Updated: Tuesday March 18, 2014/AthThulatha
Jamada El Oula 17, 1435/Mangalavara
Phalguna 27, 1935, at 09:23:04 PM
The Business Profits Tax Act, 1947
ACT No. XXI of 1947
[11th April, 1947]
An Act to impose a special tax on a certain class of
income
WHEREAS it
is expedient to impose a special tax on income arising from business;
It is hereby enacted as follows:---
1. Short title extent and commencement--‑(1) This Act may be called the Business Profits
Tax Act, 1947.
(2) It extends to the whole of
(3) It shall come into force on such date’ as the
Central Government may, by notification in the official Gazette, appoint.
2. Interpretation--- In this Act, unless there is anything repugnant in the subject or
context,---
(1) “abatement” means, in respect of any chargeable
accounting period, a sum which bears to a sum equal to,---
(a) in the case of a company, not being a company
deemed for the purposes of section 9 to be a firm, six per cent. of the capital
of the company on the first day of the said period computed in accordance with
Schedule 11, or one lakh of rupees, whichever is greater, or
(b) in the case of a firm having,---
(i) not more than two working partners, one lakh of
rupees, or
(ii) three working partners, one and a half lakhs of
rupees, or
(iii) four or more working partners, two lakhs of
rupees or
(c) in the case of a Hindu undivided family, two lakhs
of rupees, or
(d) in any other case, one lakh of rupees, the same
proportion as the said period bears to the period of one year;
(2) “accounting period” in relation to any business
means any period which is or has been determined as the previous year for that
business for the purposes of the Income‑tax Act, 1922;
[CI. (2A) which was ins. by the
(3) “business” includes any trade commerce or
manufacture, or any adventure in the nature of trade, commerce or manufacture;
or any profession or vocation the profits of which. are chargeable according to
the provisions of section 10 of the Income tax Act, 1922:---
Provided that where the functions of a company or of a
society incorporated by or under any enactment consist wholly or mainly in the
holding of investments or other property, the holding of the investments or
property shall be deemed for the purpose of this definition to be a business
carried on by such company or society:---
Provided further that all businesses to which this Act
applies carried on by the same person shall be treated as one business for the
purposes of this Act;
(4) “chargeable accounting period” means,---
(a) any accounting period falling wholly within the
term beginning on the first day of April, 1946, and ending on the thirty‑first
day of March, 1958;
[The original words and figures “thirty‑first
day of March, 1947” have successively been amended by the Pakistan Finance Act,
1948 (1 of 1948), the Pakistan Finance Act, 1949 (9 of 1949), the Finance Act,
1950 (26 of 1950), the Finance Act, 1951 (1 of 1951), the Finance Act, 1952 (4
of 1952), the Finance Act, 1952 (1 of 1953), the Finance Act, 1954 (1 of 1954),
the Finance Ordinance, 1955 (12 of 1955), the Finance Act, 1956 (1 of 1956),
the Finance Act 1957 (1 of 1957), and the Finance Act, 1958 (22 of 1958), to
read as above.]
(b) where any accounting period falls partly within
and partly without the said term, such part of that accounting period as falls
within the said terms,---
Provided that where an accounting period falls partly
before and partly after the thirty‑first day of March, 1951, so much of
that accounting period as falls before and so much of that accounting period as
falls after the end of March, 1951, shall be deemed each to be a separate
chargeable accounting period. [Proviso added by Act 4 of 1952, s. 15.]
(5) “company” has the same meaning as in section 2 of
the Income‑tax Act, 1922;
[Subs. by Act 22 of 1958, s. 13 (with effect .from the
1st April, 1958), for the original cl. (5), as amended by A. O., 1949.]
