pathfinder - The Institute of Chartered Accountants of Nigeria
pathfinder - The Institute of Chartered Accountants of Nigeria
pathfinder - The Institute of Chartered Accountants of Nigeria
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PATHFINDERQUESTION 3(a)MR JAMESCOMPUTATION OF ADJUSTED PROFIT FOR 2009 YEAR OF ASSESSMENTN NNet Pr<strong>of</strong>it 233,000Add: Disallowable ExpensesPreliminary expenses 3,000Loss on disposal <strong>of</strong> vehicle 3,000Depreciation 8,000Donation: Purchase <strong>of</strong> furniture 1,300Legal and Pr<strong>of</strong>essional fees: Renewal <strong>of</strong> long lease 3,000Cost <strong>of</strong> tax appeal 1,800 4,800Bad Debts: General Provision 7,500 27,600260,600Less: Non-taxable incomePr<strong>of</strong>it on sale <strong>of</strong> fixed assets (165,000)ADJUSTED PROFIT N95,600(b)ii) Badges <strong>of</strong> Trade<strong>The</strong> question as to which activity constitutes a trade or business for the purpose<strong>of</strong> subjecting the pr<strong>of</strong>it there from to tax has been a matter <strong>of</strong> judicialcontroversy over the years.<strong>The</strong> question was settled by case laws which laid down the tests against whicha particular activity is measured in order to determine whether or not a tradehas indeed been carried on.<strong>The</strong> tests referred to as to what constitutes “Badges <strong>of</strong> trade” are: Subjects – matter <strong>of</strong> the transactions; Frequency <strong>of</strong> transactions; Supplementary work; Pr<strong>of</strong>it motive; and Reason for sale.INTERMEDIATE EXAMINATION - NOVEMBER 201073
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