance –60% of basic salary
Medical allowance – Tk.2,000 per month
Conveyance allowance – Tk.1,800 per month
Subscription to RPF – 10% (Employer‘s contribution also same) Interest
accrued Tk.190,000 on PF balance calculated @ 16% p.a.
(b) Interest on Securities:
Interest on BSEC approved debenture Tk.30,000.
(c) Income from House Property:
Mr. Rahim owns one floor of a commercial building. It has been let out at a monthly
rent of Tk.20,000. The following expenditures were incurred during the year by Mr.
Rahim for the commercial floor space:
Municipal Tax Tk.24,000
Repairs and maintenance 60,000
Fire insurance premium 15,000
Salary of caretaker 30,000
The floor space remained vacant for one month during the year.
(d) Agricultural Income:

Mr. Rahim received Tk.35,000 from agricultural land by selling crops.
(e) Income from other sources:
Cash dividend (net) from a listed company Tk.54,000. Stock dividend of 100 shares (face
value per share Tk.10, but market price on the day of dividend declaration was Tk.150
and on 30 June 2017 was Tk.165).
During the year Mr. Rahim made the following investments:
(1)Life insurance premium in the name of his dependent old mother Tk.50,000 (policy value
Tk.5,00,000).
(2) Investment in shares of a listed company Tk.1,00,000.
(3) Contribution to monthly deposit pension scheme at Sonali Bank Tk.5,000 p.m.
Required:
Compute the total income and tax liability of Mr. Rahim for the Assessment year
2017-2018.
Mr. Rahim
Note Taka
Income from Salary (u/s-21):
Basic salary(30,000 *12) 360,000
Festival Bonus (One month's Basic salary) 30,000

House Rent Allowance
60% of Basic Salary (360000*60%) 216,000
Less: Exemption (Rule-33 A)
50% of Basic salary 180,000
Or TK. 15,000 per month 180,000
Whichever is lower 180,000 36,000

Medical allowance (Tk 2,000*12) 24,000
Less: Exemption (Rule-33I):
Actual expense (assumed allowance are expended) 24,000 -
Conveyance Allowance ( Tk. 1,800*12) 21,600
24,000
Less: Exemption (Rule-33C): Maximum Limit -
Employer‘s Contribution to RPF(10% of Basic) 36,000

Interest on recognized provident fund @16% 190,000
Less: Exemption @14.50% 172,188
Or 1/3 of BS (360000/3) 120,000
Whichever is lower 120,000 70,000
Income from Salary (u/s-21) 532,000

Income from securities (U/S-22)
Income from BSEC approved debentures 30,000

Income from securities 30,000
Income from house property ( U/S- 24 & 25)
Rental / Annual Value ( 20,000 *12 ) 240,000
Less: Admissible Expenditures-
Repairs & Maintenance ( 240,000 *30%) 72,000
Municipal Tax 24,000
Insurance premium 15,000
Vacancy Allowance for 1 month 20,000 131,000
Income from House property 109,000

Income from Agriculture ( U/S-26 & 27)
Sale of Crops 35,000
Less: Cost of Production @60% 21,000 14,000

Income from Other sources (u/s-33):
Dividend from listed company 54,000 *100/90
60,000
Income from Other sources (u/s-33):
60,000
Total income 745,000

Calculation of investment allowance(under Part B 6th schedule):
Investment in listed company's share
(As per SRO 60-2012) 100,000
Contribution to monthly DPS (5000 * 12) 60,000
Allowable up to Tk. 60,000
Whichever is lower
60,000
Employee and employer's contribution to RPF(10% of salary each)
(allowable as per para-5) 72,000
Actual investment
232,000
Allowable investment allowance(u/s-44):
Actual investment
232,000
20% of total income [excluding employer's contribution to RPF, interest on RPF
(excluding interest para-25, part-A 6th schedule), income u/s-82C]. So 20% on Tk 127,800
(745,000-36,000-70,000).

Maximum allowable investment
15,000,000
Allowable investment (whichever is lower)
127,800
On first Tk.
200,000 @ 0% -
On next Tk.
300,000 @ 10% 30,000
On balance Tk.
245,000 @ 15% 36,750
Total
745,000 66,750
Gross tax liability
66,750
Less: 10% Rebate on investment Tk 127800 12,780

53,970
Less: TDS 6,000

Notes:
The total income & tax liability of Mr. Rahim are computed in the light of the provision of Finance Act-
1 2017
2 Salary of caretaker can not be claimed separately as it is included in the repair maintenance allowance.
As Mr. Rahim did not maintain as books of accounts, 60% of income from agriculture is charged as
3 cost of production.
4 Sock dividend will not be considered as income as per definition of “Income”
5 As Mr. Rahim is above 65 years, his exempted limit of income is Tk. 200,000
2 Mr. Azim is a Chartered Accountant in practice. He has the following income for the year ended May
June 30, 2017: Jun
Taka 2011
a) Share of income from C.A. Firm 471,518
b) Interest Income (Gross):
i) From Leasing Company 1,247,502
ii) On Fixed Deposit (Bank) 138,214

iii) On Saving Account (Bank) 53,790
c) )Dividend Income (Gross) 11,350
d
d))Shop Rent 13,200
e
e))Directors Fee 65,000
f
f) )Income from ICAB as Examiner Fee 174,325
g
g))Income from Sundry Business 55,440
h
h))Capital Gain:
i) Profit on Sale of shares of Private Ltd. Co. 6,050,000
ii) Sale of Shop (deed value Tk.192,500, original cost Tk.27,750, Tax deducted
at source at the time of registration Tk.3,850 to be assessed u/s 82C)
iii) Profit on Sale of Shares on publicly listed company 3,430,501

He has investment of Tk.328,000 on purchase of BSP and life Insurance premium.
He has paid an amount of Tk.150,000 as advance tax.
His last slab of Tax is @25% during the assessment 2017‐2018.
Compute the total income and Tax payable by Mr. Azim.

Answer:
Mr. Azim
Assessment Year 2017-2018
Income from House Property (U/S: 24-25)

Shop Rent 13,200
Less: Repair & Maintenance@ 30% 3,960 9,240
Income from Business or Profession: U/S: 28-29
Share of Income from CA Firm 471,518
Income from Sundry Business 55,440 526,958
Capital Gain: U/S: 31-32
Profit on Sale of Shares of Private limited co. 6,050,000
Sale of Shop 164,750
Profit of Sale of Shares of PLC 3,430,501 -
(Fully exempted as per SRO 269 of 2010) 6,214,750
Income from Other Sources: U/S: 33-34
Interest Income from Leasing Company 1,247,502
Interest Income on Fixed Deposit (Bank) 138,214
Income from Saving Account (Bank) 53,790
Dividend Income 11,350
Less: Exemption 10,000 1350
Director fee 65,000
Income from ICAB as Examiner Fee 174,325 1,680,181
Calculation of investment allowance (under Part B 6th schedule):

Investment in BSP and LIP 328,000
Allowable investment allowance (u/s-44):
Actual investment 328,000
30% of total income [excluding employer's contribution to RPF and 2,479,914
interest thereon (as par para-4, part-B 1st schedule),
income u/s-82C]. Hence 30% on Tk. (8,431,129-164,750)
Maximum allowable investment 15,000,000
Lower of the above 328,000

On total income including the Capital gain of Tk.6,214,750
On first @ 0% -
220,000
On next 300,000 @ 10% 30,000
On next 400,000 @ 15% 60,000
On next 300,000 @ 20% 60,000
On next 7,211,129 @ 25% 1,802,782
Total 8,431,129
Gross Tax Liability 1,952,782
On total income other than Capital gain of Tk.6,214,750
On first @ 0% -
220,000
On next 300,000 @ 10% 30,000
On next 400,000 @ 15% 60,000
On next 300,000 @ 20% 60,000
On next 996,379 @ 25% 249,095
sub-total 2,216,379
On Capital Gain 6,214,750 @ 15% 932,213
Total 8,431,129
Gross Tax Liability 1,331,308
Lower of the above two calculation is Gross Tax Liability 1,331,308
Less: Tax on Share of income from Partnership firm @ average rate 74,454
(1,331,308 / 8,431,129*471,518)
Less: 15% Rebate on investment Tk 328.000 49,200

1,207,653
Less:
TDS U/S 82 on sale of shop 3,850
TDS on Dividend @ 10% 1,135
TDS on Interest 143,951
Advance Tax paid 150,000 298,936
1. Sale of Shop:
Tax deducted at Source 3,850
Grossed up income U/S 82 C 25,667
Actual gain (192,500 - 27,750) 164,750
(Excess amount over the grossed
income U/S 82C i.e. (164,750-25,667)
139,083 shall be liable to tax U/S 82C
of Sub-Section- 6)
2. It is assumed that the capital gain from sale of shop is arrived after 5 years of purchase
3. It is also assumed that gain from the sale of private limited companies shares arrived after 5 years of
purchase.
4. It is assumed that Interest on leasing company, fixed deposit and saving bank triggered for TDS 10%
i.e. Tk. 143,951
3 Mr. Aminullah is a service holder. Following are the particulars of his income, investment and May
expenditure for the year 2016-17. Compute his taxable income and tax payable under the following Jun
situations: 2012
i) The provident fund is recognized
ii) The provident fund is unrecognized
The information available are as follows:
a) Basic salary Tk.9,000 per month
b) Dearness Allowance @ 20% on Basic salary
c) Bonus- two Bonuses @ one month Basic salary
d) Rent Free Accommodation (Annual value Tk.30,000)
e) Conveyance Allowance Tk. 1,200 per month
f) Medical Allowance Tk.300 per month (Actual expenses Tk. 2,500)
He contributes 10% of his basic pay to the provident fund. Interest on provident fund balance for
the year is Tk.2,500 @ 15% interest. He paid life insurance premium Tk. 5,000 for the year and
purchased share of a company for Tk.4,000.
Mr. Aminullah
Particulars Recognised Unrecognised
Basic Salary 9,000 x 12 108,000 108,000
Dearness Allowance 20% of Basic Salary 21,600 21,600
Bonus 9,000 x 2 18,000 18,000
Rent Free Quarter 25% of Basic Salary or Annual Value 27,000 27,000
(Tk. 30,000) Lower one
Conveyance Allowance 1,200 x12 =14,400 exempted Upto 30,000 - -
Medical Allowance 1,100 1,100
300 x 12 = 3,600 exempted upto actual
(Tk. 2,500)
Provident Fund 10% 108,000 x 10% 10,800 0
Interest of PF 15% of Fund balance. 83 0
Exempt up to Lower of
1/3rd of basic salary and dearness allowance
or 14.5%
Total Income 1,86,583 1,75,700/-
Calculation of Tax
No tax will be imposed as the total income in both cases is below taxable limit.
Note - 1:
Interest @15% on Balance 2,500
Less: Exempted 2,417
Taxable 83
(Lower of 1/3rd of basic salary and D.A or 14.5% as per clause 25 of Part A of 6th Schedule.
Note 2: Employer's contribution to unrecognized P.F during the year and interest thereon is taxable at the time
of withdrawal from fund not every year and TDS on such withdrawal is also applicable at that time.
4 The following are the income of Mr. Rahman for the year ended June 30, 2017. Compute May
his total income and tax liability. Jun
2013
(a) Salary Income;
Basic Salary - Tk. 25,000 p.m
Bonus – 2 months basic salary
House rent allowance – 40% of basic salary
Medical allowance – Tk. 1,500 p.m
Conveyance allowance – Tk. 2,000 p.m
Concessional passage within Bangladesh – Tk. 1,50,000
Subscription to RPF – 10% (Employer’s contribution is the same).
Interest accrued Tk. 96,000 on P.F balance calculated at 16% p.a.
(b) Interest income (Gross) :
i. From Leasing Company Tk. 12,47,502

ii. On Bank Fixed Deposit Tk. 1,38,214
iii. On Bank Savings Account Tk. 53,790
(c) Income from House Property :
Mr. Rahman has one residential house-one half of which is let out at a monthly rent of
Tk.2,000 and the other half-self occupied
Following expenditures were incurred by Mr. Rahman :
Taka
Municipal tax 20,000
Repairs and maintenance 60,000
Insurance premium 12,000
Salary of caretaker 30,000
(d) Income from Land :
Sale of paddy from land given on “Adhi” system – Tk. 1,25,000. Sale proceeds from
trees of spontaneous growth in Mr. Rahman’s land Tk. 20,000
(e) Income from Business :
Share of profit from a partnership firm Tk. 75,000
(f) Capital Gains :
i. Profit on sale of shares of ABC Ltd (A Private Ltd. Co.) Tk. 60,50,000
ii. Sale of Shop (Deed Value Tk. 1,92,500), Original cost Tk. 27,750 and tax
deducted at source at the time of registration Tk. 3,850 to be assessed u/s.
82C.
iii. Profit on sale of Shares of XYZ Ltd. Tk. 34,30,501 (A Publicly listed Co.)
(g) Income from other Source :
i. Dividend (gross) Tk.11,350
ii. Income from shop rent Tk. 13,200
During the year Mr. Rahman made the following investments –
i) Life insurance premium (Policy Value Tk. 500,000) Tk. 60,000
ii) Investment in shares of a listed company Tk. 100,000
iii) Donation to charitable institutions as approved by NBR Tk. 30,000
Mr. Rahman
Income Year ended 30 June 2017
Q. REF.
PARTICULARS Taka Taka
NO.
Income from Salary-u/s-21 read with rule-33
Basic Salary -25,000 p.mX12 300,000
a. Bonus-2 months basic Salary-25,000X12 50,000
a. House Rent allowance-40% of basic Salary 120,000
Less: Exempted as per Rule-33A
(Exempted-Lower of 50% of basic salary e.gTk-1.50 Lac or 0
Taka-15000 p.m. e.g Taka-180,000 per year) 180,000
Medical alloance-Tk.1500X12
18,000
Less Exempted as per Rule-33I
a.
(Assumed that actual expenditure is more than the allowance
18,000
received ) 0
a. Conveyance alowance-Tk.2000X12 24,000
Less: Exempted as per Rule 33C
- 24,000 0
a. Concessional passage within Bangladesh 150,000 0
Less: Exempted as per rule-33G
(Assume that the passage was given in terms of employment in
150,000
alternate year and actual expenditure is more than the amount 0
received)
a. Employer's Contribution to RPF-10% of Basic Salary 30,000

a. Interest accrued-16% p.a on P.F 96,000
Less: Exempted-14.50% (Para 5(2) of First Schedule to ITO 1984) 87,000 9,000
A. Total Income from salary= 389,000
Income from Other Sources-u/s-33-34:
b. From Leasing Company (Gross), TDS @ 10% 1,247,502
b. On the Bank Fixed Deposit (Gross),TDS @ 10% 138,214
b. On Bank savings account(Gross), TDS @ 10% 53,790
Dividend Income-Gross 11,350
g Less Exempt (6th Sch. Part A of ITO 1984) Tk. 5,000 6,350
d Sale proceeds from tree 20,000
B. Total Income from Other Sources= 1,465,856
c Income from House Property-u/s-24 & 25:
c Annual Value: Rental value 24,000
c admissible Expenses-
c Municipal Tax-50% e.g Taka- 20000/2 (10,000)
c Insurance Premium- 50% e.g. Tk. 12,000/2 (6.000)
c Repair and Maintenance-25% of taka-24000.00 (6,000) 2,000
g Shop Rent-(Tk. 13,200-30% Repair & Maintenance. Since
Commercial) 9,240
C. Total Income from House Property = 11,240
d Income from Agricultural-u/s-26 & 27:
1. Sale of Paddy-On Adhi System 125,000
D. Total Income from Agriculture= 125,000
Income from Business or profession-u/s-28 &29:
e Income from Share profit from Partnership Firm: 75,000
E. Total income from Business or profession= 75,000
Income from Capital Gain-u/s-31 & 32:
f Sale of Share of a PVT Ltd Co-ABC Co. 6,050,000
3,430,501
Sale of Share of a Public Ltd Co-XYZ Co
Less: Exempted as per SRO-269/2010 dated 01.07.2010 3,430,501 -
f . Sale of Shop-Tk.(1,92,500-27,750), Capital Gain Tk-164,750
Since TDS of Tk. 3850 is treated as final discharge of tax liability 15,400
U/S 82C of ITO 1984, the income from this head is (3850X100/25)
F. Total Income from Capital Gain= 6,065,400

Total Income of Mr.Rahman (A+B+C+D+E+F) 8,131,496
Computation of Investment As per Section

Taka Taka
Rebate of Mr. Rahman 44-2(b)
Employees and Employers
60,000
Contribution to RPF
Life Insurance premium-
50,000
maximum 10% of Policy
Investment in Shares of 1,00,000
Listed Company
Donation approved by NBR 30,000
Total Investment 240,000
ALLOWABLE LIMIT OF INVESTMENT:
Lower of 20% of Total Income excluding
Employers Contribution to RPF e.g Tk-
(81,40,456-30,000)X20% =Tk.16,22,091.00
or Taka-1.50 Crore-Lower one.
So, Here Allowable Investment—Actual Investment 240,000
Rate 10%
Investment Tax Credit (Rebate)=240,000X10%
24,000

Computation of Tax Liability of Mr. Total Tax amount
Rahman: Income Tax Rate
On First Taka-200000 200,000 @0% Nil

.
On next Taka-300000 300,000 @10% 30,000
On next Taka-400000 400,000 @15% 60,000
On next Taka-300000 300,000 @20% 60,000
Sub-Total 1,200,000
On the balance Tk.(8,131,496- 12 Lac-60.5
Lac-15,400- Section -82C) 866,096 @25% 216,524
Total 2,066,096 366,524 -
Gross up-adj. of Section-82C (Final

Settlement) 15,400 @25% 3,850
Tax on Capital Gain-Sale of Pvt. Co's Shares-

6,050,000 @15% 907,500
15%,tk-605,000,000
X. Gross Tax Liability 8,131,496 1,277,874
Tax Rebate as per 6th Schedule-

24,000
Part-B
Net tax liability 1,253,874 Avg. Tax Rate =15.42%
Less :Tax Paid/Advance Tax Taka

1. Adjustment of Tax as per 82C(Final
settlement) 3,850
2.TDS as per 53FTaka-

12,47,502@10% 124,750
3.TDS as per 53ATaka-

138,214@10% 13,821
4.TDS as per 53FTaka-

53,790@10% 5,379
5.Rebate from Share of Income of Partnership

Firm @15.42% 11,565
Y. Total Rebate and adjustment

- 159,366
Net Tax Payable U/S 74 of ITO 1984

1,094,508
5 Nov
The following are the income of Mr. Azad for the year ended June 30, 2017. Compute his total income Dec
and tax liability.
20130
a. Salary Income
Basic Salary 4,20,864
Festival Bonus 70,144
House Rent Allowance 3,75,735
Entertainment Allowance 4,173
Conveyance Allowance 35,072
Other Allowance 16,262
Employees‘ Contribution to Provident Fund 42,086
Tax Deducted from Salary 12,000
b. House Property Income
House Rent 2,97,600
City Corporation Tax 9,000
Salary of Security Guard 48,000
Salary of Sweeper 12,000
c. Income from Business 3,78,975
d. Income from partnership (A Real estate business) 5,96,400
(Tax deducted at source Tk. 65,280)
e. Income from land sale (Capital gain) (TDS Tk. 40,000) 1,60,000
f. Income from share business U/S. 32(7) 89,74,071

g. Dividend Income (Gross) 12,04,374
h. Interest from SB A/C (Gross) 966
i. Income from Fisheries Business 4,03,000
j. Income from poultry firm (investment in Govt. Bond) 2,05,000
Notes :
1. Purchase of 5 years Bangladesh Sanchaya Patra 2,00,000
2. Investment in DPS 1,20,000
3. Advance tax for car registration 15,000
4. The assessee has a flat in Bashundhara R/A but was vacant
due to non-connection of Electricity and GAS.
5. Assessee‘s total wealth 12,50,90,210
Computation of total income :
Mr. Azad
Taka Taka
a. Income from Salary-u/s-21:
Basic Salary 4,20,864
Festival Bonus 70,144
House Rent Allowance 3,75,735
Less : Exemption 2,10,432 1,65,303
Entertainment-as per rule 33H 4,173
Conveyance Allowance 35,072
Less : Exemption-as per rule 33C 30,000 5,072
Other Allowance-as per rule 33J 16,262
Employees Contribution to PF 42,086
A. Total income from Salary 7,23,904
b. House property income-u/s-24-25 :
House Rent 2,97,600
Less : 25% Repair-Since residential 74,400
City Corporation Tax 9,000 83,400
B.Total Income from House Property 2,14,200
Income from business or profession-u/s-28:
c. Income from Business 3,78,975
d. Income from Partnership 5,96,400
f. Income from share business-Exempted as per SRO- 269/2010 Ni1
i. Income from Fisheries Business 4,03,000
j. Income from Poultry Firm-para-34 of 6th Schedule part-A of ITO- Nil
1984-(Exempted as the assessee has invested 10% in Govt. Bond)
B. Total Income from Business or Profession 13,78,375
Capital Gain-u/s-31:
e. Income from Capital gain-from Land Sale 1,60,000
C. Total Income from Capital Gain 1,60,000
Income from Other Sources-us/33:
g. Dividend Income 12,04,370
Less: Exempted as per para-11A of 6th Schedule part-A of ITO-1984. 10,000 11,94,370
h. Interest Income 966
D. Total Income from Other Sources 11,95,336
Total Income (A+B+C+D+E) 36,71,815
Calculation of Tax Liability :
Taxable income Tk. 36,71,815
i. On Tk. 2,20.000 0% Nil
ii. On Tk. 3,00,000 10% 30,000
iii. On Tk. 4,00,000 15% 60,000
iv. On Tk. 3,00,000 20% 60,000
v. Balance (24,61,815 — 4,03,000) = 20,48,815 25% 5,12,204
Income on Fisheries Business on Tk. 4,03,000 5% 20,150
6,82,354
Less : Investment Rebate
X. Actual Investment
PF 84,172
5 Years S. Patra 2,00,000
DPS (Actual 1,20,000 but Maximum 60,000) 60,000
3,44,172
Y.(Total Income-Employers Cont. to RPF)X30%=(3671815-42086)X.30 10,88,919
Z.Taka-1.50 Crore 150000000
Allowable Investment-Lower of X or Yor Z 344,172
Less: 15% of Actual Investment 51,626
6,30,728
Less : Tax Rebate of Partnership Firm
5,96,400 X 6,30,728
36,71,815 1,02,447
5,28,281
Add :Surcharge 15% 79,242
Total Tax Liability 6,07,523
Tax Paid
On Salary 12,000
Car Tax 15,000
Dividend Income 1,20,437
Interest Income 97
Land Sale 40,000 1,87,534
Tax to be paid u/s. 74 Tk. 4,19,989
Notes:
1.1t is assumed that disposal of Land has been done after no more than five years as per Para-2b of the second schedule:
2.1t is assumed that P.F is a RPF and employer's contribution has been erroneously typed as employee's contribution.
3. Since net wealth is more than 10 crore so Surcharge will be 15% instead of 10% as per Finance Act-2017.
6 May
Mr. A is 60 years old and employed by a private limited company. He has joined the company Jun
on 1 July, 2016. He has received the following income and benefits during the year ended 30
2014
June, 2017:
(a) Basic Salary Tk. 100,000/- per month sent to his bank directly. He had
outstanding salary for the month of June-2017 which was paid on 2 July 2017.
He had also received arrear salary of Tk. 50,000/- during the year from previous
employment.
(b) The present employer allowed house accommodation at a concessional rate. Mr.
A. paid Tk. 60,000/- only as rent during the income year 2016-2017.
(c) Additional Conveyance allowance of Tk. 50,000/- was paid to Mr. A in addition
to the conveyance allowed under Rule 33D.
(d) Entertainment allowance @ 5% of basic salary was paid to Mr. A.
(e) Free and concessional passage of Tk. 2,00,000/= for Travel in Bangladesh by Mr.
A was allowed by the employer against actual claim of expenditure of Tk.
300,000/-.
(f) Employer spent Tk. 500/- p.m. for free Tea, Coffee, and Beverage for the office
of Mr. A during working hours.
(g) Company spent Tk. 200,000/- for Mr. A. during the year against reimbursement
of utility bills of his residence..
(h) Received share of Net Profit of Tk. 200,000/- from partnership. He is entitled to
tax rebate as per tax law.
(i) Derived Net income from production of corn, maize and sugar beet for Tk. 5,000/-.
(j) Purchased wage earners bonds on 30 June, 2016 and received interest of Tk.
50,000/- in the following year on the said investment of Tk. 5,00,000/-.
(k) Taken advance of Tk. 200,000/- from a company against accumulated profit
where he was an alternate director and a shareholder.
(l) Mr. A is also a Manufacturer and Exporter of garments products. He sold export
quota at Tk. 25,000/- against export value of Tk. 500,000/-.
(m) Mr. A incurred a capital loss of Tk. 500,000/- on account of sale of shares, but
made a capital gain of Tk. 600,000/- from the sale of government securities.
(n) Rental income of Tk. 600,000/- received from a five storied building consists of
10 flats constructed during the period from 1 July, 2016 to 30 June, 2017 in an
area of Muladi, Barisal.
During the year Mr. A. has claimed the following expenditure as his investments.
(1) Purchased Sanchya Patra for Tk. 50,000/-
(2) Contributed 10% of his basic salary towards Super Annuation Fund.
(3) Deposited Tk. 75,000/- under Deposit Pension Scheme with a Financial Institution.
(4) Contributed Tk. 20,000/-to Benevolent Fund.
(5) Contributed 10% of basic salary to a recognized Provident Fund. A similar
contribution was made by the employer wherefrom he received interest of Tk.
1,800/- from the said fund @ 18%.
(6) Paid insurance premium of Tk. 20,000/- for his spouse and minor child. The
policy value is Tk. 100,000/-.
(7) Purchased one computer for Tk. 50,000/= and one laptop for Tk. 60,000/=
You are required to calculate the total income and tax liability of Mr. A for the assessment year
2017-2018. Make necessary assumptions, if required.
Mr. A
Income Year 2016-17
Computation of total income and tax liability thereon
Tk. Tk.
1 Income form Salary
Basic Salary TK. 1,00,000x11 months 1,100,000
Add: Outstanding- June 2017 100,000 1,200,000
Add: Arrear Salary 50,000
House Accommodation at concessional Rate
300,000
25% of Basic Salary
Mr. 'A' Paid Cash (60,000) 240,000
Additional Conveyance Allowance received under Rule 33E 50,000
Add: 7.5% Basic Salary as per Rule 33D 90,0000 1,40,000
Utility Bill paid by employer 200,000
Free & Concessional Passage under Rule 33G 2,00,000
Actual Expenses 3,00,000 -
Free Tea, Coffee Beverage
Employer Spent (500x 12) 6,000
Exempted 6,000 -
Entertainment allowance 5% of Basic Salary 60,000
Contribution to P. Fund clause 6 of 6th Schedule Part-B 120,000
Interest from P. F. 1,800
Actual entitlement (1 800 X 100 / 18 =10,000 x 14.50%) (1450) 350
2 Income from Partnership firm u/s 44 ( 1 & 2) 200,000
3 Net income from sale of corn 5,000
Less Exempted up to 50% as per Para 46 of the 6th Schedule Part-A 2,500 2,500
4 Interest received from wage earner's scheme during 30th June 2016-2017 50,000
5 10% contribution to benevolent fund under clause 17 of 6th Schedule Part-B
6 Advance taken from a company where he is a shareholder treated as loan taken -
from the company
7 Sale/Transfer of Garments Quota Limited to 3% of Tk. 500,000 15,000
8 Capital gain-Govt. Securities 600,000
Less: exempted u/s 32 (7) 600,000 -
Carry forward of capital loss (500,000-5,000)= 495,000 -
9 Rental income from 10 Flat of 5 stories building in the village of Muladi, 600,000
Barisal
Less: tax exempted as per clause 38 of the Sixth Schedule Part-A 600,000 -
Tax Computation on:
1st Tk. 220,000 @0% -
Next Tk. 300.000 @10% 30,000
Next Tk. 400.000 @15% 60,000
Next Tk. 300,000 @20% 60,000
Balance TK. 1,057,850 @25% 264,463
Gross tax liability 414,463
Tk.
Investment Tax credit
30% of total income 647,355
(excluding employers' contribution of Tk. 120,000)
Actual Investment 560,000
Or 15,000,000
Lower one is selected 560,000
Investment tax credit @ 15% 84,000
Calculation of tax liability
Gross tax liability 414,463
Investment tax credit (84,000)
330,463
Tax rebate on partnership income (Tk. 330,463/ Tk. 2277850)x Tk. 200,000) (29,015)
Net Tax Payable 301,447
Notes;
1. Assumed that arrear salary was not considered in previous year.
2. Investment facility on insurance premium is confined to 10% of policy value.
3. In absence of information surcharge is not considered.
4. It is assumed that Mr. A contributed to Approved Super Annuation Fund.
5.Actual Investment
Purchase of Sanchayapatra 50,000
Contribution to super Annuation fund 120,000
Deposit pension scheme up to Tk. 60,000 60,000
Contribution to Benevolent Fund 20,000
Contribution to recognized provident fund 240,000
Insurance premium paid 10,000
Purchase of Laptop 60,000
5,60,000
7 Nov
Calculate Mr. Adib Ahsan’s taxable Income and tax liability for the assessment year 2017-2018 Dec
considering the following, as may be relevant: 2014
Income from Salary:
Basic salary Tk. 22,000 per month, Dearness allowance 10% of basic salary, Medical allowance Tk. 2,000
p.m, Two festival bonuses each equal to one month’s basic salary and Annual performance bonus equal to
four months’ basic salary. Mr. Ahsan received free accommodation from his office which has annual
rental value of Tk. 120,000 and a full time car. Leave encashment during the year was Tk. 6,600. He and
his employer both contribute 10% of basic salary to a recognized provident fund.
Income from House Property:
Mr. Adib is the owner of a three storied house at Dhanmondi, Dhaka. He let out each floor at a monthly
rent of Tk. 10,000. Annual municipal value of the house is Tk. 300,000. Beside all the repair and
maintenance expenses, he paid municipal tax of Tk. 8,000, Insurance premium Tk. 20,000 and interest on
mortgage loan Tk. 3,000 for the house. The ground floor remained vacant for 2 months during the year.
Income from Business or Profession:

Profit from sole proprietorship business Tk. 155,000. In the previous year he incurred a loss of Tk. 40,000 in
the same business and carried forward Tk. 5,000 to set off this year. During the year he also earned profit
from partnership firm Tk. 120,000.
Income from other sources:
Dividend received Tk. 54,000 from a private limited company, Income from talk show Tk. 10,000 and
Interest received from bank savings account Tk. 2,700.
Income from FDRs in the name of his daughter and wife:
He has a daughter studying in a private university in Dhaka. She is dependent on her father. She has an
FDR amounting to Tk.10 lakhs, which is made up of her savings of pocket money, gifts she has received in
her birth days from the relatives and friends over the years and the accumulated interest on FDR. The FDR
account was opened in 2008, and the balance of Tk.10 lakhs as on 30/6/2017 includes interest of Tk.3
lakhs (net of income tax) earned during the period from 2011 to 30 June 2016 and Tk.90,000 (net of 15%
income tax) interest earned during the income year 2016-2017.
Mrs. Ahsan has an FDR of Tk.20 lakhs. This is made up of her savings from the funds allocated for
household expenditure and interest earned upto 30 June 2017. Tk.1,80,000 was credited as interest
income (net of 15% income tax) during the income year 2016-2017.
Neither Mrs. Habib nor their daughter has any other income and has any Tax Identification Number (TIN).
Payments made during the year:
He paid Tk. 40,000 and Tk. 35,000 as insurance premium for his own and his spouse. He purchased share
from secondary market amounting to Tk. 7,200. He also purchased medical books for Tk. 15,000 during
the year. He donated Tk. 30,000 to Prime Minister’s Relief Fund, Tk. 20,000 to his relative and Tk. 35,000
to Aga Khan Development Foundation.
Computation of income of Mr. Adib Ahsan for the assessment year 2017-18
A. Income from salary:

Component of salary Gross Exempted Net amount Reason for the treatment
amount amount chargeable to tax
Basic salary 2,64 000 Nil 2,64,000 (20,000X12)
Dearness allowance 26,400 Nil 26,000 (10% of Tk. 2,64,000)
Medical allowance 24,000 24,000 Nil Under rule 33I medical
allowance upto 10% of Basic
salary subject to a maximum
of Tk. 60,000 is exempted.
Festival bonus 22,000 nil 22,000
Annual performance bonus 88,000 nil 88,000
Deemed income for residential 66,000 Under rule 33B 25% (66,000)
accommodation of basic salary or rental
Value (1,20,000) whichever is
lower will be deemed income
Deemed income for fulltime car 13,200 5% of basic salary under rule 33D
Leave encashment 6,600 nil 6,600
Employers contribution to 26,400 nil 26,400 10% of basic salary
provident fund
Salary Income: 5,05,600
B Income from house property:
Annual value -
(a) Rent (10,000X3X12) =Tk.360,000

Municipal Value = Tk.300,000
Under section 2(3) (a)(i) ALV will be (a) being higher at Tk.3, 60,000
Less expenditure:
(a)Repair & maintenance, considering residential use = Tk. 90,000
@25% of ALV u/s 25(1)(h)(i)
(b)Municipal tax =Tk.8,000
(c)Insurance premium =Tk. 20,000
(d)Interest on loan u/s 25(1)(g) = Tk. 3,000
( e) Vacancy allowance u/s 25( 1)(j) = Tk.20,000
Total expenditure: Tk . 1, 41,000
Net income from house property: Tk. 2, 19,000
C. Income from business:
Profit during the year: Tk.1, 55,000
Carry forwarded loss set off under section 38: Tk. 5, 000
Resultant business income: Tk. 1, 50,000
Share of profit from firm: Tk.1, 20,000
Income from business: Tk. 2, 70,000
Income from other sources:
(a) Dividend: Tk. 54,000
Less exempted under paragraph
1lA of Part A of Sixth Schedule: Tk. 20,000 Tk. 34,000
(b) Honorarium from talk show: Tk. 10,000
( c) Interest from savings account: Tk. 2,700
Total income from other sources: Tk.46, 700
Income of spouse & children: Section 43(4) of Income Tax Ordinance Prescribes certain conditions when income of
spouse or children to be included in the hand of father/husband. This includes when either or both are member of
firm or assets transferred to them none of this happened in this case. As such their income can not be clubbed with
income of Mr. Adib Ahsan. Both of them are required to obtain TIN, file their tax return and declare the interest income
in their tax return.
Total income of Mr. Ahsan =: Tk.5,05,600 + Tk.2,19,000 + Tk.2,70,000 + Tk.46.700 = Tk. 10,41,300
Investment for tax credit u/s 44(2) (b):
(a) Insurance premium (40,000 +35,000)
(under paragraph 7 of Part B of Sixth Schedule) Tk.75, 000
(b) Investment in secondary share
(under paragraph 27 of Part B of Sixth Schedule): Tk.7, 200
(c) Donation to Aga Khan Development Fund (Para21): Tk. 35,000
(d) Employer's contribution to Recognised Provident Fund (Para 5): Tk.26,400
(e) Employee's contribution to Recognised Provident Fund (Para 5): Tk. 26,400
Tk. 1, 70,000
The limit of investment for tax credit under section 44(3) is 30%
Of total income of Tk 10,41,300 = Tk 3, 12,390.
The entire investment is within permissible limit of tax credit.
Note: The following will not be entitled for tax credit under section 44(2) and Part B of Sixth Schedule:
(1) Purchase of Medical book (The assesse is not a Physician) = Tk.15,000
(2) Donation to Prime Minister's Relief Fund = Tk.30,000
(3) Donation to relative = Tk.20,000

Computation of tax:
Total income: Tk.10, 41,300
Tax on first Tk. 220,000 @0% = Nil
Balance: Tk.8,21,300
Tax on next Tk. 300,000 (a) 10% = Tk. 30,000
Balance: Tk. 5,21,300
Tax on next TK. 400,000 @15% = Tk. 60,000
Tax on balance Tk. 121,300 @20% = Tk.24, 260:
Gross tax: Tk.1, 14,260
Less: Proportionate tax on share of profit of firm, deemed as paid
[1,14,260 /10, 41,300) X120, 000] = Tk.13,167
Less: Investment tax credit @15% on Tk.1,70,000 = Tk. 25,500
Net tax payable: Tk. 1,75,593
8 Mr. A. Quader works as Manager Finance in a reputed financing company. The following are the May
details of income of Mr. A. Quader for the year ended June 30, 2017. Jun
(a) Income from House Property : 2016
Mr. Quader has one residential house-one half of which is let out at a monthly rent of Tk.
12,000 and the other half is self-occupied.
Following expenditures were incurred by Mr. Quader:
Municipal tax Tk.22,000; Repairs and maintenance Tk.55,000; Insurance premium Tk.16,000;
Salary of caretaker Tk.36,000
(b) Salary Income:
Basic Salary - Tk. 35,000 p.m., Bonus – 2 months basic salary, House rent allowance –
40% of basic salary, Medical allowance – Tk. 2,500 p.m., Conveyance allowance – Tk.
3,000 p.m., Concessional passage within Bangladesh – Tk. 1,30,000, Subscription to
RPF – 10%
(Employer‘s contribution is the same), Interest accrued Tk. 85,000 on P.F. balance
calculated at 16% p.a.
(c) Capital Gains :
i. Profit on sale of shares of MNC Ltd (A Private Ltd. Co.) Tk. 40,50,000
ii. Sale of Shop (Deed Value Tk. 1,82,500), Original cost Tk. 30,750 and tax deducted at
source at the time of registration Tk. 5,650 to be assessed u/s 82C.
iii. Profit on sale of Shares of ERZ Ltd. Tk. 23,30,500 (A Publicly listed Co.)
(d) Income from Land :
Sale of paddy from land given on ―Adhi‖ system – Tk. 1,12,000. Sale proceeds from trees of
spontaneous growth in Mr. Quader‘s land Tk. 12,000
(e) Income from Business :
Share of profit from a partnership firm Tk. 67,000
Business Income Tk. 70,000 (after allowing current year‘s depreciation Tk. 20,000)
(f) The following sums have been brought forward from the preceding year:
(i) Unabsorbed depreciation Tk. 80,000 (ii) Business loss Tk. 50,000
(g) Interest income (Net @ 10% tax deduction at source) :
i. From Leasing Company Tk. 8,33,500
ii. On Bank Fixed Deposit Tk. 1,25,250
iii. On Bank Savings Account Tk. 55,700
(h) Income from other Source :
i. Dividend (gross) Tk.12,350
ii. Income from shop rent Tk. 2,500 per month
During the year Mr. Quader made the following investments – i) Life insurance premium (Policy
Value Tk.500,000) Tk.65,000 ii) Investment in shares of a listed company Tk. 120,000
iii) Donation to charitable institutions as approved by NBR Tk.33,000.
Requirement:
Compute Mr. Quader‘s total income and tax liability for the assessment year 2017-18.
Name of the Assessee: Mr. A. Quader
Assessment year: 2017-2018
Computation Total Taxable income
Income from salary (u/s 21) Tk. Tk. Tk.
Basic salary (35,000 Tk. Per month) 420,000
Bonus (2 months basic) 70,000
House rent (40% of basic salary) 168,000
Less: Exempted (lower of 50% of basic salary i.e. Tk. 210,000 (168,000) -----
or Tk. 300,000 or actual HR allowance)
Medical allowance
30,000 --------
Less: Allowable up to 10% of basic salary or Tk.1,20,000
(30,000)
whichever is lower
Conveyance allowance 36,000
Less: Exempted up to 30,000 (30,000) 6,000
Concessional passage within Bangladesh 130,000
Less: Exempted as per rule 33G 130,000
(Assumed that it is as per employment contract and actually spent) -------
Employer‘s contribution to RPF (10% of basic salary) 42,000
Interest accrued on PF @16% p.a. 85,000
Less: Exempted @ 14.5% p.a. 77,031 7,969
(Para 25 of 6th Schedule, Part-A of ITO 1984)
Taxable income from salary 545,969
Income from house properties: (u/s 24,25)
Annual value (as it seems reasonable)
144,000
Less: Admissible deductions
Repair and maintenance (25% of annual value) (36,000)
Municipal tax ( 1/2 of Tk. 22,000) (11,000)
Insurance premium (1/2 of Tk. 16,000) (8,000) 89,000
Deemed income u/s 19(30): 91,000/2=45,500-36,000 9,500
Shop rent (as it seems reasonable) 30,000
Less: Repair and maintenance (9,000)
(30% of annual value) 21,000
Total income House property 119,500
Income from agriculture: (u/s 26,27)
Sale of paddy on Adhi system
112,000 1,12,000
(To be added direct as he did not cultivate)
Income from business & profession: (u/s 28,29,30)
Share of profit of partnership firm 67,000
(assumed that firm's income is below taxable so partner will
have to pay tax on this income at regular rate)
Business income 70,000
Less: Business loss b/f (50,000) 20,000
87,000
Less: Unabsorbed depreciation (from Tk.80,000) 20,000
Total income from business 67,000
Capital gain: (u/s 31,32)
Profit on sale of shares of MNC Ltd (A Private Ltd. Co.) 4,050,000

Profit on sale of shares of ERZ Ltd (Publicly listed Co.) 2,330,500
Less: Exempted fully as per SRO no:196 date 30/6/15 2,330,500 -
Actual Gain on sale of shop (1,82,500 -30750Tk.)