(6) “control of a company” means control direct or
indirect of more than one half of the voting power attached to the total issued
paid‑up share capital of the company, or control vested by its Memorandum
and Articles of Association otherwise than by reference to such voting
power,---
Provided that the voting power attached to shares held
by a nominee or trustee for any person shall be deemed for the purpose of this
definition to be held by that person;
(7) “deficiency of profits” means,---
(i) where profits have been made in any chargeable
accounting period, the amount by which such profits fall short of the abatement
in respect of that period;
(ii) where a loss has been made in any chargeable
accounting period, .the amount of the loss added to the abatement in respect of
that period;
(8) “director” includes any person occupying the
position of a director by whatever name called and also includes any person
who,---
(i) is a manager of the company or concerned in the
management of the business, and
(ii) is remunerated out of the funds of the business,
and
(iii) is the beneficial owner of not less than twenty
per cent. of the ordinary share capital of the company;
(9) “dividend” has the same meaning as in section 2 of
the Income tax Act, 1922;
(10) “firm”, “partner” and “partnership” have the same
meanings respectively as in the Partnership Act, 1932;
(11) “fixed rate” in relation to dividends on share
capital, other than ordinary share capital, includes a rate fluctuating in
accordance with the maximum rate of income tax;
(12) “loss” means a loss computed in the same manner
as, for the purposes of this Act, profits are to be computed;
(13) “ordinary share capital”, in relation to a
company, means all the issued share capital (by whatever name called) of the
company, other than capital the holders whereof have a right to a dividend at a
fixed rate but have no other right to share in the profits of the company;
(14) “person” includes a Hindu undivided family;
(15) “prescribed” means prescribed by rules made under
this Act;
(16) “profits” means profits as determined in
accordance with Schedule I;
(17) “taxable profits” means the amount by which the
profits during a chargeable accounting period exceed the abatement in respect
of that period;
(17A) “taxable territories” means, as respects any
period before the 15th day of August, 1947, the territories then referred to as
British India, but including Berar, and as respects any period after the 14th
day of August, 1947, the territories for the time being comprised in Pakistan;
[CI. (17A) ins. by the finance Act, 1953 (1 of 1953),
s. 13,]
(18) “working partner” of a firm means a partner
thereof who devotes substantially the whole of his time to the business of the
firm.
3. Tax authorities‑(1) Every Commissioner of Income tax, Appellate Assistant
Commissioner of Income‑tax, Inspecting Assistant Commissioner of Income tax
and Income tax Officer shall have the like powers under this Act and in
relation to the same area and cases as he exercises under the Income tax Act,
1922.
(2) All officers and persons employed in the execution
of this Act shall observe and follow the orders, instructions and directions of
the Central Board of Revenue,---
Provided that no such orders, instructions or
directions shall be given so as to interfere with the discretion of the
Appellate Assistant Commissioner of Income tax in the exercise of his appellate
functions.
4. Charge of tax---- Subject to the provisions of this Act, there shall, in respect of
any business to which this Act applies, be charged, levied and paid on the
amount of the taxable profits during any chargeable accounting period, a tax
(in this Act referred to as “business profits tax”) which shall be equal to
sixteen and two-thirds per cent. of the taxable profits;
Provided that,---
(a) any profits which are, under the provisions of sub‑section
(3) of section 4 of the Income tax Act, 1922, exempt from income tax,
(b) all profits from any business of life insurance,
(c) any sum paid to a business by or through the
Central Government by way of bonus or subsidy, shall be totally exempt from
business profits tax under this Act,---
Provided further that where the profits of an
industrial undertaking to which section 15B of the Income‑tax Act, 1922,
applies are included in the profits and taxable profits of any chargeable
accounting period no tax shall be payable under this Act on such part of the
said profits as ranks for exemption under the said section:---
Provided further that no tax shall be payable under
this Act on the profits of an industrial undertaking as described in sub-section
(2) of section 15B of the Income‑tax Act, 1922, which has been set up or
commenced after the 31st day of March, 1951, and before the first day of April,
1958, as respects the first five successive chargeable accounting periods,---
Provided further that notwithstanding anything to the
contrary contained in sub-section (8) of section 10 of the Income tax Act,
1922, no tax under this Act shall, subject to the terms of the agreement
entered into with Government, be payable by an undertaking 4[the profits or
gains of which are liable to be computed in accordance with the rules contained
in the Second Schedule to the Income tax Act, 19221,---
Provided further that, as respects any chargeable
accounting period relevant to the previous year for assessment under the Income
tax Act, 1922, for any year ending on or after the 31st day of March, 1959 no
tax shall be payable under this Act on profits of any business carried on by a
firm which is registered under section 26A of the Income‑tax Act, 1922 or
a firm treated as a registered firm under clause (b) of sub-section (5) of
section 23 of the Income tax Act, 1922.
