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CHAPTER
Advance Taxation

1
Basic concepts of taxation

Contents
1 Operation of the Ordinance and scope of tax
2 Tax year and Return filing dates
3 Mechanism for determination of taxable income
4 Person
5 Residential status
6 Determination of tax liability
7 Whether to form a company or AOP-Tax planning
8 Common rules
9 Circulars, notification, advance ruling and treaties
10 Taxpayer’s registration and Income tax authorities
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1 OPERATION OF THE ORDINANCE AND SCOPE OF TAX

Section overview

 Operation of the Ordinance

 Applicability of the Ordinance to Azad Jammu Kashmir & Gilgit Baltistan
 Scope of tax

1.1 Operation of the Ordinance (Sec-1)

 As per section 1(2), the Income Tax Ordinance, 2001 extends to whole of
Pakistan. Similarly, all other federal taxes (sales tax, federal excise act, custom
act) and provincial taxes are also applicable to whole of Pakistan.
 The territories comprising Pakistan are specified in Article 1(2) of the Constitution.
According to the said article, the areas comprising Pakistan are as follows:
(i) The Provinces of Baluchistan, Khyber Pakhtunkhwa, Punjab and Sindh
(ii) Islamabad Capital Territory;
(iii) Such states or territories as are or may be included in Pakistan such as
Provincially Administered Tribal Areas (PATA).
Note: Federally administered Tribal areas have now form part of KPK province.
 Previously Income Tax Ordinance, 2001 was not applicable on Tribal areas except
where specifically extended through President or Governor for FATA or PATA, as
the case may be. However, Parliament on 28 May 2018 passed 31st Amendment
to Constitution. As a result Tribal areas will now be treated as part of Federation
of Pakistan if such areas form part of any province.
 Subsequently the provincial assembly of KPK, by two third majority has included
the areas previously being Federally Administered Tribal Areas (FATA) as part of
province of KPK.
 PATA territories shall form part of province of KPK or Baluchistan as the case may
be.
 Article 247(3) has been removed from the constitution. As a result the non-
applicability of taxation laws on tribal areas has finished. Now such territories are
subject to all the Acts of the Parliament as part of province of Pakistan.
 Economic Coordination Committee (ECC) of the Cabinet of Pakistan has also
decided to continue certain exemptions and concessions to persons and entities
in FATA and PATA. This includes exemption from income tax for five years,
exemption from sales tax to retailers, exemption from withholding taxes except
salary etc.
 There will be no exemption for salary income for persons residing and exercising
services in FATA and PATA and the employers are required to withhold tax with
immediate effect.

1.2 Applicability of the Ordinance to Azad Jammu Kashmir & Gilgit-Baltistan

 The territories of Azad Jammu and Kashmir and Gilgit-Baltistan do not constitute
a part of Pakistan in terms of Article 1(2) of the Constitution. The Azad Jammu and
Kashmir and Gilgit-Baltistan are independent jurisdictions and, as such, the
Income Tax Law in Pakistan does not extend to these areas which are treated as
foreign territories as far as application of Pakistan's tax laws is concerned.
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Note: Tax deducted in Azad Kashmir & Gilgit would be treated as foreign tax.
 AJK Council and the Gilgit-Baltistan Council have adapted the Income Tax law in
Pakistan through their legislative assemblies. Under these enactments, the Gilgit-
Baltistan and AJK councils have adapted Pakistan's Income Tax law i.e. the
Income Tax Ordinance, 2001 and the Finance Acts passed subsequently by the
National Assembly of Pakistan for purposes of their own territories. However, the
Azad Jammu Kashmir and Gilgit-Baltistan are foreign territories as far as
applicability of the Income Tax Ordinance, 2001 is concerned.
 There will be no withholding of tax in case of payment made to residents of Azad
Kashmir who execute contracts in Azad Kashmir only and produces a certificate
from the Taxation Officer concerned [SRO 586(I)/91 dated June 30, 1991]
 Section 146 prescribes mechanism for recovery of tax from persons who have
been assessed in Azad Kashmir or Gilgit Baltistan but tax could not be recovered
from them. Under the said section where any person assessed to tax for any tax
year under the law relating to income tax in the Azad Jammu Kashmir and Gilgit
Baltistan has failed to pay the tax and the income tax authorities of the Azad
Jammu and Kashmir or Gilgit cannot recover the tax because
(a) the person ‘s residence is in Pakistan; or
(b) the person has no movable or immovable property in the Azad Jammu and
Kashmir or Gilgit Baltistan

the Deputy Commissioner in the Azad Jammu and Kashmir or Gilgit Baltistan may
forward a certificate of recovery to the Commissioner and, on receipt of such
certificate, the Commissioner shall recover the tax referred to in the certificate. The
certificate of recovery must mention place of residence of person in Pakistan and
amount of tax payable by the person along with detail of moveable and
immoveable properties situated in Pakistan.

1.2 Scope of tax

The scope of income tax law is defined in section 4 of the Income Tax Ordinance,
2001 in the following manner:
“Tax should be imposed on the taxable income of every person for each tax year
as per the applicable tax rates.”

Definition: Tax means

Means any tax imposed under the Income Tax Ordinance and includes any penalty, fee
or other charge or any other charge or any sum or amount leviable under this
Ordinance.

Note: Default surcharge @ 12% should be calculated on an amount inclusive of

penalty.
Perusal of the aforesaid provision of law rises following questions in our minds:
 What is a tax year
 What is taxable income and how it is computed
 Who is person
 What are specified rates of tax
 What is the procedure for levy of tax
These primary questions are answered in the upcoming paragraphs.
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2 TAX YEAR & RETURN FILING DATES

Section overview

 Tax year
 Return filing dates

2.1 Tax year (Sec-74)

There are three kinds of tax years as stipulated in Section 74 of the Income Tax
Ordinance, 2001:
 Normal tax year
 Special tax year
 Transitional tax year

Normal tax year

Normal tax year is a period of twelve months ending on the 30th day of June and is
denoted by the calendar year in which the said date falls. For instance financial year
which starts on 01 July 2018 and ends on 30 June 2019 would be denoted by Tax
year 2019.

Special tax year

 A person can have special tax year under following three cases:
(i). Where a person’s income year under the repealed Ordinance, is different from
the normal tax year, or
(ii). where by an order a person has been allowed by the Commissioner Inland
Revenue to use a twelve months’ period different from normal tax year or
(iii).The Board has prescribed to use special tax year. The Board has authority to
prescribe any special tax year in respect of any particular class of taxpayer. For
example in respect of certain classes of taxpayers following special income
years are specified by the Board.

Classes of taxpayers Special income year Notification No. (SRO)

and Date
Companies 1st October to 134(R)/68,
manufacturing sugar 30th September July 31,1968

All persons exporting 1st January to 367(I)/74,

rice 31st December January 14,1974

All insurance companies 1st January to 878(I)/95,

31st December August 30,1995
such income year or such period shall be that person’s special tax year and shall
be denoted by the calendar year relevant to normal tax year in which the
closing date of the special tax year falls.
 A taxpayer may get permission from Commissioner to adopt special tax year
subject to fulfilment of following conditions laid down in section 74 ibid:
 A taxpayer may apply to the Commissioner for change of tax year from normal
tax year to special tax year or from special tax year to normal tax year and the
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same can be granted only if the person has shown a compelling need subject
to any conditions that may be imposed by the authority.
Note: A tax year can be a period of less than twelve months under some
special circumstances. For example in section 117(2), a taxpayer has to file a
return on discontinuance of business for the period commencing on the first
day of the tax year to the date of discontinuance of business, even if it
comprises, say 50 days. This period will be treated as a separate and distinct
tax year.
 A change of year from normal to special or vice versa, granted by the
Commissioner is subject to withdrawal of grant if in his opinion it is no longer
feasible but not unless the taxpayer has been provided an opportunity of being
heard.
 An order of the Commissioner for change of tax year shall take effect from such
date, being the first day of the special tax year or the normal tax year, as the
case may be, as may be specified in the order.
 A taxpayer may file a review application with the Board against the decision of
the Commissioner at the time of granting permission for a special year or
withdrawal of the same and the decision by the Board on such application shall
be final.

Transitional tax year

Where the tax year of a person changes as a result of an order by the Commissioner
of Income tax either from the normal tax year to special tax year or vice versa, the
period between the end of the last tax year prior to change and the date on which the
changed tax year commences shall be treated as a ‘transitional tax year’.
Example
The normal tax year of ABC Limited was the period from 01 July 2018 to 30 June
2019. On an application by ABC Limited, Commissioner granted approval to adopt
special tax year of 30 September each year. The period from 01 July 2019 to 30
September 2019 will be treated as transitional tax year. Special tax year will start from
01 October 2019 and end on 30 September 2020.

2.2 Dates for filing of return/ wealth statement (Sec-118)

In case of company
With tax year ending any time between On or before the 31st day of December
the first day of January and thirtieth day next following the end of tax year to
of June which the return relates
In any other case On or before the 30th day of September
next following the end of tax year to
which the return relates

Persons other than company (Individual, AOP, Federal/foreign Government)

In case of a FTR statement required On or before the 31st day of August next
under section 115(4) or return required following the end of tax year to which the
to be filed through e-portal in case of statement/return relates
salaried individual (when salary income
is greater than Rs.500,000).
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In any other case On or before the 30th day of September

next following the end of tax year to
which the return relates
Note: Return filing date is also considered as assessment date (Deemed assessment)
in case return filed is complete in all respects as prescribed in section 114.