Income as TDS Tk. 5,650 treated as income u/s 82 (c):
(5,650Tk. X 100/15) assuming it was sold after 5 years.
37,667
Capital Gain 40,87,667

Income from other sources: (u/s 33,34)
Interest from leasing company (gross, TDS @ 10%)
926,111
Interest on Bank Fixed deposit (gross, TDS @ 10%) 140,278
Interest from Bank saving account (gross, TDS @ 10%) 61,889
Sale proceeds from trees 12,000
Dividend income (gross) assumed from listed company
12,350
Less: Exempted up to (Para 11A Part A, Sixth Schedule)
(25,000) ------
Total income from other sources 1,140,278

Total Taxable Income 60,72,414
Computation of Investment Tax Rebate
Employee's and Employer's contribution to RPF
84,000
Life insurance premium actual Tk. 65,000 (allowed) maximum
10% of policy value Tk. 5,00,000) 50,000
Investment in shares of listed companies 120,000
Donation approved by NBR 33,000
Total Investment 287,000
Allowable limit of investment :
Lower of-
30% of total income excluding employer‘s contribution to RPF 17,97,825
and income u/s 82C Tk. (5,987,487-42,000-37,667) x 30%
Maximum limit 1,50,00,000 287,000
Tax rebate on investment (15% of Tk. 287,000) 43,050
Computation of Tax Liability Total
Tax rate Tax
income
First up to Tk. 2,50,000 250,000 0% -
Next up to Tk. 4,00,000 400,000 10% 40,000
Next up to Tk. 5,00,000 500,000 15% 75,000
Next up to Tk. 6,00,000 600,000 20% 120,000
On balance Tk.2,34,747 2,34,747 25% 58,687
Total except Profit on sale of shares of MNC Ltd. (A Private
Ltd. Co.) Tk. 4,050,000 and Adjustment for final settlement 19,84,747 2,93,687
for sale of shop Tk. 37,667
Less: Adjustment for Final settlement u/s 82C 37,667 15% 5,650
Add: Tax on Capital Gain on sale of shares of MNC Ltd. 4,050,000 15% 607,500
(A Private Ltd. Co.)
Gross tax liability 60,72,414 9,06,837
Less: Tax rebate on investment (15% of Tk. 287,000) (43,050)
8,63,787
Less: TDS
(1)From sale of land u/s 82C 5,650
(2) TDS from interest from leasing company 92,611
(3) TDS on Interest on Bank Fixed deposit 14,028
(4)TDS on Interest on Bank Savings account 6,189
Total 1,18,478
Net tax payable u/s 74 7,45,309
9 May
Captain Tausif U. Khan, a Bangladeshi young man, a successful RMG entrepreneur well-known in June
the selected EU customers network, operates following business units in Bangladesh (a,b,c being 2017
private limited companies):
a) TUK BD Ltd. (Captain held 60%, four other Bangladeshi directors 40%)
b) TUK Woven BD Ltd (Captain held 60%, four other Bangladeshi directors 40%)
c) TUK Knit BD Ltd. (Captain held 60%, four other Bangladeshi directors 40%)
d) TUK and Partners (the Firm. Captain Khan‘s share 60%, balance with three friends)
e) TUK Singapore Limited (100% held by Captain Khan). TUK UK Ltd. (100% held by Captain
Khan)
Captain Khan is the MD of the limited companies in Bangladesh and only director in companies in UK
and Singapore. TUK BD Ltd. secures export orders from EU retailers from Bangladeshi suppliers.
Captain Khan, living with his parents in Dhaka until he permanently migrated to UK with his family in
2016. As condition of migration, he set up ‗TUK UK Ltd‘ during the relevant income year in UK. He
bought an apartment in London. Captain Khan qualifies for UK tax residency in 2016-17(ending
05.04.2017). He also qualifies for tax residency for the same income year in Bangladesh (2016-17,
ending 30.06.2017). Captain Khan provided following information affecting the income year 2016-17:
i) He received total taka 30,00,000 (net of tax) tax-paid remuneration from three Bangladeshi limited
companies.
ii) Bank interest received in Bangladesh taka 99,000 net of tax 10%.
iii) Dividend received on his investment in ICB Mutual Fund taka 25,000.
iv) Remuneration receivable from TUK and Partners (the Firm) taka 2,50,000 for the income
year ended 30.06.2016. In the income year ended 30.06.2016, the firm made net loss taka
3,00,000.
v) Interest received on Resident Foreign Currency Deposit A/c (RFCD) equivalent Taka 25,000 net
of tax.
vi) Singapore company paid his salary US Dollar 120,000/=. Of this, the company remitted USD
50,000 to his London bank a/c to meet his London living and remitted USD 50,000 to his Dhaka
bank a/c to make up the shortfall of funds to buy a plot of land(Exchange rate Taka 80 to USD;
USD 1.25 to GBP; Taka 110 to GBP).
vii) He received compensation of taka 10,00,000 from a developer for cancellation of an
apartment-buy contract and his default penalty clause of taka 10,00,000 in a land-buy
agreement with a land seller has been waived to his favour.
viii) Paid Tk. 2,00,000/= interest on loan he took to buy a car and income tax Tk. 50,000 paid on fitness
renewal.
ix) He paid GBP 5,000 net income tax in UK after Singapore tax relief and USD 20,000 tax in
Singapore.
x) He sold his 9% share in TUK &Partners(Firm) for amount with a gain of taka 10,00,000/-.
He invested full amount of gain in shares in a private limited company in the same month.
Requirements:
a. Compute total income and tax liability of Captain Khan in Bangladesh for income year ended
June 30, 2017. Use current year (AY 2017-18) tax provisions, rates rules for this computation.
14
Computation of total income and tax liability of Captain Tausif U Khan

Income year: July 01 2016 to June 30, 2017. [Assessment Year: 2017-18
Status: RESIDENT (based on criteria of centre of vital interest).
TIN: XXXXXXXXXXXX
Income from Salaries u/s 21: BDT
Net salaries from Bangladeshi companies 30,00,000
i) Salaries from Singapore company (120,000 x 80) = 96,00,000
Less: Exempted due to remittance to BD a/c (6th Schedule, Part A, Para 48) (40,00,000) 56,00,000
ii) Remuneration receivable from Firm 2,50,000
88,50,000
Income from capital gain u/s 31:

i) Gain on sale of partnership firm share 10,00,000
Less: Exempted u/s 32(11) due to invested in equity of a new company (10,00,000) zero
Income from other source u/s 33:

i)Bank interest received [grossed up] 1,10,000
ii) Cash dividend on ICB MF 25,000 (exempted, 6th Schedule, Part A, Para 22A) ----------
iii)Bank interest received on RFCD net 25,000 [grossed up] 27,778
iv) Compensation received on contract cancellation ills [19(10)] 10,00,000
v)Cancellation of indebtedness (default penalty waived) u/s [19(11)] 10,00,000 21,37, 778
Total Income 1,09,87,778
Tax Computation:
On first taka 250,000 at 0% = 0
On next taka 4,00,000 at 10% = 40,000
On next taka 5,00,000 at 15% = 75,000
On next taka 6,00,000 at 20% = 1,20,000
On next taka 30,00,000 at 25% = 7,50,000
On next taka 62,37,778 at 30% = 18,71,333
Total Gross tax – world income basis 28, 56,333
No investment; so no investment tax rebate
Rate of average tax on Bangladesh rates = 28,56,333/1,09,87,778 = 26%
Tax on Singapore NET income using BD tax rate = (56, 00,000x26%) =14,56,000
Tax paid in Singapore on Singapore salary income (USD 20,000 x 80)= 16,00,000
[Tax paid in UK cannot be taken relief against Singapore income]
Tax relief available for Captain Khan for on overseas income as per section 144(4) =14,56,000
Net Tax Payable:
Total Gross tax – world income basis =28,56,333
Less: Tax relief for overseas income =14,56,000
Less: Tax paid in Bangladesh:
i) Tax paid by BD companies on salary 6,00,000
ii) TDS on bank interest 11,000
iii) TDS on interest on RFCD 2,778
iv) AIT paid on car fitness 50,000 21,19,778
NET DUE 7,36,555
10 Your tax client Ms. Nusrat Kabir, an architect, has family of three. Her husband, a CA, and her only Nov
son who is a second year undergraduate in USA (attained 18 in July 2017). Nusrat is on payroll of one Dec
company, ‗Engineers & Architects Ltd. (EAL). She also provides casual consultancy. She is an E-TIN 2015
holder. Gathered from the IT-10 (wealth statement) for 30.06.2017, the net assets of Ms. Nusrat
attracts her to 10% surcharge on her annual tax liability with a trend of her quickly graduating to 15%.
She wants a legal exit from the increasing burden of such a high surcharge coupled with such high
taxability by re-structuring her wealth if necessary. Extracted from her wealth statement (net assets on
30.06.17 being Tk.95,000,000/=, the major assets are:

i) Six-storey building (10 flats), constructed in 2017, in her native upazilla of Rouzan,
Chittagong.
ii) Apartment in Dhanmondi (250 SQM) rented.
iii) Office floor space (120 sqm) in Uttara. This was bought in 2017 with a bank loan.
iv) Industrial plot in Gazipur (two blocks–100 dec and 50 dec. Bought in 2011 @ Tk.60,000/=
per decimal).
v) Shares in public listed company (as sponsor shareholder).
vi) FDR in commercial banks (Tk.15,000,000/= including Tk.7,500,000/= in the name of her
only son).
vii) Personal cash loan (from mother). Nusrat is the only daughter of her parents.
viii) Personal loan from husband
Particulars of Nusrat Kabir’s income during the income year ended 30.06.2017:
Income from Salary: Basic pay Tk. 2,400,000/=, Medical insurance cover with hospitalization
amounting to Tk. 120,000/=, Company provides free accommodation(i.e. the apartment of her
husband). Nusrat made a lease agreement between her husband and her employer at a monthly rent of
50,000/=.
Income from House Property: Rent from Dhanmondi flat tk. 400,000/=(full amount received in
cash), from Rouzan residential building Tk. 300,000/= and from Uttara office space Tk. 30,000/=
monthly (rented from January 2017 to a company under a lease agreement for two years; security
deposit non-adjustible against monthly rent received Tk.250,000 on Uttara space). Amount spent on
repair/security salary etc on Dhanmondi flat Tk.125,000/=, on Uttara office space Tk. 100,000/=. She
paid Interest on bank loan (a/c Uttara office space) Tk. 200,000/=.
Income from other source: Casual consultancy income net of tax 10% u/s 52(A)(3) Tk.900,000/=.
Sold listed company shares (sponsor) Tk.1,000,000/= (cost 700,000), section 53M applied. She
received interest income Tk. 810,000 NET on FDR post tax-deduction by bank at 10%. She sold one
part of her Gazipur industrial land (50 decimal) at deed value of Tk.5,000,000/= (3% gain tax u/s 53H
applied); brokerage incurred 5% of deed value. Consultancy provided on-line to a foreign company in
which Nusrat received through banking channel Tk. 108,000 net after tds u/s 52Q.
Other Information:
Nusrat‘s mother told her not to pay back personal loan Tk.100,000/= in writing and also she gifted
Nusrat Tk.250,000/= worth of private company shares. Nusrat bought a laptop (worth Tk.50,000/=
taka) out of the allowance made available to her by the EAL Employees Welfare Trust. She received a
10-day long company-paid training in Singapore where EAL incurred Tk.500,000/=. Nusrat sold her
old SUV car for Tk.2,500,000 (cost 4,500,000) which she bought in 2014. She bought a replacement
SUV at Tk.5,000,000/= in the income year. She remitted US Dollar of equivalent Tk.1,000,000 during
the year to her son in USA through an official student file with an AD. Interest paid Tk.300,000/= on
bank loan a/c Uttara office space during construction period of 2015-2016 (taken delivery in January
2017). Nusrat‘s employer ‗Architects & Designers Limited‘ (EAL) is the subsidiary of reputed
Engineers Ltd.(EL), a PLC. Under Regulators approval, EL introduced a Stock Option policy for the
senior employees of the group companies, conditionally. The option is exercisable at a price 75%
below the market on the date of option. EL stock option holds promise for many a reasons. At the
moment, Nusrat heard that there is a tax exposure upon her exercising the option in the same income
year. Nusrat is keen to exercise the option but perturbed as to why she should be charged to tax for
merely holding the shares, before she sells those and more for that fact that EL is not her Employer
(EL is a third party to Nusrat).
Requirements:
a) Compute total income and gross tax liability of Ms. Nusrat for the
assessment year 2017-18.
b) Explain your views on whether Nusrat shall be charged to tax for her
stock option from EL and what tax effect shall attract her when she will
sell in future those shares under option.
c) Advise Nusrat on the planning tondrestructure her wealth so as not to
contain the net wealth below 2 slab that attracts her to 15% surcharge
on income tax. 10
(a)
Computation of Total Income and Tax Liability of Ms. Nusrat Kabir for the AY 2017-18:
Income from Salaries u/s 21 Taka Taka
(1)Basic Salary 24,00,000
(2) Rent-free accommodation (Rule 33B)-25% of basic salary 6,00,000
Or Rental value of the accommodation whichever is lower -
(3)Medical cover - Actual 1,20,000/ nil
or
10% of Basic salary Tk. 2,40,000
or
1,20,000/= whichever is less
(4)Allowance from EAL employees welfare trust 50,000 30,50,000
Income from House Property u/s 24
(1) Annual Value from Dhanmondi flat 4,00,000
Less: Statutory Repairs 1/4th u/s 25(1)(h)(i) (1,00,000) 3,00,000
(2) Rent from Rouzan building nil
(exempted as per Para 38 of 6th Schedule, part A assuming the 300,000
building was completed within 30/6/2016)
Annual Value from Uttara office space (30,000x12) 3,60,000
Less: (a) Statutory repairs 30% u/s 25(1)(h)(i) (1,08,000)
(b)Vacancy allowance [30,000x6 months] (1,80,000)
(c)Interest paid on Uttara space u/s 25(1)(g) (2,00,000)
(d)1/3rd of construction period interest u/s 25(1)(gg) (1,00,000) (5,28,000)
(2,28,000)
(4) Deemed HP income from Uttara office space u/s 19(30) [1,08,000- 8,000
1,00,000]
(5) Deemed HP income from Uttara office space u/s 19(22) 2,50,000 30,000
Capital Gain u/s 31
(1) Gazipur land sale (50 dec ) (50,00,000 less 50x60,000) 20,00,000
Less: Brokerage. incurred on land sale (5% of D.V.) (2,50,000)
17,50,000
(TDS u/s 53H at 3% 150,000. Final discharge u/s 82C
(Tk. 150000x100/15)= 10,00,000
The balance Tk.17,50,000-10,00,000=7,50,000 will direct fit at
serial no 17(3) of wealth statement (IT 10B) as per NBR circular
Sale of SUV (Cost 45,00,000, Sale 25,00,000 = no gain),
Here loss Tk. 20,00,000. It is not capital loss as per section
2(15).
Only asset will be decreased by Tk. 20,00,000 at wealth
statement.
(2)Capital gain on sale of listed company shares (10,00,000- 3,00,000 13,00,000
7,00,000)
(TDS u/s 53M at 5% = Tk. 15,000/=. Final discharge u/s 82C.
Tax rate is also 5% as per SRO no 196 dated 30.6.2015)
Income from Other Sources u/s 33
( 1) From casual consultancy Net 9,00,000/=, gross up
10,00,000
using 10% TDS--
(2) FDR interest net 8,10,000, gross up using 10% TDS 9,00,000
(3) Consultancy income on-line net 108,000 gross up
1,20,000
using 10% TDS
(4) Cancellation of indebtedness (personal loan from 1,00,000
mother) u/s 19(11) 21,20,000
Note-1: Gift of Private company shares from Mother not taxable being gift.
Note-2: company expenditure on foreign training is not part of salary as it is business related expenditure of the company.
TAX CALCULATION
Computation of Gross Tax Liability on total income other than capital gain:
On first taka 3,00,000 at 0% ---
On next taka 4,00,000 at 10% 40,000
On next taka 5,00.000 at 15% 75,000
On next taka 6,00,000 at 20% 1,20,000
On next taka 30,00,000 at 25% 7,50,000
On the balance 4,00,000 at 30% 1,20,000
11,05,000
Gain tax on sale of land 10,00,000x15%= 1,50,000
Gain tax on sale of listed companies share 3,00,000x5%= 15,000
Gross tax liability: 12,70,000/
(b)
The stock option offered by Engineers Limited is 75% below the M/V. When Nusrat Kabir exercises her option to
take the shares, no gain will arise as gain can only arise at the time of disposal. When she will have sold those
shares, the price she now pays for option shall be the cost of acquisition for the purpose of measuring capital gain
u/s 31 and 32.
That the offering company EL is not Nusrat's employer and so the benefit on option should not be termed as
taxable perquisite; an indirect relationship through the subsidiary is not enough to bring her within the meaning of
employee as defined u/s 2(28). Moreover it would not be the deemed income u/s 19(8) as because stocks and
shares are excluded from there.
(c)
The net wealth of Ms. Nusrat Kabir as on 30.06.2017, one year ago, was taka 9,50,00,000/=. Rate of surcharge is
10% upto net wealth taka 10,00,00,000/=. It appears, her net wealth would shoot to the 15% surcharge level in
this year tax return. The restructuring of wealth may reduce her wealth level below 15% surcharge threshold
while income on those assets would move out of her file. As a result, the tax on the highest slabs of 30% tax shall
overall reduce.
If she agrees immediate restructuring recommendation can be:
(i) Obtain a separate TIN file in the name of Son. Her son attained majority in July; so it is possible to open
tax file in his name.
(ii) Transfer FDRs for taka 75,00.000/= now in the name of Son to his own tax file while Ms. Nusrat can
remain operating nominee for with full power of attorney to manage the assets of her Son.
(iii) Some other income-generating but small assets (such as gifted shares) can also be transferred (under gift)
to the Son. This will reduce Nusrat's tax outright at the highest rate of 30%.
(iv) Her free-lancer consultancy income is added to total income in gross. Subject to no-objection from her
employer, she can choose to obtain a trade license and set up a proprietorship firm to provide casual
consultancy. This firm shall open up scope to create charges against revenue that will lead to reduction of
tax liability at highest rate of 30%.
11 Mr. Samual Gomez works in Bangladesh as an officer in a Multinational Company, headquartered in Nov
the USA. His sources of income for the year ended on 30th June, 2017 were as follows: Dec
a. Income from Salary: 2016
(1) Basic Salary Tk.15,000 per month.
(2) Dearness allowance 10% of the basic salary
(3) Two bonuses equivalent to two months basic salary
(4) Medical allowance Tk.20,000 per year (actual expense for the year Tk.10,000)
(5) Entertainment allowance Tk.200 per month
(6) He has been provided with a free car both for official and personal uses.
(7) He has also been provided with a rent free quarter, municipal value of which is Tk.80,000
p.a.
(8) Travel allowance as a part of his contract Tk.100,000 p.a. from where he saved
Tk.10,000.
(9) He contributes 10% of his basic salary to a Recognized Provident Fund (RPF). His
employer also contributed the same.
(10) During the year, he received interest of Tk. 1,800 @ 12% on RPF.
(11) He has taken one month‘s basic salary as advance in the month of June to meet up some
of his financial difficulties.
b. Interest on Securities:
(1) Interest on tax-free government securities Tk.3,000.
(2) Interest on less-tax government securities Tk.2,700.
(3) Interest on approved debentures Tk.27,300. He has borrowed Tk.20,000 @ 10%
interest to purchase it. Bank also charged Tk.400 to collect the interest.
c. Income from House Properties:
He owns a two-storied house in Dhanmondi. He stays in one floor with his family and
another floor is let out for residential purpose at a rate of Tk.9,000 per month. The
municipal value of the house is Tk.200,000 per annum. During the year he spent the
following expenses for the whole house:
Repair expense Tk.2,000, Insurance expense Tk.4,000, Land development tax Tk.1,500
Sewerage and utilities expense Tk.1,000, Payment of DBH Loan installment (including
interest of Tk.500) Tk.5,000.
During the year, the house has remained vacant for two months.
d. Agricultural income:
Sale of crops Tk.5,000 and Income from barga Tk.2,000
e. Share of profit from a partnership firm Tk.10,000 (firm paid no tax thereon)
f. Income of spouse and minor child Tk.40,000
g. He won Prize Bond lottery of Tk.300,000 [tax deducted at source (TDS) @ 20% - from it]
h. During the year Mr. Gomez visited South Korea as a consultant and generated income of Tk.500,000
and he paid income tax @ 25% in South Korea. He brought Tk.250,000 to Bangladesh through bank.
From another visit to Uganda he generated income of Tk.300,000 and paid income tax there @ 20%.
Bangladesh has DTAA (Double Taxation Avoidance Agreement) with South Korea, but not with
Uganda.
i. Income from business and profession
Profit from sole-proprietorship business Tk.4,000; last year‘s loss carried forwarded Tk.1,000.
j. Income from other sources:
(1) Interest income from fixed deposit account Tk.4,500 (net of TDS @ 10%)
(2) Profit from Islami bank Tk.900 (net of TDS @ 10%)
(3) Dividend from ICB Mutual Fund Tk.31,500 (net of TDS @ 10%)
(4) Dividend from a listed company share Tk.1,800 (net of TDS @ 10%)
(5) Sale of forest timber Tk.2,000
Investment claimed by Mr. Gomez:
(1) Payment of life insurance premium Tk. 8,000 (Policy value Tk.100,000)
(2) Purchase of a listed company‘s primary share Tk.5,000
(3) Purchase of books and magazines Tk.1,000
(4) Purchase of a share of co-operative society Tk.2,000
(5) Contribution to Government Zakat Fund Tk.2,500
(6) Purchase of Furniture Tk.15,000
Requirement:
Based on the above information, calculate Mr. Samual Gomez‘s total income and tax
liability for the assessment year 2017 -18.
Mr. Samual Gomez

Heads of Income Amount Amount Amount

1. Income from Salary (Section: 21):
Basic salary (15,000 X 12) 1,80,000
Dearness allowance (1,80,000 x 10%) 18,000
Bonus (15,000 x 2) 30,000
Medical allowance
Less: Exempted - whichever is lower 20,000
- 10% of Basic salary - Tk. 18,000
- Maximum limit - Tk. 1,20,000
(18,000) 2,000
Entertainment allowance (200 X 12) 2,400
Car facility (1,80,000 x 5% or 60,000 higher) 60,000
Rent Free Accommodation: lower of:
25% of basic salary 45,000
Or, Rental value 80,000 45,000
1,00,000
Travel allowance 90,000
Less: Exempted - up to actual expense 10,000
Advance salary 15,000
Employer's contribution to RPF (10% of Tk. 180,000) 18,000
Interest from RPF 1,800
Less: exempted - up to: _1,800 Nil
1/3rd of basic and DA [180,000+18,000=1,98,000/3] = 66,000 90,000
or,Interest @14.50% [(1,800/12)* 14.5] = 2,175 whichever is lower
TOTAL
3,80,400
2. Income from interest on Securities (Sec.22):
Interest on tax free government securities 3,000
Less: Exempted – Full 3,000 Nil
Int. on less-tax Govt. securities (2,700 x 100/95) 2,842
Interest on approved debentures 27,300
Less: Allowable expenses:
Bank Charge (400)
Interest on loan (2,000) 24,900
Total 27,742
3. Income from House Property (Section: 24 ):
Particulars Rate Amount
Actual rental value (9,000 x 12) 1,08,000
On first Tk. 2,50,000 0% 0
Municipal
On next Tk. value (2,00,000 / 2)
4,00,000 110%
00 000 40,000
Annual
On rest value (whichever is higher)
Tk. 4,68,642 15% 1,08,000
70,296
Less:
Total Allowable
11,18,642 deductions u/s 25 1,10,296
+ tax on
Repair andprize bond lottery
maintenance (25%@x20% on Tk.3,00,000[82C income]
1,08,000) 27,000 60.000
Insurance (4,000 / 2) 2,000 1 70 296
Less: development
Land Investment taxtaxrebate
(1,500(51,500
/ 2) x 15%) 750 7.725
Interest on loan (500 / 2) 250 250 1,62,571
No Tax credit as firm's income was below taxable Nil
Vacancy allowance (9,000x 2) 18,000 48,000
1,62,571
Less: Double
Courtesy: taxation
Saiful Islam relief (foreign
Mozumder, tax credit as
ShirazkhanBasak& Co.per sec 144(4)
[email protected] cell-01711-981920
Average tax rate in Bangladesh is (1,62,571/14,18,642) i.e.
11.46%.Tax relief on income from South Korea (as per DTAA)
TOTAL 60,000
Deemed income u/s 19(30)
Repair and maintenance allowed 27,000
Less: claimed [2,000+1,000=3,000/2=1,500] 1,500 25,500
4. Agricultural Income (Section: 26):
Sale of crops 5,000
Less: Allowable deductions: Production cost 60% 3,000 2,000
Income from barga 22,0002,,.,0
2,000
TOTAL 00 4,000
5. Income from Business and Profession(Sec:28):
Profit from sole-proprietorship business 4,000
Less: Carry forward & Set off of previous loss 1,000
TOTAL 3,000
Share of profit from partnership firm (below taxable) 10,000
6. Income of spouse or minor child 40,000
7. Income from other sources (Section: 33):
Interest on FDR (4,500 x 100/90) 5,000
Profit from Islami Bank (900 x 100/90) 1,000
Dividend from ICB Mutual Fund (31,500 x 100/90) 35,000
Less: Exempted — up to Tk. 25,000 25,000 10,000
Dividend of listed Public Ltd. Co. (1,800 x 100/90) 2,000
Less: exempted up to Tk.25,000 2,000 Nil
Sale of forest timber 2,000
Prize Bond Lottery [income u/s 82C] 300,000
TOTAL 3,18,000
8. Foreign Income:
Income from South Korea 5,00,000
Less: Brought to Bangladesh through official channel (exempted as per 2,50,000 2,50,000
6th schedule(part-A) Para-48 of ITO,1984). On remaining Tk.2,50,000
foreign tax credit will be applicable as per sec.144(4).
Income from Uganda:(As there is no DTAA between 3,00 000
Bangladesh and Uganda, so no foreign tax credit will be allowed as per
section 145 as NBR not yet prescribed any rules in this behalf)
5,50,000
Calculation of Allowable Investment Allowance

Particulars Amount
Life insurance premium 8,000
Share purchase 5,000
Contribution to Govt. Zakat Fund 2,500
Contribution to RPF (18,000 x2) 36,000
Maximum limit of allowable investment:
25% (total income —income under 82C) = (1346,800 — 3,00,000) X 25% 2,79,660
Or 1,50,00,000
Whichever is lower 51,500
Thus allowable investment allowance for tax rebate would be 51,500
Calculation of Allowable Investment credit
15% on Tk. 51,500 7,725
Total 7,725
Calculation of Tax liability:
Particulars Rate Amount

On first Tk. 2,50,000 0% 0
On next Tk. 4,00,000 10% 40,000
On rest Tk. 4,68,642 15% 70,296
Total 11,18,642 1,10,296
+ tax on prize bond lottery @ 20% on Tk.3,00,000[82C income] 60,000
1,70,296
Less: Investment tax rebate (51,500 x 15%) 7,725
1,62,571
No Tax credit as firm's income was below taxable Nil
1,62,571
Less: Double taxation relief (foreign tax credit as per sec 144(4)
Average tax rate in Bangladesh is (1,62,571/14,18,642) i.e.
11.46%.Tax relief on income from South Korea (as per DTAA)
30% of 2,50,000 = Tk. 75,000 but maximum relief is at an average rate
of the country(2,50,000 X 11.46%) = Tk. 28,650 28, 650
,
1,33,921
Less: TDS [142+500+100+3,500+200+60,000] 64,442
69,479
12 Mr. PQ used to compute his income tax and prepare tax return of income on his own. While Nov
computing income tax for the assessment year 2017-2018, he was confused about the computation Dec
and presentation of the tax collected at source on transfer of inherited property and at the time of 2017
import of goods. Therefore, he appointed XYZ & Co. (―Firm‖), Chartered Accountants, for assisting
him in computation of taxable income, tax liability and preparation of return of income. You are a
Chartered Accountant and working as a tax consultant of the Firm. Mr. PQ sent you an email
furnishing the following information on transfer of inherited property:
Particulars Tk.
Tax Collected/Deducted at Source on transfer of property 10,000,000
Sale proceeds received in cash and by bank transfer 250,000,000
In addition to the above, Mr. PQ also provided you with the following information on
income and tax deducted at source relating to the assessment year 2017-2018:
Particulars Tk.
Remuneration as a member of the Board of Directors of a private 6,000,000
limited company
Interest on fixed deposits 3,000,000
Income from dividend of a publicly listed company 1,000,000
Interest on savings instruments 1,500,000
Income from a mutual fund 500,000
Income from lease of vacant land 1,200,000
Taxes were deducted at source from remuneration, interest, dividend and lease income were
as per applicable rates
Mr. PQ imported goods of Tk.10,000,000/= during the income year 2016-2017 and tax was collected
at source amounting to Tk.500,000/= at import stage applying 5% rate. He made profit of
Tk.3,000,000/= from import business in the same period.
Net wealth of Mr. PQ was computed at Tk.30,050,000/= as of 30 June 2017 which you should
consider for computation of wealth surcharge. During the income year 2016-2017, Tk.10,000,000/=
was invested by him in acquisition of shares of companies listed on Dhaka Stock Exchange. He also
invested Tk.1,000,000/= in deposit pension scheme sponsored by a scheduled bank. He was 67 years
old on 30 June 2017 and has been submitting return of income for last 20 years.
Requirements:
Write a reply to the email of Mr. PQ along with computations of the following:
(i) Minimum tax on income from import business.
(ii) Total taxable income from all sources and total tax liabilities.
(iii) Investment Tax Credit.
(iv) Surcharge and Net Tax Payable.
Email
To: PQ
From: XYZ & Co.
Date: 20 December 2017
Re: Assistance in computation of your taxable income and tax liability for the assessment year 2017-18
Dear Mr PQ,
Thank you very much for the email dated 15 November 2017. I went through the information provided by you.
We are providing you with the draft computations, as requested, below:
Name of Assessee: PQ
Taxpayer's Identification Number :
Income Tax Computation
Sources fall under section 82C( 2) d) proviso (for which regular computation is not required):
Particulars Tax deducted/collected at Income (Tk.)
source (Tk.)
Transfer of property 10,000,000 250,000,000
Interest on savings instruments 75,000 1,500,000
10,075,000 251,500,000
Sources fall under section 82C(2)(b) (for which computation in regular manner is required):
Particulars Tax deducted/ collected at Income (Tk.)
source (Tk.)
Import Business 500,000 3,000,000
500,000 3,000,000
Regular sources of income:

Particulars Tax deducted/ Gross Taxable
collected at Income Income (Taka)
source (Tk.) (Taka)
Income from Salary
Remuneration from the private limited company 1,345,000 6,000,000 6,000,000
Sub-total: (i) 1,345,000 6,000,000 6,000,000
Other Income
Interest on fixed deposits 300,000 3400,000 3,000,000
Income from dividend of publicly listed company 100,000 1,000,000 975,000
Income from mutual fund - 500,000 475,000
Income from lease of land 60,000 1,200,000 1,200,000
Sub total: (ii) 460,000 5,700,000 5,650,000
Total: (i) + ii) 1,805,000 11,700,000 11,650,000
Tax on taxable Income from regular sources:

Slabs Taxable Income (Tk.) Rate Tax (Tk.)
First 300,000 0% -
Next 400,000 10% 40,000
Next 500,000 15% 75,000
Next 600,000 20% 120,000

Next 3,000,000 25% 750,000
Balance 6,850,000 30% 2,055,000
Total 11,650,000 3,040,000
(a) Computation of minimum tax liability for import business:

Taxable income from regular sources 11,650,000
Income from import business computed in regular manner 3,000,000
14,650,000
Tax on taxable Income from regular sources:
First 300,000 0% -
Next 400,000 10% 40,000
Next 500,000 15% 75,000
Next 600,000 20% 120,000
Next 3,000,000 25% 750,000
Balance 9,850,000 30% 2,955,000
Total 14,650,000 3,940,000
Applicable tax on sum of income from regular sources and income from import business 3,940,000
Less: Tax applicable to income from regular sources 3,040,000
Tax liability for import business computed in regular manner and applying regular tax rate 900,000
Tax collected at source at import stage 500,000
Since, regular tax liability from import business is higher than tax collected/deducted at source, so Tk. 900,000/=
will be minimum tax on income from import business
(b) Computation of total taxable income from all sources and total tax liabilities:
Taxable Income Tax Liabilities

A (Tk.) (Tk.)
Taxable income from regulars sources of income 11,650,000 3,040,000
Income from sources fall under section 82C (for which 3,000,000 900,000
computation in regular manner is required)
Income from sources fall under section 82C (for which 251,500,000 10,075,000
computation in regular manner is not required)
Total 266,150,000 14,015,000
(iii) Investment Allowance & Tax Rebate: Tk. Tk.
(a) Actual Investment made during the income year:
Shares of companies listed on Dhaka Stock Exchange 10,000,000
DPS (Maximum Tk. 60,000) 60,000 10,060,000
(b)25% of (Total Taxable Income-Income u/s 82C-Exempted 29,12,500
Income-Income
(c) Maximum subject
Limit to reduced tax rate) 15,000,000
(d) Eligible Amount for Tax Rebate: the lowest of (a), (b) and (c) 29,12,500
Investment Tax Rebate:
Tk 250,000 15% 37,500
Tk 500,000 12% 60,000
Tk 21,62,500 10% 2,16,250
29,12,500 B 3,13,750
Total Income Tax Payable (from regular sources) C=A-B 27,26,250
Income Tax (from section 82C sources) D 10,975,000
Surcharge @ 30% E=(C+D) X 30% 41,10,375
Total Income Tax & Surcharge F=C+D+E 1,50,85,375
Tax collected /deducted at source
Tax deducted/collected from sources fall under section 82C (for which
computation in regular manner is required): 500,000

Tax deducted/collected from sources fall under section 82C (for which
10,075,000
computation in regular manner is not required):
Tax deducted/collected from regular sources 1,805,000
Total Tax deducted/collected from all sources G 12,380,000
sources Tax Payable
Balance H=F-G 4,502,450
Surcharge has been computed on the basis of information provided by you on net wealth as of 30 June 2017. We
could not compute closing net wealth for the assessment year 2017-18 due to lack of necessary information.
Should you have any queries in this regard, please feel free to contact us.
Best wishes and regards,

3 Special provisions, recovery, refund and dispute resolution in Tax law (20%)
S.L Question Year
1 Explain the following: Nov
i) Penalty for concealment of income u/s 128 of ITO 1984. Dec 3
ii) Penalty for incorrect or false audit report by a chartered accountant 2014
u/s 129A of ITO 1984. 3
(i) Under the provision of section 128-
(1) the following tax authority during the course of any tax proceeding can impose penalty:
(a) Deputy Commissioner of Taxes ;
(b)Appellate Joint/Additional Commissioner of Taxes or Commissioner of Taxes (Appeals);
(c)Taxes Appellate Tribunal.
(2) Such penalty may be imposed for:
(a) concealment of particulars of income;

(b) furnish inaccurate particulars of income;
(c) understate value of an immovable property in connection with sale/transfer.
(3) The amount of penalty will be 15% of the tax avoided. If it is detected after 1 year, it will increase by
15% for each preceding assessment year.
(ii) Under the provision of section 129A-
(1) the following tax authority during the course of any tax proceeding can impose penalty:
(a) Deputy Commissioner of Taxes ;
(b)Appellate Joint/Additional Commissioner of Taxes or Commissioner of Taxes (Appeals):
(c)Taxes Appellate Tribunal.
(2) Such penalty may be imposed for:
(a) audit report is not certified by a chartered accountant that accounts are maintained according to BAS or
BFRS standard;
(b) audit report is false or incorrect.
(3) The amount of penalty will not be less than Tk. 50,000 and not more than Tk. 200,000.
2 You are a Chartered Accountant and working in Y Ltd. (―Company‖) as a tax May
manager. The Company is engaged in the business of export of the goods Jun
manufactured by itself. The bank, through which export proceeds of Y Ltd. is 2015
received, deducts tax at the specified rate from the total export proceeds in
accordance with the provisions of section 53BB of the Income Tax Ordinance
(―ITO‖), 1984. The export proceeds net of income tax deducted at source under
Sec.53BB received by Y Ltd. during the income year 2016-17 came to
Tk.100,000,000. Export income of Y Ltd. falls under the scope of section 82C of
the ITO, 1984. Generally, the Company does not have additional income from
export as referred to in section 82C (6) of the ITO, 1984.
In the income year 2016-17, a warehouse owned by the Company since 1/7/2016
was leased out to another company for a term of 3 years from 1/7/2016 at a
monthly rent of Tk.100,000 with an advance rental payment of Tk.900,000 to be
adjusted with monthly rental payments over 3 years. Y Ltd. received rent for the
income year 2016-2017, but no tax was deducted at source from the rent paid by
the lessee. Nor any VAT was paid on the rent. The repair cost of Tk.15,000,
municipal tax of Tk.10,000 and insurance premium of Tk.1,000 were paid for the
warehouse during the income year 2016-17.
The net profit before tax for the year as per the draft financial statements for the
income year came to Tk.3,304,000. The net profit as per income tax comes to the
same amount, assuming no penalty/liability (if any) for non-deduction of tax at
source by the tenant and for non-payment of VAT. There is a tax refundable of
Tk.150,000 for the last assessment year 2016-17. The income (including
advance) from warehouse and its related expenses were deposited/paid out in
cash into/from an undisclosed bank account of Y Ltd. and have not been included
in the draft financial statements. The purchase money of Tk.50,000,000 (total
accumulated undeclared income of Y Ltd. over the last 2 assessment years) for
the warehouse was also paid from the same bank account.
The management of Y Ltd. is thinking of assessment of income of the Company
for the income year 2016-2017 under section 82C of the ITO, 1984, upon
considering the tax collected at source by the bank from the export proceeds as
final discharge of tax liability. In a meeting with the management team of Y Ltd.
on tax issues, you have been asked to consider whether it is possible to ignore
income from house property so that no demand for additional income tax arises.
To discuss the issue further, a meeting would be held next week.
Requirements:
What will be the financial consequences for such non-deduction and

non-payment as Per tax laws?
4
3 You are a Deputy Commissioner of Taxes (DCT) working in the income tax May
department of Bangladesh government. While carrying out your routine jobs, you Jun
came across with the following information in respect of various assessees: 2016
(i) Mr. A submitted return of income for AY 2017-2018 under section 82BB
showing total taxable income of Tk. 1,000,000, investment of Tk. 200,000
eligible for investment allowance and tax credit of Tk. 40,000 on the said
investment.
(ii) X Ltd. submitted income tax return for the assessment year 2009-2010
within the time stipulated in section 75 of the ITO, 1984, and assessment
was completed long ago. In the assessment year 2017-2018, specific
information about concealment of particulars of income of X Ltd. has
come into your possession.
(iii)Z Ltd. is engaged in production of woven garments and 100% of its
products are exported to Europe. Return of income of Z Ltd. for the
income year 2016-2017 has been submitted. Tax collected at source from
the export proceeds of Z Ltd. was shown as final discharge of tax liability
and was converted into taxable income applying 10% tax rate.
(iv) Return of income submitted by Mr. B under Universal Self Assessment
scheme of the ITO, 1984, for the AY 2015-2016, was selected for audit
pursuant to section 82BB(3). Afterwards, proceeding under section 83
was initiated but not completed as of 30 June 2017.
Requirement:
Express your thoughts and course of action as a DCT on the aforementioned
issues referring to the specific provisions of tax laws.
(i) It appears from the information that tax rebate on admissible investment allowance
claimed by Mr. A is not correct. Correct admissible investment allowance and tax rebate
thereon will be computed in the following manner:
Name of Assessee: A
Taxpayer’s Identification Number :
Particulars Tk.
Taxable Income 1,000,000

First 25,000 0% -
Next 400,000 10% 40,000
Next 350,000 15% 52,500
Total 1,000,000 , 92,500
Tax Leviable on total taxable income A 92,500

Investment Allowance & Tax Credit: Tk.
200,000
(a) Actual Investment made during the income year:
(b) 30% of (Total Taxable Income – Employer’s Contribution to RPF) 300,000
(c) Maximum Limit 15,000,000
(d) Allowable Investment Limit for Tax Credit - the lowest of (a), (b) and (c) 200,000
Tax Credit [(d) X 15%)] B 30,000
Income Tax Payable C=A-B 62,500
The Assessee claimed tax rebate of Tk. 40,000 on admissible investment allowance, whereas he
was entitled to Tk. 30,000 as computed above. As per section 82BB(2) of the ITO, 1984, the DCT shall
make adjustment in respect of incorrect claim if the said incorrect claim is apparent from the existence of
any information in the return. The tax payable shall be determined after adjustment of the incorrect
claim of tax rebate on investment allowance. After processing the return in the aforesaid manner, the
DCT shall send demand notice along with an intimation to the assessee specifying the income so
computed, the liability to pay tax on such income, the amount of tax rebate allowed, the sum
determined to be payable by him and such other particulars within 30 days of such computation as
may be specified. Provided that no such intimation shall be sent after the expiry of a period
of 12 months from the end of the year in which the return is furnished. Moreover, no demand notice
requiring the assesse to pay more taxes shall be made unless the assessee is given an opportunity in
writing in this regard.
(ii) No proceeding under section 93 of the ITO, 1984, shall be initiated unless definite information
has come into the possession of the DCT and he has obtained the previous approval of the IJCT in
writing to do so, except in a case where a return has not been filed under section 75 or 77. A notice
under section 93 of the ITO, 1984, may be issued by the DCT in any case in which he has reason to
believe that the assessee has for any assessment year concealed the particulars of his income or furnished
inaccurate particulars thereof or omitted or failed to disclose all material facts necessary for the
assessment for such year, within 6 years from the end of the assessment year for which the
assessment is to be made.
In light of the above law, it emerges that the DCT has specific information into his possession and has
sufficient reason to believe that X Ltd. concealed the particulars of income for the AY 2009-2010. As X
Ltd. submitted return of income for the assessment year 2009-2010 within the time stipulated in section
75 of the ITO, 1984, commencement of proceeding and service of notice under section 93 will not be
valid as 6 years has already passed from the end of the assessment year 2009-2010.
(iii)As per section 53BB of the ITO, 1984, the bank, through which export proceeds of an exporter of
certain items is received shall deduct tax at the rate 0.60% of the total export proceeds at the time of
crediting the proceeds to the account of the exporter. Section 82C provides that tax deducted or
collected at source under 53BB from the amount received on account of export of certain items shall be
deemed to be the final discharge of tax liability from that source. Income from the sources referred to
in section 82C is determined on the basis of the tax deducted or collected at source and the rate relating to

the assessment year is applied.
Any income shown or assessed in excess of the amount determined in the aforementioned manner
shall be liable to tax at the rate or rates applicable for the assessment year. In the case under
discussion, Z Ltd. applied incorrect tax rate for deriving taxable income from tax collected at source
through back calculation. The SRO, which introduced presumptive tax rate of 10% for export income of
readymade garments industry, was not renewed after 30 June 2014. Hence, in the case of a private limited
company, tax will be computed for the export income earned by readymade garments industry from 01
July 2014 @ 35%. Excess amount of taxable income shall have to be determined comparing taxable
income derived by applying 35% tax rate to tax collected at source and total income shown or assessed.
(iv)As per section 82BB(3), National Board of Revenue (NBR) or any authority subordinate to NBR,
if so authorized by NBR in this behalf, may select, in the manner to be determined by NBR, returns
filed under Universal Self Assessment scheme and refer the returns so selected to the DCT for the
purpose of audit and the DCT shall thereupon proceed, if so required, to make the assessment under
section 83 or section 84, as the case may be.
Section 94 provides for limitation of time for assessment and as per the said section no order of
assessment under section 82BB (3) shall be made after the expiry of 2 years from the end of the
assessment year in which the income was first assessable. Accordingly, the assessment order shall
have to be passed under section 82BB(3) within 30 June 2018.
14 The following particulars of income of Mr. Ali Ahmed are available for the Nov
assessment year 2017-2018. Dec
Taka 2013
Income from House Property 100,000
Business Income (after allowing for current Year’s depreciation of Tk.20,000) 70,000
The following sums have been brought forward from the preceding year
Unabsorbed Depreciation 80,000
Business loss 50,000

Deputy Commissioner of Taxes is proposing to assess him on a total income of
Tk.100,000 by setting off only of the business loss of Tk.50,000 and part of the
unabsorbed depreciation of Tk.20,000 against the business income of Tk.70,000.
Is he right in his action? Explain
The DCT is not right in his action.
The assessment should be done in the following manner
Particulars Taka
Business Profit / (loss): Profit for the year 70,000
Previous business ―loss‖ — b /f (50,000)
20,000
Less : Unabsorbed depreciation (20,000)
Business profit NIL
Property income 100,000
Unabsorbed depreciation c /f (60,000)
Taxable Income 40,000
Mr. Ali Ahmed should not accept the DCT's proposal. He should submit the proposal which is in line

with law. Moreover if the DCT still remain in his decision and assessed in his (DCT’s) own view
then he (Ali Ahmed) may prefer an appeal to the appellate authority.
15 Write your arguments against the following grounds of appeal. Nov
a) Sale proceeds of a land Tk. 79,000,000 deposited in the bank account of a Dec
company. The land was in the name of the Chairman of the company but 2013
the land was not shown in the wealth statement of the Chairman’s
personal tax file. The company claimed the amount as loan from chairman
but the DCT added as income of the company and upheld by CT(A).
b) The DCT estimates Gross profit 36% of last year instead of shown GP
25% because the company failed to produce all the vouchers of raw
materials, factory overhead and added Tk. 40,500,000 with total income.
The DCT computed tax liability TK. 230,000,000 and advance tax deposited by the company Tk.
7,800,000 against income tax provision of Tk. 10,000,000. The DCT charged interest because Tk.
7,800,000 is less than 75% of the claimed tax.
(a)
The DCT and CT (A) both are not justified to add the sum because the land is in the name of the
chairman and the sales proceeds belongs to the chairman. The company received the money as loan from the
chairman through banking channel and accordingly, the company owes to the chairman for the same
amount.
(b)
The estimation of GP ratio to 36% against 25% shown by the company is unlawful. GP of a company is
largely dependent upon the purchase and sales price of the products traded by the company.
However, the DCT can disallow expenses for non-submission of supporting documents on a ground
that those are not business expenses.
(c)
The DCT is not justified to charge interest because as per section 73 (1) if an assessee paid advance tax on
the basis of his own estimate is less than 75% then the assessee shall pay 10% simple interest on the
shortfall amount but the assessee paid tax more than 75% of tax provision.

