Final (Semester-end) Examination Max Marks: 100

BCom (Fin & Act) Spring 2020 Time: 2hrs &

30min
BLT203: Taxation Law and Practice Semester IV Enrolment No._________

Instructions:
This is a time bound, open book exam, and should be completed within 2.5 hours. A further 0.5 hours is
allocated for you to download. You need to write the answers neatly in own handwriting and scan the
same into ONE PDF FILE using mobile scanner app and upload the file in VLE within the given time.
Plagiarized work will not be tolerated.
Please put your Enrolment number at the top of your paper. Should any of you experience a VLE issue
at the time of submitting, contact exam committee on the following number 77333848 /17729018
/17634302.
Avoid plagiarism and make sure to submit on VLE within the allotted time. For any late submissions,
you must send it to exam committee via this email – [email protected]. Your work will not be graded if you
fail to comply with this.
_____________________________________________________________________________________

Q1. “Indirect tax motivates an individual to save more”. Do you agree with the statement? Justify it with not
more than 80 words. (5 marks)

Q2. “Losses incurred by one business unit can be offset by another business unit under the same ownership
irrespective of business type.” Do you agree with the statement? Justify your answer in accordance to
income tax rule of Kingdom of Bhutan. (5 marks)

Q3. (20 marks) Read the scenario given below and answer the question that follows:

Mrs. Pema owns two buildings in Thimphu, one in Babesa and another in Olakha. Both the building is of
four storied where the ground floor is occupied by two business units for Nu. 20,000 each per month and
rest of the units were given for rental purpose for Nu. 12,000 per month for each unit. However, the top
floor of building at Babesa was occupied by Mrs. Pema and family, and one shop in Olakha building is used
by Mrs. Pema’s husband (No rent is collected from it). Other information are provided below in the table
below:

Particulars Building at Babesa (Nu.) Building at

Olakha (Nu.)
Municipal tax paid per year 14,000 (20% is paid by tenants) 12,000
Fire Insurance premium paid for the year 49,000 56,000
Loan for construction of Building from bank of Bhutan 6,000,000 5,000,000
Loan from other sources 3,000,000 1,000,000
Annual interest on loan from Bank 15% 10%
Annual interest on loan from other sources 16% 15%
Annual repairing cost 200,000 250,000
Units remained vacant during the year 4thunit for two months. All occupied
Additional information:
i. Unexpired insurance premium paid for house in Olakha is Nu. 4,000

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 ii. Government had announced 50% interest waver scheme on housing loan for 6 months starting
April 1st 2019. She is qualified to avail this scheme for both of her houses.

She has also invested her money in stock market the details of which is given below:
Name of the Details about the Investment Dividend Date of
Company company Amount in Nu. Amount in Nu receipt
TBT Ltd Registered in Bhutan 1,20,000 25,000 25.10.19
LABF Ltd Registered in India 90,000 15,000 31.05.19
LCTB Ltd Not a registered co 50,000 9,000 01.07.19
NAPS Ltd Registered in Bhutan 1,50,000 25,000 17.02.20
She has taken a loan of Nu. 1,30,000 for purchase of shares from bank @ 10% and bought the shares of
LCTB Ltd and TBT Ltd.

Required: Calculate her taxable income and the amount of tax liability for the income year 2019. ( Note:
Explain all the information in foot note for the items that are not considered for calculation)

Q4. (35 marks) Read the scenario given below and answer the question that follows:

Mr. Tshewang is an employee of ABC Company. He joined the office on 1 st January of 2015 with salary of
Nu. 15,000 in Bumthang. He is entitled for increment of Nu. 1,000 every year in his salary. He is also
entitled for Contract Allowance of 20% on basic salary, House rent allowance of 15% and City
Compensatory allowance of 5%. Other information are provided below:
i. He was transferred to Thimphu on 30 th June 2019 for which he got transfer grant of Nu. 20,000.
ii. In Thimphu, he was provided with accommodation for which 10% of his basic was deducted for rent.
The accommodation was connected with internet for which the company paid Nu. 12,000 per month.
iii. He was also provided with personal attendant by the company paying salary of Nu. 8,000 per month.
iv. He is provided with a laptop worth Nu. 30,000 by the company to enable him to work from home.
v. Company also bears 60% of monthly electricity and water bill of the apartment he is living in.
vi. During the income year he earned Daily allowance of Nu.12,000 and Travelling allowance of Nu.15,000
relating to official tours undertaken by him.
vii. Company gifted him with a mobile phone worth Nu. 20,000 for his service to the company, and also
received cash of Nu. 20,000 as commission for achieving the sales target for the year.
viii. He also received a bonus of 2 month basic salary and leave travel concession of Nu. 12,000. In
addition, he received a leave encashment equivalent to one month’s basic salary in December.
ix. He has commission accrued of Nu. 5,000 from previous year.
x. Mrs.Tshewang had minor injury and the company paid medical benefits of Nu 35,000 for the
treatment.
xi. Mr.Tshewang deposited 10% of his basic salary to a recognized provident fund and company also
contributed 10% of basic in his provident fund.
xii. He deposited an amount of Nu.1,000 per month for group insurance scheme maintained under
Lodedh Foundation in NPPF and also an amount of 1% of basic pay for health contribution.
xiii. He paid Nu.25,000 for donations on schemes approved by Ministry of Finance.
xiv. He took a personal whole life Insurance policy worth Nu.1,000,000 at an annual premium of 5% on
sum insured.
xv. He also contributed total of Nu. 2,000 as yearly premium for education millennium opened for his son
and a daughter.