Exercise:
(a) Determine the tax year and return filing date in respect of each accounting
periods mentioned below:
(i) 1.09. 2016 to 31.08.2017
(ii) 1.01.2017 to 31.12.2017
(iii) 1.04.2017 to 31.03.2018
(iv) 1.05.2015 to 31.04.2016
(v) 1.07.2015 to 30.06.2016
(b) Determine the financial year in respect of each tax year mentioned below:
(i) Tax year 2017, year end is 30 September
(ii) Tax year 2018, year end is 31 August
(iii) Tax year 2018, year end is 28 February
(iv) Tax year 2016, year end is 31 July

Answer
(a) Tax Years:

For all the three cases (i), (ii) and (iii) mentioned above, relevant tax year will be 2018
i.e. calendar year relevant to normal tax year [1.07.2017 to 30.06.2018) in which the
closing date ( 31.08.2017, 31.12.2017, 31.03.2018) of special year falls.

For case (iv), relevant tax year will be 2016 i.e. calendar year relevant to normal tax
year in which the closing date (31.04.2016) of special tax year falls.

For case (v) mentioned above, relevant tax year will be 2016 i.e. calendar year in which
the closing date (31.06.2016) of normal tax year falls.

Return filing date

(i) 30 September 2018 for all persons
(ii) 30 September 2018 for all persons
(iii) 31 December 2018 for company and 30 September 2018 for other than company
(iv) 31 December 2016 for company and 30 September 2016 for other than company
(v) 31 December 2016 for company and 30 September 2016 for other than company
(b) Financial year
(i) 01 October 2015 to 30 September 2016
(ii) 01 September 2016 to 31 August 2017
(iii) 01 March 2017 to 28 February 2018
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(iv) 01 August 2014 to 31 July 2015

3 COMPUTATION OF TAXABLE INCOME

Section overview

 Definition of income
 Mechanism for determination of taxable income

3.1 Income (Sec-2(29))

The definition of term “income” uses the word “includes” therefore, it is inclusive
definition and not exhaustive. An inclusive definition is that which not only extends to
those things which are included in it, but also covers all such things which the term
signifies according to its general and natural meaning.

Definition: Income includes

 Any amount chargeable to tax under this Ordinance,
 Any amount subject to collection or deduction of tax under section 148
(Imports), 150 (Dividend), 152(1) (Royalty/fee for technical to non-resident),
153 (Payments for goods, services and contracts), 154 (Exports) ,156 (Prizes
and winnings) ,156A (Petroleum products) , 233 (Brokerage & Commission),
233A (Collection of tax by stock exchange), 234 (Tax on motor vehicles),
 Any amount treated as income under any provision of this Ordinance
 Any loss of income
Note: With effect from tax year 2019, Bonus shares have been excluded from
the definition of income. Bonus shares are not recorded as income for
accounting purpose as well.

3.2 Mechanism for determination of taxable income

The mechanism for determination of taxable income is categorised under four regimes
which are as under:
(1) Normal tax regime
(2) Final tax regime
(3) Income subject to separate charge
(4) Minimum tax regime

(1) Normal tax regime

Under the normal tax regime, tax is charged on net taxable income of the taxpayer i.e.
gross revenue reduced by admissible deductions. Generally, all expenditure incurred
for purpose of business is tax admissible except certain expenses which are
specifically provided in section 21(deductions not allowed) of the Income Tax
Ordinance,2001.Under the normal tax regime, income is categorized under the
following heads of income:
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Heads of income (Sec-11)

 For the purposes of the imposition of tax and the computation of total income, all
income are classified under the following heads, namely:
(i) Salary;
(ii) Income from property;
(iii) Income from business;
(iv) Capital gains; and
(v) Income from other sources.
 The income of a person under a head of income for a tax year is the total of the
amounts derived by the person in that year that are chargeable to tax under the
head as reduced by the total deductions, if any, allowed under this Ordinance to
the person for the year under that head.
Illustration:
Sum of amounts changeable to tax under any particular head xxx
Less: Deductions (expenses) if allowed in relevant head of
Income (xx)
Total Income under a particular head of income xxx

 Where the total deductions allowed to a person for a tax year under a head of
income exceed the total of the amounts derived by the person in that year that are
chargeable to tax under that head, the person shall be treated as sustaining a loss
for that head for that year of an amount equal to excess.
 The income of a resident person under a head of income shall be computed by
taking into account amounts that are Pakistan-source income and amounts that
are foreign-source income.
 The income of a non-resident person under a head of income shall be computed
by taking into account only amounts that are Pakistan-source income.
 In view of aforesaid provisions of law, the equation to determine the taxable
income is a under:
Illustration
Source of Income Resident Non Resident
Pakistan source Taxable Taxable
Foreign source Taxable Not Taxable

Note: The principles for calculating Pakistan and foreign source income under a
particular head are different under the Ordinance. Therefore, while calculating total
income under a particular head, foreign and Pakistan source income should be
separately calculated. Foreign expenses should only be deducted against foreign
income and vice versa. For instance income from other source will be calculated as:
Income from other source = Net (foreign + Pakistan) income from other source

Total income (Sec-10)

The total income of a person for a tax year shall be the sum of the
 Person’s income under all heads of income for the year; and
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 Person’s income exempt from tax under any of the provisions of Income Tax
Ordinance, 2001.

Taxable income (Sec-10)

The taxable income of a person for a tax year shall be the total income other than
exempt income of the person for the year reduced (but not below zero) by the total of
any deductible allowances of the person for the year.
Total Income other than exempt xxxxx
Less: Deductible Allowances (Detail Below) (xxxx)
Taxable Income xxxxx
Note: There is a difference between deductible allowance and deductions. Deductible
allowance is deducted from total income whereas deductions are allowed under a
particular head. Deductions are generally allowed to be carried forward in case there
is loss under a particular head, whereas deductible allowances are not allowed to be
carried forward.

Deductible allowances (Sec-60-60D, Clause 61 Part I 2nd Schedule)

(a) Zakat (Sec-60)

 A person is entitled to a deductible allowance for the amount of any Zakat paid
by the person in a tax year under the Zakat and Ushr Ordinance, 1980.
 Where profit on debt is taxable under NTR (in case of company it is taxable as
NTR under the head income from other source) any Zakat deducted will be
allowed as expense against profit on debt (not deductible allowance).
 Where the amount of Zakat is more than income, the excess amount shall not be
refunded or carried forward or carried back.
Note:
(a) Zakat even if paid in cash is allowed as deductible allowance.

(b) Worker’s welfare fund (Sec-60A)

A person shall be entitled to a deductible allowance for the amount of any Workers’
Welfare Fund paid by the person in tax year under Workers’ Welfare Fund Ordinance,
1971.
FBR has clarified through Circular No 1 dated 3 January 2004 that WWF payable
expense is also admissible expense in the cases where accrual based accounting is
employed as regular method of accounting.
Computation:
WWF is payable to FBR at the time of filing the return. Therefore, it must be added in
income tax liability while computing net tax payable/refundable. In view of the latest
judgment of Honourable Supreme Court of Pakistan dated 10 October 2016, relevant
provisions for computation are summarised as under:
(a) The WWF Ordinance, 1971 to apply only to an industrial establishment engaged
in manufacturing or production of goods through various means of energy. A
service sector entity is not subject to the levy of WWF under the WWF Ordinance.
(b) WWF not to be calculated on accounting profit. The levy of WWF is to be calculated
@ 2% only on the amount of taxable income if any. Where there is a tax loss
available for adjustment against taxable income for the year, WWF liability would
be calculated on resultant taxable income, if any, after the aforesaid adjustment.
(c) In the case of exempt income and for cases falling under FTR, no WWF liability
would be payable.
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(c) Worker’s participation fund (Sec-60B)

A person shall be entitled to a deductible allowance for the amount of any Workers’
Participation Fund paid by the person in a tax year in accordance with the provisions
of the Companies Profit (Workers’ Participation) Act, 1968.
Note: WPPF payable is also allowed as expense on the basis of number of judgments
of higher appellate authorities wherein it has been held that where accrual based
accounting is employed as regular method of accounting expense payable would also
be allowed.

(d) Deductible allowance for profit on debt (Sec-60C)

 Every individual shall be entitled to a deductible allowance for the amount of any
profit or share in rent and share in appreciation for value of house paid by the
individual in the year on a loan advance by:
(i). a scheduled bank
(ii). non-banking finance institution regulated by the Securities and Exchange
Commission of Pakistan
(iii). Local Government, Provincial Government or a statutory body
(iv). Public company listed on stock exchange in Pakistan
Individual will be entitled for allowance only where the he utilizes the loan for the
construction of a new house or the acquisition of a house.
 Deductible allowance shall not exceed fifty percent of taxable income or two million
rupees whichever is lower.
 Deductible allowance not able to be deducted during the year shall not be carried
forward to a subsequent tax year.
Note:
(a) Profit on debt paid for any loan utilised for purchase of plot,
renovation/construction of existing house or purchase of any commercial or
industrial property is not entitled for deductible allowance.
(b) Profit on debt paid on any loan obtained from private company and used for
construction of new house will be not entitled for deductible allowance.