5. Application of Act---- This Act shall apply to every business of which
any part of the profits made during the chargeable accounting period is
chargeable to income‑tax by virtue of the provisions of sub‑clause
(i) or sub‑clause (ii) of clause (b) of sub‑section (1) of section
4 of the Income‑tax Act, 1922, or of clause (e) of that sub‑section,---
Provided that this Act shall not apply to any business
the whole of the profits of which accrue or arise without taxable territories
where such business is carried on by or on behalf of a person who is resident
but not ordinarily resident in taxable territories unless the business is
controlled in Pakistan,---
Provided further that where the profits of a part only
of a business carried on by a person who is not resident in taxable territories
or not ordinarily so resident accrue or arise in taxable territories or are
deemed under the Income‑tax Act, 1922, so to accrue or arise, then,
except where the business being the business of a person who is resident, but
not ordinarily resident, in taxable territories is controlled in Pakistan, this
Act shall apply only to such part of the business, and such part shall for all
the purposes of this Act be deemed to be a separate business.
Explanation.‑As respects any period before the 15th day of August, 1947, the
reference to ‘
6. Relief on occurrence of deficiency of profits-- Where a deficiency of profits occurs in any
chargeable accounting period in any business, the taxable profits of the
business shall be deemed to be reduced and relief shall be granted in
accordance with the following provisions:---
(a) the aggregate amount of the taxable profits for
the previous chargeable accounting periods shall be deemed to be reduced by the
amount of the deficiency of profits and the amount of business profits tax
payable in respect thereof ‘before taking into account any credit that may be
due under an agreement referred to in section 49AA of the Income‑tax Act,
1922, shall be deemed to be reduced accordingly, and the relief necessary to
give effect to the reduction shall be given by repayment or otherwise;
[Ins. by the Finance Act, 1956 (i of 1956), s. 13
(with effect from the 1st April, 1956).]
(b) where the amount of the deficiency of profits
exceeds the aggregate amount of the taxable profits for the previous chargeable
accounting periods or where there is no previous chargeable accounting period,
the balance of the deficiency of profits or the whole of the deficiency, as the
case may be, shall be applied in reducing any taxable profits for the next
subsequent chargeable accounting period, and if and so far as it exceeds the
amount of those profits, any taxable profits for the next subsequent chargeable
accounting period and so on.
7. Change in persons carrying on business--- As from the date of any change in the persons
carrying on a business, the business shall be deemed for all the purposes of
this Act to have been discontinued and a new business to have been commenced:---
Provided that where a change takes place in the
persons carrying on a business and where except for such change relief would be
allowable under section 6, the Central Board of Revenue may, if it thinks fit,
allow such relief under that section as it considers just, having regard to the
extent to which the persons directly or indirectly interested in the business
before the change remain interested therein after the change.
8. Interconnected companies‑(1) Where any interest, annuity, or other
annual payment, or any royalty or rent, is payable by one company to another
company, and one of those companies is a subsidiary of the other, or both are
subsidiaries of a third company, and the recipient company is resident outside
taxable territories no allowance shall be made in respect of such payment in computing
the profits or losses of the paying company.