16 ABC & Co. (―Firm‖), Chartered Accountants, acts as tax consultant of XYZ Ltd. Nov Dec
(―Company‖), a private limited company incorporated in Bangladesh. The 2017
Company is engaged in the business of yarn dyeing. You are a Chartered
Accountant and working as Tax Partner of the Firm. Assessment and appeal
proceedings of the Company for the assessment year 2017-2018 are complete.
There were cross appeals before the taxes appellate tribunal for AY 2017-2018
relating to addition of current liabilities to taxable income and application of 35%
tax rate on business income from sale of fixed assets. The assessment order
analyzed the components of current liabilities that consist of working capital loan,
term loan, lease finance, trade creditors and liabilities for expenses and are
disclosed under separate notes to the audited financial statements. The sale of
fixed assets was also recorded in detail. The Deputy Commissioner of Taxes
(―DCT‖) added back taka 20,000,000/= out of current liabilities and the
Commissioner of Taxes (Appeals) reduced the same to Taka 15,000,000/=. In the
cross appeal, the Taxes Appellate Tribunal further reduced the addition under
current liabilities to Taka 5,000,000/=. Subsequently the Director General of
Inspection (Taxes) called for the file and reviewed the same where he did not find
supporting documents as regards the appealed issues. Being advised by the office
of the Director General of Inspection (Taxes), the DCT reopened the case and
issued notice under Section 93 of the ITO, 1984, on the ground that tax was
evaded by non-submission of evidences.
Requirement:
Prepare a reply to the notice of the DCT considering the grounds for reopening
the case and applicability of Section 93 of the ITO, 1984, for XYZ Ltd.
The Deputy Commissioner of Taxes
Taxes Circle ---Taxes Zone ---
Dhaka, Bangladesh
05 December 2017
Dear Sir:
Request to Cancel the Proceedings of Income Tax Cases Reopened under section 93 of
the Income Tax Ordinance, 1984, (“ITO, 1984”) for the Assessment Year 2017-2018
Assessee: XYZ Ltd.
Please refer to the subject mentioned above. As regards income tax case reopened under section 93
of the ITO , 19 84,f or the a s s e s s m e nt ye ar 20 17 - 20 18 w e w oul d li ke to offe r
follow i ng explanations/statements/documents/information:
Business Income from Sale of Fixed Assets:
The DCT recorded the detailed information on sale of assets upon examination of all the
documents and information submitted in support of the said transactions and computed
income/(loss) from sale of assets. He also confirmed that the assessee submitted information on
purchase price, sales prices, accumulated depreciation, and computation of income and minutes
of the meeting of the board of directors relating to sale of assets.
Section 93 is not applicable in the instant case as non-submission of evidences relating to sale of
assets is fabrication of information and the DCT acted on suspect, surmise and conjecture
and he is just on a fishing expedition.
Where the decisions of the appellate authorities are there and if the DCT is aggrieved by the
decisions of the appellate authorities, he had the option to file appeal to the higher appellate
authority or reference application to the High Court Division, as the case may be, in accordance
with the provisions of the ITO, 1984. Reopening of the case on the appealed grounds without

going to higher appellate authority or reference application to the High Court Division is
violation of income tax law and against the natural justice.
Current Liabilities:
The DCT examined the documents submitted in support of current liabilities of Tk. .................
disclosed under separate notes to the audited financial statements and he recorded the same
in the assessment order. Upon examination of submitted documents and information, he
added back Tk. 20,00,000/=.
Section 93 is not applicable in the instant case as the audited financial statements clearly
disclosed information on current liabilities and the assessee submitted all supporting documents
relating to current liabilities. In reopening the cases on this ground, the DCT acted on suspect,
surmise and conjecture and he is just on a fishing expedition. Non-submission of evidences
relating to heads under current liabilities as reasoning for reopening the cases is completely
vague, fallacious and distortion of information.
Where the decisions of the appellate authorities are there and if the DCT is aggrieved by the
decisions of the appellate authorities, he had the option to file appeal to the higher appellate
authority or reference application to the High Court Division, as the case may be, in accordance
with the provisions of the ITO, 1984. Reopening of the case on the appealed grounds without
going to higher appellate authority or reference application to the High Court Division is
violation of income tax law and against the natural justice.
It is notable that once the DCT examined and decided on current liabilities as mentioned
in the assessment orders along with notes, he verified all the heads under current liabilities
such as Trade Creditors, Working Capital, Accounts Payable, Liabilities for Expenses, Term
Loans, etc. The orders from the appellate authorities provided their decisions in the like
manner.
Applicability of section 93 of the ITO, 1984:
The following conditions should be studied for which any sum payable by an assessee under
the ITO, 1984, shall be deemed to have escaped payment as referred to in section 93 of the
ITO, 1984:
S1 # Conditions
i. The income or a part thereof has escaped assessment
ii. The income has been understated
iii. Excessive loss, deduction, allowance or relief in the return has been claimed
iv. The liability of tax or any other amount payable under the ITO, 1984, has been shown
or computed lower by concealment or misreporting of any income or by
concealment or misreporting of any assets, expenditure or any other particulars in a
statement submitted under section 80
v. Income chargeable to tax has been under-assessed, or income has been assessed at a
lower than due tax rate
vi. Income that is subject to tax has been made the subject of tax exemption
vii. Income has been made the subject of excessive relief, or excessive loss or depreciation
allowance or any other allowance under the ITO, 1984, has been computed
viii. A tax or an amount, payable under the ITO, 1984, has been computed or paid lower than
due amount by reason of lower base
In light of the above, we would earnestly request you to withdraw the proceedings of income
tax case reopened under section 93 of the ITO, 1984, for the sake of upholding the rule of law
and natural justice.
Yours faithfully,

19 What sort of punishments and prosecutions are provided in the Income Tax May
Ordinance, 1984 for different offences and non-compliances of obligations by a June
2014
person mentioned under Sections 164, 165 and 165A of Income Tax Ordinance
1984?
According to Section 164 of the ITO 1984 a person is guilty of an offence punishable with
imprisonment for a term which may extend to one year, or with fine, or with both, if he, without
reasonable cause,-
a) fails to deduct or collect and pay any tax as required under the provision of Chapter VII except
advance payment of tax or fails to deduct and pay tax as required under section 143 (2);
b) fails to produce, or cause to be produced, on or before the date mentioned in any notice under
Chapter VIII, or under section 83, such accounts, documents or statements as are referred to in
such notice;
c) fails to furnish, in due time, the return of income which he is required to furnish under section 75, or
by notice given under section 77 or 93;
d) refuses to furnish such information as may be necessary under section 113;
e) refuses to permit inspection or to allow copies to be taken in accordance with the provisions of
section 114;
f) fails to afford necessary facilities or to furnish the required information to an income tax authority
exercising powers under section 115;
g) fails to comply with the requirement under sub-section (1) of section 116;
h) fails to comply with the order made under sub-section (1) of section 116A;
i) refuses to permit or in any manner obstructs the exercise of powers under section 117 by an income
tax authority.
According to Section 165 of the ITO 1984 a person is guilty of an offence punishable with
imprisonment for a term which may extend to three years but shall not be less than three months, or with
fine, or with both, if he-
a) makes a statement in any verification, etc. in any return or any other document furnished under any
provisions of this Ordinance which is false;
b) knowingly and willfully aids, abets, assists, incites or induces another person to make or deliver a false
return, account, statement, certificate or declaration under this Ordinance, or himself knowingly and
willfully makes or delivers such false return, account, statement, certificate or declaration on behalf of
another person;
c) signs and issues any certificate mentioned in the first or second proviso to section 82 which he either
knows or believes to be false or does not believe to be true;
d) refuses to furnish such information as may be necessary for the purpose of survey under section 115.
According to Section 165A of the ITO 1984 a person is guilty of an offence punishable with
imprisonment for a term which may extend to three years or with fine upto taka fifty thousand or both, if he
deliberately uses or used a fake Tax-payer’s Identification Number (TIN) or a Tax-payer’s
Identification Number (TIN) of another person.
21 Nov
What penalties can be imposed for: 6
Dec
(a) Failure to the file return u/s 75:
2011
(b) Failure to pay Taxes u/s 74:
(c) For furnishing inaccurate particulars of income
Particulars Penalty

Failure to file return u/s 75: Penalty amounting to 10% of last assessed tax subject
(According to section 124 of ITO 1984) to minimum of Tk. 1,000/- and a further sum of Tk. 50 for
everyday of continuing default.
Failure to pay Taxes u/s 74 : If tax paid u/s 74 is less than 80% of the payable amount
(According to section 127 of then 25% of the short fall (maximum),If 80% is covered
ITO 1984) then no penalty.
For furnishing inaccurate particulars of 10% of the tax evasion. If the tax evasion is detected after
income (According to section 128 of ITO one year or more, then the amount of penalty will
1984) increase by additional 10% for each earlier assessment year
22 Nov Dec
Discuss the provisions of ITO 1984 regarding penalties for the following 2012
defaults :
a)Failure to file return of income under section 75
b)Failure to pay advance tax under section 64
c)Failure to deduct tax at source
d)Failure to comply with notices for production of accounts under section 79
e)Failure to pay tax on the basis of the return of income under section 74

The penal provisions are tabulated below: -
SI. Grounds of Reference Amount of Penalty Pre-conditions/
Penalty Section Comments
1. Penalty for failure to 124(1) 10% of the last assessed tax Penalty cannot be imposed
file return including or Tk.1,000/-whichever is unless the assessee has been
withholding tax higher. plus heard or has been given a
return reasonable opportunity of being
Tk. 50/- per day during which
heard.
the default continues.
2. Failure to pay 125 The amount of short fall 1) Penalty cannot be i m pos ed
advance tax (maximum) unl ess t he assessee has
been heard or has been
given a reasonable
opportunity of being heard.
2) DCT shall not impose the
penalty without the previous
approval of the IJCT
3. Penalty for non- 126 The amount of tax
compliance with subsequently assessed -Do-
notice u/s 79 (maximum)
4. Failure to pay tax u/s 127 If tax paid u/s 74 is less than
74 on the basis of 80% of the payable amount
return then 25% of the short fall
(maximum).
-Do-
If 80% is covered then no
penalty.
5. Failure to deduct/ 57 2% per month of the amount (1) The deducting authority
collect tax at source or of tax to be deducted, will also be treated as an
having deducted / collected or deposited assessee in default.
collected but fails to
deposit into national (2) Expenditure willbe disallowed
exchequer. as per section 30(a) and 30(aa)
23. May June

What are the consequences of failure to deduct TDS as per income tax Ordinance 1984? 2013
As per section 57 of I.T.O 1984 the following are the consequences of failure to deduct tax at
source:
(1) Without prejudice to any other consequences enacted under ITO 1984 to which the assesse
may be liable, be deemed to be an assessee in default in respect of the tax, and
(2) In addition to such tax, pay an amount at the rate of two percent per month of such tax for
the period commencing the day following the expiry of the time within which it is to be
paid u/s 59 and ending on the date of the actual payment of the tax.

4a International Taxation (20%)
S.L Question Year
1 What are the effects of Double Tax Avoidance Agreements (DTAA) in Bangladesh? Can an Nov
assesse get any relief in respect of his income arising from another country with whom the Dec
Government of Bangladesh does not have any DTAA? Discuss. 2010
2 What is the provision with regard to penalty for failure to keep, maintain or furnish information, May Jun
documents or records to DCT in relation to transfer price? 2013
Penalty for failure to keep, maintain or furnish information, documents or records to the Deputy Commissioner of
Taxes:-
Where any person fails to keep, maintain or furnish any information or documents or records as required by
section 107E of ITO 1984, without prejudice to the provisions of Chapter XV of ITO 1984, the Deputy
Commissioner of Taxes may impose upon such person a penalty not exceeding one percent of the value of
each international transaction entered into by such persons.
3 Name the five different methods to determine the arm‟s length price in relation to an May Jun
international transaction mentioned in Section 107C of the Income Tax Ordinance 1984. 2014
Is there any statutory requirement to furnish a report from a Chartered Accountant in
the case of international transactions? When?
Five different methods to determine the arm‟s length price in relation to an international transaction mentioned in Section 107C of
the ITO 1984 are as follows:
(i) Comparable uncontrolled price method;

(ii) resale price method;
(iii) cost plus method;
(iv) profit split method;
(v) transactional net margin method;
According to Section 107F of the ITO 1984 every person who has entered into international transaction or transactions the
aggregate of value which, as recorded in the books of account, exceeds the 3 crore during an income year shall furnish, on or
before the specified date in the form and manner as may be prescribed, a report from a Chartered Accountant.
4 XYZ Ltd., a company registered in Hong Kong, is engaged in procuring garments from Nov
different parts of the world and exporting to different retailers in Europe and USA. They Dec
want to set up an establishment in Bangladesh in order to ensure timely shipments and 2014
quality of garments exported by different factories of Bangladesh against letters of credit
issued by the company’s bank in Hong Kong.
The company undertakes that the establishment can be set up in any form as follows:
(a) Liaison Office; or
(b) Branch Office; or
(c) Subsidiary Company
They need your advice on the income tax implications in the above three cases, so that they can
take a proper decision and plan accordingly. They also need your advice on the income tax
implications for the expatriate employees as may be appointed to work for their establishments
in Bangladesh. Advise.
The income tax implications in the case of three types of establishment of a foreign company in Bangladesh are as follows:
(i) Liaison office: Setting up of a liaison office requires permission from the BangladeshInvestment Development
Authority (BIDA). As per BIDA regulation, a liaison office can perform, on behalf of its parent company (XYZ
Ltd.), the activities of inspection, quality control and liaise for exportable or other goods for that company. All its expenses
are to be met out of remittances received from XYZ Ltd. It cannot generate any income. It is also required to submit
prescribed statement to Bangladesh Bank.
It has to obtain a TIN (Tax Identification Number) from the income tax authority in Bangladesh, and submit annual
income tax return in every assessment year along with receipts and payments statement and balance sheet. Since a
liaison office will have no income, assessment is to be made by the tax office at „Nil‟ income and „Nil‟ tax.
However, in case the liaison office makes any payment to its vendors or employees without deduction of income tax
(TDS, i. e. Tax deduction at source) and deduction of VAT (VDS,i.e., VAT deduction at source) and deposit of the same to
Government Exchequer, as may be applicable under the tax laws, it may be subject to income tax @35% (current rate of income
tax in the case of a company) on such payments. In addition, it may also be liable to pay such income tax and VAT amounts not
deducted and paid.
(ii) Branch office: A branch office is required to obtain TIN from the income tax authority. It can generate its own income. So,
it has to submit annual income tax return along with its audited financial statements and necessary documents to tax office
for every assessment year. It is allowed to claim maximum 10% of profit before tax as head office expenses. Its income
accruing or arising from Bangladesh is subject to income tax. It is to be taxed@35% (current rate) on its taxable
profit, i.e. total income as is called in income tax law. Any income repatriated out of Bangladesh will be deemed as
dividend and will be subject to withholding tax @20% (applicable for dividend to parent company in Hong Kong).
(iii) Subsidiary Company: Subsidiary company (if any) of XYZ Ltd. is to be incorporated with Registrar of Joint Stock
of Companies in Bangladesh. It will be considered as a Bangladeshi company, and will be subject to income tax
like any other Bangladeshi company. So it has to obtain TIN and submit annual income tax return along with its
audited financial statements and necessary documents to tax office for every assessment year. It is to be taxed@35%
(current rate) on its taxable profit, i. e. total income as is called in income tax law. Any income to be repatriated out of
Bangladesh will be in the form of dividend and will be subject to withholding tax @20% (applicable for dividend to parent
company in Hong Kong).
Advice on income tax implications for the expatriate employees: Any expatriate employee working in Bangladesh
will require work permit from BIDA/EPZ authority. They will be subject to same provisions of the income tax law and rules,
irrespective of whether it is a liaison office or a branch office or a subsidiary company.
If he/she is a non-resident for income tax purposes in Bangladesh in any income year, he/ she will be subject to income
tax@30% (current rate) on his/ her total income (as per tax law) in the relevant income year. It he/she is a resident, the income
tax rate will be on a slab basis from 10% to 30%, as is applicable for any individual assessee.
5 Mr. XY was employed in a real estate company in Singapore up to 25 June 2016. In the income May
year 2016-2017, he is expected to stay in Bangladesh for a period of, or for periodsamountingin June
all to, minimum three hundred days. After returning to Bangladesh on 30 June 2016, Mr XY 2015
communicated with ABC & Co. (“Firm”), Chartered Accountants. You are a tax partner of the
Firm and have been requested by Mr. XY to provide him with a report on implications of tax on
the estimated income and investment options. He furnished you with the following information:
(i) Estimated income (taxable) for the assessment year 2017-2018 would be as follows:
Particulars of Income Tk.
Income from Bangladesh 5,000,000
Income from Sweden 1,000,000
Income from Russia 1,500,000
Income from Singapore 2,5000,00
Total 10,000,000
(ii) Out of the countries mentioned above, Bangladesh signed Double Taxation
AvoidanceAgreement (“DTAA”) with Sweden and Singapore. Mr. XY would pay
25% tax in Sweden as per DTAA, whereas income tax rate for a foreigner in Sweden
is 30%. He would pay 15% tax for income generated in Singapore pursuant to the
provisions of DTAA. General tax rate for a foreigner in Singapore is 35%. For the
income generated in Russia, he would pay tax at the rate of 30%.
The estimated income would be generated as interest on investments he made upon
compliance with the provisions of the Foreign Exchange Regulation Act, 1947.
However, Mr. XY is considering whether he would bring his overseas investments
into Bangladesh and purchase publicly traded shares or would keep the amount
invested abroad. A capital market analyst of Bangladesh sent him a report analyzing
that he would earn Tk. 2,000,000 as dividend income and Tk. 2,500,000 as gain from
sale of shares in the income year 2016-2017, if the overseas investments is brought
into Bangladesh and reinvested in the shares listed on the stock exchanges in
Bangladesh.
It was agreed that tax rate for the assessment year 2014-2015 will be applied for the
purpose of determining tax implications and necessary computations. Assume that
income from Bangladesh amounting to Tk. 5,000,000, as shown in the above table,
will remain same irrespective of his decision as to bringing his overseas investments
into Bangladesh. You don‟t need to consider foreign exchange gain or loss.
Requirements:
Send a report to Mr. XY addressing the following:
(i) Computation of relief from income tax by way of credit in respect of foreign tax
and net tax payable in Bangladesh.
(ii) Advise Mr. XY whether he should bring the foreign investments into Bangladesh
for making investments in the shares listed on the stock exchanges in
Bangladesh.
Mr XY
Address .......
15 June 2018
Dear Mr. XY:
(a) Computation of relief from income tax by way of credit in respect of foreign tax and net tax payable in Bangladesh.
(b) Opinion on whether foreign investments should be brought into Bangladesh and reinvested in the shares listed on
the stock exchanges in Bangladesh.
Thank you for your recent letter on the aforementioned subject. The issues raised in your communication have been
based on a few assumptions and report submitted by professional analyst of capital market inBangladesh. I have
considered the tax issues only. Our computation and opinion may be changed if there is any change in the assumptions
and projections. As requested, I provide you with the following feedback:
(a) Computation of relief from income tax by way of credit in respect of foreign tax and net tax payable in Bangladesh
Mr. XY
Computation of net tax payable in Bangladesh for the assessment year 2017-2018 applying tax rates
applicable to assessment year 2016-2017
First 220,000 0% -
Next 300,000 10% 30,000
Next 400,000 15% 60,000
Next 500,000 20% 100,000
Next 3,000,000 25% 750,000
Balance 5,580,000 30% 1,674,000
Total 10,000,000 2,614,000
Less: Double taxation relief (Notes) 1,017,100
Net Tax Payable 1,596,900
Notes:
1. Average tax rate in Bangladesh :

Computation of Tax Relief:
(2,614,000/10,000,000) X 100 26.14%

Tk. Tk.
Computation of Tax Relief:
2. Foreign tax credit in respect of income from Sweden:
There is DTAA with Sweden. Foreign tax credit would be

allowed applying the average rate of 26.14% or tax to be paid in
Sweden at the rate of 25% whichever is lower as per section (1,000,000 X 25%) 250,000
144(4) of I.T Ordinance, 1984.
3. Foreign tax credit in respect of income from Singapore:
There is DTAA with Singapore. Foreign tax credit would be

allowed applying the average rate of 26.14% or tax to be paid in
Singapore at the rate of 15% whichever is lower as per section (2,5000,000 X15%) 375,000
144(4) of I.T Ordinance, 1984.
4. Foreign tax credit in respect of income from Russia:
There is no DTAA with Russia. But foreign tax credit would also
be allowed applying the average rate of 26.14% or tax to be paid
in Russia at the rate of 30% whichever is lower as per (1,500,000 X 26.14%) 392,100
section 145 of I.T Ordinance, 1984 though NBR not yet
prescribed any rule in this behalf.
Total Foreign tax credit 1,017,100
(b) Opinion on whether foreign investments should be brought into Bangladesh and re-invested in the shares listed
on the stock exchanges in Bangladesh
Income from Overseas Investments: Option -1
Particulars Tk. Bangladesh Foreign Tax Double Income

Tax (@ (Tk.) Taxation net of tax
30%) Relief (Tk.) (Tk.)
(i) (ii) = (i) x 0.30 (iii) (iv) (v)=(i)-(ii)- (iii)+(iv)
Income from Sweden 1,000,000 300,000 250,000 250,000 700,000

Income from
Singapore 2,500,000 750,000 375,000 375,000 1,750,000
Income from Russia 1,500,000 450,000 450,000 392,100 992,100
Total 5,000,000 1,500,000 1,075,000 1,017,100 3,442,100
Income from Investments in Bangladesh: Option -2
Particulars Applicable Income Tax Income net of

Tk. Tax Rate (Tk.) Implication (Tk.) tax (Tk.)
Income from
Dividend 2,000,000 30% 600,000 1,400,000
Capital gain from
Sale of Shares 2,500,000 0% - 2,500,000
Total 4,500,000 600,000 3,900,000
Note: (1,500,000 X26.14%)

On the basis of workings presented hereinabove, it is obvious that estimated income, net of tax,
frominvestments in the capital market of Bangladesh would be higher than that of abroad and we take the view
that you may bring the overseas investments into Bangladesh and make reinvestment in Bangladesh‟s
capitalmarket However, we also suggest you to consider the risk factors, economic indicators, investment climate,
company fundamentals, market trend, etc. before taking such decision.
I hope that the above computation/opinion will be helpful to take decision. If there is any further quarry you may
please contact us without any hesitation.
Yours sincerely,
6 ABC Bangladesh Ltd., a company incorporated in Bangladesh, manufactures high class motor May Jun
vehicle engines for sale both in Bangladesh and abroad. Foreign sales are made through ABC 2015
Hong Kong Pte Ltd., a company incorporated in Hong Kong and wholly owned by ABC
Bangladesh Ltd. In Hong Kong, corporate tax rate is 25% and in Bangladesh, it is 35%. ABC
Bangladesh Ltd. sells engines to ABC Hong Kong Pte Ltd. at USD 30,000 (FOB) per unit. In
Bangladesh, the same engine is sold at USD 40,000 per unit. ABC Hong Kong Pte Ltd. sells
these units at USD 60,000 per unit in their local market.
During the income year ended 31 March 2017 ABC Bangladesh Ltd. sold 10 such engines
at the above FOB price and 5 such engines at USD 31,000 C&F price per unit. The freight
was USD 1,000 per unit. 14 of the above 15 export sales took place during the last 9
months of the year.
The cost of sales and total overhead expenses (related to the above units sold) of ABC
Bangladesh Ltd. were USD 20,000 per unit in equivalentTaka. The overhead expenses (related to
the above units imported and sold) including the freight for the above FOB imports of ABC
Hong Kong Pte Ltd. were USD 10,000 per unit.
Neither of the above two companies had any other income and expense during the income year.
Requirements:
(i)Will any report from accountant be required to be furnished to the income tax authority? If
so, who can issue the report?
(ii)Draft a report to be issued in this regard. On the basis of the information given
above,determine incomefrom the above international transactions having regard to arm‟s
length price
(iii) Which method have you followed in computing the arm‟s length price as in (ii) above?
(iv) How much additional income tax will the government earn by following the above
method?
You may use exchange rate of USD 1= Tk.78.

(i) Yes, a report from a qualified accountant is required to be furnished to the income tax authority as per section
107F of The Income Tax Ordinance, 1984 as ABC Bangladesh Ltd. has entered into international transactions
amounting to [30,000x10+31,000x5=4,55,000x78=Tk.3,54,90,000] which is more than Tk.3 crore. Only a qualified
accountant, either a Chartered Accountant or a Cost and Management Accountant can issue such report. A report is
drafted as per Rule-75 as under:
Report on international transaction as per section 107F
a) The accounts and records of ABC Bangladesh Ltd. TIN… relating to the international
transactions entered into by ABC Bangladesh Ltd. during the income year ending on 31 March
2017 has been examined by me.
b) It appears from our examination of the accounts and records that proper information and
documents, as are required by the Income Tax Ordinance, 1984, have been kept.
c) The particulars required to be furnished under section 107F are given in the Annexure of this report.
d) In my opinion and to the best of my information and according to the explanations given to me, the particulars
given in the Annexure are true and correct.
Signature
Name & address:
Membership No:
Place & date
(ii) Taking into consideration the fact that the same engine is sold in Bangladesh at fair market price (here arm‟s
length price) USD 40,000 per unit, income comes at Tk.40,000- 20,000=20,000x15=3,00,000x78=Tk.2,34,00,000/
iii) Comparable uncontrolled price method is followed here to determine arm‟s length price as arranged sales price
with associated enterprise can easily be compared with the information of local sales price.
(iv) Additional income tax to be paid 10,000x15=1, 50,000x78=Tk. 1, 17, 00,000 @35%=Tk.40, 95,000
7 ABC Hong Kong Pte Ltd. has a global agreement with M&S LLC of USA which incorporates a May Jun
clause stating that in the case of any purchase by M&S from any company within the group to 2015
which ABC Hong Kong Pte Ltd. belongs, M&S will get a rebate of 5% on the purchase
pricefrom that company. Now ABC Bangladesh Ltd. intends to enter into an agreement with
M&S to sell its engine products to M&S.
Requirement:
Will any transaction between ABC Bangladesh Ltd. and M&S fall under transfer pricing?
Yes. the transaction between ABC Bangladesh Ltd. and M & S LLC of USA will fall under transfer pricing because M
& S LLC of USA is also to be treated as deemed associated enterprise as per section 107A(2)(L).
8 May Jun
Mr. Rahman owner of smart fabric which has three out let in Dhaka. He has recently opened 2013
a new out let at UK and Mr. Rahman has decided to transfer the goods from Bangladesh but
he does not know the system of computation of transfer price and keeping of information,
documents and records as per income tax Ordinance 1984. What are the methods to compute
the transfer price and what records, information and documents are to be kept as per income
tax Ordinance 1984?
In pursuance with Chapter XIA of ITO 1984, transfer price shall be determined having regard to the arm‟s
length price. As noted u/s 107C of ITO 1984, the arm‟s length price in relation to an international
transaction shall be determined by applying the most appropriate method or methods selected from the
following methods based on the nature of transaction, the availability of reliable information, functions
performed, assets employed, risks assumed or such other factors as may be prescribed, namely:-
a) Comparable uncontrolled price method;
b) Resale pr ice met hod;
c) Cost plus method;
d) Profit split method;
e) Transactional net margin method;
f) Any other method when none of aforesaid method can be reasonably applied to determine the arm‟s
length price for the international transactions and such other method which yields a results consistent with
arm‟s length price,
Records. information and documents to be maintained relating to transfer price as per Section 107E of ITO
1984:-
1) Every person who has entered into an international transaction shall keep and maintain such
information, documents and records as may be prescribed.
2) Without prejudice to the provisions of sub-section (1), the Board may prescribe the period for which
the information, documents and records shall be kept and maintained.
3) The Deputy Commissioner of Taxes may, by notice in writing, require any person to furnish any
information, documents and records as prescribed under sub-section (1) within the period as may be
specified in the notice,
9 The following notes to the accounts pertaining to related party disclosures have been extracted from May
annual report of 2016 of MNC Ltd., a large FMCG manufacturing company of Bangladesh, ,where Jun
all the related parties are situated abroad except Bangladesh Prime Financing Ltd. 2016
Related party transactions during the Year
For y/e: For y/e:
30June 2017 30June 2016
Name of related parties Nature Nature of Taka Taka
Transactions
Singapore Quality FMCG Shareholder Dividend payment 10,000,000 11,000,000
Inc Trademark 100,000 100,000
Bangladesh Prime Shareholder Dividend payment 5,000,000 5,500,000
Financing Ltd.
Prime Communications Associate Purchase of IT 1,200,000 1,100,000
Solutions Ltd. service and software
Maintenance
Singapore Quality Group entity Management and 200,000 200,000
Consultancy PLC professional service
Fee
IT Support Cost 170,000 210,000
Singapore Civil PLC Group entity Engineering service 130,000 110,000
Fee
Singapore Machineries Group entity Professional service 220,000 180,000
PLC Fee
Singapore Asset Group entity Asset management 3,200,000 2,500,000
Management Ltd. service fee
Receivables/(payables) with related parties
as at 30 as at 30
June 2017 June 2016
Name of related parties Nature Nature of Taka Taka
Transactions
Singapore Quality FMCG Shareholder Accounts payable (40,000) (30,000)
Inc
Prime Communications Associate Accounts receivable - - -
Solutions Ltd. Accounts payable (260,000) (117,000)
Singapore Quality Group entity Accounts receivable 65,000 33,000
Consultancy PLC
Accounts payable (300,000) (200,000)

Singapore Civil PLC Group entity Accounts receivable 112,000 320,000
Singapore Machineries Group entity Accounts receivable - - -
PLC
Singapore Asset Group entity Accounts receivable - - -
Management Ltd.
Requirement:
Prepare the Statement of International Transactions of MNC Ltd. for the assessment year
2017-18 in accordance of Section 107EE of the Income Tax Ordinance, 1984 and Rule
75A of the Income Tax Rules 1984.
(a):
STATEMENT OF INTERNATIONAL TRANSACTIONS

(Section 107EE of the Income Tax Ordinance, 1984 and Rule 75A of the Income Tax Rules, 1984)
A. Particulars of the Assessee:
1. Name of the Assessee:
2. T I N:
3. (a) Circle: (b) Taxes Zone:
4. Assessment Year:
5. Inco me Year:
B. Particulars of international
transactions:PART-I
Tangible property of revenue and capital nature transaction
Expense Revenue
TPM TPM
Item (Thousand % (Thousand %
Code Code
Tk.) Tk.)
Stock in trade / raw materials - - - - - -
*Other (specify) - - - - - -
Rent, royalties and intangible property related transaction

Expense Revenue TPM
TPM
Item (Thousand % (Thousand C o d e %
Code
Tk.) Tk.)
Rent - -
- - - -
Royalties (for the use of patents,

1,00,000 - - - - -
trademark etc.)
License of franchise fees - -
- - - -
Intangible property or rights -
- - -
(acquired or disposed of) - -
Services related transaction

Expense % Revenue
TPM TPM
Item (Thousand (Thousand %
Code Code
Tk.) Tk.)
Treasury related services -- - - - -
Management and administrative
200,000 - - - - -
services
Sales and marketing services - - - - - -
Research and development - - - - - -
Software and 1CT services 1.370,000 - - - - -
Technical and engineering services 350,000 - - - - -
Commissions - - - - - -
Logistics - - - - - -
Asset management 3,200,000 - - - - -
*Other services (specify) - - - - - -
Financial transaction
Expense Revenue
TPM TPM
Item (Thousand % (Thousand %
Code Code
Tk.) Tk.)
Interest - - - - - -
Sale of financial assets (including
factoring, securitization and - - - - - -
securities)
Lease payments - - - - - -
Securities lending (fees and
- _ _ - _
compensation payment) -
Insurance and reinsurance - - - - - -
Guarantees - - - - - -
*Other financial services (specify) - - - - - -
Any other international transaction of revenue nature not reported above:

Expense Revenue
TPM TPM %
Item (Thousand % (Thousand
Code Code
Tk.) Tk.)
Total of PART-I 5,220,000
PART-II
Interest bearing loans, advances and investments (figures in thousand taka)
Opening Closing
Item Increase Decrease
Balance balance
Amounts owed by the assessee - - - -
Amounts owed to the assessee - - - -
Interest-free loans, advances and investments (figures in thousand taka)
Opening Closing
Balance balance
Amounts owed by the assessee - - - -
Amounts owed to the assessee - - - -
Current accounts and similar items (figures in thousand taka)

Opening Closing
Balance balance
Amounts of accounts payable 739,000 170,000 - 909,000
Amounts of accounts receivable 265,000 - 191,000 74,000
I , -------------------------------------------- , Designation Chief Financial Officer of MNC Ltd., solemnly declare

that to the best of my knowledge and belief the information given in this form is correct and complete.

Place: Dhaka
Date :
Signature
(Name in Block Letters)

Designation and Seal
10 Since MNC Ltd. regularly incurs a handful number of transactions with foreign related parties for May
the purpose of its business, they want professional advice with regard to agreement with AE and June
related information and documentation. Draft a letter in reply of the request to CFO, Mr. A. 2016
Kibria seeking your advice on factors to be included in agreement with AE and
documentation to prepare to deal with the new provisions of Income Tax law relating to
foreign transactions with associated enterprises.
Date:
Mr. Mr. A. Kibria

Chief Financial Officer
MN C Ltd.
Subject: Requirements on entering agreement, pricing, information and documentation relating to foreign transactions
with associated enterprises
Dear Sir,
Please refer to our meeting on 31 May 2017 at our office when you sought our guidelines on factors to be included
in agreement with AE, information to be collected from AE and documentation to prepare to deal with the
provisions of Income Tax laws relating to foreign transactions with associated enterprises. Considering our
discussion, we are providing below necessary guidelines on aspects as stated above.
Factors to be included in the agreement with AE:
1. Description of services: Description of the exact nature of services to be rendered by the AE should
be incorporated in the agreement. Such information may be detailed in a separate appendix to the
agreement and updated annually if services are to be availed on an ongoing basis..
2. Initiation and expiry date: The effective date of agreement and the expiry date should be clearly
mentioned. In case there is any change in nature of services or price, the same can be agreed by way
of addendum to the agreement.
3. Roles and responsibilities of MNC Ltd. and AEs: The agreement should define the roles and
responsibilities of each party including but not limited to provision of services by AEs, assurance that
services meets the agreed standards, how will the services be requisitioned etc.
Information to be collected from AE:

The following information is required to be collected from AE and make it ready to deliver to the tax authority:
1. Financial statements of the AE, along with consolidate financial statement of the group.
2. Details of cost incurred by AE for rendering services
3. Details of cost allocated to MNC Ltd. along with the basis of cost allocation
4. Analysis undertaken to substantiate the arm‟s length nature of the mark up charged on services rendered.
5. Documents to substantiate those services have actually been received from AE.

Documents for tax authority:
The following documents should be maintained and presented for audit conducted by tax authority
1. Copy of the agreements entered into by MNC Ltd. with the AEs
2. Copy of the invoices
3. Documents evidencing receipt of services by MNC Ltd.
4. Documents evidencing benefits received from receipt of services from AEs
5. Documents evidencing that services rendered by AEs are not duplicative
6. Documents evidencing cost incurred by AEs for rendering of services
We expect that, our above guidelines shall suffice your queries so as to enable you to take necessary
preparation on TP issues. Thank you very much for taking us to your confidence.
10 You are an ICAB CA, Tax Partner of a firm of Chartered Accountants. Your clientele includes Good Nov
Hope Limited(GHL) which is a public company in Bangladesh. You are in the process of gathering Dec
information to prepare „Statement of international transactions‟ u/s 107EE of the Income Tax 2015
Ordinance 1984 and Rule 75A thereof to go with the Tax Return of GHL for the year ended
30.06.2017. This will be the first return of GHL with international transactions statement under TP
regulations(Chapter XIA of the Ordinance). As all Associated Enterprises(AE) may not have
international transactions for TP reporting, identifying those Associated Enterprises that have
International Transactions are critical for a correct tax Return under TP provisions and for the
statement u/s 107EE, Rule 75A. Related Party Disclosure in the audited accounts provide important
sources of transactions with TP sensitivity, if not all. Following Notes to the Accounts on „Related
Party Transactions‟ are extracted from the Annual Report of Good Hope Limited for year ended 30-
06-2017(previous year‟s figures unconsidered):
GOOD HOPE LIMITED

NOTES TO THE ACCOUNTS : Related Party Transactions on Arms‟ Length Basis(Amount in
BDT):
Associate Companies
A Ltd.(a Hong Kong registered company in HKG) is the wholly-owned subsidiary of GHL.
B Ltd.(a Bangladeshi company in Dhaka) in which Mr. AnwarulKarim(Chairman of GHL) is
aDirector
C Ltd. Branch(A Hong Kong Branch in Bangladesh) which is wholly-owned by A Ltd.
D Ltd. (Bangladesh registered/managed Indian subsidiary),Indian parent company fully
owned byA Ltd.
E Ltd.(A Bangladeshi company) wholly-owned by GHLwhich is an exclusive
„AGENCY‟ofALtd. of HKG.
Joint Venture Company

F Ltd.(An Indian-BD JV in Delhi), GHL holding 24%, in which GHL‟s Mr. AnwarulKarim sits as
Chairman.
G Ltd.(a French-BD JV, managed in BD) where GHL holds 51% and a French Company
holds49% shares.
Key Management Personnel and Relatives
KMP :Mr. AnwarulKarim, Chairman of GHL.
KMP Relative: Ms. Tania Karim, daughter of Mr. AnwarulKarim and a French, Country
ManagerofFrench LO.
(Figures in Taka)
Relativ o
Nature of Associate Joint Key es French
f Liaison TOTAL
Transactions Companies Venture Managerial KMP Office where
Companies Personnel KMP relative
(KMP) interested
Goods sold(1) 20,000,000 1,000,000 21,000,000
Fixed assets 1,000,000 500,000 1,500,000
Purchased(2) (with F Ltd)
Loan Given(3) 5,000,000 1,500,000 6,500,000
(with G Ltd)
Interest 300,000
Income(4) (with G Ltd) 1,300,000
Dividend 600,000 50,000 (with 650,000
Income(5) F Ltd)
Recovery of 1,500,000 500,000 2,000,000
Expense(6)
Royalty 250,000 250,000
Received(7)
Remuneration 5,500,000 5,500,000
Notes on the break-up of various transactions made by GHL with Associate Companies:
1) Goods Sold: A Ltd. Tk.5,000,000/=, B Ltd. Tk.2,500,000/=, C Ltd. Tk.2,500,000/=, D
Ltd.Tk.5,000,000/=, E Ltd. Tk.5,000,000/=
2) Fixed Assets Purchased :B Ltd. Tk.500,000/=, C Ltd. Tk.300,000/=, D Ltd. Tk.200,000/=.
3) Loan Given :D Ltd. Tk.3,000,000/=, E Ltd. Tk.2,000,000/=.
4) Interest Income: D Ltd. Tk.600,000/=, E Ltd. Tk.400,000/= .
5) Dividend Income: A Ltd. Tk.500,000/=, E Ltd. Tk.100,000/=.
6) Recovery of Expense :B Ltd. Tk.1,000,000/=, D Ltd. Tk.500,000/=.
7) Royalty received: A Ltd. Tk.250,000/=.
Transfer Pricing (TP) Regulations are now in spotlight in Bangladesh with first tax return
underTP regulations due this year. Over 1500 BIDA-permitted Liaison Offices in Bangladesh form
largest segment of foreign interests in numbers. Liaison Office (LO) shown in the Good Hope Ltd.
„Related Party Disclosure Note‟ above belongs to a French retailer(company). Information of this
French Liaison Office, details about how you got introduced to the Country Manager, concerns of
parent company management with respect to TP provisions applicability to LO, key transactions
with parent company, your meeting with Tania Karim, the Country Manager of LO, her personal tax
matters etc. are in EXHIBIT 1.
Requirements:
(a) List the „international transactions‟ from above-mentioned Related Party disclosure of Good
Hope Ltd. in terms of TP provisions u/s 107EE of the Income Tax Ordinance 1984
mentioning the relevant „Associated Enterprise(AE)‟, „Nature of transactions‟,
„AmountReceived‟, „Amount Paid‟ to form inputs for Statement of International
Transactions(no need to follow format of 75A).
(b) Peruse and consider Exhibit 1. Make a professional opinion for Ms. Tania
KarimcoveringTP exposure, if any, for the French parent company with the Liaison Office in
Bangladesh. Your opinion should, interalia, include if this LO is an AE u/s 107A(2) of the
Ordinance for the purpose of its own tax return filing in Bangladesh and if so what
constitutes its international transactions for y/e 30-06-17 from the information in Exhibit 1,
its probable exposure under TP regulations, your conclusive recommendation(showing
reasons) with guidelines for upcoming tax return of this LO.
(c) Ms. Tania seeks your further consultation on her personal tax issue. Please explain with
reasons if DCT‟s order is correct and what should Ms. Tania do now under the
circumstances.
EXHIBIT 1(In connection with Question 3b, 3c)

Information on French Company’s Liaison Office in Dhaka
This BIDA-permitted Liaison office (LO) in Dhaka is owned/controlled by a French RMG retailer
(private limited company). The LO is engaged in QC, inspection, liaison of French company‟s RMG
orders placed directly with suppliers in Bangladesh. Ms. Tania Karim, daughter of GHL Chairman
studied Fashion Design in Paris and accepted French nationality. Tania joined this LO as the Country
Manager with Work Permit from BIDA (effective 16.01.2017). National Board of Revenue (NBR)
conditionally allowed Liaison Office dispensation from tax liability and on meeting those conditions,
a LO shall not be assumed of having any commercial activity u/s 18(2)(a) of the Income Tax
Ordinance and, thereby, made LO a tax-exempt entity. Major conditions for tax-exempt LO, interalia,
include inward remittance from parent company to meet 100% local expenditure, it works only

onbehalf of its parent company, it engages in inspection, quality control and liaison of the parent
company export orders, it doesn’t involve in self-buying or in own name and it does not engage in
any local income activity. This LO compliesallconditions. Exports executed for French company
through the liaison of this LO during the year ended June 30, 2017 is USD 10 million. This LO
brought in from its parent company foreign currency equivalent of Tk.10,000,000/= during the year
ended June 30, 2017 through the bank to meet its local expenditure; current tax return filing due by
December 31, 2017.
You, in the capacity of Good Hope Ltd. tax adviser, were introduced to Ms. Tania by her father.
French management advised Tania to consult a tax lawyer covering the TP exposure, if any, of the
Liaison Office. It is argued that a LO operates like a conventional „buying house‟ and Bangladesh
misses tax on LO transactions as it allegedly fails to meet Comparable Uncontrolled
Price(CUP)method tests. Under Bangladesh-France DTAA, a Permanent Establishment (PE) does
not include foreign entity which maintains a fixed business place solely for the purpose of purchasing
goods or ofcollecting information for the enterprise. Tania met you on 31.07.2017.
Ms. Tania came to Bangladesh for the first time in five years and joined this Liaison Officeas a
French expat from 16-01-2017 at monthly salary of USD 7000/=(Tk.550,000/=). Tania‟s bank a/c
with HSBC Dhaka delayed. French parentcompany paid Ms. Tania initial 3.5 months salary (from
16.01.17 to 30.04.17) into her Paris bank account instead. She received salary in Dhaka for May and
June, after HSBC account is operational from May. Tania filed her own tax return for the
Assessment Year 2017-18 (accompanied by Work Permit copy and tax pay order at highest rate on
for gross two months salary – May and June). DCT took the view that the taxability arises in the
country where service is rendered and he issued AO with additional tax demand at highest rate
taking into account salaries for the entire period fromwhich BIDA Work Permit has been effective
(from 16.01.17 to 30.06.17).
(a)
Section 107A(2) defines Associated Enterprise(AE) as an enterprise(as defined) which bears defined relationship
withother enterprise. To be AE, there must be two or more enterprises. For a transaction to be „international
transaction‟mere presence of two enterprises with defined relationship is not enough. In other words,
Transactions between two resident parties are not international transactions. For a transaction to be „international
transaction‟, either or both of the AEs must be non-resident. As GHL is a resident company in Bangladesh, allAEs of
GHL for the purpose of international transactions must be non-resident.
The list of international transactions with Good Hope Limited is tabulated below (not in the format of Rule 75A)
GOOD HOPE LIMITED (GHL)
List of International Transactions
For the year ended 30.06.2017
Associated Transaction Amount Amount Paid Explanation
Enterprise Nature Received (Tk.) (Tk.)
A Ltd. Goods Sold 50,00,000 GHL holds >25% shares in A Ltd.(a

Dividend income 5,00,000 nonresident)
Royalty received 2,50,000
C Ltd. Goods Sold 25,00,000 c Ltd. is a HKG branch (non-resident in
Branch Assets bought 3,00,000 Bangladesh; owned by A Ltd.
G Ltd. Loan Given 15,00,000 G Ltd. is a non-resident in India.