(e) Donations to institutions under clause 61 Part I of 2nd Schedule

 Donations are not allowed as tax expense as they are not incurred for the purpose
of business. Only tax credit is allowed if it the criteria mentioned in section 61 of
the Income Tax Ordinance, 2001 is fulfilled.
 However amount paid as donation to the institutions mentioned in clause 61 Part
I of 2nd Schedule of the Income Tax Ordinance, 2001 is an allowable expense.
Amount paid will be straight deduction from the total income of the donor (treated
like deductible allowances).
 The amount donated shall not exceed 30% of the taxable income in the case of
individual and AOP and 20% in the case of company.
 To claim tax credit under section 61, donation must be paid through banking
channel/ crossed cheque. However, deductible allowance under clause 61 Part I
of the Second Schedule is allowed even if it is paid in cash.
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(f) Education expenses (Sec-60D)

 Every individual shall be entitled to a deductible allowance in respect of tuition fee
paid by the individual in a tax year provided that the taxable income of the
individual is less than one and half million rupees.
 The amount of an individual‘s deductible allowance for a tax year shall not exceed
the lesser of
(a) five per cent of the total tuition fee paid by the individual
(b) twenty-five per cent of the person’s taxable income for the year; and
(c) an amount computed by multiplying sixty thousand with number of school
going children of the individual.
 Any allowance or part of an allowance under this section for a tax year that is not
able to be deducted for the year shall not be carried forward to a subsequent tax
year.
 Allowance under this section shall be allowed against the tax liability of either of
the parents making payment of the fee on furnishing national tax number (NTN)
or name of the educational institution.
 Allowance under this section shall be claimed only at the time of filing of return of
income (computation of taxable income) and shall not be taken into account for
computation of withholding tax to be deducted by employer on salary under section
149.

(2) Final tax regime (Sec-169)

 Income subject to final tax are those which are subject to collection or deduction
of tax at source and the tax so collected or deducted at source is treated as final
tax on the income arising from such transactions.
Note: Tax deducted/collected as per applicable rate is final tax. Wrong application
of withholding rate (rate other than applicable) will result in refund/shortfall.
 The tax collected or deducted on such transactions is commonly known as non-
adjustable tax collected or deducted at source. The taxation of income subject to
final tax is governed by Section 169 of the Income Tax Ordinance, 2001.
 All transactions subject to collection or deduction of tax at source do not fall under
income subject to final tax. Different set of rules apply for each nature of income
 Where the tax collected or deducted at source is not treated as final tax the income
arising from such transactions is chargeable to tax under the respective heads of
income (Salary, Property, Business, Capital Gains or Other Sources) and forms
part of the taxable income. The tax collected or deducted on such transactions is
commonly known as adjustable tax collected or deducted at source.
 Following rules apply to the income subject to final tax (S-169)
(i). Such income is not chargeable to tax under any head of income in computing
the taxable income;
(ii). No deduction is allowed for any expenditure incurred in deriving the income
(iii). The amount of the income is not reduced by
(a). Any deductible allowance; or
(b). The set off of any loss
(iv). The tax deducted or collected is not reduced by any tax credit.
(v). Where tax deductible has not been deducted or short deducted by withholding
agent, the said non- deduction or short deduction may be recovered from the
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person to whom payment was made. However this will not absolve withholding
agent from any legal action under the law (i.e. expense disallowance and
recovery of default surcharge).
(vi). There is no refund of the non-adjustable tax collected or deducted at source
unless such tax is in excess of the amount of final tax for which the taxpayer
is chargeable and
(vii). An assessment is treated to have been made and the person is not required
to furnish a return of income in respect such income.
Where the tax collected or deducted is final tax under any provision of the Ordinance
and separate rates for filer and non-filer have been prescribed for the said tax, the
final tax shall be the tax rate for filer and the excess tax deducted or collected on
account of higher rate of non-filer shall be adjustable in the return filed for the relevant
tax year
 Various incomes which are treated as final tax liability of the person under the
Income Tax Ordinance,2001 are:
(i) Execution of contract by non-resident u/s 152 subject to exercising the option.
(ii) Sale of goods by individual, AOP and trading companies under section 153.
(iii) Services of stitching, dying, printing, washing, sizing and weaving u/s 153.
(iv) Advertisement services by print media u/s 153.
(v) Exports u/s 154.
(vi) Prizes and winnings under section 156.
(vii) Commercial importer under section 148(7).
(viii) Person selling petroleum products to petrol pump operator under section
156A.
(ix) CNG stations under section 234A.
(x) Commission and brokerage under section 233.
(xi) Tax collected on the lease of the rights to collect toll under section 236A.
(xii) Payment to residents for use of machinery under section 236Q.

Definition: Imputable Income (Sec 2(28A))

Imputable income in relation to an amount subject to final tax means the income
which would have resulted in the same tax, had this amount not been subject to final
tax.
Example A (Assuming supplies are FTR):
Supplies made by Individual Rs. 2,000,000
Tax deducted @ 4.5% Rs. 90,000
Income upto tax of Rs.60,000 Rs. 2,400,000
Income on balance tax of Rs.30,000 Rs. 300,000 (Rs.30,000/0.10)
Total imputable income Rs. 2,700,000
Example B (Assuming contractual income is FTR):
Contractual income in case of company Rs. 2,000,000
Tax deducted @ 7% Rs. 140,000
Imputable income (Rs. 140,000/0.29) Rs. 482,758
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Imputable income is used for the following purposes:

(a) If individual’s income falls under final tax regime and he does not maintain
books of accounts, then imputed income is used to reconcile the wealth
statement (wealth reconciliation). Wealth reconciliation statement is mandatory
for every resident individual under section 116(2) of the Ordinance. It is a
reconciliation between opening and closing net wealth of the taxpayer for a
particular year.
(b) It is used to calculate Super tax for all persons. Super tax is applicable for tax
year 2019 @ 4% for banking companies irrespective of amount of income and
@ 2% for persons other than banking companies having income equal to or
exceeding Rs. 500 Million.

(3) Income subject to separate charge (Sec-5-8)

 Income subject to separate charge are those incomes, which do not form part of
total income or taxable income and are subject to tax on the basis of gross income.
 Section 5,5A 6, 7,7A,7B,7C,7D and 8 of the Income Tax Ordinance, 2001 govern
the taxation of such income and these are:
(i). Dividend
(ii). Tax on undistributed profits
(iii). Tax on return on investment sukuks
(iv). Royalty/Fee for technical services to non-resident
(v). Shipping income of non-resident and resident
(vi). Air transport income of non-resident.
(vii). Tax on profit on debt other than a company
(viii). Tax on developers and builders for tax year 2017 only. For 2018 onwards
they will be subject to normal tax regime.
 Following rules apply to income subject to separate charge:
(i). Tax imposed is a final tax
(ii). Such income is not chargeable to tax under any head of income in computing
the taxable income of the person
(iii). No deduction is allowed for any expenditure incurred in deriving such income
(iv). The amount of the such income is not reduced by:
(a). Any deductible allowance
(b). The set off of any loss
(v). The final tax payable is not reduced by any tax credit allowed (foreign tax
credit or tax credits on donations, investments etc.)
(vi). The liability of the recipient of such income is discharged to the extent that:
(a). In the case of shipping and air transport income, the tax is paid in
accordance with section 143 or section 144 of the Ordinance
(b). In any other case, the final tax payable has been deducted at source
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(4) Minimum tax regime

 Certain types of incomes are subject to minimum tax under the Income Tax
Ordinance, 2001 to assure that certain portion of tax is paid by the taxpayer
irrespective of quantum of income.
 Under the minimum tax regime we will calculate tax liability under both normal and
final tax regime in the following manner:
FTR = Gross receipts x applicable tax rate A
NTR = (Gross receipts – expenses) x applicable tax rate B
Tax liability will be higher of A or B
 Various incomes which are treated as minimum tax under the Income Tax
Ordinance,2001 are:
(i). Tax collected at import stage on import of plastic raw material by industrial
undertaking, edible oil and packing material under section 148(8)).
(ii). Tax collected at import stage on commercial importers (an importer who
sells the goods in same state) upto 5% is minimum tax.
(iii). Tax collected upto the electricity bill amount of Rs.360,000 per annum for
a person other than company under section 235 on commercial and
industrial consumer
(iv). Tax deduction at source @ 8%/10% from gross amount of service rendered
under section 153 for all persons. However companies in few sectors have
the option to opt out of minimum tax regime.
 P a g e | 15

4 PERSON
Section overview

 Person
 Whether to form a company or AOP-Tax planning

4.1 Person (Sec-2(42) read with Sec-80)

As per sub-section (1) of section 80, following are treated as person:

Definition: Person
 an individual;
 a company or association of persons incorporated, formed, organised or
established in Pakistan or elsewhere;
 The Federal Government, a foreign government, a political subdivision
of a foreign government or public international organisation

Definition of person includes different entities so these are defined and discussed
hereunder:

Definition: Association of Persons (AOP)

“Association of persons” includes a firm, a Hindu undivided family, any artificial
juridical person and anybody of persons formed under a foreign law, but does not
include a company;
“Firm” means the relation between persons who have agreed to share the profits of
a business carried on by all or any of them acting for all.
Note: A joint venture will also be taxed as an AOP. For AOP varying tax rates
are applicable depending upon on the taxable income for a particular tax year.
These rates are discussed later in the chapter.