[Subs. by the Finance Act, 1953 (1 of 1953), s. 13,
for “
(2) Where,---
(a) a company (hereinafter referred to as “the
principal”) is resident in taxable territories and is not a subsidiary of any
other company resident in taxable territories; and
(b) during the whole or any part of any chargeable
accounting period of the principal, another company resident or carrying on
business within taxable territories (hereinafter referred to as “the subsidiary”)
is a subsidiary of the principal, the capital or profits or losses of the
subsidiary for such chargeable accounting period or part thereof shall be
treated for the purposes of this Act as if they were the capital of, or as the
case may be, profits or losses arising from the business of, the principal;
[Subs. by the Finance Act, 1953 (1 of 1953), s. 13,
for
Provided that the profits of the subsidiary so treated
shall not be exempted from business profits tax in the hands of the principal
by reason of any exemption applicable to the principal under the proviso to
section 4.
(3) Where the chargeable accounting periods of the
principal and subsidiary are not co‑terminous, such division and
apportionment of the profits or losses of the subsidiary for any chargeable
accounting period shall be made as will allocate the due proportion thereof to
the relative chargeable accounting period or periods of the principal ; and
such division and apportionment shall be by reference to the proportion that
the number of days of the chargeable accounting period of the subsidiary
falling within the relative chargeable accounting period or periods of the
principal bears to the total number of days in the chargeagle accounting period
of the subsidiary.
(4) For the purposes of this section a company shall
be deemed to be a subsidiary of another company if and so long as not less than
four‑fifths of its ordinary share capital is beneficially owned by that
other company, whether directly or through another company or other companies,
or partly directly and partly through another company or other companies.
(5) The business profits tax payable by virtue of this
section by the principal shall, for the purposes of section 10, be allocated by
the Income‑tax Officer to the respective companies concerned in such
proportion as in his opinion is just;
Provided that the principal shall have the same rights
of appeal against an order of allocation made under this sub‑section as
it has under this Act against the amount of its business profits tax
assessment.
9. Aggregation of profits in certain cases--- Where an individual or a Hindu undivided family is
entitled to profits arising from more than one business, of which at least one
is carried on by a firm in which he or it is a partner or by a company which
for the purposes of this section is deemed to be a firm in which he or it is
interested, the Income‑tax Officer may, with the prior sanction of the
Inspecting Assistant Commissioner of Income‑tax, aggregate the shares of
such individual or Hindu undivided family in the profits or losses of all of
such businesses and treat the sum of such aggregation as the profits of a
business carried on by such individual or Hindu undivided family and assess him
or it accordingly:---
[Ins. by the Income‑tax and Business Profits Tax
(Amdt.) Act, 1949 (6 of 1950), s. 18.]
Provided that if the accounting periods of such
businesses are not co‑terminous, the Income‑tax Officer shall
determine in respect of such individual or Hindu undivided family his or its
chargeable accounting period and shall make such divisions, apportionments and
aggregation of the shares of such individual or Hindu undivided family in the
profits or losses of the several businesses as may be necessary to determine for
such chargeable accounting period the total profits and gains of such
individual or Hindu undivided family therefrom:---
Provided further that for the purposes of this
section, a company, which is neither one in which the public are substantially
interested, as defined in the Explanation to sub‑section (1) of
section 23A of the Income‑tax Act, 1922, nor a subsidiary company as
defined in sub‑section (4) of section 8 of this Act, shall be deemed to
be a firm in which the persons having an interest in the company are partners
or, in the case of a sole‑shareholder, a business carried on by that sole
shareholder, and the profits of such company shall be computed accordingly:---
Provided further that any profits or losses so
aggregated for assessment upon an individual or a Hindu undivided family shall
be excluded from the profits or losses of the respective businesses for the
purposes of this Act ; and no assessment under this Act shall be made in
respect of any such business save in the names of the other partners therein
and such individual or Hindu undivided family shall not be treated as a working
partner in relation to such business for the purpose of sub‑clause (b) of
clause (1) of section 2.