AlthoughGHL holds less than 25%
share. the commonperson (Mr.
India-BD JV Interest Income 3,00,000 AnwarulKarim) sits in GHL and
G Ltd. board
(b)
Question is to provide opinion on whether French Liaison Office is an AE u/s 107A(2) and, if so, what constitutes
International transactions for its own return filing. Opinion should also identify the potential exposure of the French
Liaison Office in Bangladesh under the Transfer Pricing Regulations (Chapter XIA) of the Income TaxOrdinance
1984 with the recommendation. Answer to this question is given below in the form of a letter to the Country
Manager.
Date:
To Ms. Tania Karim
Country Manager
French Liaison Office in Dhaka
Please refer to your meeting with us on 31.07.2017 at our office when you seek our opinion on the taxation matter of
your Liaison Office under the Transfer Pricing regulations in Bangladesh. Considering our discussions and the
contents of Exhibit 2 of the question, we are providing our opinion in this regard as follows:
BACKGROUND AND UNDERSTANDING OF THE ISSUE

Liaison Office is given dispensation from tax liability under the NBR Circular no-10(2)Tax-8/96 dated 21/10/1998
on fulfillment of certain conditions and on the same count, NBR confirmed, Liaison Office shall not be assumed as
having any commercial activity u/s 18(2)(a). Your French Liaison Office reportedly complies all conditions of the
NBR circular; it files annual tax return and obtains tax clearance on zero tax demand. French company places direct
orders with Bangladeshi RMG suppliers who raise invoices direct to French company (USD 10 million exports).
Liaison Office simply involves in QC/liaison of the export orders of the parent company. Liaison Office receives
inward forex remittance through central bank approved bank account (received eqvt. Tk. 1,00,00,000/=) from French
parent company to meet its expenditure. L.O. fully complies with withholding tax and VAT responsibility. Among
others, it‟s a BIDA and Bangladesh Bank approved entity and it has no local income, nor any commercial activity
beyond those contained in the BIDA permission and, therefore, there is no regulatory breach whatsoever. The
Liaison Office is managed and controlled by parent company in France.
ANALYSIS OF THE ISSUE
Inapplicability of section 18(2)(a) for Liaison Office by NBR circular confirms that there accrues or arises directly or
indirectly no income to the Liaison Office. The inapplicability of Section 18(2)(a) and your continued complying the
given conditions for a „tax-exempt‟ status are central to emphasize. Your Liaison Office continues complying the
conditions and obtained tax clearance on zero demand in the past years. L.O. is not an independent entity; it only
works for parent company within the given conditions. There appears no scope of ALP tests in the remittance
transactions from parent company. Chapter XIA of the Ordinance for TP has not been given a pervasive mandate
over other sections of the same Ordinance.
Bangladesh & France have DTAA. Liaison Office only involves in QC, inspection and liaison of parent company
orders. In other words, it also does not constitute to be Permanent Establishment (PE). Chapter XIA for TP defines
PE separately. If conflicting, assessee is entitled to the benefit of the better one, i.e., DTAA override would prevail.
An entity, not being a resident and not being a PE, does not attract outright taxation unless specific taxable income
arises in Bangladesh. French Liaison Office does not have any specific income in Bangladesh to be taxed as a non-
resident and non-PE, besides inapplicability of section 18(2)( a).
The remittance of taka 1,00,00,000/= between Liaison Office and French parent company, two being nonresidents,
are the international transactions u/s 107A(5).
Liaison Office income tax return filing is not waived up in the NBR circular. So, on the same count, the „Statement
of International Transactions‟ u/s 107EE, which is to be accompanied by the annual Tax Return as it is not waived
up for the Liaison Office The ordinary assessment proceedings shall take place and finally the Liaison Office is
supposed to obtain tax clearance on zero demand.
OPINION ON THE ISSUE AND RECOMMENDATION
With the above-mentioned understanding, assumptions and analysis, we opine that:
French Liaison Office is an Associated Enterprise (AE) u/s 107A(2) in relation to its parent company.
Inward remittance of BDT 1,00,00,000/= constitutes international transactions between the Liaison Office and parent
company. Remittance is a transaction between two non-residents. Liaison Office annual tax return should accompany
Statement of International Transactions u/s 107EE at the format given at Rule 75A.
Although the French Liaison Office is an AE and it has international transactions with its parent company, there is
no tax exposure under TP regulations. Its status as non-resident and non-PE status and, overall, the inapplicability of
section 18(2)(a) under NBR Circular does not pose LO to tax. Continue maintaining complete compliance of the
NBR conditions, BIDA permission conditions, Central Bank permission conditions and TDS and VAT withholding
compliance consistently.
Hope, our above opinion shall be useful to yourself and to your French management. Thank you very much for your
interest in our service.
Thank you very much for your assistance,

Sd/=
(c)
Question is whether DCT‟s view of taxing Ms. Tania in Bangladesh from 16.01.17 to 30.06.17 under the head salary
which she received partly in France and partly in Bangladesh.
Ms. Tania arrived/joined Bangladesh Liaison Office of the French company on 16.01.2017. She is, therefore, non-
resident for tax purpose in the relevant income period under assessment year 2017-18, as she resides less than 182
days in Bangladesh and she came first time on 16/01/2017 in 5 years. So she will have to pay tax on Bangladesh
income only. Salary income from 16/01/2017to 30/6/2017 is taxable in Bangladesh as per section 18(1) of ITO, 1984
where it was clearly stated that in case of non-resident salary income will be taxed in Bangladesh, wherever paid, if
it is earned in Bangladesh.
So in our opinion DCT‟s action was correct. Ms. Tania should pay balance tax immediately.
11 ABC Ltd. is a Bangladeshi RMG company, having its factory in Jessore, in which XYZ Inc., a Nov Dec
UK based company has 28% shareholding and voting power. The management of these two 2017
company is going to enter into an agreement on the following transactions:
a) ABC Ltd. will sell 1,000,000 pieces of T-shirts @ $2 per T-shirt to XYZ Inc. This type
of T-shirts is generally sold to unrelated parties namely @ $3 per T-shirt.
b) ABC Ltd. will borrow $200,000 from a foreign lender based on the guarantee of XYZ
Inc. For this, ABC Ltd. will pay $10,000 as guarantee fee to XYZ Inc. To an unrelated
party for the same amount of loan, XYZ Inc. collects $7000 as guarantee fee.
c) ABC Ltd. will pay $15,000 to XYZ Inc. for getting various potential customers
details to improve its business. XYZ Inc. provides the same to same services to
unrelated parties for $10,000.
d) ABC Ltd. will procure used machineries from XYZ Inc. costing $150,000 which will be
paid in four installments.
Furthermore, in the current year, ABC Ltd. will need to write off receivable amount from XYZ
Ltd.amounting to Tk. 1,000,000.
MAT & Co, Chartered Accountants, acts as tax consultant of ABC Ltd. You are a Chartered
Accountant and currently working as Director of Transfer Pricing Department of MAT & Co.
The CFO of ABC Ltd. requested you to provide your opinion in the report form on the above
matters, which will assist ABC Ltd. to get an extensive idea on tax exposure according to
Bangladeshi Tax Law. On the basis of your report, ABC Ltd. will make their tax planning and
determine their decision. [Consider 1$= BDT 78]
Requirements:
Your report should cover the following issues:
a. Brief discussion on area of implication of TP regulations.
b. Elaboration of TP aspects on the above issues, demonstrating financial impact of tax
exposure.
The Managing Director
ABC Ltd.
18 December 2017
Dear Sir:
Report on the queries based on Transfer Pricing Provisions
Please refer to the subject mentioned above and your request providing professional opinion(s) on the various
issue(s) raised therein. As requested, we are providing below our professional opinion:
Requirement # a
Provisions relating to TP as mentioned in Chapter XIA, Section 107A to 107J of the ITO, 1984, are applicable
from the income year 2014-15. The provisions relating to TP has been summarized below:
TP refers to the pricing of international transactions between two associated enterprises. Due to the
special relationship between related parties, the transfer price may be different than the price that would
have been agreed between unrelated parties. A price between unrelated parties is known as the “arm‟s length”
price. The provisions of TP are applicable only if:
 There are two or more enterprises
 The enterprises are Associated enterprises
 The enterprises enter into an international transaction
Method of TP: There are five methods for TP:
 comparable uncontrolled price method;
 resale pr ice method;
 cost plus met hod;
 profit split method;
 transactional net margin method;
A statement of international transactions is required to be submitted as per section 107EE. The DCT may require a
report singed by a Chartered Accountant or a Cost and Management Accountant. There is also penal provisions
for non-compliance regarding TP provisions.
Requirement # b
ABC Ltd., the Bangladeshi Company and XYZ Inc., the UK based company are deemed to be associated enterprises
as per section 107A(2),as XYZ Inc. holds shares carrying not less than 25% of the voting power of ABC Ltd.
As per section 107A(5), the transactions entered into between these two companies for sale of product, lending or
guarantee and provisions of services are included within the meaning of international transactions.
Accordingly, provisions of transfer pricing would be attracted and the income arising from such international
transactions have to be computed having regard to arm‟s length price. In this case from the information given, the
arm‟s length price has to be determined taking the comparable uncontrolled price method to be the most
appropriate method.
Amount by which total income of ABC Ltd. is enhanced on account of adjustment in the
Taka
value of international transactions:
a) Difference in price of T-shirt @$ 1 each for 1,000,000 pieces sold to XYZ Inc. 78,000,000
($ 1 X 1,000,000 X 78)
b) Difference for excess payment of guarantee fee to XYZ Inc. for loan borrowed 234,000
from foreign lender ( $ 3000 X 78)
c) Difference for excess payment for services to XYZ Inc. ( $ 5000 X 78) 390,000
d) Bad debt written off: it will be admissible expenditures only when proper -
supporting is presented, such as, supporting related legal action taken for recovery,
board resolution, etc. No impact under TP regulations.
Total 78,624,000
Amount of Tk. 78,624,000 will be added back to the taxable income under section 107C(5) of the ITO, 1984.
Should you have any query in this regard, feel free to contact us.
Yours faithfully,
MAT & Co.

Chartered Accountants

12 Tax heaves or Offshore Financial Centres (OFC) are financial jurisdictions outside the Nov –
regulations of one‟s own nation used by companies and individuals to lower their taxes on Dec
profits and assets. They are often small islands, such as, Cayman Island, mostly in the 2017
Caribbean. After „panama paper leaks in 2016, now hit the headlines are „Paradise Papers‟
which contain millions of documents reportedly from offshore legal and corporate service
providers. Names are up in the media in ref to Paradise papers including name of an accounting
firm which allegedly worked for dodging assessees. You, a CA, involve in cross-country tax
practice.
One of your clients, „Cell BD Ltd‟, a Bangladeshi public limited JV company, is a mobile
operator in Bangladesh. Cell BD Ltd. is owned 75% by „Cell CI Ltd.‟, a Cayman Island (tax
heaven) company which is 100% owned by Cell UK Ltd. As BTRC stopped issuing new license,
Mobile UK Ltd., which is wanting to enter Bangladesh market hammered out a strategic
investment deal with Cell UK Ltd. to take control in Cell BD Ltd. through „Cell CI Ltd‟
Pre-Transfer Structure Post-Transfer Structure
Cell UK Ltd. Mobile UK

owns 100% Ltd.
Cell CI Ltd. Mobile CI

owns 75% Ltd.
Cell BD Ltd Mobile BD

Ltd
Share capital of „Cell CI Ltd.‟ is US$1.0 million. „Mobile UK Ltd.‟ bought the entire share of
Cell CI Ltd. for US$2.0 million from Cell UK Ltd. Mobile UK Ltd. made full payment to Cell
UK Ltd. in UK for the transfer and then changed the name of Cell CI Ltd. to „Mobile CI Ltd.‟ in
Cayman Island and from Cell BD Ltd. to Mobile BD Ltd. in Bangladesh. Cell UK Ltd. made a
huge gain on the transfer which is in public through media. You have filed tax return for your
client (Cell BD Ltd.) with the audited accounts for the relevant income year which depicts
information about the ownership change and subsequent name change. Tax Dept issued a show-
cause notice to Mobile UK Ltd and to your client to explain why tax was not withheld u/s 56 on
payments made by Mobile UK Ltd. to Cell UK Ltd. in relation to the share transfer in Cell CI
Ltd. Tax department contended that the share transfer in Cell CI Ltd. derived its value from
assets in Cell BD Ltd. and thus it implicated a connection u/s 18(2). Tax Department argued, the
controlling shareholding obtained by Mobile UK Ltd. in Cell BD Ltd.(75%) has its residential
status in Bangladesh and, therefore, the capital gain arising on this share transfer outside
Bangladesh is liable to tax in Bangladesh as an „indirect transfer‟. Mobile UK Ltd. is considering
a HC writ in Bangladesh challenging department‟s demand and approached you, as tax lawyer of
their Bangladesh subsidiary, for technical tax views.
Requirements:
a. Brief your views about the legality of investment in tax heavens by Bangladesh resident
assessee having overseas operations in ref to IT Ordinance. What are the ethical
implicationsof a Professional Accountant in practice and your position if approached by
such a client.
b. Consider share transfer case of Cell CI Ltd. Write technical inputs in ref to applicable
tax provisions, treaty and case decision, if any, giving your views on the validity of tax
demand on such share transfer
a:
An OFC (Offshore Financial Centre) or tax heaven is a country or also just a part of a country that offers low
tax rates or even no taxes at all for foreign investors. Disclosure and information exchange with other countries are
limited. If Bangladeshi resident assessee, having foreign income, duly taxed in source country and disclosed
the same fully under the concept of scope of world income u/s 17 in Bangladesh and invests part of his such
taxed income in tax heaven country, it may not be termed as an illegal conduct.
As Bangladesh Foreign Exchange regulations generally prohibit transfer of fund out of Bangladesh,
investment in OFCs or tax heavens from Bangladesh shall be generally illegal. If any resident assesse uses
OFCs to hide untaxed income, it‟s an utter illegal conduct. Leaks through Panama papers and now Paradise
papers generated extreme heat globally naming corporations and individuals of high profile. These leaks
reveal that so-called tax heavens, though may not be illegal, are being used for illegal purpose. and they tend to
offer laws and measures that can be used for tax evasion.
Ethical implication for a professional accountant in practice is huge and specific when dealing with a client
having stake or intention to invest in tax heavens. As the activities involving OFCs are increasingly being proved
illegal, accountant must take special care to stay off those sensitive clients. Dealing with such clients brings
threats to major fundamental ethical principles like Integrity, confidentiality and professional behavior.
We cannot do anything that discredit our professional and contravene laws and regulations (like tax law, foreign
exchange law). Self-interest threat, familiarity threat and intimidation threats are prominent in this kind of client
relationship and strong safeguards to mitigate these threats are not much there. Therefore, I shall resign from the
service to such client if my consultations to stay legal seem to be failing.
b:
Tax Department issued notice to my assessee and its grandfather holding company to explain why tax was not
withheld u/s 56 on payments made by Mobile UK Ltd. to Cell UK Ltd. for transfer of 100% shares in Cell CI
Ltd. which holds 75% of Mobile BD Ltd. Tax Dept contended that the share transfer in Cell CI Ltd. derived
its value from assets in Cell BD Ltd. and thus it implicated a connection u/s 18(2).
In my view, tax department‟s notice stems from a misunderstanding to differentiate between „sale of company
shares‟ and „sale of company assets‟ of the company. Ownership of share of a company does not mean
ownership of assets of that company. The transfer of shares of one non-resident company (Cell UK Ltd.) to
another non-resident company (Mobile UK Ltd.) did not result in the transfer of any assets of Cell BD Ltd. in
Bangladesh. „Share sale‟ is one of the many different restructuring strategies adopted by corporate
managements. It cannot be argued that sale of shares in UK resulted in capital gain in Bangladesh which
binds Mobile UK Ltd. to deduct tax at source under Bangladesh tax law.
Section 18(2) provides for „income accruing or arising directly or indirectly through or from transfer of capital
assets in Bangladesh‟ but Cell UK Ltd. did not make any „indirect transfer‟ of any capital assets in Bangladesh. By
the transfer of Cell UK Share to Mobile UK, there has not been any transfer of the assets of Cell BD Ltd. As
18(2) does not invoke, application of section 56 does not arise at all. These sections shall not attract and,
therefore, gains arising to a foreign company from transfer of shares of a foreign holding company, which
indirectly held equity interest in an Indian operating company would not be taxable (Vodafone International
Holdings BV vs. Union of India, Supreme Court)
13 Captain Tausif U. Khan, a Bangladeshi young man, a successful RMG entrepreneur well- May
known in the selected EU customers network, operates following business units in Bangladesh June
(a,b,c being private limited companies):
2017
d) TUK and Partners (the Firm. Captain Khan‟s share 60%, balance with three friends)
e) TUK Singapore Limited (100% held by Captain Khan). TUK UK Ltd. (100% held by
Captain Khan)
Captain Khan is the MD of the limited companies in Bangladesh and only director in companies in
UK and Singapore. TUK BD Ltd. secures export orders from EU retailers from Bangladeshi
suppliers.
Captain Khan, living with his parents in Dhaka until he permanently migrated to UK with his family
in 2016. As condition of migration, he set up „TUK UK Ltd‟ during the relevant income year in UK.
He bought an apartment in London. Captain Khan qualifies for UK tax residency in 2016-17(ending
05.04.2017). He also qualifies for tax residency for the same income year in Bangladesh (2016-17,
ending 30.06.2017). Captain Khan provided following information affecting the income year 2016-
17:
i) He received total taka 30,00,000 (net of tax) tax-paid remuneration from three Bangladeshi
limited companies.

iv) Remuneration receivable from TUK and Partners (the Firm) taka 2,50,000 for the
income year ended 30.06.2016. In the income year ended 30.06.2016, the firm made
net loss taka 3,00,000.
v) Interest received on Resident Foreign Currency Deposit A/c (RFCD) equivalent Taka 25,000
net of tax.
vi) Singapore company paid his salary US Dollar 120,000/=. Of this, the company remitted
USD 50,000 to his London bank a/c to meet his London living and remitted USD 50,000 to
his Dhaka bank a/c to make up the shortfall of funds to buy a plot of land(Exchange rate
Taka 80 to USD; USD 1.25 to GBP; Taka 110 to GBP).
vii) He received compensation of taka 10,00,000 from a developer for cancellation of an
apartment-buy contract and his default penalty clause of taka 10,00,000 in a land-buy
agreement with a land seller has been waived to his favour.
viii) Paid Tk. 2,00,000/= interest on loan he took to buy a car and income tax Tk. 50,000 paid on
fitness renewal.
ix) He paid GBP 5,000 net income tax in UK after Singapore tax relief and USD 20,000 tax in
Singapore.
x) He sold his 9% share in TUK &Partners(Firm) for amount with a gain of taka
10,00,000/-. He invested full amount of gain in shares in a private limited company in
the same month.
Requirements:
Captain Khan qualifies for tax residency in UK in 2016-17 and also in Bangladesh for overlapping
income year (2016-17). How will you classify tax residential status of Captain Tausif U Khan in
Bangladesh for the purpose of filing tax return for Income year (30.06.2017) while he is tax
residentin same year in UK? How will you classifyan individualif you are unsure of „centre of
vitalinterest‟? Explain in reference to the DTAA standard fiscal domicile article.
Answer:
a)
Article 4 of DTAA provides for standard „fiscal domicile‟ criteria. A person is liable to pay tax by reason of his
domicile, residence, place of management or any other criterion of similar nature. An individual may be resident
in more than one country in the same income year. If an individual is a resident of both contracting state (say, in this
question of Bangladesh and UK), the individual shall be deemed to be a RESIDENT of the Contracting state in
which he has permanent home available to him. If he has permanent homes in both the countries, he shall be
deemed to be a RESIDENT of the country with which his personal and economic relations are closer (center of
vital interest).
As Captain Khan is tax resident of both Bangladesh and UK, he has permanent residence in both countries, his
centre of vital interest is in Bangladesh as his personal and economic including business connection is closer in
Bangladesh. In other words, he is tax resident in Bangladesh for the purpose of computing his total world income.
If an assessee‟scenter of vital interest cannot be ascertained. Hisdomicile, birth country, connection to parent and
properties, nationality etc. shall decide his tax residency for income computation.
14 XYZ Bangladesh Ltd. a 100% Chinese equity-held „A‟ category private company, operating as Nov Dec
export-oriented(deemed) security label products factory in Savar EPZ and enjoying 10-year tax 2016
holiday, have related party transactions. You are an ACA, working as deputy to the CA Firm‟s
tax partner who specializes in TP. Tax partner advised XYZ as to the appropriate methods for
pricing international transactions. He filed tax return of XYZ Bangladesh Ltd. for income year
ended 30.03.2017 together with Statement u/s 107EE of the Ordinance, Rule 75A; selected
extracts are:
Particulars of International Transactions (XYZ Bangladesh Ltd. For y/e 30.03.2017)

PART – I Tangible property of revenue and capital nature transactions
Item Expense(‘000) TPM Code % Revenue(‘000) TPM Code %
Export of F/G 150,000 TNMM 15%
Import of R/M 50,000 TNMM 10%
Import of Machineries 200,000 OTHER 75%
Service related transactions
Item Expense(‘000) TPM Code % Revenue(‘000) TPM Code %
Management Fee 10,000 TNMM 100%

PART – II
Interest free loans, advances and investments (figures in ‘000 taka)
Item Opening Balance Increase Decrease Closing Balance
Due to Assessee ---- 5,000 --- 5,000
Current accounts and similar items (figures in thousand taka)
Item Opening Balance Increase Decrease Closing Balance
Accounts Payable 35,000 50,000 -- 85,000
Accounts Receivable 65,000 50,000 115,000
Export of F/G to AE are same “label products”. The import of R/M include semi-finished label
papers of high specifications which are available only with one Chinese supplier; the AE in
question has global volume contract with Chinese Supplier. Machineries include state-of-the-art
printers from proprietary sources. Management fee is shared cost of technical team sitting in
China under a Management Service Agreement with assessee. “Due to Assessee” includes
remittance made to Paris trading office of the company to support its initial set-up cost(opened
in March 2017). This new trading office is set up to secure nominations for its label products
from EU customers who source apparel products from Bangladeshi suppliers. DCT referred the
case for y/e 30.03.2017 to TPO u/s 107D. TPO served a notice to XYZ Bangladesh Ltd. u/s
107D(2) requiring to explain:
i) Why assessee relied TNMM method and “OTHER” method for reported/selected
transactions with AEs?
ii) Why TP adjustment should not be given on management fee paid to AE in Shanghai?
iii) Why TP adjustment should not be given on interest-free remittance to AE in Paris?
iv) Why TP adjustment should not be given for interest on overdue receivable from AEs?
Long working with TP specialist tax partner brought you experience on TP advisory. NBR
formed TP cell comprising of proven high-caliber officials from department. TP regulations are
new in Bangladesh. NBR advertised for a short-term consultant (preferably CA) to seek
technical supports to the cell in these initial days. You got this one-year engagement at NBR to
work as Consultant at TP Cell, to begin from January 2018.
Requirements:
a
)(a)Your tax partner wants you to draft explanations in ref to TPO notice. Cover reasons why
“TNMM”and“OTHER” methods are used by XYZ Ltd in its reported transactions as opposed to 8
bother methods.
)(b)Draft explanation for your partner covering the reasons as to why TP adjustments should not be
given for reported management fee, interest-free remittance and overdue receivable. 6
(c)During incumbency at NBR, you will support TP team with your findings identifying potential
adjustments involving critical returns. Assume, you are tasked by TP head to provide findings on
a return filed by your ex-Tax partner. Answer your position covering ethical threats, if any, and
your possible actions.
Answer:
A TP study on XYZ Ltd was carried out, ready for submission to tax authority. At XYZ Ltd., operating margin
is taken as profit level indicator (PLI) when using TNMM method. Rule 70(1) of the IT Rules, 1984 was
taken as guidance and thus the selected methods were decided for given international transactions. TNMM
uses objective measures of profitability, called Profit Level Indicators (PLI) to evaluate whether the price of
controlled transactions is at arm‟s length and so it was taken as appropriate for finished goods sale (export),
raw material import and Management fee. At XYZ Ltd, when using Transactional net margin method
(TNMM) for determining selling price of „label products‟, PBIT margin on export sales from sale transactions
with AEs were compared with the PBIT margin on sale from export transaction with unrelated customers.
Adjustments for difference in functional analysis between transactions with AEs and unrelated parties were also
given.
Similarly, for purchase of materials from AEs, PBIT margin on cost from transactions of purchase raw
material transactions with AEs were compared with the PBIT margin on cost from transactions of purchase raw
material transactions with unrelated suppliers. As the raw materials semi-finished, of high specifications and
they are sourced from selected Chinese suppliers under the global volume contract with AEs in Shanghai, the
scope of comparability with uncontrolled transactions were less. However, as the rim is procured under global
volume contract with AE, the price of raw material received by XYZ Ltd, was already competitive.
TNMM was used for Management fee also on the ground of simplicity. When doing this, the PBIT margin-
Management fee to AE at XYZ Ltd, was compared with the PBIT margin-Management fee relationship
practiced by unrelated competitors in the same industry sector (Label Products). Such comparison revealed
the size of management fee at XYZ is lower than that practiced at uncontrolled competitors.
Application of TNMM for export sale, r/m purchase and management fee thus made the operations
simple, objective and so the prices are duly in arm‟s length. Net margin under TNMM is less affected by
transactional difference than in the case with price under CUP method. Net margin is also a better indicator
than gross margin which is used in the case of CPM and RPM. PSM better suits service industry.
Use of „OTHER‟ method was used for transactions with AEs for purchase of machineries. These are state-of-
the art machines, purchased from proprietary sources to maintain the quality of label products. As the source is
„proprietary‟ and having no other alternative, no ALP pricing methods could be applied but the price of the
supplier was taken as it is, i.e., the method falls under „OTHER‟. Section 107C (f) allows using any other
method‟ where it can be demonstrated that none of the specific five methods can be reasonably applied to
determine ALP for given international transaction. XYZ had to resort to section 107C (F) for machinery
import fromproprietary source
(b)
Rule 70(1) was duly complied when determining the ALP methods for the three items of international
transactions. Further grounds why TP adjustments should not be given on those three items:
Management Fee to AE in Shanghai, China

i) Management fee is paid to AE using TNMM method which is the most reliable measure on merit, duly being
backed by Rule 70(1) of the IT Ordinance.
ii) Management fee paid is still lower than size of the item practiced by the uncontrolled competitors in the
same industry of label products export, revealed by TNMM approach.
iii) Pricing method has been determined after a detailed TP study, submitted with tax return.
iv) The payment is well documented and the amount within the limit of section 30(h) of IT Ordinance.
v) The amount paid to AE is towards sharing of the cost of the technical team in China (head quarter), well
documented, and under a formalized agreement duly approved by BIDA. The management fee recovers
proportionate cost of AE without any savings, as revealed by TP study FAR analysis.
Remittance to AE in Paris
i) New trading office in Paris was set up to market, coordinate and secure nominations of the EU retainers for the
assessee‟s label products, which will be a direct increase of assessee‟s export.
ii) AE in Paris, being non-resident, cannot make any local borrowing there. The only option for initial set up cost
was funding from the assessee. This remittance is also approved by Bangladesh Bank.
iii) Fund remitted to start the set-up could otherwise be treated as „capital expenditure‟ whereas the remittance has been
recognized as repayable loan to AE. This means better protection to assesse.
iv) Financial support made to AE comes under the ordinary business practice of assessee‟soperations. This is a
one-off assistance and amount is not very large. Assesse‟s business is not „lending‟. Therefore, there cannot
be any interest charge on the funds remitted.
v) The decision to support AE in Paris was duly approved by the BOD for greater business cause.
Receivable from AE
i) Receivable with AE is in the ordinary course of assessee‟s business operations, not extra-ordinary.
ii) Receivable is not alone with AE, other parties also have receivable balance as per payment term. Such
receivable is unavoidable in business.
iii) The annual increase figure of receivable is for an amount which is equally off-set by the payable to AE The
net effect on assesse is well balanced.
iv) There is no term of interest charge on the receivable with the AEs when sale was done.
(c)
As NBR consultant, 1 shall be in the character of a PAIB. Working on a file of my ex-tax partner‟s client
at my incumbency at TP cell may be an issue of „conflict of interest‟ which may create threats to objectivity
and other fundamental principles, such as, integrity, confidentiality and good reputation of my profession. I
shall be subject to NBR contractual terms, policies and procedure of NBR and the Govt. Secrecy law. I shall be
exposed to „familiarity threats‟ for my long association with ex-tax partner plus a threat of „self interest‟ for
the likely slide of my image if I fail to do a just job at TP cell. The threats are significant. No safeguard seem to
be relevant. I have to a firm position. As a TP Cell consultant, I shall draw an ethical wall both in fact and
appearance under the circumstances. I shall remain objective, confidential at all times and shall not allow any
undue influence including any familiarity pressure in my mind to override my professional judgment. I shall
not allow conflict of interest but shall disclose to my TP cell boss the fact of my relationship with ex-tax
partner and the tasked file in hand. If I am still tasked to do the job, on merit, I shall bring change in my
conduct with my ex-tax partner during my incumbency at TP Cell. Major threats as mentioned could thereby
be managed well.

4b Ethical Considerations (10%)
S.L Question Year
1 What are the factors to be considered by a professional Accountant while initiating a formal conflict May June
resolution process? 2012
When initiating either a formal or informal conflict resolution process, a professional accountant should consider the
following five factors:
 Relevant facts;
 Relevant parties;
 Ethical issues involved;
 Fundamental principles related to the matter in question;
 Established internal procedures;
 Alternative courses of action.
Having considered these issues, theappropriate course of action can be determined which resolves the conflict with all
or some of the five fundamental principles. If the matter remains unresolved, the professional accountant should
consult with other appropriate persons within the organization for help in obtaining resolution.
Where a matter involves a conflict with or within, an organization, a professional accountant should also consider
consulting with those charged with governance of the organization.
It is advisable for the professional accountant to documents held or decisions taken concerning that issue.
If a significant conflict cannot be resolved, a professional accountant may wish to obtain professional advice from the
relevant professional body or legal advisors, and thereby obtain guidance on ethical and legal issues without breaching
confidentiality.
If, after exhausting all relevant possibilities, the ethical conflict remains unresolved, a professional accountant should,
where possible, remain associated with the matter creating the conflict.
The professional accountant may determine that, in the circumstances, it is appropriate to withdraw from the engagement team
or specific assignment, or to resign altogether from the engagement or the firm.
2 You have been invited by the organizers of a seminar to deliver lecture on the responsibilities of May June
a Chartered Accountant rendering professional tax services. The organizers of the seminar 2016
informed you about the average understanding level of the participants. According to the
organizers, the participants might have perception that a Chartered Accountant rendering
professional tax services is obliged to act absolutely in the interest of his/her client/employer.
Requirements:
Prepare handouts addressing the following issues for distribution at the seminar to be held
next month:
(i)Responsibilities of a practicing Chartered Accountant to the public while renderingtax advisory
services.
(ii)Guidance for a Chartered Accountant, working in the tax department of a company, on
conflict of loyalties.
(i) Responsibilities of a practicing Chartered Accountant to the public while rendering tax
advisory services
A distinguishing mark of a profession is acceptance of its responsibility to the public. Here public means clients,
credit guarantors, governments, employers, employees, investors, shareholders, the business community, and
others who rely on the objectivity and integrity of professional accountants to maintain the orderly functioning of
commerce.
This reliance imposes a public interest responsibility on the accountancy profession. The public interest is defined as
the collective well-being of the community as a whole and institutions the professional accountant serves.

Professional accountants have an important role in society, Investors, creditors, employers and other sectors of the
business community, as well as the government and the public at large rely on professional accountants for sound financial
accounting and reporting, effective financial management and competent advice on a variety of business and taxation
matters. The attitude and behavior of professional accountants in providing such services have an impact on the
economic well-being of their community and the country.
It is in the best interest of the worldwide accountancy profession to make known to users of the services provided by
professional accountants that they are executed at the highest level of performance and in accordance with ethical
requirements that strive to ensure such performance. Tax experts help to establish confidence and efficiency in the fair
application of the tax system. A professional accountant's responsibility is not exclusively to satisfy the needs
of an individual client or employer. The standards of the accountancy profession are heavily determined by the
public interest. As such, a Chartered Accountant in practice, who advises on tax matters, also bears significant
responsibilities to the public.
(ii) Guidance for a Chartered Accountant, working in the tax department of a company,
onconflict of loyalties
Employed professional accountants owe a duty of loyalty to their employer as well as to their profession and there
may be times when the two are in conflict. An employee's normal priority should be to support his or her
organization's legitimate and ethical objectives and the rules and procedures drawn up in support of them.
However, an employee cannot legitimately be required to:
(a) Break the law;

(b) Breach the rules and standards of their profession;
(c) Lie to or mislead (including misleading by keeping silent) those acting as auditors of the employer; or
(d) Put their name to or otherwise be associated with a statement which materially misrepresents the facts.
Differences in view about the correct judgment on accounting or ethical matters should normally be raised and
resolved within the employee's organization, initially with the employee's immediate superior and possibly
thereafter, where disagreement about a significant ethical issue remains, with higher levels of management or non-
executive directors.
If employed accountants cannot resolve any material issue involving a conflict between their employers and their
professional requirements they may, after exhausting all other relevant possibilities, have no other recourse but
to consider resignation. Employees should state their reasons for doing so to the employer but their duty of
confidentiality normally precludes them from communicating the issue to others (unless legally or professionally
required to do so).
3 Explain when a Chartered Accountant acts as a ‘Principal’ and when as an ‘Agent’ to his tax client. Nov Dec
Which position is riskier? 2014
Principal
An accountant acts as “principal” when he provides advice to the client as to the taxation consequences of
different courses of action. The accountant may be liable to the taxpayer in the event the advice given turns out to be
incorrect or inappropriate.
Where an accountant does not have the professional skill required to act as a "principal" in a particular case he may
still accept the engagement. However, he must ensure that the correct opinion after consultation with experienced
qualified accountant.
Acting as a “principal” is therefore considered to be a high risk activity.

Agent
An accountant acts as “agent” when he merely prepares document on behalf of a client. The client retains responsibility
for the accuracy of the document itself. The accountant is thus an agent when performing tax compliance work such as
preparing and submitting a tax return on behalf of a client. The client would be required to sign the return prior to its

submission.
The 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.
4 1. Prepare a briefing note as regards tax evasion, tax avoidance and professional ethics to be May June
followed by a Chartered Accountant rendering taxation services. 2015
Briefing Note for the Management Team
Subject: Tax Evasion. Tax Avoidance and Professional Ethics to be followed by a Chartered Accountant rendering
Taxation Services.
Tax Evasion:
Tax evasion is unlawful dodging in tax payments by tax payers. It is a process whereby a person illegitimately
pays less tax than the law mandates. Tax evasion often entails taxpayers deliberately misrepresenting the true state of
their affairs to the tax authorities to reduce their tax liability and includes dishonest tax reporting, such as declaring less
income, profits or gains than the amounts actually earned, overstating deductions or suppressing turnover.
Tax Avoidance:
On the other hand, tax avoidance is the process whereby a person plans his or her finances so as to apply all exemptions and
deductions provided by tax laws to reduce taxable income. Through tax avoidance, a person takes advantage of all legal
opportunities to minimize his or her tax. Tax avoidance must be distinguished from Tax Evasion, which is the
employment of unlawful methods to circumvent the payment of taxes. Tax evasion is a crime; tax avoidance is the legal
way to reduce tax burden.
Professional Ethics to be followed by a Chartered Accountant rendering Taxation Service:
A professional accountant rendering taxation service is entitled to put forward the best position in favor of his employer
provided the service is rendered with professional competence, does not in any way impair integrity and objectivity, and
is in the opinion of the professional accountant consistent with the law. Doubt may be resolved in favor of the employer
if there is reasonable support for the position. A professional accountant should not hold out to an employer the assurance
that the tax return prepared and the tax advice offered are beyond challenge. Instead, the professional accountant should
ensure that the employer are aware of the limitations attaching to tax advice and services so that they do not
misinterpret an expression of opinion as an assertion of fact. A professional accountant should not be associated with
any return or communication in which there is reason to believe that it:
1) Contains a false or misleading statement;

2) Contains statements or information furnished recklessly or without any real knowledge of whether they are true or
false; or
3) Omits or obscures information required to be submitted and such omission or obscurity wouldmislead the
revenue authorities.
5 You are a Chartered Accountant and working in Y Ltd. (“Company”) as a tax manager. The May June
Company is engaged in the business of export of the goods manufactured by itself. The bank, 2015
through which export proceeds of Y Ltd. is received, deducts tax at the specified rate from the
total export proceeds in accordance with the provisions of section 53BB of the Income Tax
Ordinance (“ITO”), 1984. The export proceeds net of income tax deducted at source under
Sec.53BB received by Y Ltd. during the income year 2016-17 came to Tk.100,000,000. Export
income of Y Ltd. falls under the scope of section 82C of the ITO, 1984. Generally, the Company
does not have additional income from export as referred to in section 82C (6) of the ITO, 1984.
In the income year 2016-17, a warehouse owned by the Company since 1/7/2016 was leased out
to another company for a term of 3 years from 1/7/2016 at a monthly rent of Tk.100,000 with an
advance rental payment of Tk.900,000 to be adjusted with monthly rental payments over 3
years. Y Ltd. received rent for the income year 2016-2017, but no tax was deducted at source
from the rent paid by the lessee. Nor any VAT was paid on the rent. The repair cost of
Tk.15,000, municipal tax of Tk.10,000 and insurance premium of Tk.1,000 were paid for the
warehouse during the income year 2016-17.
The net profit before tax for the year as per the draft financial statements for the income year
came to Tk.3,304,000. The net profit as per income tax comes to the same amount, assuming no

penalty/liability (if any) for non-deduction of tax at source by the tenant and for non-payment of
VAT. There is a tax refundable of Tk.150,000 for the last assessment year 2016-17. The income
(including advance) from warehouse and its related expenses were deposited/paid out in cash
into/from an undisclosed bank account of Y Ltd. and have not been included in the draft financial
statements. The purchase money of Tk.50,000,000 (total accumulated undeclared income of Y
Ltd. over the last 2 assessment years) for the warehouse was also paid from the same bank
account.
The management of Y Ltd. is thinking of assessment of income of the Company for the income
year 2016-2017 under section 82C of the ITO, 1984, upon considering the tax collected at
source by the bank from the export proceeds as final discharge of tax liability. In a meeting with
the management team of Y Ltd. on tax issues, you have been asked to consider whether it is
possible to ignore income from house property so that no demand for additional income tax
arises. To discuss the issue further, a meeting would be held next week.
Requirements:
(i) Enumerate the steps that you should take to deal with the unethical request from the
management, if any.
In light of the aforementioned academic discussion, I will take following steps if there is any unethical request from my
employer:
(i) I will put my tax advice on record, either in the form of a letter or in a memorandum, while providing the
requested opinions on ignoring / concealing income from house property.
(ii) I will let my employer know the consequences of error/omission/concealment of income as provided in the
income tax laws for the time being in force and will recommend that appropriate disclosure be made to the revenue
authorities.
(iii) If my employer does not accept my suggestion, I will inform them that it is not possible to act for them in
connection with the evasion of tax or pertinent return of income.
(iv) I will follow the established policies of Y Ltd. to seek a resolution of such conflict.
(v) If those policies do not resolve the ethical conflict, I will brought the problem to the notice of thenext higher
reviewing level such as the Executive Committee. Board of Directors or Shareholders. I will also seek
counseling and advice on a confidential basis with an independent advisor to obtain an understanding of
possible courses of action.
(vi) If the ethical conflict still exists, I will consider whether continued association with Y Ltd. in any capacity is
consistent with professional responsibilities and as a last resort I may have no other recourse on the tax evasion issue
than to resign and to submit an information memorandum to an appropriate representative of Y Ltd.