Definition: Company
“Company” means:
 a company as defined in the Companies Ordinance, 1984
 a small company as defined in section 2 of Income Tax Ordinance,2001
 a body corporate formed by or under any law in force in Pakistan;
 a Modaraba;
 a body incorporated by or under the law of a country outside Pakistan
relating to incorporation of companies;
 a foreign association, whether incorporated or not, which the Board has,
by general or special order, declared to be a company for the purposes
of this Ordinance;
 a Provincial Government; or
 a local Government in Pakistan; or
 a Co-operative society, a Finance society or any other society
 P a g e | 16

 a non-profit organisation
 a trust, an entity and a body of persons established or constituted by or
under any law for the time being in force
“Public company” means —
(a) a company in which not less than fifty per cent of the shares are held by
the Federal Government or Provincial Government;
(b) a company in which not less than fifty per cent of the shares are held by
a foreign Government, or a foreign company owned (100%) by a
foreign Government;
Note: Foreign company must be 100% owned by foreign Government
(c) a company whose shares were traded on a registered stock exchange in
Pakistan at any time in the tax year and which remained listed on that
exchange at the end of that year; or
(d) a unit trust whose units are widely available to the public and any other
trust as defined in the Trusts Act, 1882.
For tax year 2019 rate of tax imposed on the taxable income of the public company
other than a banking company will be 29% which will be reduced by 1% each year
upto the tax year 2013. From Tax year 2023 onwards rate will be 25%.
For Banking companies income tax is chargeable at flat rate of 35% for all tax years.
For Modaraba rate of income tax is 25% for financing activities.
Note: A Public unlisted company under the Companies Ordinance, 1984 will be
considered as private company under the Income Tax Ordinance, 2001 unless it
fulfils criteria of 50% Government holding.
“Unit trust” means any trust under which beneficial interests are divided into units
such that the entitlements of the beneficiaries to income or capital are determined
by the number of units held. In Pakistan all open ended mutual funds are unit trusts.
“Private company” means a company that is not a public company.
For tax year 2019 rate of tax imposed on the taxable income will be 29% which will
be reduced by 1% each year upto the tax year 2023. From Tax year 2023 onwards
rate will be 25%.
"Small Company" means a company registered on or after the first day of July,
2005, under the Companies Ordinance, 1984 which,-
(i) has paid up capital plus undistributed reserves not exceeding fifty
million rupees;
(ii) has employees not exceeding two hundred and fifty any time during the
year;
(iii) has annual turnover not exceeding two hundred and fifty million
rupees; and
(iv) is not formed by the splitting up or the reconstitution of a company
already in existence;
For tax year 2019 rate of tax imposed on the taxable income of small company will
be 24% which will be reduced by 1% each year upto the tax year 2023. From Tax
year 2023 onwards rate will be 20%.
Note: A small company can be private or a public company.
"Start-up" To strengthen and promote the local IT industry of Pakistan a concept
of Start-up is introduced through Finance Act, 2017. Start-up means a business of
 P a g e | 17

resident individual, AOP or company that commenced on or after 01 July 2012 and
person is engaged or intends to offer technology driven products or services to any
sector of the economy subject to following conditions:
(i) It is registered with and duly certified by Pakistan Software Export
Board.
(ii) It has turnover of less than Rs. 100 Million in each of last five tax years.
Profits and gains of any business fulfilling the above conditions is exempt from tax
in the tax year in which it is certified by PSEB and for following two tax years. Start-
up are also exempt from minimum tax under section 113 and from withholding tax
on receipts from local sales and services under section 153 as recipient. (Ref: Sec
2(62A), Clause 143 Part I, 11A and 43F Part IV of Second Schedule).
Note: This exemption is available in case of income from local sales of IT
products and services. Income from export of computer software, IT services or
IT enabled services is already exempt under Second Schedule provided 80% of
the receipts are brought into Pakistan through normal banking channel.
Tax credits for reduction in tax rates of companies:
Tax credits are tax reliefs provided under the law to the tax payer. Tax credits are
deducted from tax liability. Further unless specifically stated, tax credits are only
available against income assessable under the normal tax regime. Few of the tax
credits available Under the Income Tax Ordinance, 2001 are as follows:
(a) Tax credit for enlistment (Sec 65C)
Where a taxpayer being a company opts for enlistment in any registered stock
exchange in Pakistan, a tax credit shall be allowed for the tax year in which the
said company is enlisted and for the following three tax year. Tax credit equal to
20% of the tax payable is allowed for first two tax years and 10% of tax payable
for last two tax years.
(b) Sharia complaint companies already listed on stock exchange (Clause 18B
Part II of Second Schedule)
The rate of tax shall be reduced by 2% (27% for tax year 2019) in case of a
company whose shares are traded on stock exchange if:
(i) it fulfils prescribed shari’ah compliant criteria approved by State Bank of
Pakistan, Securities and Exchange Commission of Pakistan and the Board;
(ii) derives income from manufacturing activities only;
(iii) has declared taxable income for the last three consecutive tax years; and
(iv) has issued dividend for the last five consecutive tax years.
Further Board through Rule 231H of the Income Tax Rules, 2002 has prescribed
following Shari’ah compliant criteria for a company:

(i) The business of the company shall be Halal i.e. it shall not include
processing or manufacturing of pork, liquor, non-Halal products,
pornographic material or any other activity not permitted by Shari’ah.

(ii) There should be Riba free financing on the balance sheet of the company,
however the company may be leveraged through Islamic modes of
financing obtained from licensed Islamic financial institutions.

(iii) All the investments made by the company should be one hundred percent
Shari’ah compliant, therefore, it would not be permissible for the company
 P a g e | 18

to acquire non-Shari’ah compliant instruments or securities which yield

interest or income that is not Halal.

(iv) The company shall be obliged to maintain free float of the company at
thirty percent of the outstanding shares.

Note: Free float generally means shares available for trading.

(c) Companies established through foreign direct investment (Clause 18A Part
II of Second Schedule)
The rate of tax shall be reduced to 20% for a company setting up an industrial
undertaking between the first day of July, 2014 to the thirtieth day of June, 2017,
for a period of five years beginning from the month in which the industrial
undertaking is set up or commercial production is commenced whichever is later:
Provided that fifty percent of the cost of the project including working capital is
through owner equity foreign direct investment.

Sec 2(36) “Non-profit organization” means any person other than individual
which is

(i). established for religious, educational, charitable, welfare or development

purposes, or for the promotion of an amateur sport;
(ii). formed and registered under any law as a non- profit organization;
(iii). approved by the Commissioner for specified period on an application
made by the person, and
Assets of such organization are not available for private benefit to any other
person.

Tax credit equal to 100% of the tax payable is allowed to non-profit organization
subject to fulfilment of certain conditions mentioned in Section 100C.

Exercise
(a) Briefly state, with reasons, whether or not you consider the below mentioned
companies to be a public company for tax purpose:
(i). PPL is a company incorporated under the Companies Ordinance, 1984 and is
not listed on any stock exchange in Pakistan. 59 per cent of the shares in PPL
are held by BBC Ltd, a company incorporated in United Kingdom. United
Kingdom holds 97% of the shares in BBC Ltd
(ii). XYZ Limited is a public company incorporated under the Companies
Ordinance, 1984 whose shares were traded on the Pakistan Stock Exchange
(PSX) from 01 August 2017 until 29 June 2018 on which date the company was
delisted on the exchange.
(iii). The Provincial Government of NWFP holds 50% of the shares in ABC Ltd, a
public company under the Companies Ordinance, 1984. ABC Ltd is not listed
on any stock exchange in Pakistan.
(iv). BRR is a public company under the Companies Ordinance, 1984. 41% of the
shares are held by the Federal Government, 50% by the Government of Saudi
 P a g e | 19

Arabia and 9% by the individuals and group companies. BRR is not listed on
any stock exchange in Pakistan.
(b) Anderson Inc., a public company incorporated under the law of the United
Kingdom relating to the incorporation of companies, has been operating in Pakistan
for over 50 years. The control and management of the Pakistan branch for the
accounting year ended 31 December 2017 was situated wholly outside Pakistan.
Required:
Briefly state, with reasons whether Anderson Inc. will be assessed as a company for
Pakistan tax purposes for the relevant tax year.

Answer(a)
(i). A public company for Pakistan tax purposes, inter alia means a company in
which not less than 50% of the shares are held by a foreign government or a
foreign company owned by a foreign government. 59% of the shares in PPL
are owned by BBC Ltd, which is a foreign company but BBC Ltd is not wholly
owned by the United Kingdom (foreign government). Therefore PPL is not a
public company for Pakistan tax purpose.

(ii). A company whose shares are traded on a registered stock exchange in Pakistan
at any time in the tax year and which remained listed on that exchange at the
end of that year is a public company for tax purpose.
Though the shares of XYZ Limited were traded on the Lahore stock exchange
during the tax year 2018, XYZ Ltd did not meet the test of being a public
company for tax purpose since its shares were not listed on the Pakistan stock
exchange on 30 June 2018. XYZ Ltd is therefore not a public company for tax
purpose.
(iii). A company in which not less than fifty per cent of the shares are held by the
Federal Government or Provincial Government is a public company for tax
purpose. Since the Provincial Government of NWFP holds 50 percent of the
shares in ABC Ltd, ABC Ltd is a public company for tax purpose
(iv). A public company for Pakistan tax purposes, inter alia means a company in
which not less than 50% of the shares are held by a foreign government,
therefore, BRR is a public company as 50% of the shares are held by
Government of Saudi Arabia.
(b)

As per section 80, a company also mean a body incorporated by or under the law of
a country outside Pakistan relating to incorporation of companies. Therefore
Anderson Inc., will be treated as company for Pakistan tax purpose.
 P a g e | 20

5 RESIDENTIAL STATUS
Section overview

 Resident taxpayer
 Resident and non-resident persons
 Resident individual
 Resident company
 Resident association of persons

5.1 Resident taxpayer

S2(53). Resident taxpayer
Resident taxpayer means a taxpayer who is a resident person.