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 xvi. The total education expenses incurred for his children, studying in private school amount to
Nu. 400,000 during the year.
xvii. He also earned Nu. 300,000 form a consultancy firm he owned and Nu. 150,000 from a vehicle he has
given for higher to another company. TDS deducted for these two sources amount to Nu. 15,000 and
Nu.7,500 respectively and deposited in the concern RRCO.

Required: (Note: All the work note carries marks.)

i. Calculate his Tax liability for the Assessment year 2019. (Note: reflect and explain all the items that
are not considered in calculation in foot note, as per Income Tax Rule of Kingdome of Bhutan.
ii. Calculate the amount of tax payable by Mr. Tshewang for the income year 2019 if Nu. 40,000 is
deposited as TDS from salary in the concern RRCO for the year.

Q5. (35 marks) From the following income statement extracted from the Books of ABC Company,
Compute taxable profit and tax liability payable by the Company for the income year 2019.
Profit and Loss Account
Particulars Amt. (Nu.) Particulars Amt. (Nu.)
Opening Stock 60,000 Sales 4,000,000
Purchase A/c 2,260,000 Closing stock 130,000
Carriage on Purchase 8,000    
Dock charges 24,000    
Octroi duty 7,000    
Customs duty 5,000    
Gross Profit c/d 1,766,000
Total 4,130,000 Total 4,130,000
     
Dividend paid to partners   40,000 Gross profit b/d 1,766,000
Duties and tax 90,000  Bad debt recovered   30,000
Telephone and internet expenses 50,000 Income from sales of furniture 20,000
Income from sales of old
Interest on loan 42,000 equipment 300,000
Printing and stationeries 46,000  Commission and interest   40,000
Depreciation 69,000    
Salary and wages 120,000    
Development and training 50,000    
Preliminary expenses written off 150,000    
Staff welfare expenses 90,000
Research and development expenses 130,000    
Medical expenses of wife of GM 26,000    
Stock obsolescence 70,000
Provision for bad debt 20,000
Transfer to reserve 30,000
Bonus (2 months basic pay) 60,000    
Entertainment expenses 30,000    
Donations 80,000    
Advance tax paid 40,000
Net Profit 923,000    

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 Total 2,156,000 Total 2,156,000
Additional information:
i. The telephone expense include the payment of personal mobile bill of proprietor Nu. 8000
ii. Commission received of Nu. 20,000 was wrongly recorded under staff welfare expenses.
iii. Duty and taxes includes Nu. 12,000 paid towards the payment of personal income tax of general
manager.
iv. The amount of Nu. 20,000 paid to the political parties as donation.
v. Duty and tax also includes the fine of Nu. 6,000 paid for late submission of Business income tax.
vi. The amount of Nu. 20,000 spend on development and training was not included in the book.
vii. Interest of Nu. 3,000 on loan includes interest paid for amount borrowed to pay off the dividend.
Outstanding interest on loan of Nu. 8,000 was omitted to be recorded.
viii. The total preliminary expenses of Nu. 420,000 was incurred during the financial year 2018.
ix. There was no proper inventory records maintained for stocks obsolescence worth Nu. 10,000.
x. Profit on sales of old furniture Nu.36,000 and loss on sales of old computers worth Nu. 24,000 was
not included in income statement.
xi. Investment in shares received Nu. 40,000 was mistakenly booked under drawings.
xii. Service charge paid to employee worth Nu. 30,000 was not accounted in the books of account.
xiii. Research and development expenses include cost of one computer worth Nu.20,000 to be used for
research purpose (15% depreciation need to be charged)
(Note: Explain all the information in foot note for the items that are not considered for calculation)

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