5a. Tax Research, Planning, Compliances (20%)
S.L Question Year
4 You are a Chartered Accountant in practice and have expertise in income tax May
matters. Mr ABC (“Client”) is your client and a director of XYZ Ltd. Jun
(“Company”). He has provided you with the following information and requested 2016
to consider each case separately:
(a) The Client is interested to do his own tax planning for the income year
2016-2017 on the basis of following forecasted information and
considering the provisions of prevailing tax laws:
Particulars Tk.
Gross interest income from savings instruments (taxable) 300,000
Tax deduction at Source @ 5% from interest income 15,000
Income from house property (taxable) 180,000
Income from salary (taxable) 400,000
Investment eligible for tax credit 100,000
Requirements:
Provide the Client with the information about his taxable income, investment
allowance, net tax payable and suggest him whether he should invest in savings
instruments.
(b)The Client is planning to buy a residential flat of 500 square meter (sqm)
located at Gulshan along with 0.50 katha share of land from a real estate
company. The total purchase price of the flat is Tk. 5,750,000, which is sum of
land value of Tk. 2,000,000 and flat value of Tk. 3,750,000.
Requirements:
(i) Advise the Client about the amount of tax to be collected at source by
the Registering officer under section 53H of the ITO, 1984 and
rule 17II of the ITR, 1984;
(ii) Discuss the provision of tax law as regards the person from whom the
said tax is supposed to be collected.
(c) The Client provided you with the following information on income year
2016-2017:
Particulars Tk.
Taxable income from business 500,000
Taxable income from house property 600,000
Taxable income from other sources 350,000
He has also informed that income from house property was derived from a
residential flat owned by him and the amount of house rent was not deposited
in his bank account.
Requirements:
Compute the amount of penalty to be imposed under section 123 of the ITO,
1984, for non- compliance with rule 8A of the ITR, 1984.
(a):
The required information are provided below on the basis of forecasted information relating to
income year 2016-2017 applying provisions of tax laws applicable for AY 2017-2018:
Name of Assessee: Mr. A
Taxpayer's Identification Number : xxxxxxxxxxxx
Statement of Forecasted Income during the income year ended on 30 June 2017

Taxable
Tax
Particulars Income (Taka)
(Taka)
_1. Salaries: u/s 21 400,000
2. Interest on securities: u/s 22 (gross interest on savings instruments) 300,000
3. Income from house property: u/s 24 180,000
4, Total income: (1+2+3) 880,000
5. Tax leviable on total income (Note 2) 48,000
6. Tax rebate: u/s 44(2)(b) , 15,000
7. Tax payable (difference between serial no. 5 and 6) 33,000
8. Tax Payments (tax deducted from interest on savings instruments) 15,000
9. Net tax payable (difference between serial no. 8 and 9) 18,000
Note 1:
Tax deduction at source from the interest on savings instruments shall be deemed to be the final
discharge of tax liability from that particular source as per amendment made to the provisions of
section 82C through the Finance Act, 2015
Note 2:
Taxable Income excluding interest on savings instrument 580,000
Tax on Taxable Income excluding interest on savings instruments:
Slabs/Particulars Taxable Income (Tk.) Rate Tax (Tk.)
First 250000 0%
Next 330000 10% 33000
(a) Tax payable on taxable income excluding interest on savings instruments 33,000
(b) Tax @ 5% on interest on savings instruments (final tax liability) 15,000
(a+b) Total tax payable (including final settlement of tax liability) 48,000
Investment Allowance & Tax rebate:

Tk.
(a)Actual Investment made during the income year: 100,000
(b) 30% of (Total Taxable Income – Employer‟s Contribution to RPF-Income u/s 82C) 174,000
( c) Maximum Limit 15,000,000
( d) Allowable Investment limit for Tax rebate - the lowest of (a), (b) and (c) 1,00,000
Tax rebate [(d) X 15%)] 15,000
Suggestion to him whether he should invest in savings instruments.
Maximum eligible amount for getting tax rebate Tk. 1,74,000 whereas he has only allowable investment
Tk.1,00,000. That means he should invest Tk.74,000 more at savings certificate to get maximum tax
rebate facility. If he buy it within 30th June,2017 then he will get extra Tk.74,000 x 15% =11,100 tax
rebate
(b)(i):
The computation of tax to be collected at source by the registering officer responsible for registering
any document of a person has been computed below:
Deed value Amount Tax Payable
Particulars Quantity Rate Remarks
(Tk.) (Tk.) (Tk.)
0.50 4% of deed value 80,000 Whichever -
Land 2,000,000 150,000 is higher
Katha Tk. 300,000/Katha 150,000 '
500 4% of deed value 150,000 Whichever-
Flat 3,750,000 300,000
sqm Tk. 600/sqm 300,000 ' is higher
Total tax to be collected at source by the registering officer 450,000
(b)(ii):
As per section 53H of the ITO, 1984, and rule 17II of the ITR, 1984, tax on transfer of property shall
be collected from the person whose right, title or interest is sought to be transferred, assigned,
limited or extinguished thereby, at the time of registration of transfer document.
(c):
The required information is enumerated below:
Name of Assessee: Mr. A
Taxpayer’s Identification Number :xxxxxxxxxxxx
Particulars Tk.
Taxable income from business 500,000
Taxable income from house property 600,000
Taxable income from other sources 350,000

First 250,000 0% -
Next 400,000 10% 40,000
Next 500,000 15% 75,000
Next 300,000 20% 60,000
Total 1,450,000 175,000
Tax Leviable on total taxable income A 175,000
Investment Allowance & Tax rebate

(a)Actual Investment made during the income year: -
(b)30% of (Total Taxable Income –Employer‟s Contribution to RPF- income u/s 82C) 435,000
(c)Maximum Limit 15,000,000
(d)Allowable Investment Limit for Tax Credit - the lowest of (a), (b) and (c)
Tax rebate [(d) X 15%)] B -
Income Tax Payable C=A-B 175,000
Tax Payable on Income from House Property [175,000/1,450,00 X 600,000] 72,414
Penalty u/s 123 for not depositing house rent into bank account as per rule 8A of
the ITR,1984:
50% of tax payable on income from house property [50% X 72,414] = 36,207
or
Tk. 5,000
Whichever is higher 36,207
Total Tax Payable including Penalty 211,207
5 May
Mr. Shin, Chief Financial Officer (CFO) of Techno world Inc., a Singapore based Jun
IT company has appointed you as tax consultant and sought your opinion on the 2016
areas of tax planning so as to prepare an effective business plan.
Technoworld wants to expand its business in Bangladesh by providing IT based
solutions in many industries along with BPO services. It wants to set up a liaison
office. But it has been advised by Bangladesh Investment Development Authority
(BIDA) to incorporate a company in Bangladesh with 100% equity ownership to
run the business.
In the first year it has a plan of selling BDT 1Bn of IT and BDT 500 Mn of BPO
services with 10% increment in each of the following two years. If the service
charges are remitted from Bangladesh, the purchaser will deduct 20% of
withholding tax of it and 15% VAT will be borne by the service recipient.
Technoworld achieves 20% income before tax on net proceeds and has 25%
corporate tax rate in Singapore. If it incorporates a company in Bangladesh, the
services it will deliver will fall under ITES (information technology enable
services) and in accordance of business plan it will achieve 30% Income before
tax. Under double taxation avoidance agreement, Dividend from Bangladesh to
Singapore is subject to maximum 15% tax withholding.
Requirement:
Give your opinion to Technoworld elaborating the aspects of the above mentioned
options with demonstrating financial impact.
Mr. Shin,
Chief Financial Officer (CFO)
Technoworld Inc.
Subject: Opinion regarding tax planning and techniques
Dear Sir.
We refer your letter dated 15 April 2018 where you have narrated a plan of business with Bangladesh and
requested us to provide our opinion on the areas of tax planning which will enable you to prepare an
effective business plan. We are submitting the following analysis and suggestions which will curtail
the tax burden for your prospective business complying the tax legislations presently enforced in
Bangladesh.
Technoworld wants to expand its business in Bangladesh by providing IT based solutions in many
industries along with BPO services. Initially it wants to set up a liaison office. It has been advised
by Bangladesh Investment Development Authority (BIDA) to incorporate a company in Bangladesh
with 100% equity ownership to run the business. Hence, there are two options in hands, namely,
selling services from abroad where liaison office will play a coordination roles and setting a local
fully owned subsidiary of Technoworld to deliver the services to Bangladeshi customers locally.
Relevant tax regulations in Bangladesh:
(a) As per para 33 of Sixth Schedule, Part A of Income Tax Ordinance (ITO), 1984 Information
Technology Enable Services (ITES) has been exempted from income tax till 30th June, 2024.
(b) Para 33 of Sixth Schedule, Part A of ITO 1984 states the definition of ITES as under:
Information Technology Enabled Services (ITES) means-Digital Content Development and
Management, Animation (both 2D and 3D), Geographic Information Services (GIS), IT Support and
Software Maintenance Services, Web Site Services, Business Process Outsourcing, Data entry, Data
Processing, Call Centre, Graphics Design (digital service), Search Engine Optimization, Web Listing,
document conversion, imaging and archiving including digital archiving of physical records.
(c) Under Finance Act 2017, the corporate tax rate of a non-listed company is 35%.
(d) Under section 54 of ITO 1984, the tax deduction rate on payment of dividend is 20%
(e) Based on article 24 of Double Taxation Avoidance Treaty between Singapore and Bangladesh, Tax
deducted at source in Bangladesh will be eligible to take credit in Singapore to the extent of tax
computed on the same income.
(f) As per sec 56 of ITO 1984, foreign remittance on account of IT solutions and BPO related services
to a non-resident Bangladeshi is subject to deduction of tax at source @ 20% under the category of
Technical service fees or Technical knowhow fees.
(g) Under VAT Act 1991, for the import of services, service recipient will be responsible to pay
VAT and will be eligible for input VAT credit against the treasury challan of the deposit of VAT.
Analysis of tax legislations applicable for Technoworld:
Technoworld has two alternatives for doing business here in Bangladesh. It can sell services from abroad
where liaison office will play a coordination role or set a local fully owned subsidiary of Technoworld
Singapore to deliver the services to Bangladeshi customers locally.
From the perspective of tax laws, if it sells services to Bangladesh from Singapore, it will receive
the proceeds in Singapore, which will be remitted by the service recipients in Bangladesh. This
remittance will be subject to withholding tax @ 20% as per ITO, 1984 after which the net
proceeds will be remitted to Technoworld from Bangladesh. In Singapore, Technoworld will be
eligible to take the credit of tax deducted at source in Bangladesh. VAT will be borne by the
service recipient and will be eligible for input VAT credit. It will incur cost neither to
Technoworld nor to the service recipients in Bangladesh.
If Technoworld Singapore sets a local fully owned subsidiary in Bangladesh, it will be subject to
35% corporate tax rate. Moreover, in accordance with double taxation avoidance treaty between
Singapore and Bangladesh, the payment of dividend from Bangladesh is subject to 15% tax
withholding in Bangladesh which we can assume will be available for full foreign tax credit by
Technoworld in Singapore.
Outcome in Business plan after tax impacts:
Technoworld sells services to Bangladesh from Singapore

Year 1 Year 2 Year 3
Gross proceeds A 1,500,000,000 1,650,000,000 1,815,000,000
Tax deduction at source in BD @ 20% B 300,000,000 330,000,000 363,000,000
Remittance i.e. Net proceeds C=A-B 1,200,000,000 1,320,000,000 1,452,000,000
Income before tax (20% on net proceeds) D 240,000,000 264,000,000 290,000,000
Corporate tax (25%) E 60,000,000 66,000,000 72,500,000
Credit on corporate tax on business F 60,000,000 66,000,000 72,500,000
from BD under DTAA
Net profit after tax for Technoworld D-E+ F 240,000.000 264,000,000 290,000,000
Technoworld sets a fully owned subsidiary in Bangladesh

in Bangladesh Year 1 Year 2 Year 3
Gross proceeds A 1,500,000,000 1,650,000,000 1,815,000,000
Income before tax (30% on Gross B 450,000,000 495,000,000 544,500,000
proceeds) tax rate in BD (35%)
Corporate C 157,500,000 173,250,000 190,575,000
Income after tax / Gross dividend D=B-C 292,500,000 321,750,000 353,925,000
income of Technoworld
Withholding tax on dividend (15%) E 43,875,000 48,262,500 53,088,750
Net remittance of dividend to Technoworld F=D-E 248,625,000 273,487,500 300,836,250
Corporate tax of Technoworld (25%) on G= 73,125,000 80,437,500 88,481,250
dividend 25% D
Withholding tax credit on dividend H=E 43,875,000 48,262,500 53,088,750
taken by Technoworld under DTAA
Additional tax in Singapore I=G-H 29,250,000 32,175,000 35,392,500
Net profit after tax for Technoworld J=F-I 219,375,000 241,312,500 265,443,750
Suggestions:
From the above table of business plan analysis it is found that, for the first three years in
Singapore Technoworld will earn Tk. 794,000,000 if it sells services from Singapore to
Bangladesh and Tk. 726,131,250 if it sets a fully owned subsidiary in Bangladesh.

Hence, after putting the taxation impacts, considering the change in financial of Technoworld,
Singapore, you should option to provide services from abroad and take the net proceeds from
Bangladesh.
Thank you very much for taking us to your confidence. Should you require any clarification,
please do not hesitate to contact us.
Thanking you,
6 Mr. XY (“Assessee”) submitted income tax return for the assessment year 2017- May
2018. Jun
In the return of income for the said assessment year, he disclosed inter alia 2015
purchase of a flat, registered deed value of which was Tk. 8,000,000. In the
course of making assessment, the Deputy Commissioner of Taxes (“DCT”)
identified that the Assessee took out a home loan of Tk. 5,000,000 mortgaging
the flat; and the market value of the flat was shown by the lender at Tk.
10,000,000 in the sanction letter of loan. At the same time, an insurance company
insured the flat after assessing value thereof at Tk.8,000,000. The Assessee
purchased the flat from the first owner, not from the real estate company. The
DCT asked the Assessee to clarify the difference between registered deed value
of the flat and the market value thereof as assessed by the lender. If the Assessee
offers no explanation or the explanation offered by him is not satisfactory, the
excess amount shall be deemed to be the income of the Assessee classifiable
under the head “Income from other sources”. At the hearing, the DCT also
referred to the provisions of income tax laws whereby he might deem the
difference between the fair market value of an asset and price paid by the
assessee for the said asset to be income of the assessee classifiable under the
aforementioned head.
Mr. XY has requested you, being a tax partner of ABC & Co., Chartered
Accountants, to provide him with professional support.
Requirement:
Draft a letter for Mr. XY explaining the difference between registered deed value
of flat and market value thereof assessed by the lender so that Mr. XY can
successfully defend his case before DCT.
The Deputy Commissioner of Taxes
Circle-... , Taxes Zone-
Dhaka
15 June 2018
Dear Sir:
Written explanation in respect of difference between registered deed value of flat and market value
thereof assessed by the lender
Name of Assessee: Mr. ABC
TIN:…………………
Please refer to your letter no .................................... dated………………..on the subject mentioned above.
I am pleased to submit following written observation/explanation in respect of difference between
registered deed value of flat and market value thereof assessed by the lender:
A lender is mere a business entity and run by its own business policy. The lender appraises the value of a
property, against which funding is being made, following its own strategy and generally accepted norms of
funding. For example, a piece of land was purchased at the cost of Tk. 100 few years back and a lender may
estimate the present value of the property at Tk. 1,000. In doing such valuation, the lender may take
various factors into account.
Lending money and earning interest thereon is the prime business of a lender and for doing business it
may think, plan and act as per its own business strategy. For the purpose of approving loan to the
assessee and doing business with him, the lender estimated the market value of flat at Tk. 10,000,000
and granted loan of Tk. 5,000,000 which is 50% of Tk. 10,000,000. On the contrary, the insurance company
insured the flat after carrying out a willful valuation of the same at Tk. 8,000,000. It is remarkable that
the two companies of different industry, i.e. lending and insurance, have worked out the different
market value of the same property, i.e. Tk. 10,000,000 and Tk. 8,000,000 respectively.
There should not be such a difference of ocean in the market value of the same property. It evidences that
computation of market value of a property is significantly influenced by the business policy and own
methodologies of the lender and insurance company. Lender and insurance company may compute the
tax status and tax liability of a borrower, but it is the tax authority whose computation is legally acceptable
and obligatory for that borrower. Hence, there is no legal ground to accept the market value of the flat
determined by the lender and even the insurer for the purpose of imposition of tax. There is no such law
especially at section 19 of Income Tax Ordinance,1984 to impose tax on this difference
On the basis of aforementioned facts, it is clear that the valuation of a property by a lender may not
reasonably match with the registered deed value of the same. Such valuation is done by the lender for its own
business purpose and is not an authentic one in the eye of the Registration Act, 1908, the Stamp Act,
1899, and the Income Tax Ordinance, 1984. Estimation of market value of a property by a business entity
can't supersede the valuation done by the Registrar or Sub-registrar appointed by the government..
In light of the above, I would like to request you to accept my explanations.
Yours faithfully,
7 Mr. X is now negotiating with Mr. Y and Mr. Z for renting out the 1st and 2nd Nov
floors with effect from 1 January 2017 for a period of 4 years. He is also Dec
negotiating with ABC Ltd. to rent out two rooms with a kitchen and a wash 2014
room for 3 years. The rent amounts have been agreed as follows:
(i) Ground floor (as above): Tk.20,000 p.m. with an advance of 6 months to be
adjusted over a period of the last 12 months of the rental period in equal amounts.
(ii)1st floor: Tk.30,000 p.m. with an advance of 3 months to be adjusted over the
last 3 months of the rental period in equal amounts.
(iii)2nd floor: Tk.25,000 p.m. with no advance, but with a security money of
Tk.50,000 to be refunded at the time of vacating the premises on the expiry of the
rental period.
Mr. X wants all the rental payments, advances and security money to be paid in
cash. Mr. Y, Mr. Z and ABC Ltd. agree, provided it does not contradict with the
provisions of the Income Tax Ordinance 1984 and the Income Tax Rules 1984
and does not deprive them of any income tax benefit which they would have
otherwise got.
You are required to give necessary advice with regard to above in the light of
the Income Tax Ordinance 1984 and Income Tax Rules 1984.
7
The National Board of Revenue (NBR) has introduced a new rule i.e. rule-8A in order to provide guidelines
regarding the rent of any house property. As per rule 8A of the Income Tax Rules, 1984, any person having
ownership or possession of any house property receives any sum or aggregate of sums exceeding Tk.25, 000
per month in respect of any rent of such house property or its unit, is required to maintain a bank account in
any scheduled bank for the purpose of depositing rent from the house property or its unit. He is to deposit such
rent or advance received from such house property or its unit in that bank account. Such person is also
required to maintain a separate register and record the particulars of the tenant or tenants and the sum
received.
As per section 123 (2) of the Income Tax Ordinance (ITO) 1984, any person having income from house
property, failing, without reasonable cause, to maintain a bank account and separate register, as mentioned above,
shall be penalized by an amount of fifty per cent of taxes payable on house property or five thousand taka
whichever is higher.
Income received by Mr. X in the income year 2016-2017 may be analysed as below:
Analysis of rent receivable by Mr. X:
Floor Tenant‟s Monthly Advance/ Remarks

name rent Security
money
Ground floor ABC Ltd 20,000 120,000 Advance is adjustable with
monthly office rent
1st floor Mr. Y 30,000 90,000 Advance is adjustable with
monthly rent
2nd floor Mr. Z 25,000 50,000 Security money is refundable at the
time of vacation premises.
Total 75,000 2,60,000
Since the total rent of Mr. X is Tk.75,000 per month which exceeds the threshold limit i.e. Tk.25,000. Mr.
X is required to maintain a bank account in any scheduled bank to deposit the monthly rent and advance or
security money received therefrom ,even if receives part/full of the amount in cash. He is also required to
maintain a separate register containing the particulars of the rent & tenants. Otherwise penalty under section
123(2) of the Income Tax Ordinance, 1984 may be imposed on him.
Amount received by Mr. X from Mr. Z as security money not adjustable with rent payable will be deemed
as house property income of Mr. X for the income year 2016-17 under section 19(22).
However under 1st proviso of section 19(22) Mr. X may option to split the income in income year 2016-
17, 2017-18, 2018-19, 2019-20 & 2020-21 in equal instalments. Under 2nd proviso of the section Mr. X
may claim the entire amount (Tk. 50,000) as expenses to house property income the year of refund.
In the instant case , the tenure of tenancy with Mr. Z will expire on December, 2021 (4 years from
January,2017) which falls in the income year 2021-22 As such Mr. X may split the security money of
Tk. 50,000 in 5 equal instalments of Tk. 10,000 each. In addition to normal rent, he is required to show
Tk. 10,000 for each of income year 2016-17, 2017-18, 2018-19, 2019-20, 2020-21 and 2021-22 as
house property income. He will also claim refund of security money of Tk. 50,000 as expenses from house
property income in the income year 2021-22 (as it was refunded to Mr. Z in that year).
Advice to Mr. Y, Z and ABC Ltd. with regard to mode of payment
As per section 30 (n) of the Income Tax Ordinance, 1984, any payment in respect of rent of any property
otherwise by crossed cheque or bank transfer shall be disallowed against income from business or profession
on which the tenant is required to pay income tax at applicable rate. As such, I would advise Mr. Y and Z
(if they carry on business or profession in the said premises) and ABC Ltd. to pay the amount of office rent
through crossed cheque or bank transfer to get the amount so paid as allowable deduction at the time of
assessment.
As per section 53A of the ITO, 1984, tax @5% shall have to be deducted at source by the responsible
Withholding authority from any payment as office rent or advance rent/security deposit (which is not
adjustable against rent payable). ABC Ltd will be required to deduct tax @ Tk. 1,000 per month (5% of Tk.
20,000) and pay the remaining Tk 19,000 to Mr. X.
As per section 57 of the Income Tax Ordinance (1TO) 1984. the tenant would be subject to penalty for
non deduction of tax as detailed below:
 As per section 57 (1) (a) of the ITO 1984, the tenant would be deemed to be an assessee in default in
respect of the income tax deducted or collected at source;
 As per section 57 (1) (b) of the ITO 1984, the tenant would be liable to pay an amount at the rate of
two per cent per month on income tax not withheld 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;
 As per section 57 (2) of the ITO 1984. DCT may take necessary action for realization of tax not
withheld along with additional amount payable under section 57 (1) (b).
In addition, as per section 30 (aa) of the ITO, 1984, the amount from which income tax has not been
withheld may be disallowed by the Deputy Commissioner of Taxes (DCT) and the tenant will thus be
exposed .
Therefore. I would advise ABC Ltd. (not applicable for Mr. Y and Mr. Z as they are not deducting
authority) to deduct tax at source @5% from the rent paid and to deposit tax so deducted at source within
the stipulated time in order to avoid the consequences laid down in section 57 of the ITO, 1984 and to get
the amount so paid as allowable business expenditures.
8 Mr. X has constructed a 3-storied building with a loan of Tk.60 lakhs from
Sonali Bank Ltd. The construction was completed in November 2017. His loan Nov
account was debited by the bank with loan interest as follows: Dec
July 2015 to June 2016 Tk. 6 lakhs 2014
July 2016 to June 2017 Tk.10 lakhs
July 2017 to November 2017 Tk. 6 lakhs
You are required to advise whether Mr. X will be entitled to any deductions
for the above loan interest amounts to arrive at his total income for the
purpose of income tax. While giving your advice, consider the rental income
as in (b) below, if relevant.
As per section 25(1)(gg) of the Income Tax Ordinance, 1984, if any house property has been
constructed/reconstructed with a loan from any bank or any financial institution and there was no income
earned during the period of such construction, the interest on such loan shall for the construction period
be allowed as a charge in three equal proportionate instalments for subsequent, first three years for
which income is assessable from that property. Mr. X has constructed the building with a loan from
Sonali Bank and no income was earned up to the income year ended 30 June 2016. Mr. X is thus
allowed to get the deduction of interest payable (up to 30 June 2016) on such loan in three equal
proportionate instalments against first three subsequent years‟ income from the said house property.
Interest accrued up to 30 June 2016 can be determined as below:
Period Figure in Tk. (lakhs)

July 2015 to June 2016 6
July 2016 to June 2017 10
Total interest during this period 16
I would, therefore, advise Mr. X to claim the deduction of such interest amounting Tk.5.33 lakhs (Tk.16
lakhs/3) against annual value of the said house property for each of the income years 2016-17,2017-18
and 2018-19.
In addition Mr. X will get full deduction of the interest (of TK.6 lakh being interest) for the income year
2016-17 under section 25(1)(g)against the income earned during that period as evident from question
3(b).
In case the net result of computation of income from house property is a loss in the income year 2016-17 (or
any other year), Mr. X is entitled to set off such loss against his income, if any. assessable for that income
year (i.e., relevant assessment year) under any other head under section 37.
9 You are a Tax Advisor of ABC Ltd. Mr. Kabir, the Chief Financial Officer Nov
(CFO), of the company has sought your advice for an effective and efficient Dec
business tax planning and techniques to provide the assessee with maximum tax 2014
advantage. It has got 5(five) directors and 10(ten) salaried employees who are
individual assessees.
In response to the request of the CFO you are required to explain some effective
business tax planning techniques conducive to ABC Ltd.
(i) As an individual tax payer for its directors & employees. 5

(ii) As a business organization 5
Date:26th June 2018
Mr. Kabir
Chief Financial Officer
ABC Ltd
Subject: Opinion regarding tax planning & technique.
Dear Sir,
We are submitting the following suggestion which will lessen your tax burden complying present tax
law:
(1) Regarding personal income tax of directors & employees —

(a) Directors should draw monthly/yearly director‟s remuneration from the company which will
reduce the net profit of the company.
(b) Director‟s remuneration should have break up like basic salary, house rent allowance, bonus,
medical allowance, conveyance allowance so that their tax burden comes down due to the
exemption admissible in rule 33A,33I,33C.
(c) Directors may invest in life insurance premium, deposit pension scheme, sanchaypatra, shares
of listed company. This will enable them to get investment tax rebate @15% on investment.
However investment should be up to the limit of 30% of income or Tk. 1,50,00,000.
(d) Employee‟s salary should not be gross. Instead it should have break up like basic salary, house
rent allowance, bonus, medical allowance, conveyance allowance, rest & recreation
allowance, so that their tax burden comes down due to the exemption admissible in rule
33A,33I,33C,33G.
(e) Employee‟s provident fund is to be introduced. Recognition of which may be obtained from
concerned Commissioner of Taxes.
(f) Employees may invest in provident fund, life insurance premium, deposit pension
scheme, sanchaypatra and shares of listed company. This will enable them to get
investment tax rebate @15% on investment. However investment should be up to the limit
of 30% of income or Tk. 1,50,00,000.
(2) Regarding corporate income tax of your company —
(a) Directors should draw director‟s remuneration of the company which will reduce the net profit of
the company.
(b) Company may introduce provident fund for employees. Which should obtain recognition
from concerned Commissioner of Taxes. Contribution of company in such, being admissible expense
and will reduce its tax burden.
(c) Company should not give perquisite in excess of Tk. 350,000 in a year to any employee.
(d) Company should explore export business. Which will reduce tax burden of export business by 50
% under paragraph 28 of part A of Sixth Schedule.
(e) Company should invest in industry which is illegible for tax holiday under section 46B.
(f) Company should invest in poultry, dairy etc. which is exempt from tax.
(g) Company should strive to enjoy tax concession under SRO No 185-ain/2014 dated 01/07/2014.
(h) Company should prepare to enlist itself with Bangladesh Securities and Exchange Commission so
that it can enjoy favorable rate of tax.
(i) In case the company is engaged in a business where tax is deductible from its receipt and such tax
deducted is final discharge of tax liability under section 82C, separate accounts is to be maintained
for such business.
Tax Advisor
10 Your firm has assigned you the responsibility of tax planning for its clients, and May
has recently referred the following case to you for your advice: Jun
2014
ABC Ltd is a private limited company, expecting to generate a net profit before
tax of TK. 2 crore in the accounting year ending 30 June 2017. The company
needs to purchase a motor vehicle and a general purpose machine, costing Tk. 30
lac each, within a period of maximum another forty days. As on 12 June 2017,
ABC Ltd. has a surplus fund of Tk.30 Lac which it can now either invest in FDR
at 10% p.a. interest for one month or use in purchasing any of the above two
fixed assets. The motor vehicle can be put in use within 5 days from the date of
purchase. But the machine cannot be put in use before the third week of July
2017. The company is expected to generate at least an additional surplus fund of
Tk. 30 lac in the second week of July 2017. The company‟s paid – up share
capital is Tk. 5 crore.
What should the company do with Tk. 30 lac additional fund currently in hand,
giving due consideration to the opportunities of tax savings and additional income?
Your advice should be assumptions, if required. 4
Option-1
Interest income from FDR 15,833
Corporate income tax payable @ 37.5% (5,938)
Net Benefit 9,896
Option-2
Investment in Vehicle 3,000,000
Eligible amount for depreciation allowance 2,000,000
Eligible normal tax depreciation @ 20% 400,000
Eligible initial tax depreciation @ 25% 500,000
Total depreciation 900,000
Tax savings on depreciation @ 37.5% 337,500
Option-3
It appears that the machine will be available for use after 30 June 2017 and not recognizable in the

financial statements before 30 June 2017. ABC Ltd will not be eligible for any depreciation allowance
in this regard.
Decision:
Considering the impacts of the above options, it appears that investment in vehicle would be most
beneficial.
Regulators provisions:
As per paragraph 11 (6) (a) of the Third Schedule of the ITO 1984, income tax depreciation is allowed
on maximum value of Tk. 2,000,000 for sedan car and passenger vehicles not plying for hire.
It is assumed that the vehicle falls under this category.
11 Nov
Comment on the following two scenarios:
Dec
Scenario-1: 2014
A company wants to raise capital of Tk.20,00,000 for a project where earning
before tax shall be 30% of the capital employed. The company can raise debt
fund @12%. Suggest which of the following 3 alternatives should it option for.
(a) Tk.20,00,000 to be raised by equity capital.

(b) Tk.16,00,000 by equity and Tk.4,00,000 by loan.
(c) Tk.4,00,000 by equity capital and Tk.16,00,000 by loan.
Assume the company shall distribute the entire amount of profit as dividend
while income is subject to tax rate of 30%. Tax on dividend is 15% plus 3%
additional tax on tax amount and 10% surcharge on tax.
Scenario-2:
What will be the option, if the earning before tax is 10% of capital employed.
Analysis of scenario - 1:
[Figures are in Taka]
(a) (b) (c)
Equity share capital 20,00,000 16,00,000 4,00,000
Debt capital - 4,00,000 16,00,000
Total investment 20,00,000 20,00,000 20,00,000
Earnings before interest and tax (EBIT) 30% 6,00,000 6,00,000 6,00,000
Less: Interest on debt @ 12% - 48,000 1,92,000
Earning before tax (EBT) 6,00,000 5,52,000 4,08,000
Less: Tax @ 30% + 3% Additional tax 1,85,400 1,70,468 1,26,072
Dividend available 4,14,600 3,81,532 2,81,928
Less: Tax @15% + 3% + 10% on dividend to 60,226 55,408 40,954
be distributed
Amount available for distribution 3,54,374 3,26,124 2,40,974
Return on equity share capital 17.788% 20.382% 60.243%
Analysis of scenario - 2:
[Figures are in Taka]
(a) (b) (c)
Earning before interest and tax (EBIT) 10% 2,00,000 2,00,000 2,00,000
Less: Interest on debt @ 12% - 48,000 1,92,000
Dividend available 2,00,000 1,52,000 8,000
Tax on income @30% + 3% 61,800 46,968 2,472
Gross dividend inclusive of tax 15% + 3% Tax on 1,38,200 1,05,032 5,528

Tax + surcharge @ 10%
Less: Tax on dividend 20,075 15,257 803
Net dividend distributable 1,18,125 89,775 4,775
Return on equity share capital 5.906% 5.611 % 1.181%
Comments on two scenarios:
The above two scenarios make it clear that the existence of securities being fixed rate of return in capital structure.
It has magnifying effect from earning after tax. It also clears from the second scenario that shareholders suffer to
a great extent.
* Tax rate on profit is 30% + 3% Additional tax (applicable on tax payable). i.e. 30.90%
** Tax on dividend @ 15% + 3% Additional tax (applicable on tax payable)

+ 10% surcharge. (applicable on tax payable) i.e. 16.995%.
2014
Mrs. A is 66 years old and her total income for tax purposes for the income year
2016-2017 is estimated to be TK. 40,00,000/=. Currently she has idle fund of Tk.
18,00,000 /= lying in her bank account (current account). She reckons that on 30
June 2017 she will have the same amount of idle fund in hand, and that she will
have more idle fund in hand during the next five income years.
Now she is considering making investments as follows:-
(i) 5 -year FDRs at an interest rate of 13% p.a.; or/ and
(ii) 5- year savings certificates (Bangladesh Sanchaya Patra) with an
average interest rate of 12% p.a.
Since FDR interest rate is higher, Mrs. A wants to invest the entire amount of TK.
18,00,000/- in 5-year FDRs. In any case she is not agreeable to invest in any other
type of asset except for the above two. She has not made any investments in the
income year 2016-2017.
Where should Mrs. A invest? How will Mrs. A be benefitted if she follows your
advice? Your advice should be based on the current provisions of Income Tax
Ordinance 1984 and its Rules and the earnings potential. The compounding of
interest is done on yearly rest in both the cases. Ignore time value of money.
Investment decision can be taken considering the net proceeds to Mrs.

A. Savings
FDR Certificate
Total Matured Fund 3,316,383 3,172,215
Principal Amount 1,800,000 1,800,000
Interest Accrued 1,516,383 1,372,215
Tax payable on interest (200,346) (169,443)
Saving from investment tax credit (AY 2017-18) - 180,000
Net proceed from investment decision 1,316,037 1,382,772
Additional proceed from investment in savings certificate 66,735
Tax payable on interest

Amount Slab Rate
On first Tk. 275,000 0% - -
On next Tk. 300.000 10% 30,000 30,000
On next Tk. 400,000 15% 60,000 60,000

On next Tk. (500,000 and 20% 1,00,000
397,215) 79,443
On remaining Tk 41,383 25% 10,346
200,346 169,443
Investment Tax Credit

Investment tax credit is allowed up to
30% of total income 1,200,000
Actual Investment 1,800,000
Maximum Limit 15,000,000
Lower one is eligible for investment tax credit. So eligible amount is Tk. 1,200,000
Assumptions
1. Assumed that Mrs, A will make investment by 30 June 2017.
2. Interest income will be assessable in the assessment year corresponding to the year of maturity.
ABC Ltd. is a parent company of a group of private limited companies 2014
comprising three companies. The other two companies are DEF Ltd. and GHI
Ltd. Mr. X, FCA holds 1% shares in DEF Ltd., and is also a director of the
company. He does not hold any share in ABC Ltd. and GHI Ltd.
It has been decided that Mr. X will be employed by the Group as the group
CFO with effect from 1 July 2017 at a gross monthly salary of Tk. 1,80,000/=
per month plus 2 festival bonuses, each bonus being one month‟s full basic
salary. He will not get any other benefit. He will work for all the three
companies.
Currently Mr. X lives in an apartment at Gulshan at a rental of Tk. 50,000/= per
month. He also pays common service charges of Tk. 5,000/= per month. He
will continue to live in the same apartment. Mr. X confirms that he spends on
an average Tk. 2,000/= per month on medical expenses for himself and his
dependent family members. He is 55 years old.
You are required to advise as to how the gross monthly salary should be broken
down into basic salary and allowances so that the tax expenses are minimized to
an optimum level, considering the interests of both the employee and
employer(s). Your advice should be based on the current provisions of Income
Tax Ordinance 1984 and its Rules.
An effective salary tax planning involves providing the maximum benefits to the employees of an
organization considering the maximum allowable limit of perquisite of Tk.350,000 under Section 30 ( e) of
the Income Tax Ordinance (ITO) 1984.
From the information given in the question it appears that though Mr. x holds 1% share in DEF Ltd and
a director of the company. He is not director of any of the other companies under the group. As such, in
presence of employer-employee relationship he is eligible for exemptions allowed under Rule 33 (2)
(b) of the Income Tax Rules (ITR) 1984. It is beneficial to split his monthly salary among the three
companies. As per Section 2 (45) of the ITO 1984, festival bonus is excluded from the ambit of
perquisite and fully taxable under Rule 33J of the ITR 1984. So festival bonus is not relevant
information here.
ABC DEF GHI Total

Gross salary receivable 60,000 60,000 60,000 180,000
Festival Bonus 75,778 75,778 75,778 27,333
Break up of Gross salary 60,000 60,000 60,000 180,000
Basic Salary 37,889 37,889 37,889 113,667
House rent allowance 18,944 18,944 18,944 56,833
Conveyance allowance 1,500 1,500 1,500 4,500
Medical Allowance 1,667 1,667 1,666 5,000
Required documentation:
Each company should provide separate appointment letter to Mr. X, FCA
17 ABC Private Ltd. manufactures and sells float glass boat. Paid-up capital of the May
company is taka 1,00,00,000(10,000 shares of taka 1,000 each) held by Mr. A(60%), June
Mr. B(20%) and Mr. C(20%). Mr. A acquired 6,000 shares from B and C for taka 2017
65,00,000/= in June 2015. Key extract from Balance Sheet on 31.12.2016 are: P/up
capital 1,00,00,000, Accumulated Surplus 17,00,000, Cash at Bank 2,00,000, Cash In
Hand 3,00,000.
Mr. A holds technical expertise of float glass boat making. Boats are sold to Coast
guard, Bangladesh navy, and private theme parks. Migrated to Canada three years
ago, Mr. A cannot run business any more. Other shareholders are not capable to run
the business. They decided to wind up the company per EGM on 31-12-2016 which
appointed you a Liquidator. Company commenced winding-up based on balance
sheet of 31-12-2016. Company obtained tax clearance with no tax liability.
Liquidator‟s Receipts & Payments on 31-03-2017:
ABC Private Ltd.(Under Members Voluntary Liquidation)

Liquidators’ Receipts & Payments Account
Receipts Payments
Opening Balance(bank) 2,00,000 VAT/TDS paid 1,00,000
Opening balance (cash) 3,00,000 Payable settled 2,00,000
Receivable collected(all) 10,00,000 Office expense paid 2,00,000
Sale of boat stock(all) 25,00,000 Liquidator fee paid 3,00,000
Paid to shareholders
including TDS on cash
dividend 32,00,000
----------- ------------
40,00,000 40,00,000
In addition to the above receipts and payments, Liquidators distributed entire stock
of fixed assets to the shareholders in proportion to their shareholding at a market
value of taka 75,00,000. Considerations to shareholders have been made in
proportion to their share holding.
Fixed assets that Mr. A got upon liquidation are mostly open boat yard and
equipments. Mr. A is in talk with a buyer of those assets and agreed to an offer at
taka 62,00,000/= for his entire portion of the ABC Ltd. assets. Mr A is unsure about
the taxability of such sale deal and whether he can take out the proceeds to Canada.
Status of Mr. A is a non-resident Bangladeshi.
Requirements:
a. What is the compliance obligation of the Liquidator in ref to the relevant
section of Income Tax Ordinance 1984? Can a Liquidator be treated as
Principal Officer of the Company?
b. Compute income and tax implication of Mr. A for the considerations he 1
received upon liquidation. 0
c. Write your views in ref to the provisions of the Ordinance about (i) taxability
on the company on the distribution of assets to shareholders upon liquidation,

(ii) tax implications of the sale of assets by Mr. A he got from ABC Ltd. upon
liquidation.
Answer:
a) A Liquidator shall send notice about my appointment to the DCT of respective company circle
within 30 days of my appointment u/s 101(1). On being notified by the DCT u/s 101(3), the
Liquidator shall set aside amount equal to the amount on notice and shall not part with the assets of
the company excepting the preferential payments as per law.
As per section 2(48)(b) of 110,1984 the Liquidator may be treated as Principal Officer of the
company If the DCT served notice of his intention to treat him as Principal Officer. After all the
affairs of liquidation are vested on the Liquidator and upon getting notified by the DCT u/s 101(2),
Liquidator very much lands in the shoes of Officer or manager of the company. This binds him to
comply with TDS obligation on the payments and income, if any, during the liquidation process at his
disposal. There may still be collections of taxable income and payments of expenses subject to TDS.
Ordinary liability of the company continues on the Company under Liquidation and so on the
Liquidator. This binds the Liquidator to comply with all applicable provisions including TDS and file tax
return if any due until the end of the winding up process.
b) Tax Consequence in the hands of Mr. A on considerations from ABC Ltd.
Income year: 2016-17. Assessment Year: 2017-18
Proportion of
Total Sum TAKA
A
Money received upon liquidation 3,200,000 60% 1,920,000
Assets received upon liquidation (market value) 7,500,000 60% 4,500,000
Total Consideration of Mr. A 6,420,000
Less: Amount as deemed dividend u/s 2(26)( c) 1,700,000 60% 1,020,000
[Pro-rata of the Accumulated Surplus on 31-12-16]
Consideration to be treated as capital assets transfer upon 5,400,000
liquidation
LESS: Costu/s of32
Acquisition u/s 32(2)(d) 6,500,000
CAPITAL GAIN on consideration received - Loss (1,100,000)
FROM THE ABOVE COMPUTATION:
Capital Gain upon liquidation U/S 32 - LOSS (1,100,000)
Dividend Income upon Liquidation U/S 2(26)(c) ,(33) 1,020,000
TAX IMPLICATIONS ON Mr. A:
Dividend income taka 10,20,000/= shall be taxed u/s 33(Other Source)
Mr. A shall satisfy discharge of tax liability on dividend income with the TDS evidence from the
company. Loss under Capital Gain can be set off against income under same head in same year u/s 37
or to be carried forward u/s 40.
The claim of loss under Capital gain can be taken in the year in which affairs of the winding up are
complete.
(c)
[1] Company is not liable to capital gain tax on the distributions of assets to the shareholders upon
liquidation. Gains made by the liquidator on sale of company‟s assets with the object of proceeds
distribution to the shareholders are assessable in company. Company (Liquidator) is liable to comply
with TDS as applicable u/s 54 of the Ordinance on the distribution of dividend, if any, upon
liquidation.
[2] Mr. A got consideration of capital assets for taka 54,00,000/= net from ABC Ltd. upon liquidation
based on the market value on distribution.
This distribution of capital assets resulted into a capital loss taka 11,00,000 in the hands of Mr. A. Mr. A
entitles right to claim set off and carry forward of this loss under Capital Gain. He subsequently reached an
agreement to sell these assets to a buyer for taka 62,00,000.
Difference of market value of capital assets received from ABC Ltd. (Taka 54,00,000/=) and Sale
price (62,00,000) is taka 8,00,000 excess.
Mr. A shall be subject to assessment for this excess (gain) of taka 8,00,000/=. He was taxed on the
assets earlier based on market value.
Mr. A can set off earlier loss under Capital Gain (taka 11,00,000) against this Capital Gain of taka
8,00,000/=.As the carry-forward loss is higher than the gain, the net effect is still a carrying loss
under Capital Gain. So, no tax on gain of taka 8,00,000/=.Mr. A should file tax return, get assessed
and obtain clearance. Remittance of the tax-cleared proceeds is subject to Central Bank permission.
18 ABC & Co. (“Firm”), Chartered Accountants, acts as tax consultant of XYZ Ltd. Nov
(“Company”), a private limited company incorporated in Bangladesh. You are a Dec
Chartered Accountant and working as Tax Partner of the Firm. XYZ Ltd. is a 2016
subsidiary of a parent company incorporated in the UK. The Chief Financial
Officer (“CFO”) of the Company has requested you through an email to advise the
Company on the following issues in view of the amendments made by the Finance
Act, 2016:
a) The Company imported goods of Tk.4,000,000/= and tax was collected at the
import stage at the rate of 5% during the income year ended 30 June 2017. The
annual turnover of the Company is Tk.7,500,000/= and disclosed profit in the
financial statements is Tk.800,000/=. Assume that there is no disallowances of
expenditure under section 30 of the ITO, 1984, and depreciation allowances
are claimed as per the provisions of the 3rd Schedule of the ITO, 1984. How
will minimum tax be computed?
b)What would be the delay interest if the Company submits return of income
for the assessment year 2017-2018 on 15 March 2018 upon making payment
of tax payable on the same date?
c)Mr. P is a supplier of the Company and has 12-digit TIN. He supplied
stationeries of Tk.1,800,000/= and Tk.2,000,000/= on 20 July 2017 and
01 October 2017 respectively.. Compute the amount of tax deductible at
source and payment to be made to Mr. P for the supply dated 01
October 2017.
d) In the situation stated above under (b), what would have happened
if the income of XYZ Ltd. had been exempted from tax or subject to
reduced rate of tax?
(e)The financial year of the parent company of XYZ Ltd. is closed on 31

December. Is it possible for XYZ Ltd. to follow the income year from 01
April to 31 March?
Requirement:
Prepare a report for XYZ Ltd. providing computation/opinion on the
aforementioned issues based on the relevant changes made through the
Finance Act, 2016.