5.2 Resident and non-resident persons

The determination of residential status of a person is necessary as the law explicitly
provides that a resident is taxable in respect of its worldwide income whereas the non-
resident is taxable only in respect of his Pakistan source income. Section 81 of the
Ordinance lays down the method for determination of residential status of a person in
the following manner:
S81. Resident and non-resident persons
 A person shall be a resident person for a tax year if the person is:
(i) a resident individual, resident company or resident association of persons
for the year; or
(ii) the Federal Government.
 A person shall be non-resident person for a tax year if the person is not a
resident person for that year.
A very important point to note from the above discussion is that residential and non-
residential status of any person is to be determined in respect of each tax year as it
may vary from year to year. A person can be resident in tax year 2017 (01 July 2016
to 30 June 2017) but may be non-resident in tax year 2018 (01 July 2017 to 30 June
2018).

5.3 Resident individual

S82. Resident individual
 An individual shall be a resident individual for a tax year if the individual:
(i) is present in Pakistan for a period of, or periods amounting in aggregate to,
one hundred and eighty-three days or more in the tax year; or
(ii) Is an employee or official of the Federal Government or a Provincial
government posted abroad in the tax year.
It is not essential that the stay should be at the same place. It is equally not
necessary that the stay should be continuous. Rule 14 of the Income tax Rules
2002 states the method for computing the number of days of stay of an individual
in Pakistan. The said rule read as under:
 The following rule applies for the purposes of section 82, which provides for the
determination of a person as resident individuals.
 P a g e | 21

 Part of a day that an individual is present in Pakistan (including the day of

arrival in, and the day of departure from, Pakistan) counts as a whole day of
such presence;
 the following days in which an individual is wholly or partly present in
Pakistan count as a whole day of such presence, namely:
(i) a public holiday;
(ii) a day of leave, including sick leave;
(iii) a day that the individual’s activity in Pakistan is interrupted because of a
strike, lock-out or delay in receipt of supplies; or
(iv) a holiday spent by the individual in Pakistan before, during or after any
activity in Pakistan; and
 A day or part of a day where an individual is in Pakistan solely by reason of
being in transit between two different places outside Pakistan does not count
as a day present in Pakistan.
 Residential status of companies and Association of persons is discussed in
sections 83 and 84 of the Ordinance and the said section stipulates that:

5.4 Resident company

S83.Resident company
A company shall be a resident company for a tax year if:
(i) it is incorporated or formed by or under any law in force in Pakistan irrespective
of where its control and management is placed;
(ii) Any other company, not being a company incorporated or formed by or under any
law in force in Pakistan, is resident in Pakistan in the relevant tax year if control
and management of its affairs is situated wholly in Pakistan at any time in that
tax year.
(iii) It’s a Provincial government or local Government in Pakistan.
The term control and management has not been defined in the Ordinance. Generally
it refers to “Head and Brain” which directs the affairs of policy, finance, disposal of
profits, investment, and other crucial matters concerning the management of
company. Control and management means de facto control and management and
not merely the right to control or manage. Usually control and management is situated
at the place where meetings of its Board of Directors are held.

5.5 Resident association of persons

S84.Resident association of persons
An association of persons shall be a resident association of persons for a tax year if
the control and management of the affairs of the association is situated wholly or partly
in Pakistan at any time in the year.
Control and management of association of person is normally vested with principal
officer. In case of firm it is normally vested with partners would ordinarily be at the
principal place of business. Relevant factor is not who has power to control, but who
in fact controls.
 P a g e | 22

Exercise:
Explain the residential status of the following persons for the tax year 2019:
(i). Mr. Raza is working as Director Operations in the Ministry of Tourism. On 15
July 2018 he was posted to Pakistan Embassy in Italy for two years.
(ii). Anderson LLC was incorporated as limited liability Company in UK. The control
and management of its affairs was situated wholly in Pakistan. However, with
effect from 01 November 2018, the entire management and control was shifted to
UK.
(iii). On 01 February 2019, Mr. Sameel was sent to Pakistan by his UK based company
to work on a special project. He left Pakistan on 23 August 2019.
(iv). BBL is a non-listed public company incorporated under the Companies
Ordinance, 1984. All the shareholders of the company are individuals. The control
and management of affairs of the company during the year was outside Pakistan.
(v). Mr. Salman a property dealer in USA came to Pakistan on 01 February 2018.
During his stay upto 02 August 2018 in Pakistan, he remained in Lahore upto 30
June 2018 and thereafter till his departure from Pakistan, in Quetta. Assume that
Commissioner has granted him permission to use calendar year as special tax year.
(vi). Omega LLC (OLLC) was incorporated as a limited liability company in UAE.
OLLC has 5 directors out of which 2 are involved in management, the rest of them
were situated in UAE. The 2 directors control the affairs of the company from
Pakistan.
(vii). Ramiz proceeded to Saudi Arabia on 24 December 2018 to assume
responsibilities on his new job. He visited Karachi from 20 June 2019 to 24
June 2019 for presenting a paper in a seminar but due to unavoidable
circumstances, the seminar was cancelled.

Answer
(a)
(i). Being an employee of Federal Government, Mr. Raza would be treated as
resident irrespective of number of days he stays in Pakistan.
(ii). A company shall be resident if control and management of the affairs of the
company is situated wholly in Pakistan at any time in the year. Therefore,
company is resident irrespective of the fact that it was incorporated in UK.
(iii). The stay of Mr. Sameel for the purpose of tax year 2019 is 150 days
(28+31+30+31+30). Since his stay in Pakistan is less than 183 days in tax year
2018, he is non-resident for tax purposes.
(iv). If a company is incorporated or formed by or under any law in force in Pakistan,
it is treated as a resident company. Such company cannot be treated as non-
resident merely on the basis that the control and management of the affairs of
the company were situated abroad. Therefore, BBL is a resident company.
(v). It is immaterial where he stayed in Pakistan. No. of days shall be counted from
the day of his arrival in Pakistan to the day of his departure in the following
manner:
Accounting period 01 January 2018 to 31 December 2018 (Tax year 2019)
 P a g e | 23

Month No. of days

February 2018 28

March 2018 31

April 2018 30

May 2018 31

June 2018 30

July 2018 31

August 2018 2

Total 183

Since he was present in Pakistan for 183 days, therefore, he is resident

individual. Mr. Salman would not be resident individual, had the tax year been
a normal financial year ending on 30 June 2018.
(vi). Since the management and control of affairs of Omega LLC was wholly situated
in Pakistan during the tax year 2018, it is a resident company irrespective of the
fact that it was incorporated in UAE.
(vii). The number of days Mr. Ramiz spent in Pakistan for the tax year 2019 is as
follows:

Month No of
Days
July 2018 31
August 2018 31
September 2018 30
October 2018 31
November 2018 30
December 2018 24
June 2019 5
Total 182

Ramiz is a non- resident person as his total stay in tax year 2019 is less than
183 days.
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6 DETERMINATION OF TAX LIABILITY

Section overview

 Tax computation and rates

6.1 Computation of tax liability and tax rates (Sec-4 read with First Sch.)
 Income tax shall be imposed on every person having taxable income for each tax
year at the applicable rates as mentioned in first schedule of the Income Tax
Ordinance, 2001
 First Schedule of the Income Tax Ordinance,2001 prescribes different tax rates
for different classes of persons in the following manner:
Tax rates for every individual (salaried or other than salaried)

Sr. Taxable Income (Rs.)

Rate of Tax
No. From To
1. Up to 400,000 0%
2. 400,001 800,000 Rs. 1,000
3 800,001 1,200,000 Rs. 2,000
4. 1,200,001 2,400,000 5% of the amount exceeding
Rs.1,200,000
5. 2,400,001 4,800,000 Rs.60,000 + 10% of the amount
exceeding Rs.2,400,000
6. Above 4,800,001 Rs.300,000 + 15% of the amount
exceeding Rs.4,800,000

Provided that where taxable income exceeds eight hundred thousand rupees the
minimum tax payable shall be two thousand rupees.
Tax rates for Association of persons (AOP)

Sr. Taxable Income (Rs.)

Rate of Tax
No. From To
1. Up to 400,000 0%
2. 400,001 1,200,000 5% of the amount exceeding
Rs.400,000
3. 1,200,001 2,400,000 Rs. 40,000 + 10% of the amount
exceeding Rs. 1,200,000
4. 2,400,001 3,600,000 Rs.160,000 + 15% of the amount
exceeding Rs.2,400,000
5. 3,600,001 4,800,000 Rs.340,000 +20% of the amount
exceeding Rs.3,600,000
6. 4,800,001 6,000,000 Rs.580,000 + 25% of the amount
exceeding Rs.4,800,000
7. Above 6,000,000 Rs.880,000 + 30% of the amount
exceeding Rs.6,000,000
 P a g e | 25

Rates of tax for companies

The rate of tax imposed on the taxable income of a company (other than a banking
company) is 29% for 2018 onwards.
For banking company rate of tax imposed is 35%.
Rate of tax for small company
The rate of tax imposed on the taxable income of a small company is 24%:
Computation of tax liability
Tax liability is sum of liability computed under four tax regimes. Tax liability is
computed under four tax regimes in the following manner:

Normal tax regime

Tax Payable = (Taxable Income x applicable tax rate) – Tax Credits/already
deducted
 If a taxpayer is allowed more than one tax credit for a year, the credits shall be
allowed in the following order:
(i).Any foreign tax credit; then
(ii). Any tax credit allowed under Part X of Chapter III; such as
 Charitable donations
 Investment in shares and insurance
 Contribution to an approved pension fund
 Tax credit for employment generation by manufacturer u/s 64B
 Tax credit for investment in health insurance premium
(iii). Second schedule credits e.g. reduction in tax liability due to full time teacher
allowance etc.
(iv). Any tax credit allowed for quarterly advance tax paid u/s 147 and for tax
collected / deducted at source u/s 168

Final Tax regime

Tax payable = (Gross receipts x applicable tax rate) – Tax already
deducted/collected

Income subject to separate charge

Tax payable = (Gross receipts x applicable tax rate) – Tax already
deducted/collected
Separate block liability is calculated in the same manner as in the case of final tax
regime, however in few instances net liability (Gross receipts-expenses) is multiplied
by relevant tax rate to arrive at tax liability e.g. capital gain on securities.

