Problem

Rupon Glass Manufacturing Ltd. is a publicly traded company enlisted with the stock
exchanges of Bangladesh having a paid up share capital of Tk. 50,00,000. Its Profit and Loss
Account for the last income year was as follows:

To Opening stock
Purchase of jute
Purchase of coal
Wages
Salaries and allowances
General expenses
Income tax
Fess for technical services
Interest on loan
Directors remuneration
Stock damaged in fire
Bonus to employees
Depreciation on fixed
assets
Net profit

(1)
(2)

(3)

(4)
(5)
(6)
(7)

Taka
12,00,000
By
40,00,000
10,00,000
5,00,000
6,00,000
3,00,000
1,00,000
60,000
50,000
1,25,000
2,65,000
3,00,000
5,00,000
23,13,50
0
1,13,13,
500

Sales
Closing stock
Share transfer fees
Sale proceed of old machine
Rental income from office
space let out
Dividends

Taka
90,00,000
11,00,000
11,500
11,00,000
8,500
93,500

1,13,13,
500

On examination of the books of account of the company, the following additional

information was revealed:
The company has valued the closing stock of Tk. 11,00,000 at cost price and
opening stock would have been Tk. 10,00,000, if valued at cost price.
Dividend received from a public limited company having its registered office in
Bangladesh, and which had paid a dividend distribution tax (DDT) u/s 16D.

General expenses include:

Tk.
Employee club building construction
50,000
Opening of night school for the workers
10,000
Legal fees related to other taxes
15,000
Embezzlement of cash by cashier
5,000
Distribution of free sample
1,50,000
Repair and maintenance expenses for office space let out
4,250
The cost price of the machine sold was Tk. 10,00,000 whereas its written down
value was Tk. 3,70,740. The machine was bought 6 years back.
Interest on loan was paid to a non-resident, the company did not deduct tax at
source while making the payment thereon.
Depreciation on fixed assets granted as per Third Schedule Tk. 4,50,000.
The company disclosed total income in its return Tk. 23,13,500 and paid Tk.
6,66,000 as tax on the basis of return (including the income tax shown in the
Profit & Loss A/C) as follows:
Source of income
Dividend income
Other income
Total income

Amount (Taka)
93,500
22,20,000
23,13,500

Exempted under para 22, Part A, Sixth

Sch.
@ 30%
Total tax payable u/s 74

Tax (Taka)
nil
6,66,000
6,66,000

Tax paid on the basis of return

(8)

6,66,000

The company paid dividend @ 10% during the last income year. Its accumulated
profit and free reserve up to the end of the last income year were Tk. 2,51,278
and Tk. 37,00,000 respectively.

Solution
Rupon Glass Manufacturing Ltd.
Income Year: 2003-04

Assessment Year: 2004-05

Particulars of Income
1.

Income from House Property: u/s 24 (W-2 and Note-3)

2.

Income from Business or Profession: u/s 28 (W-1)

3.

Capital Gains: u/s 31 (W-3)

4.

Income from Other Sources: u/s (W-4)

Amount (Taka)
5,950
22,02,047
nil
11,500

Total Income

22,19,497

Calculation of Tax Liability:

Amount (Taka)
1.

On Dividend Income

2.

On other income (22,19,497 @ 30%)

nil
6,65,849

Gross tax on Total Income u/s 74

4.

6,65,957

Additional tax @ 5% on undistributed profit Tk. 62,64,778 u/s 16B

(W-5)
Total tax

3,13,239
9,79,088

Less: Tax deducted at source

Nil

Less: Advance tax paid

(6,66,000)

Tax Liability before penalty

3,13,088

Workings:

W-1: Calculation of Income from Business or Profession:

Taka
Net Profit as per Profit and Loss Account
Add: Items of deductions disallowed/allowed for other incomehead:
opening stock (12,00,000 10,00,000)
Employee club building construction

2,00,000
50,000

Taka
23,13,500

Interest to non-resident, tax not deducted at source u/s 30(aa)

Income tax (shown in P. & L. A/C)

1,00,000

Repair & maintenance expenses (for office space let out)

4,250

Add: Items of deductions to be considered as per ITO:

50,000

4,04,250

1,50,00
0
5,00,000

Cost of distribution of free sample

Depreciation on fixed asset (as per accounts)

7,10,000

60,000

Fees for technical services

Less: Income to be shown under other heads:

93,500

Dividend received DDT paid u/s 16D

Sale proceeds of old machine

11,00,00
0

Share transfer fees

11,500

Rent received

8,500

(12,13,500
)

Add: Income not yet included:

Revenue profit from sale of old machine (10,00,000

3,70,740)
Less: Deductions allowed as per ITO:

Depreciation as per Third schedule

Cost of distribution of free sample u/s 30(f)(iv) and u/r 65C

(up to

6,29,26
0

6,29,260

4,50,000
1,35,000

(5,85,000)

turnover Tk. 5 crore @ 1.5%, i.e., 1.5% of Tk. 90,00,000)

Profit before charging the above expense

Less: Deductions allowed as per ITO:
Fees for technical services u/s 30(h) [up to 2.5% of

22,58,510
(56,463)

above profit]

Income from Business or Profession: u/s 28

N.B.:

22,02,047

Following three expenses are not to exceed the limit specified in this behalf. The
calculation of the limit will be based on the profit before charging the expenses.

(i)

Entertainment expenses u/s 30(f)(i) and u/r 65: On first Tk 10 lakh @ 4% and on balance
@ 2%.

(ii)

Head Office expenses for branch company u/s 30(g): up to 10% [Effective from 1-72003].

(iii) Payment by way of royalty, technical services fee, technical know how fee or technical
assistance fee u/s 30(h): up to 2.5% [Effective from 1-7-2003].

W-2: Calculation of Income from House Property:

Annual value (Rental income from office space let out)

Tk.

8,500

Less: Repair & maintenance Actual Tk. 4,250

2,550

Allowed equal to 30% of annual value u/s 25(1)(h)

Income from House Property

Tk.

5,950

Tk.

11,500

W-3: Calculation of Capital Gains:

Sale proceeds of old machine

Tk.
11,00,000

Less: Cost of acquisition of the machine

10,00,000

Capital Gains (long-term), non-assessable u/s 32(5) & para

31A, Part A, 6th Sch.

1,00,000

W-4: Calculation of Income from Other Sources:

Share transfer fees
Dividends DDT paid u/s 16D Tk. 1,10,000 [non-assessable under para 22, Part A,

nil

6thSch.]

Income from Other Sources

11,500

W-5: Calculation of Undistributed Profit u/s 16B:

Disclosed income
Accumulated profit
Free reserve
Undistributed profit

Md. Foysal Hossain Sohag

www.foysal.info

Tk.

23,13,500
2,51,278
37,00,000
Tk. 62,64,778