The Chief Financial Officer
XYZ Ltd.
Dhaka, Bangladesh 10 December 2017
Dear Sir:
Opinion on the issues referred by the Company from the perspective of relevant changes made through the
Finance Act, 2016
I n r e s p o n s e t o yo u r e m a i l d a t e d - - - - 2 0 1 7 , w e a r e p r o v i d i n g b e l o w o u r
professional opinion on the issues referred by you:
(a) Computation of Minimum Tax: Annex-1
(b) Computation of Delay Interest: Annex-2
(c) Amount of tax deductible at source and payment to be made: Annex-3
(d) Effect on tax exemption or reduced tax rate:
Sub-section (5) has been inserted under section 44 of the ITO, 1984, through the Finance Act, 2016.
According to the newly inserted provisions, the income of a person for the relevant income year shall not be
exempted from tax or be subject to reduced rate of tax in an assessment year if the person fails to submit the
return of income, as required under section 75 of the ITO, 1984. Every return under section 75 shall be
filed, unless the date is extended, on or before the Tax Day. The last date for the submission of a return for
a person may be extended by the DCT upon the application by the person in the prescribed form. Provided
that the DCT may extend the date up to two months at his own capacity and he may extend another two
months with the approval of the IJCT.
In light of the above, the Company would not be able to enjoy any exemption from tax or reduced tax
rate if the time for submission of return of income had not been extended after expiry of Tax Day, i.e., 15
January 2018.
(e) Different Income Year:

Generally, income year is the period of 12 months commencing from 01 July of the relevant year. Bank,
insurance or financial institution or any subsidiary of foreign company may follow income year from January
to December. A proviso has been added to the definition of “income year” through the Finance Act, 2016.
According to the new provision, the DCT may allow a different financial year for a company which is a
subsidiary or holding company of a parent company incorporated outside Bangladesh if such company
requires to follow a different income year for the purpose of consolidation of its accounts with the parent
company
In the case under discussion, the closing date of the parent company is 31 December and the
intended closing date of XYZ Ltd. is 31 March. The DCT may reject the application for change
of income year of XYZ Ltd. as the intended date, i.e., 31 March, would not justify that the
purpose of change of income year is to consolidate its accounts with the parent company.
Disclaimer:
If there is any contradiction between our views/opinion provided in this report and judgment of a
court of law or official publication/decision of any competent authority of the government of
Bangladesh on the subject matter, the latter shall prevail.
Should you have any further queries in this regard, please feel free to contact us.

Yours faithfully,
Partner
Annexure-1
XYZ Ltd.
ETIN:
Computation of Minimum Tax
Assessment Year 2017-2018 (income year ended on 30 June 2017)
Tk.
Minimum tax on income from business relating to import: (A)
Value of Import 4,000,000
Tax collected at source at import stage (@ 5%) 200,000
Income disclosed in the financial statements 800,000
Tax determined in regular manner (@ 35%) 280,000
In this case, minimum tax shall be 280,000
Minimum tax on gross receipts: (B)

Gross receipts 7,500,000
Minimum tax on gross receipts (@0.6%) 45,000
Minimum tax for XYZ Ltd. shall be the higher of (A) & (B) 280,000
XYZ Ltd. Annexure-2

ETIN:
Computation of Delay Interest
Assessment Year 2017-2018 (Income year ended on 30 June 2017)
Minimum tax payable as per answer to the question no. 2 (a) 280,000
Tax collected at source at import stage (g) 5%) 200,000
Difference 80,000
Tax Day for XYZ Ltd. 15 January 2018
Date of Submission of Return 15 March 2018
Delay Interest:
Monthly 2% Interest on Tk. 80,000 for 2 months 3,200
Annexure-3
XYZ Ltd,
ETIN:
Computation of Tax Deduction at Source Tk.
Base Amount:
Contract Value Nil
Bill for the supply dated 01 October 2017 2,000,000
Tk.
Total amount for supplies on 20 July 2017 and 01 October 2017 3,800,000
Hence, base amount 3,800,000
Rate of TDS applicable to base amount 4%
Amount of tax deductible at source 152,000
Tax already deducted from supply of stationeries on 20 July 2017 (@3%) 54,000
Amount of tax deductible at source from the bill dated 01 October 2017 98,000
1,902,000
Amount payable to Mr. P in connection with bill dated 01 October 2017
20 The cost of a machine owned and used by ABC Ltd. for business purposes was May
Tk.40,000,000 and its written down value was Tk.5,368,709 as on 30 June 2016. June
The machinery has been discarded on 10 June 2017. The scrap value is likely to be 2015
Tk.10,000 only. ABC Ltd. management intends to disposed of the machine in
August 2017.
Requirement:
Will ABC Ltd. get more tax relief all together for the machine in the
assessment years 2016-17 and 2017-18 if the machine is disposed of in June
2017 instead of in August 2017? Advise.
As per sub-Section 1 (xi) of Section 29 of the ITO, 1984, an obsolescence allowance is allowed in the
manner specified in paragraph 10 the Third Schedule of the ITO, 1984, where any building,
machinery or plant which has been discarded, demolished or destroyed in any income year or any
such asset has been sold, transferred by way of exchange after having been used for the purpose of
business or profession. As per paragraph 10c of the ITO, 1984, where the sales proceeds are less than
the written down value of the asset, the deficit shall be deemed to be an expenditure and deductible from
the profits and gains of business or profession of that year. The term ‘sales proceed’ has been defined in
sub-paragraph 3(f) of paragraph 11 of the Third Schedule of the ITO, 1984. As per sub-paragraph 3(f) of
paragraph 11 of the Third Schedule of the ITO, 1984, where the asset ceases to be used by the assessee for
the purpose of business or profession, sales proceed means the fair market value at the time of
such cessation. Provisions of the ITO 1984, do not delimit itself to the physical disposal of the asset
rather it also includes cessation of the assets from their effective use.
In addition, in respect of the building, machinery or plant which is wholly or partly discarded or
demolished or destroyed, the allowance can be granted only for that income year in which the building,
machinery or plant has actually been discarded or demolished or destroyed. Since this Section applies
only if the property is used in the relevant income year, where a property is discarded in one year and
sold in a subsequent year, the assessee must claim the allowance in the year in which the property is
discarded and cannot wait until the property is sold and claim the allowance in subsequent year in which
the sale takes place.
However, as per paragraph 10 (1) of the Third Schedule of the ITO, 1984, no allowance for depreciation is
allowable in the year of disposal.
Assessment Year: 2016-17 Taka Taka
Depreciation allowance (not eligible) -
Obsolescence/balancing allowance (eligible)
Written down value as at 1 July 2015 5,368,709
Scrap Value (fair value) (10,000)
Loss on disposal of assets 5,358,709
Income tax relief (5,358,709*35%) 1,875,548
Assessment Year: 2017--18

No depreciation allowance is allowable on machinery once it's sold or discarded. Similarly once loss
on disposal is allowed in the year of disposal, the assessee will not get any tax benefit in the year after
disposal. As such ABC Ltd. will not get any benefit in the Assessment Year 2017-18.
The loss on disposal of the machinery shall be considered on the point when the machinery has been
discarded. As such, if the physical disposal is done in June 2017 instead of August 2017, it will not
bring about any difference.
24 Captain Tausif U. Khan, a Bangladeshi young man, a successful RMG entrepreneur May June
well-known in the selected EU customers network, operates following business units 2017
in Bangladesh (a,b,c being private limited companies):
d) TUK and Partners (the Firm. Captain Khan‟s share 60%, balance with three friends)
e) TUK Singapore Limited (100% held by Captain Khan). TUK UK Ltd. (100% held
by Captain Khan)
Captain Khan is the MD of the limited companies in Bangladesh and only director in
companies in UK and Singapore. TUK BD Ltd. secures export orders from EU retailers
from Bangladeshi suppliers.
Captain Khan, living with his parents in Dhaka until he permanently migrated to UK with
his family in 2016. As condition of migration, he set up „TUK UK Ltd‟ during the relevant
income year in UK. He bought an apartment in London. Captain Khan qualifies for UK tax
residency in 2016-17(ending 05.04.2017). He also qualifies for tax residency for the same
income year in Bangladesh (2016-17, ending 30.06.2017). Captain Khan provided following
information affecting the income year 2016-17:
i) He received total taka 30,00,000 (net of tax) tax-paid remuneration from three
Bangladeshi limited companies.
iv) Remuneration receivable from TUK and Partners (the Firm) taka 2,50,000 for
the income year ended 30.06.2016. In the income year ended 30.06.2016, the
firm made net loss taka 3,00,000.
v) Interest received on Resident Foreign Currency Deposit A/c (RFCD) equivalent
Taka 25,000 net of tax.
vi) Singapore company paid his salary US Dollar 120,000/=. Of this, the company
remitted USD 50,000 to his London bank a/c to meet his London living and
remitted USD 50,000 to his Dhaka bank a/c to make up the shortfall of funds to buy
a plot of land(Exchange rate Taka 80 to USD; USD 1.25 to GBP; Taka 110 to
GBP).
vii) He received compensation of taka 10,00,000 from a developer for
cancellation of an apartment-buy contract and his default penalty clause of
taka 10,00,000 in a land-buy agreement with a land seller has been waived to
his favour.
viii) Paid Tk. 2,00,000/= interest on loan he took to buy a car and income tax Tk. 50,000 paid
on fitness renewal.
ix) He paid GBP 5,000 net income tax in UK after Singapore tax relief and USD 20,000
tax in Singapore.
x) He sold his 9% share in TUK &Partners(Firm) for amount with a gain of taka
10,00,000/-. He invested full amount of gain in shares in a private limited
company in the same month.
Captain Khan has issues for decisions which he wants to discuss with you (Exhibit 1).
Requirements:
Write an opinion letter to Captain Khan detailing the tax planning advices in the light of the
provisions of I.T. Ordinance 1984 touching all issues raised by him in the
Exhibit 1.
EXHIBIT 1
(In connection with Question No. )
1. Captain Khan wants to engage a full-time expatriate CEO (an Indian, now

working at a retailer sourcing office in UK) to oversee his Bangladesh
business. They agreed on a monthly salary of US Dollar 5000/= all-in plus tax
on company and the expatriate is free to join subject to work permit. How to
split monthly sum into pay components and when the expatriate should be
asked to join so as to have lowest tax exposure for the company in Bangladesh?
2. Captain Khan received Taka 36,00,000 tax-paid salary from his Bangladeshi
companies during the year ended 30.06.2017. He filed own tax return claiming
credit of the tax paid by the company on his salary. Assessing Officer (AO) issued
order adding taka 600,000(tax paid by company) to his personal expenditure (IT
10BB) creating tax demand on the ground of undisclosed expenditure (the tax paid
by companies). What is the validity of AO‟s action and next course?
3. Captain Khan is mulling the option of creating a website within his UK
company. Primary objective of the site is to sell space to Bangladeshi RMG
suppliers to advertise their products for EU customers on payment of agreed
rental to Captain‟s UK company. Idea appears promising. He wants to be sure
about tax exposure for his UK company in Bangladesh for earnings from
Bangladeshi customers (Bangladeshi companies will pay from permitted forex
quota).
To
Captain Tausif U Khan
In reference to your tax issues embodied in Exhibit 1 of your letter, we are pleased to inform following tax opinion:
1. As the salary tax is on the company, we understand, you want to keep the tax exposure on in-talk Indian
expatriate as low as possible. To achieve this, attention should be given to available tax-free allowances for
individual (being a resident), maximum perquisite limit binding on the company and tax-paid salary remit
ability by the expat to his home. Approx monthly salary split can be offered as:
Basic salary USD 4,500

House rent allowance USD 330
Conveyance allowance USD 40
Medical allowance USD 130
Total Monthly USD 5,000
To keep the salary tax lower, expat should be engaged officially in Bangladesh so as to enable him qualify tax
residency. For this reason, expat can be asked to join from July 2017 white formalities of his work permit can be
accomplished by the time prior to that.
2. Action of Assessing Officer is not correct. You received tax-paid salary from companies as per the
terms of your employment. The tax was paid by the companies, not by you. There is no „deduction of
tax‟ here in this case u/s 50. This is perquisite in the hand of the company. There is no impact of your
cash flow. That claiming credit of the tax on company‟s tax-paid salaries cannot be legally termed as
your expense. Tax amount cannot be added to your personal expenditure as it is not paid by you. Better
you can prefer an appeal for deletion of such unlawful addition
3.Orders for renting the website shall be received directly in UK. The contract for renting your
company‟s website by Bangladeshi customers is considered to be executed in UK. Business is
transacted in place where contracts are executed. We assume that you will continue to remain in UK as a
condition of your migration program and you will control and manage UK Company from being there in
UK. In that case, TUK UK Ltd. shall be a resident company, non-resident in Bangladesh. We also
assume, UK Company shall not operate any PE in Bangladesh to source and manage customers in
Bangladesh. Website rental payments shall be paid by the Bangladeshi customers in remittable foreign
currency directly to UK Company. Business is transacted in the local in which the contracts pertaining to
business transactions are concluded. Under these circumstances, TUK UK Ltd. shall have no tax
liability in Bangladesh for profits arising to UK from website earnings from BD customers.

5. VAT & Other Taxes
S.L Question Year

1 What will be the consequences of failure to deduct VAT and to pay the same tothe Nov Dec
credit of the Government in the above cases? 2010
2 Give some argument for and against Value Added Tax (VAT). May Jun 2011
Argument For VAT:
Proponents of VAT give a number of arguments as to the merits of VAT. Some of the Important Points are given
as follows:-
(i) It increases the cost of consumption, thus stimulating savings and investment.
(ii) The government gets its money earlier; it does not have to wait until after the final sale.
(iii) It is used to stimulate exports; the exporter gets 100% rebate for the tax paid.
(iv) Importers pay the VAT based on the prices of their imports. The tax is paid on goods purchased, whether
manufactured domestically or imported. Thus imported goods are not given an advantage over locally
manufactured products.
(v) It catches service companies, which historically have been exempted from sales taxes. A service company
shall charge tax to its customers in order to recover the tax paid on its purchases of supplies and equipment.
(vi) It opens up avenue for collection of more revenue for socio-economic development of a country.
(vii) Its scope is wider and resists distortion in production and consumption.
(viii) It provides a good system of rebate and refund which prevents tax on tax.
(ix) It provides a psychological advantage to the tax payers in that the tax payers pay out in installment.
Arguments Against VAT:
i.Increase of price level: When VAT imposed the price of the articles also increase.
ii.Increase of service price: When VAT imposed on the services the price increases of the services more
than the proportion.
iii.Increases of production cost of small industries: When VAT imposed on handicraft and smallindustries
their production cost increases.
iv.Burden on poor people: VAT burdens the poorest and least influential sections of society more than other
forms of tax. As the poor have lower incomes, more of their income is consumed by consumption. The
higher the prices of consumption goods, the less money that the poor can save, and the less able they are
to improve their conditions.
v.Expensive to business men: It increases the expenses of businessmen because they have to keep regroup
books and accounts for this purpose.
3 What are the duties and responsibilities of VAT assessee? May Jun 2011
A VAT assessee needs to pay tax, maintains account and document properly. To this end his duties and
responsibilities are as follows:-
i) To ascertain tax liability through current account at the time of supply of goods and deposit relevant tax to
the exchequer.
ii) To submit VAT return and to pay VAT on time;
iii. To fill up and make entry in current account, purchase and sale account and transfer the relevant items in
concerned books and documents periodically.
iv. To deposit relevant books and account to tax authority in due time.
v. To keep in safe custody all accounts and books relevant to VAT at least for 4 years.
vi. To produce relevant books and account to tax authority.
vii. To allow tax officials to enter into his business promise.
viii. To maintain invoice to ensure refund and rebate of tax.
ix. To supply invoice to purchaser at the time of supply of goods.
4 What books of accounts are required to be maintained under VAT Act and Rules? May Jun
2011
The following books and documents shall be maintained by a VAT tax payer:-
(a) Purchases Register in Form VAT-16;

(b) Sales Register in Form VAT-17;
(c) Current Account in Form VAT-18;
(d) Invoices in Form VAT-11 or 11A;
(e) Paid Treasury Challans;
(f) VAT Return in Form VAT-19; and
These books and documents shall be maintained for at least 4 years.
5 What are procedures of VAT Registration? May Jun 2011
Procedures of Registration under VAT: Sec 15
1) A supplier of taxable goods, provider of taxable services, importer, exporter of goods and service shall be
registered with the concerned VAT officer in accordance with the procedures prescribed by Rule of this
VAT Act.
2) If any person supplies taxable goods or render taxable services or carries on import-export trade from two
or more places, he shall be registered separately for each place.
3) If the concerned VAT officer is satisfied that the application for registration is in order in all respects, he
shall register the applicant and issue a registration certificate mentioning therein his Business Identification
Number (BIN);
3a) Notwithstanding anything contained in this section, validation of this certificate to be determined by the
rules and such registration certificate may be renewed in accordance with the Rules itself;
4) Upon inquiring by the concerned VAT officer, if any person is found that he is not registered but he is
required to be registered under this Act, the VAT officer shall register the person with effect from the date
wherefrom it is obligatory to him;
5) Every registered person shall be provided unified registration number.
6 What are the goods and services subject to VAT in Bangladesh? May Jun 2011
(1) Value Added Tax will be imposed and payable @ 15% on all goods imported into Bangladesh except
the goods listed in the First Schedule of this Act and on the supply of all goods not listed in above
Schedule and on all services listed in Second Schedule.
(2) Without prejudice to the above sub-section (1) Zero rate tax will be imposed on the following
goods or services;
a. Any goods or services exported or deemed to be exported from Bangladesh.
b. Food and other things supplied in transport leaving from Bangladesh for consumption outside Bangladesh
in accordance with section 24 of the Customs Act.1969 (of 1969).
Provided that this sub-section shall not be applicable to the following goods;
a. Any goods re-imported or intended as being re-imported into Bangladesh.
aa. Any goods or services or part of it supplied in exchange of foreign currencies for consumption or use in
Bangladesh which are not mentioned in clause (aa) above;
c. Such goods which have been presented for export in accordance with section 131 of the customs Act but
not exported within thirty days of the bill of export or such extended time allowed by the Commissioner for
this purpose.
7 Define Input Tax. What are the conditions to be met for claiming input tax? Or Nov Dec 2011,
What is Input Tax ? Discuss the conditions to be met for claiming input tax. May Jun 2013
Input tax is VAT paid by a tax payer on his inputs, that is, all raw materials, packing materials,services, fuel,
machinery, spare parts, and all purchased goods for sales. However, inputs do not include labour, land, buildings,
office equipment, vehicles and their construction or maintenance materials and insurance relating thereto.
Conditions to be met for claiming Input Tax
The following conditions are to be met for claiming input tax credit:
(i) The Tax payer must have been registered for the purposes of ―full‖ VAT, not turnover tax or not VAT based
on estimated value addition.
(ii) The Tax payer must have Bill of Entry for imports and VAT Invoices (VAT-11) for local purchases of
goods and services, maintained for 4 years. No credit for input tax shall be allowed against turnover tax or
VAT based on estimated value addition.

(iii) The Tax payer must declare the inputs in Price Declaration including output/ input ratio.
(iv) The Tax payer must claim the input tax within the related year. However, claim for input tax may be
allowed after the related year if there is any genuine reason.
(v) The Tax payer must process the inputs for which input tax has been claimed.
(vi) 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―dutyexemption
and drawback‖ (generally known as DEDO) arrangement under rule 19(4).
Input Tax:
Input tax means value added tax paid by a registered person on goods imported by him or bought from other
registered person including the advance trade VAT suffered on imported input at import stage.
The conditions for obtaining input tax rebate are the followings:
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-11) 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 challanmust be taken insidethe place of production or services and to be
recorded in purchase account.
f) The name, address and registration number of the registered personshould be correctly mentioned in said
bill of entry and challanpatra.
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.
8 Discuss the Special Treatment of Specified ―Input tax‖ and the penalty for false Nov Dec 2011
declarationfor Input Tax
Special Treatment of Specified ―Input Tax‖
The Tax payer can claim 60% of the VAT paid as claim against input tax in respect of charges for telephone,
teleprinter, fax, internet, freight forwarders, clearing & forwarding agents, WASA, insurance, audit and
accounting firms, suppliers, security services, carrying agents, letter of credit services, electricity and other related
taxable services.
Penalty for False Declaration for Input Tax
If a tax payer makes false declaration relating to credit of input tax, 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 the credit
of the input tax shall be cancelled.
9 What are the conditions to be fulfilled in order to claim delivery of goods as deemed Nov Dec
export underRule 31 of the VAT Rule 1991? 2012
Following are the conditions to be fulfilled in order to claim delivery of goods as deemed export under Rule 31 of the
VAT Rule 1991:
1) Proceeds thereof receivable on foreign currency through official channel;
2) Refund (input VAT minus output VAT) claimable u/R 29 - based applicable Dakhilpatra (Return) u/s 35 -
Rule 24Mushak # 19;
3) Otherwise i.e. when Return (u/s 35 - rule 24: Mushak # 19) submission is not applicable, in that scenario,
refund (of input-Vat) to be claimed u/R 30;
4) Evidencing documents, like Tender, acceptance thereof work completion guidelines/ directions of receipt of
FC payment officially, will need to be furnished to VAT Authority.
10 How do you maintain a VAT current register (VAT – 18) as per VAT Act and VAT Nov Dec
Rules, 1991? 2012
Current account contains record of all VAT deposit, payable and adjustment. A registered person can maintain
computerized current account with the permission of the Board. BIN Number including name. address and telephone
number of registered person is recorded at the top of Current Account. The Account Current is made up of 10
columns and has cross reference with purchase and sales book. All input tax, rebate due to sales return, balance of
previous month Current Account and all other dues and return are taken into rebate column. All dues like output tax
cancellation of rebate due to purchase return, penalties and all other duties go to payable column. Treasury deposit is
shown in the column designated thereof
The Account Current should always be maintained with: positive balance.
11 How are the value of goods and services determined for imposition of VAT? May Jun 2012
According to section 5 of the Value Added Tax Act 1991:
In Case of Importation
In Case of importation of goods, the amount on which the value added tax aha II be payable shall be
determined by adding the amount of import duty, supplementary duty and all other duties and taxes, (if
any). except advance income tax payable, to the assessable value determined under section 25 or 25A of the
Customs Act.
In case of Goods Supplied
The price shall be the consideration receivable from buyer by the producer or business person, which will include
purchase price of materials and all expenditure incurred by the manufacturer and also commission, charges,
feesand all supplementary duty excluding VAT and profit.
If any registered person sells goods directly or sales centers, distributors or commission agents under his
own brand name, the value added tax shall, in the case of the goods with brand name be determined on the basis
of the consideration due from the purchaser to the owner of the brand named goods.
In case of Services:
Value added tax shall be imposed on the total receipts.
In case Goods Subject to Trade Discount
Goods on which trade discount is allowed, value added tax will be charged on the value of the goods after deduction
of trade discount.
12 When is zero tax imposed under VAT Act?What are the procedures to be adopted Nov Dec
for disposal ofdamaged or destroyed goods in accident under VAT Act? 2014
(i):
Sometime export and deemed export/ zero rates is imposed under the Value Added Tax Act. In that case all duties
and taxes paid on the imports or exported or deemed to be exported goods or services are reimbursed through duty draw
back scheme.
(ii):
Under rule 41 of the VAT Rules, 1991, if a registered person considers that the goods manufactured or
produced or stored for supplied, has for the reasons of being damaged or destroyed in accident or for any other
reason become non-suppliable, he shall submit to local VAT office an application form ―Mushak-27‖ In the case
of accident within 24 hours of the occurrence of the accident .For other reasons he has to inform the matter within 24
hours for disposal of such non-suppliablegoods.
The Superintendent of VAT shall make a spot inspection within three days of the receipt of the application from
registered persons. The value of goods damaged or destroyed in the accident, amount of output tax to be informed to
the Divisional Office for giving his decision or disposal of damaged or destroyed goods through destruction or in any
other manner.
If the goods is considered fit for supply partially or fully at reduced value, the Superintendent, shall determine, the
value of gods in his opinion, submit the value to Divisional Officer for his approval.
13 Discuss the determination of cost for calculation of VAT. May Jun 2013
0
In pursuance with Sec. 5 of Value Added Tax (VAT) Act 1991, VAT is leviableupon value. I presume the word

cost in the question meant value and accordingly presenting hereunder the legal provisions for the determination
of value for the computation of VAT under different economic conditions:-
1) In case of imported goods, the value for the computation of VAT is ascertained by adding
the amount of import duty, supplementary duty and all other duty and taxes (if any) except the advance
income tax with the assessable value as determined under section 25 or 25 (A) of the Customs Act.
1969.
2) In case of supply of goods, the value on which VAT shall be payable, shall be the consideration
of the goods receivable by the manufacturer or producer or trader from his buyer, which shall include the
value of purchase inputs, all costs of the manufacturer or producer or of the trader and where
applicable,paid commission, charges, fee and all other duties and taxes including supplementary duty
(except VAT) and profit.
Provided that in the case of supply of any specific goods or class of goods by a trader, the Board may, by
notification in official Gazette , for the determination of the base value of VAT, fix the rate and quantum of value
addition of the goods or class of goods.
In case of contract based production of branded goods of any registered manufacturer by any other registered
producer, the Board may set the procedure of determining the value of goods by Rule.
A producer or importer may, if he intends to supply goods at uniform price printed on the body or container or
packet of the goods, shall supply the goods, subject to the prior approval of the Board and on payment of the entire
tax, in case of producer at production stage and in case of importer at the stage of supply, in accordance with the
procedure set by Rule.
If the Government through any directorate or department fixes the unit price of any product or service with a view to
keep their price stable , the VAT and Supplementary Duty at production and service delivery stage shall be payable
through back calculation from that fixed price.
(3) The Government may, by notification in the official Gazette, select the goods on which VAT shall be
imposed on the retail price. For the purpose of imposing VAT, the retail price of such goods, shall be
determined by the producer or manufacturer with the approval of concerned officer, which shall be
included all costs, commission, charges, duties and taxes .And such goods shall be sold to the general
consumers at that price. The price shall be printed on the body of the goods or on every packages, sacks or
cells distinctly, conspicuously and indelibly after putting special brand or mark on the body of the goods.
(4) In the case of rendering of service, VAT shall be imposed on the total receipts.
In respect of any specific service, the Board, may by order, determines the VAT on the basis of actual
value addition or fixing specific rate of value addition by notification in the official Gazette.
In case of providing of service by the service provider, free of cost, the Government by Gazette
notification may fix minimum VAT.
(5) In case of supply of goods by a registered or registerable trader, VAT may be imposed on the basis of total
value received or deemed to have been received as determined in any particular tax period, as determined
in accordance with the procedure set by Rules.
(6) Goods on which trade discount is allowed; in the case of such goods the amount of value added tax shall
be based on the cost of the goods after deduction of trade discount. Provided that in case where goods are
supplied at a discount the cost and the amount of the discount will be shown on the invoice and the quantity of
trade discount must be consistent with the normal business policy.
(7) If the Board, in consideration of public interest and after due investigation is satisfied that it is expedient in the
case of any taxable goods or service to fix its tariff value m order to determine Value Added Tax, or where
applicable Value Added Tax and supplementary duty the Board may by Gazette notification, fix the tariff
of such goods or services.
14 May Jun
Define the following term of VAT. 2013 5
a. Input.
b. Commercial documents.
c. Zero.
d. Truncated Value.
e. Trade Service.
a. ‗Input‘ means
 all kinds of raw materials, laboratory reagent, laboratory equipment, laboratory accessories, any
type of gases and any material used as fuel, packaging materials, services, machinery and spare
parts excepting labor, land, building, office equipment and transport.
 In case of trading, goods imported, purchased, acquired or otherwise procured in any way for
sale, exchange or to transfer in any other manner.
b. ‗Commercial documents‘ means books of accounts, files, documents or papers maintained by a person to
record his commercial transaction or to present financial status of his business, namely:-
debit voucher, credit voucher, cash memo, daily accounts of sales and purchase, cash book, journal book, bank
account and the documents related thereto, trial balance, ledger, financial statements and notes thereto, profit
and loss account, profit and loss appropriation account, bank reconciliation statement and balance sheet, audit
report including all relevant documents.
c. ‗Zero‘ rated taxable goods or services means goods or services which are exported or deemed to have
been exported or any food or any material as mentioned in sub section (2) of section 3 of VAT Act
1991, upon which value added tax or where applicable supplementary duty shall not be imposed and all
other taxes and duties paid on inputs used for manufacturing of such goods(except Advance
Income Tax and the supplementary Duty paid on such inputs used for the manufacturing and producing
exported goods, as may be specified in this behalf by the Government by the notification in the official
Gazette not to be refunded) shall be refunded.
d. ‗Truncated Value‘ Truncated or short value system is one where VAT at standard 15% charged 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.
e. ‗Trade Services‘ VAT is payable by a distributor, agent, wholesaler and retailers on non-exempted
goods @ 4% of sales (that is 15% of value added at 26.67%) on a monthly basis within 10 days of the next
month through treasury challans. No input tax credit is allowed against such payment of VAT.
15 Writes short notes on following item relating to VAT : Nov Dec 2013 6
i) Current Account.
ii) Penalty for False declaration of input tax.
iii) Retail trade service.
i) Current Account: An account which is maintained in prescribed pro-forma Mushak 18 by a
registered person under Rules 22 of VAT Rules 1991. The accounts comprising of ten columns and
contains cross reference of purchase and sales, output tax payable, treasury deposit and input output
tax rebate. A registered person shall deposit into the treasury of and on so that the output tax could be
paid from that deposit including input tax rebate.
ii) Penalty for False declaration of input tax: If a tax payer makes false declaration relating to credit of
input tax, he may be penalized under section 37 of the VAT Act, 1991 to the extent of minimum half
and maximum equal to the amount of tax evaded.
iii) Retail trade service: In consideration of the difficulties in keeping books of accounts and to maintain
other formalities the government has introduced lump sum VAT payment system for retail trade service
providers. The VAT payable by retail trade service providers are as follows:
Serial no. Applicable in Areas Maximum annual Rate of Value Minimum Value
value addition Added Tax Added Tax payable
1 Dhaka and ChittagongCity Tk. 73,334 15% Tk. 11,000
Corporation area
2 Other city Corporation areas Tk. 53,334 15% Tk. 8,000
3 Municipal area in the district Tk.40,000 15% Tk. 6,000
town
4 Other areas of the country Tk. 20,000 15% Tk. 3,000
The retail trade service providers are allowed to maintain cash memo and accounts in own system and
submit return on monthly basis.
16 Discuss the salient features of changes in VAT Act.1991 brought by Finance Act.2011 May Jun
2012
1. Amendment of Section - 2:
In section 2, in definition of input tax, for words deducted at source, the words ―collected in advance‖
will be substitutedPost of Chief Commissioner of VAT is created.
2. Insertion of new section - 2KA:
Insertion of new section 2KA. By which priority will be given to VAT Act and Rules.
In place of the word ―Supplier‖, ―Supplier and receiver of service‖ will be substituted
4. Amendment of Section - 6 :
In section 2, in definition of input tax, for words deducted at source, the words “collected in
advance” will be substituted.
a) Substitution of sub-section (4KAKKA)
This relates to procedure of VAT payment by registered person.
b) Substitution of sub-section 4Kha
Issue of certificate by VAT collecting person to supplier.
c) Insertion of sub-section (4KAKAKA)
NBR‘s can be order issue the list of service renderers mentioning the code of service.
d) Insertion of sub-section 4 (Cha)
This provides for penal provisions for default in collection, deduction and deposit of VAT.
Turnover tax. By this amendment, the person engaged in manufacturing taxable good, or business or
service renderer shall pay 3% tax on his annual turnover against 4% of preceding years.
Sub-section (1 KAA) is deleted.
Sub-section 3 is substituted by new sub-section 3 which provides for by order issued by.
Director General, duty rebate and drawback, can direct for rebate and drawback.
8. Amendment of Section -15 (2):
Substituted by new section 15(2) which imposes new condition for being centrally registered for
operation of business from two or more places.
9. Creation of Post:
Creation of Post of Chief Commissioner VAT and Commissioner VAT vide amendment in
section 20.
In sub-section 1 in place of ―Bangladesh Rifles‖ the words ―Boarder Guard Bangladesh‖ will be
inserted,
11. Amendment of Section - 37(2):
New insertion of clause (khakhakha) by which a person can be penalized upto one and half times
of the tax payable in case of evasion of VAT by tampering in Form Mushak 16.
Amendment of Section 38 by reducing penalty from two and half time to one and half times.
13. Insertion of ADR in the time of Income tax and Customs (sections 41 KAA to 41 TA):
If any person is aggrieved at the order passed by any VAT authority or Duty and VAT Appeal
authority he can take recourse to ADR, for resolution of the disputes. Such application for ADR
is to be made before appeal authority passes his order. Details of appointment of facilitator, duty and
responsibility of aggrieved person for seeking redress before ADR, for an arrangement and other
relevant matters are to be guided by rules to be framed by NBR.
14. Amendment of Section -42- Time for disposal appeal:
In sub-section 4 in place of "nine months" "one year" will be replaced.
15. Insertion of New Section -71 GA:
By insertion the above section, the Government has created two funds, namely a) tax refund
fund and b) Reward and financial incentive fund. These two funds will be created from Boards
own account for refund of tax due and giving rewards to the officer and employees and VAT
officials who have collected tax more than the target.
16. Amendment of Section -72, sub-section - 3:
In place of two and half times, one and half times will be replaced.
17 State the provision of section 17 of Value Added Tax, 1991 regarding self registration. Nov Dec
What are theprocedures of registration under Rule 9? 2013
According to section 17 of Value Added Tax, 1991 :
Any personexempted from compulsory registration may apply for voluntary registration, as a supplier of
taxable goods or renderer of taxable service and the authorized officer shall, if he is satisfied that the
application is in order in all respects, register the applicant and give him a registration certificate
mentioning therein his business identification number.
According to rule 9 of Value Added Rule 1991
Procedure of registration -
If the annual turnover of the supplier of taxable goods ortaxable service is not less than taka eighty lacs, he
shall have to submit an application for registration in Form ‗Musak-6‘ to a Divisional officer or to an
officer, not below the rank of Assistant Commissioner specified by an order by the Board in this behalf.
If the turnover of a person in respect of the taxable goods supplied or taxable service rendered becomes, at
any time during twelve consecutive months after his being exempt from the requirement of registration he
shall within thirty days of the expiry of such period, submit an application for registration to the Divisional
Officer or an officer, not below the rank of an Assistant Commissioner, specified by order by the Board in
this behalf.
A person who intends to start the business of supplying taxable goods or rendering taxable service shall, before
starting the business, apply to the divisional office or such officer, not below the rank of assistant Commissioner, as
the Board may, by order, empower in this behalf, for registration, if the annual turnover of the business is
estimated to be at least taka eighty lakhs.
Where more than one taxable goods or service are supplied or rendered or import or exports are made from the
same place of manufacture or production or rendering of service or import or export, only one registration
shall be required.
A person required to be registered shall, along with the application for registration submitted in Form Musak-
7 a declaration containing particulars of premises, plant, capital machineries and fittings and goods to be
produced or purchased and sold or stocked and major inputs.
Any person who is involved in import or export of any goods shall submit application to the divisional in charge
or to an officer directed by board not below the rank of assistant commissioner.
18 What are the offences and penalties under section 37 (i) and Rule 35 of VAT Rules, Nov Dec
1991? 2013
The offences and penalties as provided under Section 37 (i) of Value Added Tax Act 1991 are the followings:
Serial
Description of the Offence Penalty
No.
a. Fails to submit an application for registration Minimum Taka 10,000and maximum Taka
under this Act, though it is required to submit 20,000
such an application
b. Fails to submit a return within the specified date Minimum Taka 10,000 and maximum Taka
20,000
c. Fails to inform the value added tax officer about Minimum Taka 5,000 and maximum Taka 10,000
any change of information in relation to
registration
d. Fails to comply with the direction of anysummons Minimum Taka 10,000 and maximum
issued under section 25 of VAT act 1991 Taka30,000
e. Failure to maintain required files in electronic Minimum Taka 20,000 and maximum
cash register or point of sales software or in Taka50,000
computer as per Section 37 (2) JA of VAT Act
1991
f. Violates any other provision of VAT Act 1991 Minimum Taka 10,000 and maximum
Taka30,000

The offence and penalties under Rule 35 of Value Added Tax Rule 1991
A registered person who contravenes any provision of Value Added Tax Rule 1991 shall be liable to a penalty of
an amount, being not less than half, and not more than equal, the amount of value added tax or, where applicable, the
value added tax and supplementary duty leviable upon the goods and services concerned, and the goods or service
(where applicable) related to such contravention shall be forfeited to the Government. However, in case of an offence
not involving evasion of tax, the amount of penalty shall be minimum Taka 5,000 and maximum taka 10,000.
19 May Jun
Under what circumstances may a company cancel its VAT registration? What will 2014
they do to cancel the VAT registration?
In pursuance with rule 15 of VAT Rules 1991, a Company, being registered person, can cancel
registration under the following circumstances:-
(a) being abstained from manufacture or production or sale of taxable goods or rendering of taxable
service, or import or export of any goods;
(b) taxable goods or services are declared as exempted goods or services;
(c) failing to start the business of production or manufacturing or supply of taxable goods or rendering
of services following being registered;
(d) the turnover becomes less than Tk. 80 lac in the next one year from the date of registration of a
voluntarily registered person as per section 17 of the Act;
(e) if the annual turnover of the registered person is less than Tk. 80 lac:
The Company shall apply to the VAT Circle Office in VAT Form-10 for cancellation of the registration.
20 If any VAT withholding entity makes any purchase from a person who is not May Jun
registered under the Value Added Tax Act, what will be the consequences? 2014
The consequences of purchasing from a non-registered person are the following:
If anybody makes any purchase from any establishment not registered under VAT, input tax credit will not
be allowed on the purchase. While making purchase through tender, a condition needs to be added in the
tender schedule stating that intending suppliers will have to submit copy of their VAT registration
certificate along with other documents. Without VAT registration certificate, purchase can not be made
from the supplier. However, if inadvertently or so, purchase has been made from any establishment who
is not registered under VAT, the obligation of VAT deduction at source does not end. VAT requires to
be deducted at source as per the relevant provisions,otherwise, the cost of purchase will be treated as a
disallowable expenditure under Income Tax Ordinance 1984.
21 Mention the rate of VAT based on value additions fixed by NBR applicable to the Nov Dec
following serviceproviders : 2013
i) Carrying contractor.
ii) Advertising firm.
iii) Printing press.
iv) Information Technology Enabled Services.
v) Sponsorship Services.
Vi) Human Resource Suppliers.
Vii) Building floor Cleaning and maintenance firm.
viii) Event management firm.
ix) Chartered Plane or Helicopter.
x) Other Miscellaneous Services.
Particulars Value addition VAT rate
i) Carrying contractor: 15% of total receipt 2.25%
In case of carrying of petroleum product 30% of total receipt 4.5%
In case of any other product
ii) Advertising firm 100% of total receipt 15%
iii) Print ing press 100% of total receipt 15%
iv) Information Technology Enabled Services 30% of total receipt 4.5%
v) Sponsorship Services 50% of total receipt 7.5%
vi) Human Resource Suppliers 15%
100% of total receipt
_
vii) Building floor Cleaning and maintenance 100% of total receipt 15%
firm
viii) Event management firm 100% of total receipt 15%
ix) Chartered Plane or Helicopter 100% of total receipt 15%
x) Other Miscellaneous Services 100% of total receipt 15%
22 XYZ Co. Ltd. has the following invoices pending for settlement in December 2010: Nov Dec
(i) Invoice dated 1/12/2010 for supply of goods Tk.10,40,000/= (inclusive 2010
of VAT Tk.40,000).
(ii) Invoice dated 3/12/2010 from the landlord (which is a company)
on account of rent for November 2010 amounting to Tk.1,50,000
plus applicable VAT.
(iii) Invoice dated 5/12/2010 from a firm of Chartered Accountants
for Tk.1,00,000 plus applicable VAT.
(iv)Invoice dated 14/12/2010 from an advertising firm on account of
an advertisement in a newspaper for Tk.2,18,000 (inclusive of
VAT Tk.18,000).
Mr. Rahman, the CFO of the company, not sure about the required deduction of
income tax and VAT and deposit of the same to the credit of the Government. He is
also not sure about the issuance of required certificate, challan, mushak, etc. in support
of such deductions and deposits. He seeks your advice on the same.
Required:
Write a memo to the CFO addressing the above issues.
To: Mr. Rahman
From: Mr. X
Date: ……………..
CC: w, y,z
Subject: Advice on different issues related to tax and VAT.
Dear Mr. Rahman
This is in reference to your e-mail of ……… and further discussion with you regarding the various issues
related to tax and VAT. You have asked to us for our opinion regarding deduction of income tax and VAT
and issuance of required certificate, challan, mushak etc. in support of such deductions and deposits.
Our considered opinion are as follows:
We have reviewed the invoices forwarded to us and appears that the following deduction of tax and VAT
would be applicable.
Applicable Invoice
Invoice Date of Invoice VAT including Withholding TDS under Withholding Service Net
No. Invoice Amount amount VAT Tax section VAT Code Payment
i. 1-Dec-10 1,000,000 40,000 1,040,000 25,000 52 40,000 S. 037 975,000
ii. 3-Dec-10 150,000 22,500 150,000 7,500 53 A - S. 033 142,500
iii. 5-Dec-10 100,000 4,500 104,500 10,000 52 A (3) 4,500 S. 034 90,000
iv. 14-Dec-10 200,000 30,000 230,000 20,000 52 A (3) 30,000 S. 007 180,000
Total 1,450,000 97,000 1,524,500 62,500 74,500 1,387,500
The following certificates required to be issue:

Mushak-11
As per general order no. 09/Mushak/2011 dated 12 October 2011, you have to withheld VAT whether your
suppliers will provide Mushak-11 or not
Challan:
After deduction of tax and VAT you have to deposit it to the government treasury. As per Rule-13 of the
Income Tax Rules-1984, Withholding tax shall be paid to the government treasury within three weeks
from the date of such deduction or collection and as per Rule-18 Kha(1) of the VAT Rules-1991, the
withholding VAT shall be deposited to the government treasury within 15 working days from the date of
such deduction.
Certificate
As per section 58 of the Income Tax Ordinance 1984, You have to issue certificates in favor of your suppliers for
deduction of tax and as per Rule-18 kha(2) of VAT Rules-1991, you have to prepare certificates in the form Mushak-
12 Kha triplicate. Among those, one copy shall be submitted to the concerned circle within five working days from
the date of deposit, one copy shall be issued to the supplier and another one shall be documented in your premises
for 6 years.
Please be noted that the rate of VAT on house rent has reduced to 9% from 10 January 2011 and you are
responsible for payment of VAT in this case. Previously it was 15%. The rate of VAT in case of
advertising firm is 15% from 1 July 2010. So you should request to your service provider to revise the said
invoice.
Please let us know if you have any further queries.
Yours truly
Mr. X
23 XYZ Ltd. is a manufacturing company engaged in paint business in Bangladesh. It has Nov Dec
two factories – one in Tongi, Dhaka and another in Kalurghat, Chittagong. In addition, 2010
it has seven sales depots in seven districts. The supply of goods against sales advice
from the Head Office are conducted from the factories as well as depots. The goods
are supplied to the depots from the factories as per advice of the Head Office located
in Gulshan, Dhaka. All the factories and depots maintain their own accounts. The
Head Office centrally maintains the entire company‘s accounts.
Required:
Does the company require to register the Head Office only or all the ten
places of their business (including the Head Office) for VAT purposes? Discuss.
24 ABC Ltd. provides the following information about its production and sales: Nov Dec
Tk. 2010
Purchase of raw materials (including VAT Tk.3,00,000) 2,300,000
Direct Wages 2,50,000
Electricity (including VAT Tk.3,000) 63,000
Telephone (including VAT Tk.1,500) 11,500
Depreciation of machinery 30,000
Other production overheads 40,000
Other administration overheads 70,000
Selling expenses 20,000
The company sells its products by adding 25% margin on cost. A trade discount of 5%
is allowed.
Other production and administration overheads and selling expenses do not include
any VAT.
There were no opening and closing stock of raw materials.
Required:
Determine VAT payable if the rate is 15%, assuming that opening and closing stock
of finished goods were Tk.30,000 and Tk.20,000 respectively.
Particulars Amount
Purchase of raw materials 2,000,000
Direct wages 250,000
Electricity (rebate 80%) 60,600
Telephone (rebate 60%) 10,600
Depreciation of Machinery 30,000
Other production overheads 40,000
Other admin overheads 70,000
Selling expenses 20,000
Add: opening finished goods 30,000
Less: Closing finished goods (20,000)
2,491,200
Add: margin 25% on cost 622,800
3,114,000
less: discount@5% (155,700)
2,958,300
Add: VAT @ 15% 443,745
Sales price 3,402,045
VAT current Account
Input stage Tk. Output stage Tk.
VAT paid (Bank) 303300 VAT on sales 443,745
Balance 140,445
443,745 443,745
25 A manufacturer sold goods worth Tk.10 lakh to the wholesaler by including to it May Jun
VAT@15%. The wholesaler added 10% as mark up and sold the goods to the retailer 2011
by adding VAT who in turn sold the goods to the consumer by adding mark up
@15%.
Compute VAT at each stage and indicate the total VAT paid by the consumer. 10
Computation of VAT at different stage:
Input Stage Output Stage
Import/ VAT Total Value Sales Value VAT @
Payable to
Persons Purchase @15% Purchase addition 15% Rebate
Treasury
Price including including
VAT profit
Manufacturer 1,000,000 150,000 150,000
Wholesaler 1,000,000 150,000 1,150,000 100,000 1,100,000 165,000 150,000 15,000
Retailer 1,100,000 165,000 1,265,000 165,000 1,265,000 189,750 165,000 24,750
Customers 1,265,000 189,750 1,454,750 - - - -

26 Nov Dec5
Bata Shoe Co. Ltd. incurred the following transactions in September 2017: 2011 8
Raw materials aggregating to Tk.5,00,000 were purchased on September 5, 2017,
VAT on thesame paid and the VAT chalan along with the goods were received on
September 10, 2017.
Shoes delivered to customers in the month at approved price as follows:

September 08, 2017 Tk.3,00,000
September 09, 2017 Tk. 2,00,000
September 10, 2017 Tk.5,00,000
September 15, 2017 Tk.6,00,000
The following deposits were made to the Govt. Exchequer through treasury chalan:
September 07,2017 Tk. 20,000
September 12,2017 Tk.30,000
September 15,2017 Tk.70,000
Balance of deposit at September 01,2017 in VAT- 18 was Tk.50,000.
You are required to:
Enter the above transactions in VAT – 18 of the company;
Current Account
(As per Rule 22(1)
Taxpayers‘ Identification Number:
Name: Bata Shoe Co. Ltd.
Address:
Telephone:
S Date Details of Purchase or Treasury Rebate Dues Closing Remarks
L.No. Transaction SalesRegister deposit Balance
SL. No. Date
1 2 3 4 5 6 7 8 9 10
1. 01.09.2017 Opening Bl. 50,000
2. 07.09.2017 Treasury 20,000 50,000 70,000
08.09.2010
3. 08.09.2017
09.09.2010 Delivery 45,000 25,000
4. 09.09.2017
10.09.2010 Delivery 0000
30,000 (5,000)
5. 10.09.2010
10.09.2017 Purchase 75,000 70,000
12.09.2010
6. 10.09.2017 Delivery 75,000 (5,000)
7. 12.09.2017 Treasury 30,000 25,000
8. 15.09.2017 Treasury 95,000
9. 15.09.2017 Delivery 70,000 90,000 5,000
27 ABC Industries Ltd. a vehicle assembly plant has imported CKD parts and May June
components for trucks amounting to TK.2,500,000 in the month of July 2017. ABC 2012
Industries Ltd. has assembled and manufactured 4 trucks from the above imported
parts and components and then sold those 4 trucks to their dealer M/s Khaleque and
Co. @Tk.1,000,000 each. M/S Khaleque and Co. then sold 3 (three) trucks to M/s
Zakaria Transport and Co. @ Tk. 1,100,000 each.
Calculate VAT @ 15% payable at import stage and each stage of sale.
A/C ABC Industries Limited
Value VAT @ 15% thereon
TakaTaka
Import - value of CKD Parts & Components 2,500,000 Paid 375,000
Sale to Khaleque& Co.: 4 trucks 4,000,000 Realised 600,000
Net VAT Payable Depositable 225,000
A/C :Khaleque and Co.
ValueVAT @ 15% thereon
Taka Taka
Purchase from ABC Indus. Ltd. as above4,000,000 Paid 600,000
Sale to Zakaria& Co.: 3 trucks3,300,000 Realised 495,000Net VAT Balance: Adjustable against future sale
105,000
A/C: Zakaria Transport:
Value VAT @ 15% thereon
TakaTaka
Purchase from Khaleque for 3 trucks3,300,000 495,000
28 Abul& Co. Ltd. incurred the following transactions in September 2017 Nov Dec
2012 10
Raw materials aggregating to Tk. 500,000 were purchased on 5 September 2017,
VAT on the samepaid and the VAT challan along with the goods were received on
10 September 2017
8 September 2017 Tk. 300,000

9 September 2017 Tk. 200,000
10 September 2017 Tk. 500,000
15 September 2017 Tk. 600,000
The following deposits were made to the Govt.Exchequerthrough treasury challan :
7 September 2017 Tk. 20,000
12 September 2017 Tk. 30,000
15 September 2017 Tk. 70,000
Balance of deposit at 1 September 2017 in VAT – 18 was Tk. 50,000
You are required to:

Enter the above transactions in VAT – 18 of the company;
Write a letter to the management on the irregularities noted by you in completing the
VAT current register (VAT – 18) and implications of the same on the company.
Current Account
(As per Rules 22(1)
Taxpayers' Identification Number:
Name:
Address:
Telephone:
S.L. Date Details of Purchase or Sales Treasury Rebate Dues Closing Remarks
No. Transaction Register Deposit Balance
1 2 3 4 5 6 7 8 9 10
1. 01.09.2017 Opening BI. 50,000 50,000
2. 07.09.2017 Treasury 20,000 70,000
3. 08.09.2017 Delivery 45,000 25,000
4. 09.09.2017 Delivery 30,000 (5,000)
5. 10.09.2017 Purchase 75,000 70,000
6. 10.09.2017 Delivery 75,000 (5,000)
7. 12.09.2017 Treasury 30,000 25.000
8. 15.09.2017 Treasury 70,000 95,000
9. 15.09.2017 Delivery 90,000 5,000
We have gone through the VAT transactions of the period from 1st September to 15th September 2017, recorded
inCurrent Account and observed negative balance at two occasions which is a clear violation of Rule 22(1) Gha,
mandated. Maintenance of sufficient balance required in the Current Account, by which adjustment or payment of
payable output tax can be made by accumulating the balance with the deposited money and the rebate (credit) of input
tax. This is an offence u/s ,37(2)(NioNioNio) which attracts a monetary penalty on an amount not less than 1/2 and
more than 2 times of the amount of VAT or where applicable, VAT and Supplementary duty, payable upon, the
goods and services and if convicted in a court of Magistrate, liability to imprisonment for not less 3 months and not
more than 2 years, or to a fine not less than 1, and more than 2 times of the amount of VAT or where applicable, VAT
and Supplementary duty or both. However, for irregularities other than evasion of revenue, the amount of fine is
limited to, not less than Tk. 5,000 and not more than Tk. 300,000.
We recommend strict compliance with the provision of VAT laws to avoid punitive actions.
Pl. don‘t hesitate to enquire any question on any matter on VAT with particular attention to the issue concerned herein.
Thanking you
Yours Sincerely
29 May Jun
X Ltd. pays Tk. 60,000/= per month as office rent and Tk. 10,000/= per month as 2014
other charges (lift and security charges) to the landlord. The landlord wants that X Ltd.
should pay 12% VAT along with the above rent and charges to him, which will then
be deposited by the landlord to the government treasury? On the other hand X Ltd.
wants to deduct 9% VAT from rent and 2.25% VAT from other charges, make the
payment (net of VAT) to the landlord and deposit such deducted amounts to the
government treasury. Both of them have now come for your advice.
Advise on the basis of the current provisions of VAT Act and its Rules.
There is no provision of VAT deduction at source on house rent. VAT on house rent is paid by the tenant. X
Ltd., as tenant. has made an agreement with the landlord regarding the terms and conditions of the rent. He pays
the rent to the landlord; and he is also required to pay 9% VAT from his own fund on the agreement amount to
the government treasury. The landlord has no responsibility of paying VAT. On payment of VAT to the
government treasury, the tenant requires to submit the Treasury Challan to the local VAT Circle Office. While
calculating VAT, charges for lift and security cannot be excluded. In our VAT system of Bangladesh, the base
for calculation of VAT is total receipt. Total receipt includes the price of the service, all charges, fees, commissions.
etc. involved thereon. Total receipt remains defined under Section 2 of the VAT Act. 1991. In this case, total
receipt Tk. 70,000/-. This amount is to be paid to the landlord. On top of this amount, 9% VAT stands at Tk.
6,300/- So. as rent (including other charges) of the premises, Tk. 70,000/- needs to be paid to the landlord and Tk.
6,300/- needs to be deposited to the government treasury as VAT on house rent. Here, VAT is being paid by the
service receiver. This is not VAT deduction at source.
30 The following information has been taken from the accounting records of XYZ Ltd for May Jun
the year 2017: 2014
Raw Materials inventory, January 1 Tk. 90,000

Raw Materials inventory, December 31 Tk. 60,000
Work in process inventory, January 1 Tk.1,80,000
Work in process inventory, December 31 Tk. 1,00,000
Finished goods inventory, January 1 Tk. 2,60,000
Finished Goods inventory, December 31 Tk. 2,10,000
Purchase of Raw Materials Tk. 7,50,000
Direct labour Tk. 1,50,000
Manufacturing Overhead Tk. 6,40,000
Selling expenses Tk. 1,40,000
Administrative expenses Tk, 2,70,000
The company sells its products by adding 15% profit on cost.
Determine the amount of VAT if the rate is 15%.

XYZ Ltd.
Statement of VAT
Particulars Tk. Tk
Raw materials inventory, January 1 90,000

Add: Purchase of raw materials 750,000
Raw materials available for use 840,000
Raw materials, December 31 (60,000)
Raw materials used in production 780,000
Direct labor 150,000
Manufacturing overhead 640,000
Total manufacturing cost . 1,570,000
Work in process. January 1 180,000

Work in process. December 31 (100,000)
Cost of goods manufactured 1,650,000
Finished goods inventory, January 1 260,000
Goods available for sale 1,910,000
Finished goods inventory December 31 (210,000)
Cost of goods sold 1,700,000
Administrative expense 270,000
Selling expense 140,000
Total cost 2,110,000
Profit @15% on cost 316,500
Sales 2,426,500
Value Added Tax for the year ended 31 December

VAT on output i.e. Sales (Tk. 2,426,500 x 15%) 363,975
Vat on input i.e. Purchase (Tk. 750000 x 15%) (112,500)
251,475
Assumptions:
1. Sales price has been determined adding 15% profit on total cost.
2. As per Section 9 (1) of the VAT Act 1991, input VAT credit is to be taken in the VAT period
(currently one month) of receiving VAT Challan i.e. Mushak-11 or in two subsequent VAT periods.
As such, it can be reasonably assumed that input VAT credit on opening inventory had been taken
before the year 2017. Hence. VAT paid on current year purchase is available for credit only.
3. In absence of information, eligible input VAT credit (if any) on manufacturing overhead, sellingexpenses and
administrative expenses are not considered.
31 ABC Ltd. is a manufacturer of cosmetic items. It sells through a number of Nov Dec
distributors across Bangladesh. Currently it sells to distributors at Tk.80 per unit and 2014
fixes the MRP at Tk.100 per unit. The declared price of distributors (i.e. selling price
of distributors to retailers) is Tk.90 per unit. ABC Ltd. withholds income tax @3%
from distributors under section 53E(2) of the Income Tax Ordinance 1984. It also
collects VAT @ 15%. Similarly the distributors also collect VAT @ 15% from
retailers.
Is there any scope for ABC Ltd. to minimize collection of income tax from distributors
under the income tax law by changing the price structure, without changing the current
MRP and reducing the government revenue collection from VAT? If yes, revise the
price for distributors to a reasonable level, and make comparison of withholding tax
and VAT collection and depositat each stage under the existing and revised scenarios.
ABC Ltd. has an incentive scheme under which its products may be given free of cost
down the distribution channel to compensate (up to a reasonable level) financial loss, if
any, due to change in price. No one should incur any loss due to pricerevision.
Answer:
If ABC Ltd. does not want to change MRP, considering the market impact, the selling price to distributor may be
increased to an acceptable level. Thus the base for withholding income tax will be reduced which will
ultimately result in less withholding tax. Of course, ABC Ltd. isrequired to declare such increase in price to VAT
authority which will attract additional output VAT for ABC Ltd. with the same amount being additional input
VAT for distributors. While invoicing, such enhanced VAT will be calculated and added with the sale price
separately under the VAT head. The distributors will pay ABC Ltd. the total invoiced amount (i.e. sales price +
VAT thereon). ABC Ltd. will thus get back the amount of output VAT deposited to the Government
exchequer at the time of taking out the products from their distribution centres for delivery to the distributors.
It is assumed that all the distributors have VAT registration, and they invoice wholesalers/retailers by
adding VAT with sales price. As such, they can claim their above input VAT against the output VAT collected
from wholesalers/retailers. In this way neither ABC Ltd. nor distributors will have to bear any additional VAT due
to increased selling price of ABC Ltd. to distributors. It is important to mention here that as per section 9(1) (aa)
of the VAT Act ,1991, to ensure full input VAT credit, distributors may be required to provide revised price
declaration if the input price is increased by at least 75%. Keeping the above in mind, ABC Ltd. canminimize
collection of income tax from distributors by changing the price structure as follows (existing as well revised
scenarios are given):
Particulars Existing Revised
Price Price
(Tk.) (Tk.)
Declared price of ABC (selling price of ABC to distributors) 80 85
Declared price of distributors (selling price of distributors to 90 90
retailers)
Maximum retail price (MRP) 100 100
Withholding income tax @ 3% as per section 53 E(2) of 0.6 0.45
ITO,1984
VAT collection by ABC Ltd. From distributors* 12 12.75
VAT collection by distributors from wholesalers /retailers 13.5 13.5
VAT deposited by distributor 1.5 0.75
Total VAT deposited to the Government Exchequer 13.5 13.5
*The incremental VAT paid by distributors for increased price is adjustable against the VAT collected by distributors
from retailer/wholesalers as input VAT credit.
The increased amount of sales price to distributors as per our above suggestion may be compensated by ABC Ltd.
by providing additional incentives to distributors or by reimbursing some expenses incurred by distributors wholly and
exclusively for the purpose of business of ABC Ltd., or by reimbursing incentives provided by distributors to
wholesalers, retailers, distributors work force (if any) etc. It is important to mention that the agreements between ABC
Ltd. and distributors are properly worded to incorporate provisions for such reimbursement of business expenses paid by
distributors on account of ABC Ltd. and such reimbursable costs should be clearly identifiable to be wholly and
exclusively incurred for the purpose of business of ABC Ltd. Similarly, providing additional incentives to or
through distributors (i.e. reimbursement of incentives paid by distributors to wholesalers, retailers, etc.) should
be properly covered by the incentive schemes announced from time to time by ABC Ltd.
32 MN Ltd. imports 15 IT equipment as a commercial importer. You are aware that the Nov
import of IT equipment is exempted from VAT at import stage. The C&F agent of Dec
MN Ltd. says that import of IT equipment is subject to collection of ATV at the time 2014
of import. MN Ltd. is subject to 4% trade VAT. If the customs authority collects ATV
@4% at the import stage, can MN Ltd. take credit of ATV as input VAT paid and
adjust against the total VAT credit in the VAT Current Account and VAT Return? The
CFO of MN Ltd. is confused, and sought your advice.
Give your opinion and advice. 4

As per SRO no.242-AIN/2012/659-Mushak dated 28 June 2012, Advance Trade VAT (ATV) @4% is collectible
on goods imported by a commercial importer if those goods are not exempted from VAT at supply stage. The
commercial importer is entitled to get input VAT credit of the ATV paid at import stage after fulfilling the
following conditions
(a) Supply of goods applying output VAT rate of 15 per cent and issuing invoice in form Mushak-11;
(b) Maintain VAT Current Account and adjust ATV as input VAT credit, submit VAT return and does
not fall under the negative list activities as mentioned in section 9 of the VAT Act 1991.
MN Ltd. is thus entitled to get credit of ATV paid at import stage, should it fulfill the above conditions.
33 Sumon purchases 100 wall clocks (WC) @Tk.70 per unit and he sold all these WC to Nov
Nikhil at Tk.9,300where he earns profit of Tk.2,000. After adding value of Tk.30 per Dec
unit Nikhil sells these WC in themarket. If VAT is same on all these clocks, calculate 2014
how much VAT Sumon has to pay and at whatprice Nikhil sells these WC in the

market.
Price paid by Sumon = Tk. (100 x 70) = Tk. 7,000

Profit earned = Tk. 2,000
Total = Tk. 9,000
Selling price (including VAT) 9,300
VAT = Tk. 300
VAT (%) = (300 ÷2000) x 100 = 15%
Price paid by Nikhil = Tk. 9,300
Value added = Tk. 3,000
Total = Tk. 12 300
VAT = Tk..3 000 x (15+100) = Tk. 450
Selling price = Tk. (12,300 + 450) = Tk. 12,750
34 May
You are a VAT consultant licensed by National Board of Revenue and have been Jun
newly appointed as a VAT outsourcing service provider of a manufacturing company, 2015
AB Ltd. Immediately after your appointment, submission of VAT return for the month
of May 2018 has become due. The Chief Financial Officer (―CFO‖) of the Company
provides you with the following particulars for the period from 01 May 2018 to 31
May 2018:
Raw materials worth Tk. 500,000/= were purchased and Tk. 1,500,000/= worth of
finished goods were sold during the month of May 2018. Applicable VAT rate is 15%
in the case of procurement of raw materials and sale of finished goods. 15% VAT was
paid on procurement of spare parts worth Tk. 100,000/= in May 2018. In addition, the
amount of VAT paid on various expenditures incurred for the month of May 2018 are
as follows:
ElectricityTk. 10,000/=
Audit FeeTk. 30,000/=
Advertising Firm Tk. 15,000/=
Repair of Building Tk. 20,000/=
Import of Machineries Tk. 25,000/=
You had a discussion with the CFO of AB Ltd. and came to know that the invoices
raised by the providers/suppliers of aforesaid services/goods are compliant with the
provisions of VAT laws. However, the advertising firm did not raise an invoice in
Mushak-11 or invoice approved by the competent VAT authority. All of the
applicable VAT Registers, including Current Account, are maintained by AB Ltd.
Opening balance of the Current Account as of 01 May 2018 was Tk. 100,000/= and
during the month of May 2018, Tk. 200,000 was deposited in the government
treasury.
Requirements:
Provide the CFO of AB Ltd. with computation of the following:
(i) Output VAT
(ii) Input VAT credit
(iii) Closing balance of the Current Account as of 31 May 2018

Computation of VAT for the month of May 2018
Particulars Tk. Tk.
Opening Balance of Current Account as of 01 May 2018 100,000
Add: Treasury Deposited in the government treasury 200,000
300,000
Less: Output VAT (Tk. 1,500,000 X 15%) (225,000)
75,000
Add: Input VAT Credit:
Raw Materials (Tk. 500,000 X 15%) 75,000
Spare Parts (Tk. 100,000 X 15%) 15,000
Electricity Bill (Tk. 10.000 X 80%) 8,000
Audit Fee (Tk. 30,000 X 80%)24,000
Import of Machineries 25,000 147,000
Closing Balance of Current Account as of 31 May 2018 222,000
Note: (i) Input VAT Credit shall not be allowed for the VAT paid on expenditure for repair of Building as
per Section 9 (1) of the VAT Act. 1991.
(ii) Input VAT Credit shall not be allowed for the VAT paid on Advertisement expenditure due to want of
a valid VAT invoice (Mushak-11).
35 May
In early June 2018 XY Ltd. offered to provide some engineering consultancy services Jun
to AB Ltd. at Tk.850,000 which is the lowest bid price. Another bidder quoted 2015
Tk.1,000,000. XY Ltd. has not attained VAT registration. AB Ltd. intends to hire the
services of XY Ltd., being cheaper.
PQ Ltd., a security service provider appointed by AB Ltd. w.e.f. 1 June 2018, is

registered with VAT authority. PQ Ltd. is unwilling to issue a valid VAT invoice
(Mushak-11) and has asked the Company to deduct VAT at source from the amount
payable thereto. In this situation, AB Ltd. is not sure whether deduction of VAT at
source would be sufficient compliance with the provisions of VAT laws.
Requirement:
Advise AB Ltd. with consequences, if any, for entering into the above transactions. 8
Advise to AB Ltd.
Case#1
As per Section 19(Ka) of the Value Added Tax (VAT) Act, 1991, no person would be able to take part in any
tender if he is not registered with the VAT Authority or any work order cannot be issued in favor of him.
Moreover, as per Section 9(1) (T) of the Value Added Tax (VAT) Act, 1991, input VAT credit shall not be
allowed on any purchase if anybody makes the purchase from any person not registered with the VAT
authority.
In the given situation, XY Ltd., the lowest bidder to provide the engineering consultancy services to AB Ltd., is
not registered with the VAT authority. As per Section 37 (1) (6) of the VAT Act, 1991, the person
awarding the tender or work order may be penalized with a minimum of Tk.10,000 and a maximum of
Tk.30,000. Therefore, it is advisable to hire the consultancy services from an entity registered with the VAT
authority instead of XY Ltd. to avoid the negative consequences as mentioned above. AB Ltd. should include a
provision of mandatory submission of a copy of the VAT Registration Certificate by the intended local
suppliers in its vendor enlistment policy and ensure availability of valid Mushak-11 before receiving
commercial invoice from suppliers.
However, AB limited will not be eligible for input VAT credit on the engineering consultancy services
irrespective of availability of Mshak-11 from another bidder since as per Section 9 (1) (D) of the VAT Act
1991, input VAT credit facility is not allowed on any service related with infrastructure. In the absence of
details it is assumed that the engineering service will be taken for infrastructural development.
However, in the event AB Limited enters into the transaction with XY limited, the invoice of XY Limited
should be considered as inclusive of VAT as per Rule 23 (4) of the VAT Rules 1991. AB Limited has the
responsibility of determining the applicable withholding VAT by back calcu.lation (i.e. multiplying invoice
amount by 15/115). In this case, the VAT amount becomes Tk. 110,870 (Tk. 850,000x 15/115). AB Limited
will be required to deduct the applicable VAT at source before making payment and deposit the same to the
Government exchequer within 15 working days of deduction.
The same process will apply if AB Limited hires the service from the other bidder and the bidder does not
mention VAT amount separately in the issued Mushk-11. However, since XY Limited is unregistered, it
appears that they did not consider VAT amount at the time of submitting the offer and it is unlikely that XY
limited will allow deducting the VAT from its fee. In such case, AB Limited would be required to bear the
applicable VAT (i.e. Tk. 110,870) from its own exchequer.
As per SRO# General Order no.-03/Mushak/2014 dated 05 June 2014 issued by the National Board of
Revenue (NBR), a company has responsibility of mandatory deduction of VAT at source at the rate of 15% from
a ‗Security service provider‘ (service code SO 40) irrespective of the availability of Mushak-11. In addition, as
per Rule 18 (L) of the VAT Rules 1991, the deducted VAT shall be deposited to the Government exchequer using
the relevant Commissioner Code within 15 working days of deduction. As per Rule 19 (1 ‗K‘) of the VAT
Rules 1991, 80% input VAT credit is allowed on security service. However, as per Section 9(1) (U) of the
Value Added Tax (VAT) Act, 1991, input VAT credit shall not be allowed on any purchase without availability
of valid VAT invoice (i.e. Mushak-1 1 ). Therefore, merely the deduction of applicable amounts of VAT would
not be sufficient to avoid the negative consequence of loss of input VAT credit.
In the given situation, PQ Ltd., as appointed by AB Ltd. to provide security service, is unwilling to issue the
valid VAT invoice (i.e. Mushak-11). AB Ltd. is required to deduct applicable amount of VAT at source and
should deposit the same to the Government exchequer within due time. However, in the absence of valid
VAT invoice, AB Ltd. cannot take input VAT credit. Therefore, I would advise AB Ltd. to discuss with PQ
LTD. to provide the valid VAT invoice.
36 May
AB Ltd. is now negotiating a deal with ST Ltd. for purchasing television sets. AB Ltd. Jun
intends that ST Ltd. delivers the television sets to CD Ltd., a dealer of AB Ltd. But 2015
AB Ltd. wants that ST Ltd. issues ―Mushak-11‖ challan in favour of ST Ltd. so that
they would be able to get input tax credit on the purchase.
Requirement:
Advise AB Ltd. on the above. 5
Assumption:
In the given situation, AB Ltd. wants that ST Ltd. issues Mushak-11 Challan in favor of ST Ltd. As per the
current provision of the VAT law, a person cannot issue Mushak-11 Challan in favor of himself. Therefore, it
is assumed that the question intends to mean to issue Mushak-11 Challan in favor of AB Ltd instead of ST Ltd.
so that it can get input VAT credit.
As per Section 32 of the VAT Act 1991 read with Rule 16 of the VAT Rules 1991, any VAT registered
person has to issue Challan in form "Mushak-11" for supply of every goods and such Mushak-11 challan has to be
accompanied with the goods up to its final destination mentioned on it. Moreover, the purchaser's and seller's name,
address, registration number and destination of goods etc. have to be clearly mentioned on theMushak-11
Challan. As per Section 38 (2)(L)of the Value Added Tax (VAT) Act, 1991, the VAT able
goods shall be confiscated if such goods are removed from the business premises with Mushak-11 Challan
which does not accompany with the goods up to its destination. Moreover, as per Section 9(1)(U) of the
Value Added Tax (VAT) Act, 1991, the products purchased are required to be brought into the premises of the
registered entity in full to avail input VAT credit.
Therefore, for the given situation in the question, it is advisable to AB Ltd. to bring the televisions into its own
premises first from ST Ltd. for avoiding the risk of confiscation by the VAT authority and availing input
VAT credit. AB limited can then supply the purchased televisions to the CD Ltd. Provided that the name,
address and VAT registration number etc. of AB Ltd. and ST Ltd. have to be clearly mentioned on the
Mushak-11 Challan.
However, this suggestion may be impracticable to follow if the business premise of CD limited and ST is
adjacent or nearer and that of AB limited is far away from ST limited. In that case, once getting the products
from ST limited and then sending them back to CD may not be cost effective. AB limited in that case may
open a small branch near to CD limited with a separate VAT registration, receive the goods from ST limited and
immediately forward the same to CD limited. The branch will perform the necessary documentation work to
get input VAT credit, deposit VAT in VAT Current Account and then sell the televisions to its dealer/customer.
37 May
Worldtel Ltd. is a fixed wireless phone service providing company. It provides Jun
services byselling fixed phone sets, connection cards and stretch cards to its 2016
customers. It has its registered head office, warehouse, seven own divisional sales
centers and almost two hundred retail sales points throughout the country. The
addresses are as below:
Head Office: Nafis Tower, 4th Floor, 12 Glushan, Dhaka

Warehouse: Plot no. 32, 14 Tejgaon, Dhaka
Divisional sales center: (1) Hosna Mansion, 13 Barishal, Barishal; (2) Sami Heights,
67/A Agrabad Commercial Area, Chittagong; (3) JanataBhaban, 18 KDA Commercial
Area, Khulna; (4) Lotif Mansion, 56 Rani Bazar, RajshahiSadar, Rajshahi; (5) Hossain
Plaza, 23 R K Road, Rangpur City, Rangpur; (6) Kushum Plaza, 117 Mirer Bazar,
Moulovi Bazar, Sylhet; (7) Bilkis Tower, 155 Motijhil, Dhaka.
Worldtel Ltd. has been operating its business for last one year under one VAT
registration with service code S 012.10 (Telephone) showing the address of its head
office and depositing VAT to Government exchequer based on its sales through the
sales centers and retailers. Recently it has received a letter issued by VAT authority
stating that it has not complied with the appropriate registration of VAT and not
having separate VAT registration for its each sales points in the country. CFO of
Worldtel has appointed you to advise on the remedy to the above crisis.
Requirement:
Draft a letter to the CFO suggesting an workable solution in accordance with the
relevantprovisions of VAT law.
Date:
Worldtel Ltd.
Nafs Tower, 4th Floor,
12 Gulshan, Dhaka
Subject: . Workable solution on VAT registration

Dear Sir.
This has reference to your recent communication requesting us to advise you on a workable solution withregard to
the VAT registration of your company in the light of the letter issued by the VAT Authority.
Your company provides services by selling fixed phone sets, connection cards and scratch cards to your customers.
Currently your company have got it's a registered head office, ware house, seven own divisional sales centers
and almost two hundred retail sales points throughout the country. You have been operating your business for last
one year under one VAT registration under service code S 012.10 (Telephone) being head office as registered
address and depositing VAT to Government exchequer based on its sales through the sales centers and sales
points.
Please note that as per sec 15 (2) of VAT Act 1991, there are two different means of getting registered for VAT.
When an entity delivers service or goods from two or more than two places, it will be required to obtain VAT
registration separately for each of the places and will be required to maintain all the books and records
separately. Alternatively, if the entity delivers service or goods from two or more than two places and maintain
all the books and records centrally for all the places altogether, it can apply for central VAT registration for all
the places of delivery of goods or services.
In order to comply with the above provisions, your company is either required to obtain VAT registration for
the warehouse, seven own divisional sales centers and almost two hundred retail sales points whereseparate
hooks and records would be maintained for each of those deliver y points or apply fo r
centralVAT registration declaring your ware house as a central distribution point and maintain centralized books
and records for the central delivery center. For central VAT registration, your company will be required to comply
with the conditions of central VAT registration stipulated in SRO 186 Ayn /2012/644 Mushakdated 7 June
2012. We would like to highlight a few major terms and conditions below:
a) Application for central VAT registration should be submitted in the form of Mushak-6;
b) VAT of all the issued products from central delivery center will be deposited in advance
c) VAT of a month of all the delivery centers will be paid through one VAT return maintained
centrally within 15th of the following month.
d) VAT 11 will be issued at the time of delivery of goods from the centrally registered delivery
center.
e) Statement of delivery from the central delivery center and statements of delivery from every sales
center have to be submitted to the local VAT authority within 15th of the following month.
f) The books and records will be maintained in the centrally registered delivery center in accordance
of sec 31 of VAT Act 1991 and rule 22 of VAT Rules 1991.
On the basis of what have been stated above, obtaining separate VAT registration for your warehouse, seven
sales center and almost two hundred sales point around the country may not be workable for your company as you
will have to employ people to maintain compliances for all of your registered office which is not at all cost
effective. Hence we would recommend you to apply for central VAT registration. by declaring your warehouse
as central delivery center which will ensure compliance as well as operating with the present cost structure for
VAT operations.
Should you have any query, please feel free to contact us .
Thank you.
38 May
Delta Ice cream Ltd., a VAT registered entity, incurred the following transactions in Jun
March 2018 2016
Raw materials aggregating to Tk.5,000,000 were purchased on 5 March 2018, VAT on

the same paid and the VAT challan along with the goods were received on 10 March
2016. The deliveries are as follows:
8 March 2018 Tk. 13,00,000

9 March 2018 Tk. 12,00,000
10 March 2018 Tk. 15,00,000
15 March 2018 Tk. 16,00,000
The following deposits were made to the Govt. Exchequer through treasury challan :
7 March 2018 Tk. 1,20,000

12 March 2018 Tk. 1,30,000
15 March 2018 Tk. 1,70,000
Balance of deposit at 1 March 2018 in VAT – 18 was Tk.1,50,000
Requirements:
Write a letter to the management showing how the above transactions will be
entered in VAT-18 of the company and on the irregularities (if any) noted by you in
completing the VATcurrent register (VAT – 18) and implications of the same for the
company.
Date:
Delta Ice cream Ltd.
Address
Subject: Irregularities in compliance of rules 22 of VAT rules 1991 for maintaining VAT 18.
Dear Sir,
Please find below our findings with regard to compliance of rules 22 of VAT rules 1991 in your
enterprise below:
Current Account (Rules 22 of VAT Rules 1991)
Tax payer‘s identification number
Name:
Address:
SL. Date Particulars Purchase or Treasury Rebate Dues Closing Remarks
no. Sales register Deposit Balance
1 2 3 4 5 6 7 8 9 10
1. 01.03.2018 Opening balance 150,000
2. 07.03.2018 Treasury deposit 120,000 270,000
3. Delivery 195,000 75.000
4. 08.03.2016
09.03.2018 Delivery 180,000 (105,000)
5. 10.03.2018 Purchase 750,000 645,000
6. 10.03.2018 Delivery 225.000 420,000
9. 15.03.2018 Delivery 240,000 480,000
In accordance of Rule 22(1) Gha of VAT Rules 1991, maintenance of sufficient balance in VAT current
account is required by which the adjustments or payments for output VAT can be made with the
accumulated balance of VAT deposited and VAT rebate. We have gone through the VAT transactions of
the period from 1 March to 15 March 2018 recorded in the current account and found negative balance in
one occasion which is a clear violation of above rule. under section 32(2) of VAT Act 1991, it is also an
offence which may cause a monetary penalty of an amount not less than half and more than two times of
the amount of VAT. However, for irregularities other than evasion of revenue, the amount of fine is
limited to not less than Tk. 5,000 and not more than Tk. 300,000.
We recommend strict compliance of VAT provisions by maintaining a positive balance in VAT 18.
Should you require further clarification on this, please do not hesitate to revert to us.
Thanking you.
39 As an Executive-VAT of the Delta Ice Cream Ltd., you have been provided with May
the following cases: Jun
2016
(i) An air-conditioned restaurant issued Mushak-11 to the Company wherein
amount of VAT was Tk.5,000.
(ii) Statutory audit was carried out by an audit and accounting firm which
raised an invoice in its own format adding VAT of Tk.15,000 on to the
audit fee.
(iii)The Company is in receipt of a Mushak-11 issued by an insurance
company against marine insurance policy showing VAT of Tk.10,000.
(iv) Goods were purchased for Tk.100,000 from a manufacturer who issued
Mushak-11 to the Company adding VAT of Tk.15,000 thereto.
(v) Mushak-11 was issued by a furniture show-room to the Company for
sale of furniture showing VAT of Tk.3,000.
Requirement:
Provide your opinion on deduction or collection of VAT at source and calming
InputVATrebate in the cases stated above.
(i) An air-conditioned restaurant issued Mushak-11 to the Company wherein amount of VAT
was 5,000.
As per General Order No. 03/Mushak/2014 dated 05.06.2014, the services from which VAT is required to
be deducted or collected at source do not include air-conditioned restaurant. Hence, VAT will not be required to

be deducted at source from the said restaurant.
Pursuant to section 9 (1) of the VAT Act, 1991, VAT paid on purchase of services rendered by air-
conditioned restaurant will not be eligible for claiming input VAT rebate considering it entertainment.
(ii) Statutory audit was carried out by an audit and accounting firm which raised an invoice in its own format
adding VAT of Tk. 15,000 on to the audit fee.
In accordance with General Order No. 03/Mushak/2014 dated 05.06.2014, VAT is required to be deducted or
collected at source from audit and accounting firm.
As per Rule 19 of the VAT Rules, 1991, 80% of VAT paid on procurement of services rendered by audit and
accounting firm will be eligible for claiming input VAT rebate. It is worth noting that invoice issued by an
audit and accounting firm in its own format will be treated as VAT (Mushak) invoice provided the invoice
fulfils conditions stipulated in Rule 17 of the VAT Rules, 1991
(iii) The Company is in receipt of a Mushak-11 issued by an insurance company against marine insurance policy
showing VAT of Tk. 10,000.
As per General Order No. 03/Mushak/2014 dated 05.06.2014, the services from which VAT is required to
be deducted or collected at source do not include an insurance company. Hence, VAT will not be deducted at
source from the company conducting insurance business.
In accordance with Rule 19 of the VAT Rules, 1991, claim for credit of input VAT paid on insurance premium is
allowable up to 80% of VAT so paid.
(iv) Goods were purchased for Tk. 100,000 from a manufacturer who issued Mushak-11 to the Company adding
VAT of Tk. 15,000 thereto.
VAT will not be deducted at source if goods are supplied by a manufacturer issuing Mushak-11 upon payment of
applicable VAT.
In accordance with section 9 of the VAT Act, 1991, there is no restriction on claiming credit for input VAT paid
on purchase of goods from a manufacturer.
(v) Mushak-11 was issued by a furniture show-room to the Company for sale of furniture showing VAT of
Tk. 3,000.
As per General Order No. 03/Mushak/2014 dated 05.06.2014, VAT is required to be deducted at source from
the sale of furniture by a show-room.
Pursuant to section 9 (1) of the VAT Act, 1991, VAT paid on purchase of furniture will not be eligible for
claiming input VAT rebate.
40 Three persons, as follows, are in the process of starting new business and approach Nov
you for advice under Value Added Tax Act 1991 considering the current provisions in Dec
force: 2015
i) A Chartered Accountant is obtaining ‗Certificate of Practice‘ from ICAB to

begin professional practice in accounting and auditing with an estimated
annual fee income of Tk.7,500,000/=.
ii) A retired Biman Airlines Manager in the process of setting up a Tour Operator
business. Estimated annual commission income is Tk.6,500,000/=.
iii) XYZ Ltd., a private limited company, operating from Kaptan Bazar, Dhaka,
and already a VAT-registered assesse, engaged in product distribution got a
new national distributorship agreement from a Chinese Manufacturer to
import, stock and sell mobile handset in Bangladesh. Estimated annual
turnover of XYZ Ltd. from new handset dealership is Tk.25,000,000/=.
Company plans to appoint District Distributors (DD) to sell mobile handsets
through selected retailers in major cities.
Requirements:
Please brief on the three persons shown in (i), (ii), (iii) above in connection with the
compliance under VAT law considering the provision now in force with respect to
initial compliance obligation and statutory VAT records. Examiner shall take into
account mention of Codes, prescribed VAT Forms, Records and Sections/Rules.
Three different parties shall have following compliance obligation, statutory records and reporting:
(i) Chartered Accountants Firm :
a) VAT Regist ration
Initial compliance obligation is VAT registration under service Code 5034 using Form VAT-6. Obtain
VAT registration certificate (VAT-8). Although it may appear that the firm will not be required to obtain
VAT registration certificate rather will be required to obtain turnover tax registration since their estimated
annual turnover is less than the threshold i.e., Tk 80 lacs, as per the SRO# 641 of 2012, the firm must
apply for the VAT registration irrespective of its annual turnover.
b)VAT payment
In most of the case the payer is responsible for deduction of VAT at source at the time of making payment
to the CA firm. The firm will be required to collect Mushak-12 (Kha) from the payer. VAT paid to the
firm must be deposited to the Government Exchequer before submission of the VAT
return.VATwithheld from the service provider should also be deposited to the government exchequer.
c) VAT return
VAT return (Mushak-19) must be filed to the respective circle within 15th day of the next month.
d) VAT record keeping
VAT-11, VAT-19, VAT-12 Kha, Treasury Challan, etc
(ii) Tour Operator:
a) TOT Registration
Since annual turnover is less than Tk 8,000,000, the retired airline manager is required to obtain
Turnover tax registration by using VAT-6 and then obtain VAT-08 for TOT registration. Service
Code will be S077
b) TOT payment
TOT is payable @ 3% on the basis of declaration made under the VAT-2. He can pay the TOT
on monthly, quarterly or annual basis.
c) TOT Return
TOT return i.e., VAT-4 is required to be submitted as the declaration made under the VAT-2
i.e., monthly, quarterly or annual basis
d) TOT record K eeping
TOT records are VAT- I 7Ka, Serial wise Sales Receipts book. TOT return (VAT-4) monthly or
quarterly. Other related documents to support information in the statutory records.
(iii) XYZ Ltd:
a) VAT Regist ration
XYZ is already a VAT registered person. Their type may be trader. However, we need to review
the VAT registration certificate as to whether their types also includes ―importer‖ or not. If not
then XYZ will be required to amend the VAT registration to include importer in their VAT
registration.
b) Price declaration
If the deemed value addition is 26.67%, XYZ will not be required to submit price
declaration, otherwise they will be required to submit price declaration through Mushak-1 Kha.
c) VAT payment
VAT is payable @ 15%. If the Value addition is 26.67%, XYZ will not be required to pay any
VAT at the time of selling goods to their customer since 4% ATV has already been deposited
to the Government Exchequer at the time of importation of the mobile handset.
If XYZ follows price declaration basis, they will be required to pay VAT on the value addition at
the time of selling goods to their customer @ 15% on value addition.
d) VAT return
VAT return (Mushak-19) must be filed to the respective circle within 15th day of the next month.
e)VAT record keeping
VAT records (as existing) are VAT-16, 17, 18. VAT-11 or 11Ka or 11Gha. VAT return-19. Other
related documents to support information in the statutory records.
41 XYZ Ltd., a private limited company, operating from Kaptan Bazar, Dhaka, and Nov
already a VAT-registered assesse, engaged in product distribution got a new national Dec
distributorship agreement from a Chinese Manufacturer to import, stock and sell 2015
mobile handset in Bangladesh. Estimated annual turnover of XYZ Ltd. from new
handset dealership is Tk.25,000,000/=. Company plans to appoint District Distributors
(DD) to sell mobile handsets through selected retailers in major cities.
XYZ Ltd., the company in above requires additional advice on the formulation of the
handset price at various stages using the system of ‗input VAT rebate claims‘ at each
stages of delivery chain u/s 9 of the law. Please make detailed computation of the
PRICE in each stage upto MRP(Price to Distributor, Price to Retailer and MRP)
clearly showing input-output VAT adjustment and net VAT payable amount in each
stage of National Distributor(ND) and DistrictDistributor. Your answer should also
contain a reconciliation of the ‗VAT (15%) on cost to retail‘ and summation of the
VAT at earlier stages beginning from the import.
[ASSUME: Per unit landed cost of XYZ Ltd is Tk.5,500/= including import stage
VAT(15%=650/=), AIT (5%=165/=) and Advance Trade VAT (4%=220/=). ND margin
15% onLanded cost, Trade Promotion expense, estimated damage recovery total 14.0%
on ‗value afterND margin‘; DD margin 5% and Retailer margin 15%.] 7
Following is the price formulation and the mechanism of input VAT rebate claim and net output vat payment by
XYZ Ltd at various stages (amount rounded off):
Taka VAT at Net VAT Explanation
each stage
VAT at import stage (15%) 650.00 650 650
AIT(Advance Income Tax) 165.00
ATV(Advance Trade VAT) 4% 220.00 220 220
Landed Cost per unit No VAT on
(excl. VAT+AIT+ATV) 4,465.00 VAT+AIT
National Distributor Margin(15%) 669.75
Value After ND Margin 5,134.75
Trade Promotion +Damage recovery 718.87