Minimum Tax regime

Under the minimum tax regime, we calculate tax payable under both normal and final
tax regime in the following manner:
FTR = (Gross receipts x applicable tax rate)- tax already deducted A
NTR =((Net income)x applicable tax rate)- tax already deducted B
Tax payable under Minimum tax regime will be higher of A or B.
 P a g e | 26

7 WHETHER TO FORM A COMPANY OR AOP-TAX PLANNING

Section overview

 Important points
 Exercise

7.1 Important points

Any decision to form a company/AOP should be made after taking into consideration the
following:
 Company’s income is taxed at flat rate of 29%. Small company is taxable @ 24%,
whereas AOP’s is taxable at varying rate with maximum rate of 30% on income
above Rs.6 million.
 Any business expense in the form of salary or any other remuneration to member
is not allowed as an expense to an AOP, whereas same is fully allowed as an
expense to director/shareholder of the company.
 AOP is taxed separately from its members and where AOP has paid tax, the
amount received (distributed by AOP) by members out of the said income is
exempt from tax, however it is added for rate purpose only. On the other hand,
company firstly have to pay 29%/24% tax on its taxable profits and then any
distribution out of its after tax profits is treated as dividend and is subject to further
tax @ 15% in the hands of members.
Exercise
Azeem, Arif and Asif are planning to commence a business venture w.e.f 01 July 2018
selling chemicals to corporate clients. They are however not certain whether the
business venture should be in the form of partnership or a limited company. They
intend to make investment and share profit in the ration of 3:2:1 respectively. Further
in case of limited company they would distribute 30% of the after tax profits as
dividends.

Projected profit and loss account for the tax year 2019 is given as follows:

Particulars Rupees

Sales 15,000,000

Profit before tax 1,095,000

Profit before tax has been calculated after deducting salaries and wages of Rs. 500,000,
Rs. 700,000 and Rs. 600,000 to be paid to Azeem, Arif and Asif respectively.

Assume that all other expenses deducted in calculating profit after tax are also
admissible under the Income Tax and members don’t have any other taxable income.

Required
Under the provisions of the Income Tax Ordinance, 2001 advice Azeem, Arif and Asif
on the preferable structure of their business, whether it should be a partnership or a
limited liability company.
 P a g e | 27

Answer
(b) Taxation impact on different structures
Tax Year: 2019

Amount
In case of partnership:

Profit before tax 1,095,000

Add inadmissible expenses:
Salary to Azeem 500,000
Arif 700,000
Asif 600,000 1,800,000
Taxable Income 2,895,000
Computation of tax liability:
Upto Rs. 2,400,000 160,000
Balance (Rs. 2,895,000- 2,400,000) x 15% 74,250
Total tax liability 234,250

Note: AOP is taxed separately from its members and where AOP has paid tax, the
after tax amount received by members out of income of AOP is exempt from tax. It
is only added in members income for rate purpose.

In case of company:
(a) Small company
Profit before tax 1,095,000
Tax liability @ 24% (A) 262,800
Profit after tax 832,200
Dividend @ 30% 249,660
Tax on dividend @ 15% (B) 37,449
Total tax liability (A + B) 300,249

(b) Public/Private company

Profit before tax 1,095,000
Tax liability @ 29% (A) 317,550
Profit after tax 777,450
Dividend @ 30% 233,235
Tax on dividend @ 15% (B) 34,985
Total tax liability (A + B) 352,535

Conclusion:
Based on the above information it would be better for Azeem, Arif and Asif to
operate as an AOP, if possible, being the lowest tax impact.
 P a g e | 28

08 COMMON RULES
Section overview

 Currency conversion
 Receipt of income
 Recouped expenditure
 Fair market value
 Rules to prevent double derivation and double deductions
 Cessation of source of income
 Limitation of exemption
 Apportionment of deductions

In addition to foregoing basic concepts, understanding of common rules is necessary for

determination and computation of taxable income and tax liability.

8.1 Currency conversion (Sec-71)

 Every amount taken into account under the Income Tax Ordinance, 2001 shall be
in Pak Rupees.
 Where an amount is in a currency other than rupees, the amount shall be
converted to the rupee at the State Bank of Pakistan rate applying between the
foreign currency and the Rupee on the date the amount is taken into account under
the Income Tax Ordinance, 2001.
Note: Open market rate should not be used for conversion. Only State Bank of
Pakistan rate should be used

8.2 Receipt of income (Sec-72)

A person shall be treated as having received an amount, benefit, or perquisite if it is:
(i) actually received by the person;
(ii) applied on behalf of the person, at the instruction of the person or under any law;
or
(iii) Made available to the person. (e.g. Salary was made available to employee but
he voluntarily waived his right to receive the payment is considered as receipt)

8.3 Recouped expenditure (Sec-70)

Any amount received subsequently in respect of deduction already allowed will be
added in the income in the year of receipt.
Note: This principle will be applicable only in case of NTR income. In case of
FTR/Separate block, no addition will be made as no deduction would have been
allowed.

8.4 Fair market value (Sec-68)

 Fair market value (FMV) of any property, or rent, asset, service, benefit or
perquisite at a particular time shall be the price which the property, or rent, asset,
service, benefit or perquisite would ordinarily fetch on sale or supply in the open
market at that time.
 P a g e | 29

 The fair market value of any property, or rent, asset, service, benefit or perquisite
shall be determined without regard to any restriction on transfer or to the fact that
it is not otherwise convertible to cash.
Note: Transactions between associates should always be recorded at Arm’s
length (Fair market value) even if actual value of transaction is greater than FMV.
 Where the price other than immoveable property is not ordinarily ascertainable,
such price may be determined by the Commissioner.

8.5 Rules to prevent double derivation and double deductions (Sec-73)

 Any income taxed on receipt basis shall not become taxable again on accrual
basis and vice versa. Similarly if any expenditure is deductible on due basis the
same shall not be deducted when it is paid and vice versa.

8.6 Cessation of source of income (Sec-72)

 This section applies where any income is derived by a person in a tax year
from any business, activity, investment or other source that has ceased either
before the commencement of the year or during the year.
 In such case the income derived before the business, activity, investment or
other source ceased, shall be chargeable to tax under Income Tax Ordinance,
2001.
 Such type of income shall be taxable as if the source of such income has not
ceased.

8.7 Limitation of Exemption (Sec-55)

 Where any income is exempt from tax under the Ordinance, the exemption
shall be, in the absence of a specific provision to the contrary contained in the
Ordinance, limited to the original recipient of that income and shall not extend
to any person receiving any payment wholly or in part out of that income. E.g.
income of Independent power producers (IPP’s) is exempt under Clause 132
Part I of the Second Schedule but any dividend distributed by them out of
exempt income is taxable in the hands of shareholders.
Exception: Few of the exceptions to above rule are:

 As per Clause 105B Part I of the Second Schedule any income received
from a corporate agriculture enterprise distributed as dividend out of its
income from agriculture is exempt from tax.
 Dividend income of shareholders of Coal mining and Coal based power
generation projects set up in Sindh is exempt for 30 years as per Clause
78 Part IV of the Second Schedule.
Exercise:
Explain the income tax implications in respect of each of the following independent
transactions:

(i). On 21 March 2011, there was a fire in the shop of Mr. Imran and the entire
stock valued at Rs.100,000 (at cost) was destroyed. Imran’s insurance
company refused to entertain the claim for Rs.100,000 for the loss of the
stock-in-trade. Imran ceased doing business as and from 30 June 2011. In
the return of income furnished for the tax year 2011, Imran claimed
Rs.100,000 as a deductible business loss in computing his income under the
head ‘Income from business’. The loss was allowed as a deductible charge
in that tax year. During the tax year 2018, the insurance company, on
receiving a legal notice from imran, made a payment of Rs.75,000 against
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the claim for the loss of stock-in-trade which Imran accepted in full
settlement.

(ii). Mr. Pansari, a resident taxpayer, is operating a departmental store in

Lahore. He received a dividend of Rs. 45,000 from Rasila Farms Limited
(RFL) for the year ended 31 September 2017. The amount received was
credited to his capital account. Mr. Pansari is of the view that since RFL
derives its entire income from agriculture, which is exempt from tax, the
dividend of Rs. 45,000 being paid from an exempt income is also not
chargeable to tax.

(iii). During the tax year 2018 an amount of Rs. 200,000 was reimbursed to ABC
(Pvt.) Limited by its parent company. The amount was incurred by ABC
(Pvt.) Limited in the previous tax year on marketing its various products.
40% of company’s income from sale of products is assessable under the final
tax regime.

(iv). A motor car with accounting and tax written down value of Rs.400,000 and
Rs. 500,000 respectively was transferred to a retiring director as a parting gift
by HPL Ltd. The director disposed of the car to an unrelated person two
days after its acquisition by transfer for Rs. 400,000. The company did not
recognize any tax gain/loss while computing its taxable income.

(v). A special payment of Rs. 75,000 in lieu of leave encashment was made
available to Atif an employee of the company, however, he voluntarily
waived his right to receive such payment. Aif has not offered this amount
to tax as he is following cash-basis accounting.

