Mr. Mteta has approached you with a view to obtaining help in determining his
taxable income for 2005. He has supplied the following information:
1. Business Income
He runs a small garage that generate taxable income of Sh.60,000. In
2004, he had a tax loss of Sh.40,000 from this business.
2. Wife’s Income
His wife was employed by Ufuta Ltd. as the Finance Director. Her
salary was sh.52,000 p.m. Additional benefits include:

Company car 1800 cc.
House at New Muthaga (market value of rent Sh.20,000 per month)
Staff gifts of oil products worth Sh.1000 p.m
3. Capital Gains
In the course of the year, the Mtetas sold one plot they owned in
Nairobi for Sh.1,200,000. This represented a gain of Sh.600,000 which
they used to take a holiday to Mombasa.
4. Investment Income

Withholding
Tax
Sh.
Net
Sh.
Dividends:
Kenya Breweries Ltd
HFCK Ltd.
CMC Ltd.
Interest:
Kenya Commercial Bank Savings
Account
HFCK – Housing Development
Bond
Post Office Savings Bank
15% 2010 Treasury Bonds.
2,000
1,000
4,000
2,000
7,000
–
1,500
18,000
9,000
36,000
18,000
63,000
20,000
13,500
5. Employment Income – Mr. Mteta
He was employed by Jiri Limited as the General Manager – Sales. His
salary was Sh.40,000 per month and a bonus of 2% on total sales
revenue. He had a car of 2000cc which he used to visit customers
otherwise his wife would pick and drop him at the place of work each
day using her official car.
6. Jiri Limited insures all its sales against default from customers. The cost of the
insurance was Sh.10,000 which represents 0.001 percent of sales. The company
also paid sh.20,000 to cover the life of Mteta and his household items.
7. PAYE of Sh.130,000 was deducted from Mteta’s pay but due to an oversight in
the part of the Chief Accountant the tax was not paid to the Collector of
Income tax. His wife’s PAYE was Sh.180,000 in the year.

Required:
(i) Compute total income chargeable to tax and show the tax payable thereon.
(15 marks)
(ii) Comment on any information not used for computing taxable income above.
(2 marks)
(iii) Is Mteta to blame for failure of the company to pay his PAYE? Explain.
(2 marks)