(14.0%)
ND Price before VAT 5,853.62
VAT at 15% at ND Stage 878.04 878.04 8.04 878.04 less
(650+220)
ND Price to District Distributor (DD) 6,731.66
DD Margin — 5% 336.58
DD Price before VAT 7,068.24
VAT at 15% at DD stage 1,060.24 1,060.24 182.20 1052.24 less
878.04
Price to Retail 8,128.47 1,060.24 VAT Sum Total
at stages.
Retailer margin — 15% 1,219.27 8128.47x3/23=
1060.24
CONSUMER PRICE PER UNIT 9,347.74
42 Nov
XYZ Ltd., a private limited company, operating from Kaptan Bazar, Dhaka, and Dec
already a VAT-registered assesse, engaged in product distribution got a new national 2015
distributorship agreement from a Chinese Manufacturer to import, stock and sell
mobile handset in Bangladesh. Estimated annual turnover of XYZ Ltd. from new
handset dealership is Tk.25,000,000/=. Company plans to appoint District Distributors
(DD) to sell mobile handsets through selected retailers in major cities.
XYZ Ltd., the company in above may soon run out of space at the present rented

premises upon addition of new set of employees for handset dealership. The company
has own bigger floor space in Uttara, Dhaka. Management is considering option of
moving from current rented space from Kaptan Bazar to own space in Uttara, two
being separate VAT divisions. Pleaseadvise Company on steps within the purview of
VAT law (mentioning Section, Rule and prescribed Form) if the company decides to
change office/store to Uttara.
Rules 12 of the VAT Rule 1991 provides for formalities as to the change of business location and situation. This
is, however, not for ownership change. Application for ‗change' of business location and nature should be done
14 days prior to the change. All pending VAT must be paid off before the application or an undertaking on stamp
paper to settle the VAT or other liabilities with the VAT law. Any work stoppage at the present location must be
informed to the respective VAT circle. Physical change of the location and transfer of the stock-in-trade
should not be done without clearance from present VAT circle. Steps to be taken are as follows:
 Application for change of location in Form VAT-9 to present VAT Circle.
[Together with the attested copies of Trade License, Lease Agreement, NID, original VAT registration
certificate, application in plain paper, copies of previous four months‘ VAT Returns.]
 VAT inspector shall visit the location to inspect stock-in-trade/other information of the XYZ Ltd.
 Information of such change and a copy of the application for change should also be filed with the
new VAT circle under newVAT division (as the change to a separate division, Uttara).
 After scrutiny and satisfaction, present VAT circle shall cause to transfer the VAT file of the assesse
to the new VAT Circle.
A new VAT registration is required to be obtained from the new transferee VAT division.
43 B Ltd. will be amalgamated with A Ltd., which has a few VAT cases pending with the Nov
VATappellate authorities. With reference to section 59 of the VAT Act, 1991, VAT Dec
authority sent a letter asking B Ltd. to make payment of VAT relating to those 2016
pending cases before starting amalgamation procedures. As a professional accountant
having expertise in VAT matters, you have been asked by the management of B Ltd.
to advise them.
Requirement:
Provide your opinion on the letter issued by the VAT authority in the case stated above. 5
VAT Act, 1991 and VAT Rules 1991 do not specifically address the issues relating to
amalgamation. Transfer of assets and liabilities by amalgamating company to the amalgamated company
is not transfer of any movable or immovable property within the control of the undertaking of a
registered person or the transfer of ownership of his undertaking as set forth in section 59 of the VAT
Act, 1991. In the amalgamation process, the shareholders of the companies desirous to be
amalgamated approve the scheme at appropriate legal forum. During the amalgamation process, one of
the companies is discontinued and the surviving company takes ownership of the assets and liabilities.
If the name of the surviving company is changed, then the change must be approved with the
respective regulatory body. In practice, clear directions are given by the appropriate legal forum with
regard to the fiscal obligations, if any, of the reporting entity.
Whereas, section 59 of the VAT Act, 1991, is made applicable for transfer of ownership wherein the
entity will remain there but only ownership is changed. Here in this case, the said shareholders
are not transferring the movable or immovable property or ownership of the undertaking, rather
assets belonging to their companies will be merged and they will remain owner thereof by holding
shares in the amalgamated company. In the amalgamation process, the companies are merged alongside the
merger of assets and liabilities owned by them. It is not the case where the transferor company will
remain as a distinct entity like a usual seller would after transfer of its assets and liabilities.
As such, we advise you to let the authority know that section 59 of the VAT Act, 1991 is not made
applicable to amalgamation scheme, unless the court so directs. For this claims, we advise you to follow
the directives given by the court.

44 As a ICAB fellow member, after working long years, you moved to own practice. Nov
VAT is your specialty. Your retainer-basis client, ―Smart Footwear Ltd.‖ involves in Dec
export and domestic sale of footwear. This is your single largest fee client. Client 2016
provided you a chamber at management floor. As proactive advisor to clients on tax
planning, you encourage client to gradually introduce process of claiming input VAT
rebate and also train them on sensitive conducts not to land in fines/penalty. Section
37 of VAT law attracts fixed fine and variable penalty for certain offences. List
includes offences of VAT evasion and offences of fixed fines. Smart Footwear use
imported bonded materials for export orders. You came across incidents that Smart
Footwear sold bonded materials in local market. This holds potential VAT action. You
discussed this with management who requested you to stay quiet as the year has
already passed by.
Requirements:
i) Write three critical suggestions for client to be careful in order not to run on
penal actions u/s 37 that may be featured as VAT evasion
ii) Consider issue of breaching bond conditions. Identify threat(s) to any
fundamental principles of professional ethics and professional threats, if
any, arising from incidents and explain why thethreat(s) arise and if you
have any safeguards to mitigate the threat(s).
5
(i) Section 37 of the VAT Act 1991 provides for offences and penalties. There are offences subject to
fixed fines and there are offences leads to charges of VAT evasion.
Threecritical suggestions I can make to Smart Footwear Ltd. to stay off charges u/s 37 are as follows:
 Selling goods (subject to VAT) without issuing VAT Invoice,
 Sales delivery without updating the same in Sales Book (VAT 17) and without recording the
payable VAT on such sale in the Current Account (VAT 18),
 Selling goods without maintaining sufficient balance in the Current Account.
(ii) Smart Footwear Ltd. need to pay zero (0) % VAT as they export their footwear. Moreover, they
enjoy bonded facility for importing raw materials to produce these exportable goods. It came to our
notice that they have sold some of these imported raw materials to local market.This is an illegal conduct
that holds potential charges to revenue evasion. An illegal conduct is always illegal regardless of its age.
Customs bond audit in future may detect this departure.
I understand that this is my single largest fee client; management keeps me in their respect and provided
me space facility. When I spoke to the management, they wanted me to stay quiet as the incident is not
current. Iam an Accountant in public practice. The incidentbrings before me threats to fundamental
principles like ‗objectivity.and independence and it exposes me intimidation threat as I might lose
my client resulting in reduced fee and increased cost for the space provided to me.
On the other hand, my engagement with Smart Footwear Ltd. is advisory. not statutory audit assignments
which mean threats are there but not significant for me. It also doesn‘t come in my obligation to disclose
the incident to revenue authority.
As my obligations to fundamental principles and to mitigate the identified threats. I shall consider
following possible safeguards:
 Putting up the incident in writing to management (Board of Directors) with my views and
the potential consequence that may result from such non-compliance,
 training department staff who are involved in the incident,
 Developing an internal control policy paper for the management to comply rules and regulations
to avoid such non-compliance.
 If the management do not take a decision in future, I may consider resignation as a consultant
45 Regent Company produces different consumer products. To produce their products Nov
they import some ingredients from China and use some local ingredients. To produce Dec
10,000 pieces(pcs) of AAA Makeup Box for November 2017 they procured and used 2016
following ingredients as per standard practice:

Ingredient A: 1,200 kgs by Tk.517,440 where VAT was Tk.65,340, AIT (advance
incometax) Tk.16,500, Customs Duties (CD) Tk.33,000 and Supplementary Duty
(SD) Tk.72,600;
Ingredient B: 600 kgs by Tk.356,345 where VAT was Tk.45,045, AIT Tk.11,000,
CD Tk.66,000 andSD Tk.14,300;
Ingredient C: 800 kgs by Tk.150,000 (VAT-exempted); and
Ingredient D: 10,050 pcs by Tk.138,000 where VAT was Tk.18,000.
Ingredients A and B were imported items and Ingredients C and D were locally
procured from wholesale market.
Standard Gas bill for such quantity of products was Tk.120,000 and Electricity bill
was Tk.55,000 excluding VAT.
Per Unit costs were: Labor cost Tk.80, factory overhead Tk.90. Standard marketing
overhead cost in total was Tk.50,000 and bank interest Tk.45,000 for November 2017.
Company profit markup policy is 30% after charging all costs.
Company produced and sold 1,000 pcs AAA Makeup Box in November 2017.
As a Manager (Costing & VAT) of the company you are required to submit Form
VAT-1 for Product AAA and Form VAT-19 for the month of November 2017.
Requirements:
(i) Find out per unit AAA Makeup Box cost for Form VAT-1 and selling price.
5
(ii) Determine the amount of input VAT that will be allowed as rebate in Form
VAT-19 and net VAT payable for November 2017.
2

(i) Regent Company
Computation of Sales price of AAA makeup Box
Cost VAT Paid
Particulars Excluding (Rebate able)
VAT
Ingredient A 4,35,600 65,340
Ingredient B 3,00,000 45,045
Ingredient C 1,50,000 0
Ingredient D 1,20,000 18,000
Gas bill (Rebate= 15% of costx80%) 1,20,000 14,400
Electricity bill (Rebate= 15% of costx80%) 55,000 6,600
Material Cost 11,80,900 1,49,385
Per unit Material Cost 11,80,900/10,000 118.09

Labor Cost 80.00
Overhead 90.00
Marketing overhead 50,000/10,000 5.00
Bank Interest 45,000/10,000 4.50
Per unit Product Cost 297.59
Profit 30% 89.28
Price before VAT 386.87
VAT 15% 58.03
444.90
(ii)
Output VAT (Tk. 58.03 x 10,000) 580,300
Input 149,385
VAT payable 430,915
As such cost per unit AAA make up box will be Tk. 297.59. After adding Tk. 89.28 as profit the VAT
assessable value will be Tk. 386.87. So the selling price to the customer will be Tk. 444.90
Input VAT for the month of November 2017 may come to Tk. 149,385 and regent will be required to
deposit Tk. 430,915 to the Government exchequer. The same will be reported in the VAT-19.
Assumptions made:
VAT on Gas and Electricity is 15%
Regent‘ name is there in the B/E and the goods entered into the factory within November 2017
There will be no input VAT in connection with the marketing overhead.
46 You are a professional practitioner where VAT practice makes an impression. You May
are supposed to peruse new VAT law and stay tuned to the on-going talks in media Jun
and meetings between NBR and Trade Bodies involving Govt‘s determination to 2017
introduce new VAT Act 2012 from July 01, 2017.
Requirements:
Specify five salient changes supposed to be coming up in new VAT law from July
2017 5
Answer:
The new VAT law, which was passed by the Parliament in 2012, is expected to be effective from
July 2017. Major changes over the existing law are as follows:
i) Universal VAT Rate: There will be a universal VAT rate which may be 15% or lower.
Presently there are many VAT rates (15%, truncated base, rates based on tariff value etc.)
ii) Threshold for registration and no Package VAT: Annual turnover of 30 lacs is expected to
be fixed for goods and services to have no VAT and thereby no VAT registration. That is,
annual turnover below 30 lacs shall attract no VAT, Annual Turnover tax threshold is
expected to be raised from taka 80. There will be no package VAT under the new law.
iii) No Price Declaration: Price declaration for goods is expected to cease.
iv) Deduction of VAT at source: Except for private limited companies, VAT deduction will not
be applicable.
v) Input VAT Rebate: 100% input VAT rebate can be taken by assesse.
47 Your client, Trims Ltd. involves in exports and local trading. Balance Sheet of Trims May
Ltd. as at 30.06.2018 shows a ‗VAT Current Account‘ debit balance taka 50,000. Jun
VAT-18 stands agreed with Balance Sheet of the company. Formatted columns of VAT 2017
Account Current (Form VAT 18):
Sl,Date, Description, Purchase/Sales book ref., Treasury Deposit, VAT
receivable, VAT payable, Balance, Remarks.
Transactions in July 2018:
 VAT deposit taka 50,000 on July 01.

 Sales (local) taka 200,000 excluding VAT on July 05.
 Sales(exports) to A category factory in Savar EPZ taka 500,000/=
 Sold goods returned worth taka 50,000 on July 15.
 Purchase goods taka 100,000 excluding VAT July 20. Purchase return
50,000 excluding VAT same date.
 Sales goods taka 450,000 excl VAT July 25. Treasury deposit same day
50,000.
 Goods sold taka 50,000 July 28 but customer withheld VAT taka 7500
when paying to Trims Ltd. Trims Ltd. delivered goods Tk 100,000 to a
Singapore-bound ship at Chittagong Port on July 29.
Requirements:
5
Using the data in above, draw a VAT Current Account (VAT 18) for Trims Ltd. for the
month of July, 2018.
1
0

Answer:
Trims Limited: VAT CURRENT ACCOUNT (Form VAT - 18), Rule 22(1) VAT
Registration No ......................
SL Date Description Purchase/ Sale Treasury VAT VAT Balance
ref Dep Receivable Payable
1 01.07.18 Opening balance 50,000
2 01.07.18 Treasury deposit Challan 50,000 100,000
3 05.07.18 Sales(local) S,B 30,000 70,000
4 11.07.18 Sales(exports. zero VAT) S.B - 70,000
5 15.07.18 Sales return DN 7,500 77,500 ,
6 20.07.18 Purchase P.B 15,000 92, 500
7 20.07.18 Purchase return CN 7,500 85,000
8 25.07.18 Sales S.B 67,500 17,500
9 25.07.18 Treasury deposit Challan 50,000 67,500
10 28.07.18 Sales VAT Challan 7,500 60,000
11 29.07.18 Sale to Outer Ship(zero VAT) S.B 0 60,000
TOTAL FOR THE MONTH 100,000 22,500 112,500 60,000
Closing Balance of VAT Current Account at the end of July 2018 is Taka 60,000 Debit. Trims Ltd.
May claim VAT of Tk. 7,500 as treasury deposit after obtaining the treasury challan in support of the
VATDEDUCTION AT SOURCE FROM ITS CUSTOMER. However, as per the general order, VAT
should not be deducted at source from a supplier who also manufactures the same. As such they
should negotiate the same with the customers.
48 Trims Ltd. needs to pay honorarium to the members of its tender evaluate committee. May
But they are not sure as to whether VAT needs to be deducted at source. June
Requirements: 2017
Advise if Trims Ltd. is required to deduct VAT at source while paying such
honorarium 6
Answer:
As per SRO, VAT deduction at source is applicable on remuneration of board members. The person involved in
the tender evaluation committee renders personalized services which is exempt from VAT as per the 2nd schedule
of VAT Act,I991. As such VAT is not deductible from remuneration as per VAT Act,1991
49 As an ICAB member, you are a VAT adviser to many large companies. You know May
about Panama papers leaks news story which put selected names of Bangladeshi under June
spotlight. One of your VAT clients name was seen in that list, truth of the report 2017
unconfirmed. Although there are legitimate ways of using tax havens, most of what
has been going on is about hiding true owners, the origin of the money and avoiding
tax thereon. VAT evasion is one of the crude tools of money launderers. You are in
the center stage of a sensitive practice.
Requirements:
Evaluate any professional and ethical issues for yourself and your firm arising from the
news story about Panama paper leaks. Set out the actions that you and your firm should
take.
5
Answer:
Panama paper leaks story is all about sheltering of assets secretly at offshore tax heavens. Offshore tax shelters
may be legal, but the ethicality of using them to eliminate taxes is highly irregular. One my client name is on
alleged list of names. I shall maintain that client be requested to fully investigate the alleged story to confirm its
truth. I see no connection of myself and my firm with such alleged leak story naming my client. However I
find this as an alert signal for me and my firm to reposition the way of client dealing. I see that two major
fundamental ethical principles ‗Professional behavior‘ and ‗confidentiality‘ are likely to be impaired at
allegation like panama paper leaks. ‗Familiarity threats‘ and ‗self-interest threat‘ are likely to crop up in such
circumstances as the leak story got in wider media. The news story obliges me to review my and my firm‘s
conduct at clients to examine if our conduct does discredit the profession. I have also examined if the leak
story pops up any threats to our compliance to these principles. I am a Professional Accountant in Public
practice. As I am not connected whatsoever with the story linking a VAT client, I do not see any significant
threat that may impair those fundamental principles.
As action steps, I shall (i) meet client management and discuss with him the leak story linking his name and for
further investigation, (ii) advise client to engage a lawyer to deal with the alleged story, (iii) request client in
writing to arrange training for the key staff on money laundering and cross-border transactions, (iv) request
client in writing to introduce a Code of Conduct for the employees. If the allegation is found true, I would elect
to distance from the service of this client. I shall review my Firm‘s Code of Conduct to make that current with
time, shall schedule training for the Firm‘s staff on money laundering and code of conduct. Public interest must
be upheld by us as ICAB member. Accountants must not forsake ethical responsibilities when working for
wealthy clients. We must not let lose privilege of our self-regulation.
50 You are a VAT adviser to PQ Ltd. (―Company‖). A taxable service provider is Nov
unwilling to issue a valid VAT invoice (Mushak-11) and has asked the Company to Dec
deduct VAT at source from the amount payable thereto. The Chief Financial Officer 2017
(―CFO‖) of the Company has requested you to discuss the issue in more detail at the
next meeting.
Requirements:
Prepare a note for discussion at the meeting with the CFO of the Company, addressing
Theconsequence of entering into a transaction with a registered person who/which does
not issue avalid VAT invoice (Mushak-11). 5
Notes for discussion at the meeting with the CFO of PQ Ltd.
Consequence of entering into a transaction with a registered person who does not issue a valid
VAT invoice (Mushak-11)
According to Section 37 (2) of the VAT Act, 1991, the following activities, inter alia, will be treated
as offence, if any person:
 fails to issue a VAT invoice or renders a fallacious VAT invoice from the perspective of material
information;
 receives goods or services without VAT invoice despite the recipient is a VAT registered
person;
 engages himself in receiving or acquiring possession of goods or entering into transactions
though he knows or he has reason to believe that VAT or, where applicable, VAT and SD
payable on such goods has been evaded; or
 evades or attempts to evade VAT or SD by any other means;
 does or abates in doing anything specified in clauses from (ka) to (tha) of Section 37 (2) of
the VAT Act, 1991.
In the event that the aforementioned offences result in evasion of VAT, the said person shall be liable to a
monetary penalty which shall be not less than 50% and not more than 100% of the amount of VAT so
evaded. For the offences set forth in Section 37 (2) of the VAT Act, 1991, which are considered as
irregularities other than evasion of revenue, the said person shall be liable to a monetary penalty of
not less than Tk. 20,000/= and not more than Tk. 50,000/=.
Section 37 (6) of the VAT Act, 1991, provides that any person who is convicted in the Court of Special
Judge for the offences set forth in Section 37 (2) of the VAT Act, 1991, shall be liable to
imprisonment for a term which shall be not less than 3 months and not more than 2 years or a
pecuniary penalty which shall be not less than 50% and not more than 100% of the amount of VAT
payable or both.
In accordance with Rule 35 of the VAT Rules, 1991, any registered person who contravenes any
provision of the VAT rules shall be liable to a pecuniary penalty which shall be not less than 50% and not
more than 100% of the amount of VAT payable on relevant supply of goods or rendering of services
and the said goods or services (where applicable) related to such contravention shall be confiscated in
favor of the government.
Furthermore, VAT authority may impose a penalty of not more than Tk. 10,000/= and not less than Tk.
5,000/= under Rule 35 of the VAT Rules, 1991, for violation of the VAT Rules, 1991, if the infringement
does not result in evasion of VAT.
In light of the above, it is obvious that there is no scope in VAT laws to do transaction with a person
who/which does not provide a valid VAT invoice (Mushak-11). Deduction of VAT at source will not
discharge the service recipient from the obligation to enter into transaction with a VAT compliant
counterpart.
51 Electric bike is a bicycle powered by lightweight lithium-ion battery which has gained Nov
popularity in many countries. A motor cycle importer imported 100 pieces of electric Dec
bicycle to try first time in Bangladesh market. Cost per piece including VAT at import 2017
point 100 US dollar. He incurred 15% import VAT. The importer incurred C&F
charges taka 50,000 to clear the consignment. He sold 90 units to wholesaler at 10%
profit. Wholesaler incurred indirect fixed overhead of taka 15,000 in a tax period in
which he sold 90 units of electric bike.
As a pricing policy, he aims to recover the fixed overhead from margin charged to
retail. Wholesale margin is 10% on his sale to retailer. Retailer sold his entire stock of
90 units in one tax period. He engaged a technician at monthly salary of taka 5,000/=
(direct cost) to service the new electric bike. Retailer‘s direct cost including technician
salary amount to taka 50,000/=. Retailer margin is 15%. Exchange rate Taka 80 to a US
dollar.
The wholesaler maintains full statutory VAT records and operates on full VAT
system. Wholesaler has 10 units unsold stock of electric bike purchase. In one later
evening, his shop got fire fully damaging (consider nothing recoverable) the entire
stock of electric bike. Wholesaler approached you for legal advice what to do under
the circumstances.
Wholesaler‘s indirect fixed overhead taka 15,000/= include estd taka 2000/= insurance
cover (including 15% VAT), taka 3000/= for electricity (including VAT 5%) and taka
10000/= (including VAT 15%) paid to part timer CA application level student to
provide bookkeeping support. This wholesaler can take rebate of input VAT in the
product cost but he is unsure if he can claim rebate of VAT he paid on the indirect
expenses of taka 15,000/=.
Requirements:
i. Compute VAT to be borne by consumer for the stock of electric bike
actually sold by retailer.
10
ii. Can wholesaler claim rebate of the input VAT included in damaged
stock? Describe procedure in ref to the applicable provisions of the VAT
law to deal with electric bike stock is damaged by fire.
(i): Check Amount (Taka)
Importer Stage - Computation of VAT
Price including VAT 100x80x100 800,000.00

[VAT on import included in the price] 104,347.83 104,347.83
Price Excluding VAT - 100 units 695,652.17
ADD: C&F Charges 50,000.00
[promotional cost 1000 tk per unit is not product cost]
Total cost excluding VAT - 100 units 745,652.17
ADD: Margin 10% 74,565.217
Value Addition 124,565.22
820,217.39
VAT on Value Addition 18,684.78

VAT on import 104,347.83 15% 123,032.61 Output
VAT
Price to Wholesale including VAT 943,250.00
Wholesaler Stage - Computation of VAT
Cost of purchase -- 100 units 943,250.00
Less: Input VAT for 100 units(Cost)*(3/23) 123,032.61 123,032.61
Net cost of goods available(100 pcs) 820,217.39
Total cost for 100 units excluding input VAT 820,217.39
ADD: Margin at 10% on 90 units 73,819.57
Selling price excluding VAT -- 90 units 812,015.22
[Total value addition at wholesaler]
VAT on value addition --

Input VAT -- prop on 90 units 110,729.35 14%
14% 110,729.35
110,729.35
Output Output
VAT
PRICE TO RETAILER 922,744.57
Retailer Stage - Computation of VAT

Cost of purchase - 90 units 922,744.57
Less: Input VAT for 90 units (Cost)*(3/23) 120,357.99 120,357.99
Net cost of goods available (90 pcs) 802,386.58
ADD: Direct cost for 90 units 50,000.00
ADD: Margin at 15% 127,857.99

Selling price excluding VAT of 90units 980,244.57
Total value addition at Retailer 177,857.99
VAT on Value Addition 26,678.70
Input VAT -- 15%
120,357.99 14% 147,036.68
110,729.35 Output Output
VAT
PRICE TO CONSUMER 1,127,281.25
Consumer cost per unit 12,525
Importer Wholesaler Retailer Consumer

100 90 90 90
Output VAT 123,032.61 110,729.35 147,036.68
Less: Input VAT 110,729.35 120,357.99
NET VAT 123,032.61 - 26,678.70
NET VAT for 90 units 110,729.35 - 26,678.70 137,408.05
Total VAT amount consumers pay for 90 units 137,408.05

Consumer Price per unit 12,525
VAT in consumer price per unit 1,633.74
90
Total amount of VAT for 90 units sale 147,036.68
(b)(ii):
VAT Rule 41 applies to deal with the manner how to dispose damaged goods in possession of the
assessee. The assessee should do police station record of the fire incident. The procedures under VAT
law are as follows:
 Wholesaler shall apply to local VAT circle using the Form VAT-27 within 24 hours of the
incident of fire duly detailing the damages resulted from the fire.
 He will coordinate with local VAT circle to visit the shop premises within three days to assess the
probable output VAT connected with the damaged stock and, at the same time, the VAT
officer shall forward the application to Division Office for approval with his
recommendation as to how to dispose the damaged stock.
 Division office shall make his decision within 30 days on how to dispose the damaged goods.
He will order for cancelling the input rebate on the purchase of the damaged stock and make
the adjustment of the same in the assessee‘s current account and in the next period monthly
return.
 Wholesaler shall act according to the order of Division Office.

Tax- Other Maths
S.L Question Year
1 State with reasons whether the following expenses are fully or partly admissible as Nov Dec
deduction while computing income from business or profession: 2014
(i) Stock-in trade was lost in fire, amounting to Tk. 12,000 and was debited to P/L
Account.
(ii) Interest paid to bank Tk. 15,000 in connection with overdraft obtained for
paying dividend.
(iii) Overseas travelling expenses Tk. 50,000. The amount of disclosed turnover
and disclosed net profit is Tk. 40,00,000 and Tk. 20,00,000 respectively.
(iv) Royalty paid Tk. 2,00,000. The amount of disclosed turnover and disclosed
net profit is Tk.40,00,000 and Tk. 20,00,000 respectively.
(v) Penalty paid for violating income tax law Tk. 25,000.
(i) Stock in trade lost in fire amounting toTk.12,000 charged in Profit & Loss Account will be an admissible
expense.
(ii) Dividend is paid from post net profit. As such bank interest Tk. 15,000 paid in connection with
overdraft for payment of dividend will not be an admissible business expense.
(iii) Under section 30(k) admissible overseas travelling expense is 1% of turnover. 1% ofTk. 40,00,000
comes to Tk.40,000. As such the claim of Tk. 50,000 is Tk. 10,000(50,000 - 40,000) more than the
admissible limit. The excess claim of Tk. 10,000 will be added to net profit of Tk. 20,00,000.
(iv) Under section 30(h) admissible royalty expense is 10% of net profit. 10% of Tk. 20, 00,000 comes to
Tk.2,00,000. As such the claim of Tk. 2,00,000 is within that limit and such is admissible in full.
(v) Penalty for violating income tax law of Tk. 25,000 will not be an admissible expense because any
infringement of law will not be an admissible expense.
2 Mr. Ahmed, a director of Prime Bank Ltd., transfers by way of gift 1,000 shares of Nov Dec
Tk.100 each to his friend Mr. Karim on 10 November 2017. The SEC accorded its 2010
consent to such transfer on 8 November 2017. The opening and closing prices of the
Prime Bank shares on 7 November, 9 November and 10 November 2017 were Tk.850
and Tk.870, Tk.860 and Tk.840, and Tk.880 and Tk.865 per share respectively in both
CSE and DSE. No Prime Bank shares were traded in DSE on 8 November 2017. The
opening and closing prices of the Prime Bank shares traded in CSE on 8 November
2017 were Tk.862 and Tk.855 respectively.
Required:
Calculate the income tax liability, if any, in the above case. 2
Here Mr. Ahmed is a director of Prime Bank Limited. So the transfers by way of gift 1,000 shares will be subject to tax
deducted at source under section 53 M of the Income Tax Ordinance 1984.
According to section 53 M of 1984, SEC will collect tax at the rate of five percent on the difference between transfer
value and cost of acquisition of the securities. or mutual fund units.
Now the question, how SEC will determine the transfer value.
According to 53 M of ITO 1984, ‘transfer value’ of a security or a mutual fund units shall be deemed to be the closing
price of securities or mutual fund units prevailing on the day consent according by the Securities and Exchange
Commission or the Stock Exchange, as the case may be, or where such securities or mutual fund units were not traded
on the day such consent was accorded, the closing price of the day when such securities or mutual fund units were last
traded.
If we assume that Mr. Rahim open his BO account with the option of trading in the Dhaka Stock Exchange then
closing price would be the closing price of DSE.

No prime bank share was traded on the day of consent accorded by DSE .
So the closing price will be the closing price of 9 November i.e tk. 840
So tax would be (840-100)*5% = 37
If we assume that Mr. Rahim open his BO account with the option of trading in both the Dhaka Stock Exchange
&Chittagong Stock Exchange or only in CSE then closing price would be the closing price of CSE since no prime
bank shares was traded in DSE on the day of consent accorded by SEC.
So the closing price will be the closing price of CSE on 8 November i.e Tk. 855.
So tax would be (855-100)*5%= 37.75

3 B Ltd. computed its advance tax payable for income year 2016-2017 based on latest Nov Dec
assessed income of Tk. 500,000 for the income year 2013-2014. Assessment for the 2013
income year 2014-2015 was completed on 15 April 2017 at a loss of Tk. 600,000.
Calculate the amount of advance tax to be paid by B Ltd. in each quarter for the
assessment year2017-2018.
Calculation of the amount of advance tax :
Here the latest assessed income is Tk. 500,000 for the income year 2013-2014.
Amount of Tax = Tk. 500,000 X 37.5% = Tk. 187,500.
Payable in 4 Quarterly installments
Date of installments Installment due (Tk.) Paid(Tk.)
th
15 September 2017 46,875 46,875
15th December 2017 46,875 46,875
th
15 March 2018 46,875 46,875
th
15 June 2018 46,875
According to section 66 of ITO 1984 the last installment is not required to be paid because the assessment
for the income year 2014-2015 was completed on 15 April 2017 at a loss of Tk. 600,000.
Relevant information
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 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.
4 The books of ABC Ltd. revealed the following information: May June
Assessment year Income / (Loss) from Income / (Loss) from Income / (Loss) from 2011
Garment Business Textile Business Jute Business
2014 – 2015 500,000 200,000 (1,000,000)
2015 – 2016 800,000 600,000 200,000
2016 – 2017 900,000 (1,200,000) 50,000
2017 – 2018 700,000 200,000 100,000
Find out the year wise Business (Loss) /income/ total income and discuss how those would
be carried forward and set off.

Answer:
ABC Ltd
Assessment Particulars Tk.
Year
2014-2015 Income from Garments Business 500,000
Income from Textile Business 200,000
Loss from Jute Business
(1,000,000)
Net Income/(Loss) from Jute business (300,000)
Loss from Jute business shall be carried forward to set off against the income
from Jute Business

Income other than Jute business 1,400,000
Income from Jute Business 200,000
Loss from Jute Business brought forwardedfrom 2014-15 to set off
(300,000)
Loss from Jute business shall be carried forward (100,000)
2016-2017 Incomefrom Garments Business 900,000

Income from Textile Business (1,200,000)
Income from Jute Business 50,000
Loss from Textile business shall be Carried forwarded and set off against 2,50,000
the income from Textile Business

Income from Jute business 100,000
Loss brought forward from 2015-16 (100,000)
Income/(Loss) from business other than Textile business 700,000
Loss brought forward from 2016-17 (250,000)
Loss from textile business shall becarried forward and set off against theIncome (50,000)
from Textile Business
5 Calculate the total income of Mr. Azad from the following if he is i) a Resident and May June
ii) a non‐ Resident for income year 2016‐2017. 2011
Bangladeshi Income:
Salary income Tk. 89,000
Interest on 10% less tax commercial securities Tk. 1,20,000
Income from partnership Firm Tk. 20,000
Agricultural income Tk. 50,000
Foreign Income:
Income from business in Singapore Tk. 50,000
Income from Partnership Firm in Pakistan Tk. 60,000
Answer:
Mr. Azad
I) When he is a Resident
Head of Income TK TK
Bangladeshi Income:
Salary Income 89,000
Interest on 10% Less tax commercial Securities 120,000
Income from Partnership firm 20,000
Agricultural Income 50,000 279,000
Foreign Income:
Income from Business in Singapore 50,000
Income from Partnership firm in Pakistan 60,000 110,000
Total Income as a resident 389,000
ii) When he is a non Resident:

Bangladeshi Income
Salary Income 89,000
Interest on 10% Less tax commercial Securities 120,000
Income from Partnership firm 20,000
Agricultural Income 50,000 279,000
Total Income as a non-resident 279,000

6 On 30th June 2017 Mr. Alam has the following investments: May June
i) Tk.80,000, 10% Company Debenture 2011
ii) Tk.50,000, 8% Treasury Bond, tax free
iii) Tk.25,000, 12% Port Trust Debenture
iv) Tk.40,000 12% Commercial Securities
v) Income from Government Securities Tk.30,000 @8% interest.
On 1st January 2017 Mr. Alam sold Tk.40,000, 10% Company Debenture with which he
purchased 12% Commercial Securities. He also took a loan of Tk.20,000 from a Bank to
purchase commercial securities at the rate of 10% interest. The bank commission for the
purchase and sale of securities amounted to Tk.100. He also paid Tk.200 as bank charge for
collecting interest.
Calculate income from securities of Mr. Alam.

Answer:
Mr. Alam
Computation of Income from Interest on Securities
Head of Income TK. TK.
ii) Interest on treasury bond, tax free 4,000
Less: Exemption Full 4,000 -
iii) Interest of Port trust debenture 3,000
Less: Admissible expenses: Bank Commission & Charges: 41 2959
300/22,200*3000
iv) Interest from Commercial Securities 4,800
Less: Admissible expenses: Bank Commission &Charges 65
300/22,200*4800
Less: Interest on loan ( 20,000 * 10%) 2,000 2735
v) Income from Govt Securities 2,400
Less: Admissible expenses: Bank. Commission & Charges 32 2368
300/22,200*2400
Income from interest on Securities 8,062
Notes: 1
Total interest of Investment collected by Bank

Company debenture 8,000
Int. on tax free treasury bond 4,000
int. on port trust debenture 3,000

Int. from approved commercial securities 4,800
Income from Govt. Securities 2,400
22,200
Notes: 2
1. Commission and Bank Charges are distributed on only to the taxable Debenture and Securities in
proportion of the income. However, bank charges and commission on the interest of treasury bond which
is tax free not charged in above calculation.
2. Since 10% Company Debenture sold on January 2017, no interest there on is considered as income.
7 A factory building was constructed in the year 2014 having a total cost of Tk.2,00,000. It was May June
insured for Tk.2,10,000. In the month of January 2015 it was destroyed by fire. The scrap was 2011
sold at Tk.10,000. Till the year 2017‐2018 assessment year, depreciation of the building was
charged at Tk.60,000. Under the following conditions find out balancing depreciation:
i) if 100% insured amount could be recovered from insurance company.

ii) if 75% of insured amount could be recovered from insurance company.
iii) if 50% of insured amount could be recovered from insurance company.
Cost value of the factory building - 200,000
Depreciation 60,000
Written down value (WDV) 140,000
Scrap was sold 10,000
Insured amount210,000
i) If 100% insured amount could be recovered from insurance company i.e 210,000
Less: WDV 140,000
Total Gain 70,000
Capital Gain (210,000 - 200,000) 10,000
Business Gain 60,000
ii) If 75% insured amount could be recovered from insurance company i.e 157,500
Less: WDV 140,000
Total Gain 17,500
Capital Gain (157,500-200,000) nil
Business Gain 17,500
iii) If 50% insured amount could be recovered from insurance company i.e 105,000
Less: WDV 140,000
Total Gain / (Loss) (35,000)
Capital Gain (105,000 -200,000) nil
Business Gain / (Loss) (35,000)
8 Nov Dec
Mr. X an employee of a limited company, received the following salaries and allowances 2011
during the income year ended 30 June, 2017.
Taka
1. Basic Salary 4,20,000
2. House Rent allowances 2,00,000
3. Festival Bonus equal to two months basic salary 70,000
4. Leave encashment Salary 35,000
5. Conveyance allowance 24,000
6. Contribution to Recognized Provident fund @ 8% 33,600
7. Servant Wages 24,000
8. Children education allowance 60,000
9. Leave fare assistance 50,000
10. Banglow utilities 25,000
Compute excess perquisite u/s 30 (e) for the assessment year 2017-2018.
Mr.X
Employee of a Limited Co.
Calculation of perquisites u/s. 30(e)
Perquisites Taka
1. House Rent allowances 2,00,000
2. Conveyance allowance 24,000
3. Servant Wages 24,000
4. Children education allowance 60,000
5. Banglow utilities 25,000
3,33,000
Allowable perquisites 2,50,000
Excess perquisites 0
9 The following particulars of income of Mr. Ali Ahmed are available for the assessment year May
2011-2012. June
2012 /
Income from House Property 100,000 Nov
Business Income (after allowing for current Year’s depreciation of the Tk.20,000) Dec
2013
70,000
The following sums have been brought forward from the preceding year
Unabsorbed Depreciation 80,000
Business loss 50,000
Deputy Commissioner of Taxes is proposing to assess him on a total income of Tk.100,000 by

setting off only of the business loss of Tk.50,000 and part of the unabsorbed depreciation of
Tk.20,000 against the business income of Tk.70,000. Is he right in his action? Explain?
Yes the DCT is right in his action.
Because business loss cannot be set off against House Property income as per provision of section 37 of I.T.O.
1984

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ICAB Professional Level Syllabus Weight Based Tax Planning & Compliance QUESTION & ANSWER BANK

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CA Professional Level

QUESTION & ANSWER BANK

Tax Planning & Compliance

Compiled & Updated by:

Saiful Islam Mozumder

Syllabus area Weighting

Critical aspects of income tax and its administrative functioning: L01

In the examination, candidates may be required to:

Basic concepts of taxation

Country Fiscal Management & Taxation

Introduction to Bangladesh income tax

Basics of income tax

o) meaning and formation of Taxes Appellate Tribunal

Tax computation of business entities and individuals: L02

2 Tax calculation, tax rates, incomes, allowances, exemptions, credits, accounting of

In the examination, candidates may be required to:

b) explain the income deemed to accrue or arise in Bangladesh

c) describe the provision regarding un-explained investments, income or expenditures and

Computation and adjustments of income tax

Tax incentives and exemptions

tax holiday, withdrawal and cancellation of tax holiday, maintenance/compliance

Tax collection (Withholding/TDS, Advance Taxation, Tax Payments)

l) brief procedure of deduction or collection of tax at source

Tax reporting (Various Returns)

Tax assessment of individual (complex) and business entities

Introduction to accounting of income tax

In the examination, candidates may be required to:

Liabilities in special cases

with prejudice to other liability

f) describe the Orders of Appellate Joint Commissioner, Commissioner or Appellate

Offences and prosecutions

Appeal and reference

Power of Income Tax Authorities including search & seizure

Alternative dispute resolution

In the examination, candidates may be required to:

Double taxation relief

e) explain the issuance of temporary registration number, displaying of TIN certificate,

k) describe the factors to be considered in judging uncontrolled international transaction,

m) explain the conflicts of interest, disclosure of information for taxation, confidentiality

Tax Research, planning, compliances, VAT and other taxes LO5

In the examination, candidates may be required to:

f) explain alternative tax strategies relating to corporate transformation, alternative tax

Value Added Tax and other taxes:

j) computation and adjustments of VAT collection (Withholding, Advance VAT, VAT

l) describe VAT reporting, liabilities in special cases, special provisions relating to

2 Write shorts notes on the following: May June

i) any distribution by a company of accumulated profits, whether capitalized or not, if such

Reference: Section 2(34) of the ITO 1984

d. ‗Market Value‘, in ITO 1984 referred to agricultural produce, which means —

Reference: Section 2(40) of the ITO 1984

3 Write short notes on the following: May

(b) Speculative Business

Courtesy: Saiful Islam Mozumder, ShirazkhanBasak& Co. [email protected] cell-01711-981920

Courtesy: Saiful Islam Mozumder, ShirazkhanBasak& Co. [email protected] cell-01711-981920

c) Fees for Technical Service:

d)Agricultural Income means:

Agricultural Income means-

i) by means of agricult ural or

(a) Double taxation avoidance agreement