(vi). ABC Limited sold a product to its associated company at Rs. 500,000. The
fair market value of the product was Rs. 400,000. The company recorded
sale at Rs. 500,000 in its books.

Answer
(i) Cessation of source of income
Law specifically provides that if there is any income that has been derived by a
person in a tax year from a business, activity, investment or other source that has
either ceased before the commencement of that year or during the year and if that
income would have been taxable had there been no cessation, then the provision of
the tax statute would apply as if there was no cessation (Ref: Sec 72)
In other words section 72 deems the business, activity, investment or other source
to have been carried on by the person in the tax year in which the income was
derived despite the cessation of the business activity, investment or other source.
The above amount shall be offered for tax in the return under the head “Income
from business”

(ii) Dividend received from exempt income

Where any income is exempt from tax under the Ordinance, the exemption, in the
absence of a specific provision to the contrary, shall be limited to the original
recipient of that income and shall not extend to any person receiving any payment
wholly or in part out of that income.
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However as per Clause 105B Part I of the Second Schedule any income received
from a corporate agriculture enterprise distributed as dividend out of its income from
agriculture is exempt from tax. Hence Rs. 45,000 will be exempt from tax.

(iii) Recouped expenditure

where a person has been allowed a deduction for any expenditure or loss incurred
in a tax year in the computation of the person’s income chargeable to tax and
subsequently, the person has received, in cash or in kind, any amount in respect of
such expenditure or loss, the amount so recovered shall be included in the income
for the tax year in which it is received.

60% of company’s income is assessable under NTR, while 40% is assessable under
final tax regime (FTR). No expense is allowed in deriving income chargeable to tax
under final tax regime. Hence only Rs. 120,000 will be added in taxable income.

(iv) Tax gain/loss on gift of car

As the motor car was gifted by HPL to its director, the fair market value of the
car will be treated as consideration received. Hence, there will be a tax loss of
Rs. 100,000 on disposal of car which will be computed as under:
Tax written down value 500,000
Consideration received (400,000)
Tax loss 100,000

(v) Special payment made available

Under section 72 of the Ordinance, an amount is treated as receipt even if it is

made available to recipient. Therefore, same will be considered as receipt and
Atif will have to offer the same to tax.

(vi) Sale of product to associate- wrongly booked as Rs. 500,000

Transactions between associates should always be recorded at Arm’s length

(Fair market value) even if actual value of transaction is greater than FMV.

8.8 Apportionment of deductions

 This concept implies that an expenditure and deductible allowances which
relates to the following, shall be apportioned on any reasonable basis taking
into account the relative nature and size of the activities to which the amount
relates:
(i) the derivation of more than one head of income; or
(ii) derivation of taxable income and any class of income subject to Final Tax
Regime.
(iii) the derivation of income chargeable to tax under any head of income and
to some other purpose.
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Rules for apportionment of common expenditures (Expenditure, deductions and

deductible allowances (Rule 13)

 Any expenditure that is incurred for particular class of income (specific

expense) shall be allocated/apportioned to that class only.
 Common expenditure means any expenditure that is not clearly allocable
to any particular class or classes of incomes. Rules regarding apportionment
of such expenses are given as follows:
 Any common expenditure (including financial expenses) shall be
apportioned amongst each class of income according to the following
formula:
Amount of expense x Gross receipts for the class of income
Gross receipts for all class of income
Note: Gross receipts (net of sales tax and FED if any) means all receipts without
deduction of expenditures.
 Where, however, net gain, brokerage, commission and other income is to
be taken into account on turnover of such transactions, such income shall
be allocated on the basis of gross profits of the business (See Exercise for
further clarification)
Note 1: Only administrative, selling and other expenses should be allocated on gross
profit ratio in this case. Cost of sales will always be allocated on sales ratio.
Note 2: In case of export sales FOB value will be taken.
 While allocating common expenditure (particularly selling expenses) the
nature and source of each class of income must be taken into account.
 The basis determined for allocation of expenditure should be certified by a
Chartered Accountant or a Cost and Management Accountant. This
certificate shall be accepted by CIR unless there is significant variations
(10% + beyond the limits) from allocation under the rules.
 Where in case of certain transaction the net gain, brokerage, commission
and other income is taken as turnover, then the gross profit from business
shall be taken as gross receipts for the purpose of apportionment of
expenditures.
 For the purpose of these rules a person may have following classes of
incomes:
(a) Pakistan source incomes
(i) Salary
(ii) Income from property
(iii) Income from business- Non speculation
(iv) Income from business-Speculation
(v) Capital gains
(vi) Income from other source
(b) Foreign source income
(i) Salary
(ii) Income from property
(iii) Income from business- Non speculation
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(iv) Income from business-speculation

(v) Capital gains
(vi) Income from other source
(c) Income chargeable to tax as separate block
(d) Income exempt from tax e.g. agriculture income
(e) Income chargeable to tax under presumptive tax regime.

Exercise:
Following information is available as per the records of ABC Limited for Tax Year
2018:
Particulars Amount
(Rupees)
Gross sales 345,800,000
Cost of sales 245,350,000
Gross Profit 100,450,000
Administration and selling 61,015,000
expenses
Other Income-Brokerage & 4,300,000
Commission
Profit before tax 43,735,000

Additional Information:
(i) Breakup of sale is as follows:
Local sales inclusive of sales tax 164,034,000
Exports 181,766,000
(ii) Cost of sales include Freight of Rs.500,000 in respect of exported goods.
(iii) Administrative and selling expenses are common in nature and also pertains to
other income.
Required:
Under the provisions of the Income Tax Ordinance, 2001 and Rules made
thereunder, compute taxable income of ABC Limited for Tax year 2018.

Answer
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ABC Limited
Computation of taxable income
Tax Year: 2018

Local Commissi
Particulars Export Total
Sales on

Scheme of NTR FTR FTR

Gross sales 164,034 181,766 4,300 350,100
Sales tax (17/117) 23,834 - - 23,834
140,200 181,766 4,300 326,266
Sales ratio excluding Commission 43.54% 56.46% 100%
Cost of sales- Common to be 106,620 138,230 244,850
allocated on sales)
Specific -freight 500 500
106,620 138,730 - 245,350
Gross profit 33,580 43,036 4,300 80,916
GP Ratio (Rule 13(3)(b)) 41.50% 53.19% 5.31% 100%
Admin and selling expenses- 25,321 32,451 3,242 61,015
Common expenses to be allocated
Taxable Income 8,259 10,585 1,058 19,901

Note: Common administrative and selling expenses are always to be allocated on

sales ratio. However if these expenses are incurred for earning brokerage,
commission etc then GP ratio is to be used.
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9 CIRCULARS, NOTIFICATION, ADVANCE RULING & TAX TREATIES

Section overview

 Circulars
 Power to issue notifications
 Advance ruling
 Agreement for avoidance of double taxation

9.1 Circulars (Sec- 206)

 To achieve consistency in the administration and to provide guidance to taxpayers
and officers of the Board, the Board may issue Circulars setting out the Board‘s
interpretation of the Ordinance/law.
 A circular issued by the Board shall be binding on all Income Tax Authorities and
other persons employed in the execution of the Ordinance, under the control of
the said Board other than Commissioners of Income Tax (Appeals).
 A Circular shall not be binding on a taxpayer
Circular letters
 Circular issued by Board is addressed to public at large. Where a specific
clarification is issued by FBR in response to a query submitted by any person,
FBR will issue a circular letter.
 A circular letter is therefore addressed to a particular person, however it is
binding on tax officials.
 A circular letter is not binding on taxpayer and appellate authorities who may
or may not agree to the interpretation given in circular letter.

9.2 SROs/Notifications and power to issue notification by Board to amend Second

Schedule (Sec 53) and to make rules (Sec 237)

Statutory Regulatory Orders SRO

A Statutory Regulatory Order (SRO) is a subordinate legislation, which is a
collective term for statutory rules, regulations, ordinances, by-laws, and notifications
which bears a unique identification number. It is made by the persons or bodies to
whom Parliament has delegated some of its law-making powers.
Under some provisions of the Ordinance, certain issues are required to be notified
in the Official Gazette. These notifications are binding on tax/appellate authorities
and the taxpayer. These notifications, commonly referred to as SRO, are generally
issued in relation to following
 Tax exemptions and concessions
 Tax treaties
 Changes in Income Tax Rules, 2002
 Special tax years

 The income or classes of income, or person or classes of persons specified in

Second Schedule shall be:
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(i). exempt from tax (Part I of the schedule)

(ii). Reduced rate of tax (Part II of the schedule)
(iii). Reduction in tax liability (Part III of the schedule)
(iv). Exemption from particular provision of the Ordinance (Part IV of the
schedule)
 Federal Government has the power to issue notification to amend Second
Schedule.
 Exemptions and concessions by Federal Government can only be given pursuant
to the approval of the Economic Coordination Committee of Cabinet, whenever
circumstances exist to take immediate action for the purpose of national security,
disaster, national food security in emergency situations, protection of national
economic interests in situations arising out of abnormal fluctuation in international
commodity prices, removal of anomalies in taxes and development of backward
areas and implementation of bilateral and multilateral agreements.
 The Federal Government shall place before the National Assembly all
amendments made by it to the Second Schedule in a financial year.
 The Board may by notification in the official Gazette make rules (Income tax Rules,
2002) for carrying out the purpose of this Ordinance. Such rules (Income Tax
Rules, 2002) may provide guidelines for calculating taxable income of a particular
person, procedure for approval of Non-profit organization, fee and other charges
to be paid, procedure of furnishing return, penalties, savings and transitional
provisions etc. (Sec 231)
9.3 Advance ruling (Sec-206A, Rule 231A)