[Ins. by the Finance Act, 1956 (1 of 1956), s. 13
(with effect from the 1st April, 1956).]
10. Allowance of business profits tax in computing---- The amount of the business profits tax payable by
any person , before taking into account any credit that may be due under an
agreement referred to in section 49AA of the Income tax Act, 1922, for any
chargeable accounting period shall, in computing total income for the purposes
of the relevant income-tax or super‑tax assessment, be allowed as a
deduction;
[Ins. by the Finance Act, 1956 (1 of 1956), s. 13
(with effect from the 1st April, 1956).]
Provided that, as respects any assessment under the
Income-tax Act, 1922 for any year beginning on or after the first day of April,
1958, the amount of business profits tax payable by any person under this Act
shall not be allowed as a deduction in computing his total income for the
purposes of the relevant income-tax or super-tax assessment.
[Ins. by the Finance Act, 1958 (22 of 1958), s. 13
(with effect from the 1st April, 1958).]
Provided further that where, under the
provisions of this Act relating to deficiencies of profits relief is given by
way of repayment from business profits tax chargeable for any chargeable
accounting period previous to that in which the deficiency occurs, the amount
of the deduction if any, allowed shall not be altered, but the amount repayable
shall be taken into account in computing the profits and gains of the business
for the purposes of income‑tax as if it were a profit of the business
accruing in the previous year (as determined for that business for the purposes
of the Income‑tax Act, 1922) in which the deficiency of profits occurs.
[Ins. by the Finance Act, 1958 (22 of 1958), s. 13
(with effect from the 1st April, 1958).]
11. Issue of notice for assessment--‑(1) The Income‑tax Officer may, for the
purposes of this Act, require any person whom he believes to be engaged in any
business to which this Act applies, or to have been so engaged during any
chargeable accounting period, or to be otherwise liable to pay business profits
tax, to furnish within such period, not being less than forty‑five days
from the date of the service of the notice, as may be specified in the notice,
a return in the prescribed, form and verified in the prescribed manner setting
forth (along with such other particulars as may be provided for in the notice)
with respect to any chargeable accounting period specified in the notice the
profits and taxable profits of the business or the amount of deficiency, if
any, available for relief under section 6:---
[Ins. by the Business Profits Tax (Arndt.) Ordinance,
1948 (5 of 1948), section 2.]
Provided that the Income‑tax Officer may, in his
discretion, extend the date for the delivery of the return.
(2) The Income‑tax Officer may serve on any
person, upon whom a notice has been served under sub‑section (1), a
notice requiring him on a date to be therein specified to produce, or cause to
be produced, such accounts or documents as the Income‑tax Officer may
require, and may from time to time serve further notices in like manner
requiring the production of such further accounts or documents or other
evidence as he may require.
12. Assessments‑‑(1)
The Income‑tax Officer shall, by an order in writing after considering
such evidence, if any, as he has required under section 11, assess to the best of
his judgment, the profits liable to business profits tax and the amount of
business profits tax payable on the basis of such assessment, or if there is a
deficiency of profits, the amount of that deficiency and the amount of business
profits tax, if any repayable, and shall furnish a copy of such order to the
person on whom the assessment has been made.
(2) Business profits tax payable in respect of any
chargeable accounting period shall be payable by the person carrying on, or
treated as carrying on, the business in that period.
(3) Where two or more persons were carrying on the
business jointly in the chargeable accounting period, the assessment shall be
made upon them jointly and, in the case of a partnership, may be made in the
partnership name.
(4) Where by virtue of the foregoing provisions an
assessment could, but for his death, have been made on any person either solely
or jointly with any other person or persons the assessment may be made on his
legal representative either solely or jointly with that other person or
persons, as the case may be.
