Practice Question
Miss Rabia is a sole proprietor running a business of different products under the name and style
“Sunshine Traders” having NTN-123456-7. The financial data of Tax year 2025 is as under:
Rs.
Sale 90M
CGS (70M)
Gross Profit 20M
Admin Exp. (9M)
Selling Exp. (3M)
Financials (4M)
Operating Profit 4M
Other Income 2M
Taxable Profit 6M
Additional Information:
1. Sale includes an amount of Rs. 7M received from customer as advance on June 30 th, 2025.
2. CGS includes the following:
a) Purchases of raw Material for Rs. 40 M out of which Tax was not deducted on Rs. 18M.
b) Accounting Depreciation Rs. 15 M.
c) Other FOH includes Income Tax deducted by different parties on payments received by
Miss Rabia Rs. 1.2M.
d) Closing stock consisting of 5,000 units at a cost of Rs. 19.7M. The market price of these
units as on 30 June 2025 was Rs. 3,800 per unit, and the estimated costs incidental to
sale were Rs. 300 per unit.
e) A repair bill of Rs. 400,000 paid in cash and another bill of Rs. 200,000 being
unverifiable.
3. Admin Expenditure includes the following:
a) A bonus of Rs. 400,000 paid to the account’s department head Mr. Zeeshan paid in cash.
However, Tax was deducted.
b) An entertainment bill of Rs. 800,000 incurred for Eid-Milan Party of staff paid through
cross cheque and tax was deducted.
c) A penalty was imposed of Rs. 600,000 by a customer for late delivery of goods.
d) A penalty of Rs. 250,000 imposed by Sale’s Tax Department.
4. Selling Expenditure includes:
a) A commission to distributors as follows:
ATL distributors at the rate of 4% is Rs. 800,000.
Non-ATL distributor at the rate of 3% @ Rs. 350,000.
5. Financial Expenditure includes:
a) Markup on lease Rs. 425,000.
b) The principal lease liability paid Rs. 800,000
6. Other income includes:
Bank Profit net of tax @ 15% Rs. 425,000.
Bad debt recovered during the year Rs. 125,000. Last year ST had written off
balances outstanding from one debtor namely Hadiya Global which were partly
allowed by the tax authorities. Amount written off Rs. 1,200,000 and Allowed by tax
authorities Rs. 900,000.
7. A vehicle not plying for hire was purchased on June 25th, 2025 costing Rs. 9M. Accounting
Depreciation was not charged in the Books of Accounts.
8. Another new machine was imported from china costing Rs. 6M inclusive of Advance Income Tax
paid on port Rs. 500,000. The machine was not reached at the factory as on
June 30th, 2025. (Payment have already made)
9. Tax depreciation was calculated Rs. 18M. (Doesn’t include of Vehicle and New Machine)
10. Miscellaneous expenditure includes the provision for doubtful debt Rs. 600,000 and the
provision for gratuity Rs. 800,000.
11. Scientific research expenditures incurred Rs. 600,000 in china (included in Admin Exp.)
12. Rs. 550,000 paid to trainer for training of the staff in Lahore office paid through cross cheque
and tax was deducted (included in Admin Exp.)
13. Trade Liabilities shows a balance of Rs. 900,000 P/A related to Tax Year 2021.
14. Intangibles put to use on March 13th, 2025. No Amortization was claimed in above, Costing Rs.
1.2M with useful life 8 years
15. Miscellaneous Expenditures includes Pre-commenced expenditure Rs. 600,000.
Required:
Under the provisions of the Income Tax Ordinance, 2001 and the Rules made thereunder, compute
under the correct head of income, the total income, taxable income and tax liability of ST for the tax
year 2025.