 With a view to reduce tax disputes and to encourage foreign investment, the law
provides for scheme of advance ruling for non-resident taxpayers. The scheme
enables a non-resident person to obtain in advance a binding ruling from the
Advance Ruling committee with reference to a tax implication arising to any
transaction.
 The application shall be considered by a three member Committee consisting of
(i) Chairman, Central Board of Revenue (ii) Member Inland Revenue, CBR (iii)
Senior Joint Secretary, Law, Justice and Human Rights Division. The Committee
may obtain comments of the concerned Commissioner and legal expert if required.
 A non-resident person desiring to seek advance ruling is required to set out in his
application all facts relating to the transaction for which he wants to seek a ruling.
 The Board shall within ninety days of the receipt of application, issue to the
taxpayer an advance ruling setting out the Commissioner‘s position regarding the
application of the Income Tax Ordinance, 2001 to a transaction proposed or
entered into by the taxpayer.
 Where the taxpayer has made a full and true disclosure of the nature of all aspects
of the transaction relevant to the ruling and the transaction has proceeded in all
material respects as described in the taxpayer‘s application for the ruling, the ruling
is binding on the Commissioner with respect to the application to the transaction
of the law as it stood at the time the ruling was issued.
 The advance ruling shall be binding on the Commissioner only in respect of the
specific transaction on which such advance ruling is issued and shall continue to
remain in force unless there is a change in facts or in the law on the basis of which
the advance ruling was pronounced.
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 The advance ruling shall cease to be binding on the Commissioner, if it is

subsequently found to have been obtained by fraud or misrepresentation of facts
about the nature of the transaction on which advance ruling was issued
 Where there is any inconsistency between a circular and an advance ruling,
priority shall be given to the terms of the advance ruling.
9.4 Agreements for avoidance of double taxation (Sec 107)

 Pakistan (Federal Government) has signed treaties for avoidance of double

taxation and prevention of fiscal evasion in relation to taxes on income with a
number of countries.
 These treaties generally provide for
(i). Relief from the tax payable under this Ordinance
(ii). The determination of the Pakistan-source income of non-resident persons
(iii). Taxpayer’s residential status i.e. when a foreign company is considered to
have a permanent establishment in Pakistan
(iv). Taxation and tax rates applicable to various income streams
(v). Concessions and exemptions and
(vi). Exchange of information for prevention of fiscal evasion
 In case there is conflict between the provisions of the Income Tax Ordinance, 2001
or any other law and those of tax treaty, provisions of tax treaty will apply in so far
as these are beneficial to the non-resident person.
 However, provision of double tax treaty are subject to powers of the Commissioner
to re-charactization of income and deductions under section 109 whereby the
Commissioner has specifically been empowered to disregard an entity or a
corporate structure that does not have an economic or commercial substance or
was created as part of the tax avoidance scheme.
 The Board shall also have power to obtain and collect information when solicited
by another country under a tax treaty, a tax information exchange agreement or a
multilateral convention. Any such information received or supplied shall be
confidential.
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10 TAXPAYER’S REGISTRATION AND INCOME TAX AUTHORITIES

Section overview

 Taxpayer’s registration
 Compulsory registration in certain cases
 Taxpayer’s registration by Commissioner
 Displaying and quoting national tax number
 Active taxpayer’s list and taxpayer card
 Income Tax Authorities

10.1 Taxpayer’s registration- (Sec 181-181B)

 Every taxpayer is required to apply for registration. The application shall be made
in the prescribed form and in the prescribed manner.
 The Commissioner having jurisdiction over a case may also register a taxpayer in
the prescribed manner if so necessitated by the facts of the case.
 Taxpayer’s registration scheme shall be regulated through the rules to be notified
by the Board.
 From tax year 2015 and onwards, in case of individuals having Computerized
National Identity Card (CNIC) issued by the National Database and Registration
Authority, CNIC shall be used as National Tax Number.”;
10.2 Compulsory registration in certain cases (Section 181AA,)

Any application for commercial or industrial connection of electricity or natural gas shall not
be processed and such connection shall not be provided unless the person applying for is
registered under FBR.

10.3 Taxpayer’s registration by Commissioner (Rule 81A)

 The Commissioner having jurisdiction over a case may register a person as a

taxpayer where he is satisfied that the income of the person is taxable and is
required to file a return of income under section 114.
 The Commissioner shall issue to the taxpayer a letter under sub-section(2) of
section 181 to submit an application for registration prescribed under rule 80 along
with documents specified therein within a reasonable time given in the said letter.
In case of compliance NTN certificate shall be issued accordingly.
 In case of failure of the taxpayer to comply with the letter issued under sub-section
(2) of section 181, the Commissioner shall register the taxpayer on a Trial
Registration Number (TRN) for which a serially numbered Trial Register shall be
maintained by the Commissioner. The Trial Register shall contain the basic
information of the taxpayer like name of the person or business, available address,
CNIC if provided nature of income generating activity and any other information
regarded useful by the Commissioner. In such case, statutory notices shall be
issued for assessment of income or other legal obligation of the taxpayer under
the Ordinance on TR Number:
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Provided that before allotment of Trial Registration Number the Commissioner

shall verify and match the particulars of the taxpayer from the NTN Master Index
to avoid duplication of registration.
 In case any assessment is made or any liability is created by the Commissioner
under the Income Tax Ordinance, 2001 against the taxpayer, the Commissioner
on the basis of information as contained in Trial Register, allot an NTN to the
taxpayer within fifteen days of the date of completion of assessment or creation of
a liability under the Ordinance.
10.4 Displaying and quoting of National Tax Number (Section 181C, 182, Rule 83)

 Every person deriving income from business chargeable to tax who has been
issued with a National Tax Number Certificate shall display the person’s National
Tax Number at a conspicuous place at every place of business of the person and
shall also quote the person’s National Tax Number in the following circumstances,
namely:
(i) in all commercial transactions entered into by the person

(ii) in cash memos issued

(iii) in all returns, statements and other documents required to be furnished under
the Ordinance and in any correspondence with the Commissioner; and
(iv) in all documents relating to the person’s business on the following matters,
namely:-
 all new connections of utilities, including water, gas, electricity and
telephone;
 the entering into a loan with a banking company or financial institution;
 the opening of letters of credit; and
 the transfer of urban immovable property

 Every person who fails to display NTN certificate at the place of business shall pay
a penalty of Rs. 5000.
10.5 Active taxpayer’s list & Taxpayer card (Sec-181A, 181B, Rule 81B, 81C)

 The Board shall have the power to institute active taxpayers ‘list. Further Board
may make a scheme for introduction of a taxpayer honour card for individual tax
payers, who fulfil a minimum criteria.
 A person shall be issued taxpayer card only if the person has filed a return. Board
shall issue Taxpayer card by first of March each year which shall be valid for a
period of one year.
Filer (Sec 2(23A)
Filer means a taxpayer whose name appears in the active taxpayers list issued
by the Board or Azad Jammu and Kashmir Council Board of Revenue or Gilgit
Baltistan Council Board of Revenue from time to time or is holder of taxpayer’s
card.
Non-Filer (Sec 2(35C)
Non filer means a person who is not a filer.
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Note: To penalise non filer, higher income tax withholding rates have been
prescribed under the Income Tax Ordinance, 2001. However, non-filer can
obtain refund of excess amount deducted on becoming a filer.
Similar a non filer cannot purchase vehicles on first registration (new car) and
immoveable property exceeding Rs. 5 million from tax year 2019 onwards.

 The Board shall publish Active Taxpayers List (ATL) which shall be made available
on the Board's web portal, by first day of March in each financial year. ATL shall
be updated on every Sunday at 24:00 hours.
 A person's name shall be included in ATL, if the person has filed a return under
section 114 or a statement under section 115 for the tax year for which the last
date as specified in section 118 (return filing date) falls during immediately
preceding twelve month.
However name of company or AOP whose return is not due to be filed because of
incorporation or formation after the 30th June, shall be included in Active Taxpayer
List.
 A person’s name shall be included in ATL on the immediately following updation
date, if at any time, criteria laid down above is fulfilled by that person.
Return not filed within due date (Sec 182A)
From tax year 2018 onwards where a person fails to file a return of income by
due date such person
(i). Shall not be included in the active taxpayers list for the year for which return
was not filed. For tax year 2018 ATL will be updated on first day of March
2019.
(ii). Shall not be allowed to carry forward any loss.

10.6 Income tax authorities (Section 207)

The income tax law provides a complete organisational set up for levy and recovery of
income tax which are described in section 207 as under:

(a) Board
(b) Chief Commissioner Inland Revenue;
(c) Commissioner Inland Revenue;
(d) Commissioner Inland Revenue (Appeals);
(e) Officer of Inland Revenue i.e.
(i). Additional Commissioner Inland Revenue;
(ii). Deputy Commissioner Inland Revenue;
(iii). Assistant Commissioner Inland Revenue;
(iv). Inland Revenue Officer;
(v). Inland Revenue Audit Officer or any other Officer;
(vi). District taxation officer Inland Revenue
(vii). Assistant Director Audit
(f) Special Audit panel
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(g) Superintendent Inland Revenue

(i) Inspector Inland Revenue; and
(j) Auditor Inland Revenue.
Board shall examine, supervise and oversee the general administration of this Ordinance.
All the income tax authorities shall be subordinate to the Boa