13. Power to make provisional assessments‑(1) The Income‑tax Officer, before
proceeding to make an assessment (in this section referred to as the regular
assessment) under section 12, may, at any time after the expiry of the period
specified in the notice issued under sub‑section (1) of section 11 as
that within which the return therein referred to is to be furnished, and
whether the return has or has not been furnished, proceed to make in summary
manner a provisional assessment of the taxable profits and the amount of
business profits tax payable thereon.
(2) Before making such provisional assessment the
Income-tax Officer shall give notice in the prescribed form to the person on
whom assessment is to be made of his intention to do so, and shall with the
notice forward a statement of the amount of the proposed assessment, and the
said person shall be entitled to deliver to the Income‑tax Officer at any
time within fourteen days of receipt of the said notice a statement of his
objections, if any, to the amount of the proposed assessment.
(3) On expiry of one month from the date of service of
the notice referred to in sub‑section (2), or earlier if the assessee
agrees to the proposed assessment, the Income‑tax Officer may, after
taking into account the objections, if any, made under sub‑section (2)
make a provisional assessment, and shall furnish a copy of the order of
assessment to the assessee;
Provided that assent to the amount of the assessment,
or failure to make objection to it, shall in no way prejudice the assessee in
relation to the regular assessment.
(4) In making any such provisional assessment the
Income-tax Officer shall make allowance for any deficiencies of profits for
previous chargeable accounting periods which are under the provisions of
section 6 to be set off against the taxable profits of the chargeable
accounting period in respect of which the assessment is being made:---
Provided that, where such deficiencies of profits have
not been determined under sub‑section (1) of section 12, the Income‑tax
Officer shall estimate the amount thereof to the best of his judgment.
(5) There shall be no right of appeal against a
provisional assessment made under this section, and it shall, until a regular
assessment is made in due course under section 12, determine the amount of
business profits tax due from the assessee.
(6) If, when a regular assessment is made in due
course under section 12, the amount of business profits tax payable thereunder
is found to exceed that determined as payable by the provisional assessment, it
shall be reduced by the amount determined as payable by the provisional
assessment.
(7) If, when a regular assessment is made in due
course under section 12, the amount of business profits tax payable thereunder
is found to be less than that determined as payable by the provisional
assessment, any excess of tax paid as a result of the provisional assessment
shall be refunded to the assessee, together with interest at two per cent. per
annum calculated from the date of payment of such excess tax to the date of
the order of refund, both days inclusive.
14. Profits escaping assessment--- Profits escaping assessment. Omitted by the
Finance Act, 1957 (1 of 1957), s. 12.
[This section was amended by the Income‑tax,
Excess Profits Tax and Business Profits Tax (Arndt.) Act, 1948 (4 of 1948), s.
30]
15. Penalties--
If the Income‑tax Officer, the Appellate Assistant Commissioner of Income‑tax
or the Commissioner of Income‑tax, in the course of any proceedings under
this Act, is satisfied that any person has, without reasonable cause, failed to
furnish the return required under sub‑section (1) of section 11, or to
produce or cause to be produced the accounts or documents or other evidence
required by the Income‑tax Officer under sub-section (2) of that section,
or has, either in the said proceedings or in any earlier proceedings relating
to an assessment in respect of the same chargeable accounting period, concealed
particulars of the profits of the business or has deliberately furnished
inaccurate particulars of such profits, he may direct that such person shall
pay by way of penalty, in addition to the amount of any business profits tax
payable, a sum not exceeding,---
[Subs. by the Income‑tax, Excess Profits Tax and
Business Profits Tax (Amdt.) Act, 1948 (4 of 1948), s. 31, for “has concealed”.]
(a) where the person has failed to furnish the return
required under sub-section (1) of section 11, the amount of the business
profits tax payable;
(b) in any other case, the amount of business profits
tax which would have been avoided if the return made had been accepted as
correct:---
Provided that the Income‑tax Officer shall not
impose any penalty under this section without the previous approval of the
Inspecting Assistant Commissioner of Income‑tax.
16. Appeals to Appellate Assistant Commissioner of
Income-tax‑(1) Any person
objecting to the amount of business profits tax for which he is liable as
assessed by the Income‑tax Officer or denying his liability to be
assessed under this Act, or of objecting to any penalty imposed by the Income‑tax
Officer, or to the amount of any deficiency of profits as assessed by the
Income‑tax Officer, or to the amount allowed by the Income‑tax
Officer by way of relief under any provision of this Act or to any refusal by
the Income‑tax Officer to grant re‑relief, may appeal to the
Appellate Assistant Commissioner of Income‑tax.
[Proviso added by the Finance Ordinance, 1960 (25 of
1960, s. 7 (with effect from the 1st July, 1960).]
Provided that no appeal under this section shall be
filed in any case in which the total income of an assessee as determined under
the Income‑tax Act, 1922 for the corresponding period exceeds two lac
rupees.
(2) An appeal shall ordinarily be presented within
forty-five days of receipt of the notice of demand relating to the assessment
or penalty objected to, or in the case of an appeal against the assessment of a
deficiency of profits, within thirty days of the receipt of the copy of the
order determining the deficiency, or in the case of an appeal against the
amount of a relief granted or a refusal to grant relief, within forty‑five
days of the receipt of the intimation of the order granting or refusing to
grant the relief, but the Appellate Assistant Commissioner of Income‑tax
may admit an appeal after the expiration of that period if he is satisfied that
the appellant had sufficient cause for not presenting it within that period.
(3) An appeal shall be in the prescribed form and
shall be verified in the prescribed manner.
(4) The Appellate Assistant Commissioner of Income‑tax
shall determine the appeal after giving both parties to the appeal an
opportunity of being heard.
If the Appellate Assistant Commissioner of Income‑tax
is not satisfied that the assessment or order which is the subject of appeal
ought to be interfered with, he shall reject the appeal and the assessment or
order shall stand good.
If he is satisfied that the assessment or order ought
to be interfered with, he shall, subject to the provisions of this Act, pass
such orders as he thinks fit and such orders may include an order enhancing the
assessment or penalty;
Provided that an order enhancing an assessment or
penalty shall not be made unless the person affected thereby has been given an
opportunity of showing cause against the enhancement.
(5) The procedure to be adopted in the hearing and
determination of appeals shall be in accordance with the rules made by the
Central Board of Revenue in relation to income‑tax.
17. Appeals to Appellate Tribunal‑.(1) Any Income‑tax Officer or any person
in respect of whose business an order under section 12 has been passed and who
objects to such order or an order, if any, passed by an Appellate Assistant
Commissioner of Income‑tax under section 15 or section 16 may, within the
prescribed time and in the prescribed manner appeal against such order to the
Appellate of Tribunal constituted under the Income‑tax Act, 1922.
(IA) The Appellate Tribunal may admit an appeal after
the expiry of the prescribed time referred to in sub‑section (1), if it
is satisfied that there was sufficient cause for not presenting it within that
time.
(2) The Appellate Tribunal shall determine the appeal
after giving both parties to the appeal an opportunity of being heard.
If the Appellate Tribunal is not satisfied that the
assessment or order which is the subject of appeal ought to be interfered with,
it shall reject the appeal and the assessment or order shall stand good.
If it is satisfied that the assessment or order ought
to be interfered with, it shall, subject to the provisions of this Act, pass
such orders as it thinks fit, and such orders may include an order enhancing
the assessment or penalty:---
Provided that an order enhancing an assessment or
penalty shall not be made unless the person affected thereby has been given an
opportunity of showing cause against the enhancement.
17-A. Power of revision by the Commissioner‑(1) The Commissioner may on his own motion call
for the record of any proceeding under this Act in which an order has been
passed by any authority subordinate to him and may make such enquiry or cause
such enquiry to be made and subject to the provisions of this Act may pass such
order thereon not being an order prejudicial to the assessee, as he thinks fit;
Provided that the Commissioner shall not revise any
order under this sub‑section if,---
(a) where an appeal against the order
lies to the Appellate Assistant Commissioner or to the Appellate Tribunal, the
time within which such appeal may be made has not expired; or
(b) the
order is pending on an appeal before the Appellate Assistant Commissioner or
has been made the subject of an appeal to the Appellate Tribunal; or
(c) the order has been made more than one year
previously.
Provided further that the Commissioner may, for
reasons to be recorded by him in writing, also revise under this sub-section
any order made more than one year previously.
(2) The Commissioner may, on application by an
assessee for revision of an order under this Act passed by any authority
subordinate to the Commissioner, made within one year from the date of the
order (or within such further period as the Commissioner may consider fit to
allow on being satisfied that the assessee was prevented by sufficient cause
from making the application within the period), call for the record of the
proceeding in which such order was passed, and on receipt of the record may
make such inquiry or cause such inquiry to be made, and, subject to the
provisions of this Act, may pass such order thereon, not being an order
prejudicial to the assessee, as he thinks fit;
Provided that the Commissioner shall not revise any
order under this sub‑section if,---
(a) where an appeal against the order lies to the
Appellate Assistant Commissioner or to the Appellate Tribunal but has not been
made, the time within which such appeal may be made has not expired, or, in the
case of an appeal to the Appellate Tribunal, the assessee has not waived his
right of appeal; or
(b) where an
appeal against the order has been made to the Appellate Assistant Commissioner,
the appeal is pending before the Appellate Assistant Commissioner; or
(c) the order has been made the subject of an appeal
to the Appellate Tribunal:---
Provided further that an order by the Commissioner
declining to interfere shall be deemed not to be an order prejudicial to the
assessee.
(3) Every application by an assessee under sub‑section
(2) shall be accompanied by a fee of twenty‑five rupees.
18. Ratification of mistake‑---(1) The Commissioner or the Appellate
Assistant Commissioner may at any time within four years from the date of any
order passed by him in appeal or in the case of the Commissioner in revision
under section 17A and the Income‑tax Officer may at any time within four
years from the date of any assessment order passed by him on his own motion
rectify any mistake apparent from the records of appeal, revision or
assessment, as the case may be, and shall within the like period rectify any
such mistake which has been brought to his notice by a person to whose business
this Act applies:---
[Subs. by the Finance Act 1956, (1 of 1956) s. 13, for
the original s. 18 (with effect from the 1st April, 1956).]
Provided that no such rectification shall be made
having the effect of enhancing the liability of any person unless that person
has been given a reasonable opportunity of being heard.
(2) The provisions of sub‑section (1) shall also
apply in like manner to the rectification of mistakes by the Appellate
Tribunal.
(3) Where any such rectification has the effect of
reducing the assessment, the Income‑tax Officer shall make any refund
which may be due to such assessee.
(4) Where any such rectification has the effect of
enhancing the assessment, the Income‑tax Officer shall serve on the
assessee a notice of demand in the prescribed form specifying the sum payable
and such notice shall be deemed to be issued under section 29 of the Income‑tax
Act, 1922 as applied to the business profits tax under section 19 of this Act
and the provisions of this Act shall apply accordingly.
28A. Agreement for avoidance of double taxation in
19. Application of the provisions of Act XI of 1922--‑(1) The provisions of sections 4A, 4B, 10,
13, 24B, 29, 34, 36 to 44C (inclusive), 45 to 48 (inclusive), 49E, 49F, 50, 54,
61 to 63 (inclusive) and 65 to 67A (inclusive) of the Income‑tax Act,
1922, shall apply with such modifications, if any, as may be prescribed, as if
the said provisions were provisions of this Act I and referred to business
profits tax instead of to income‑tax, and every officer exercising powers
under the said provisions in regard to income‑tax may exercise the like
powers under this Act in regard to business profits tax as he exercises in relation
to income‑tax under the said Act:---
Provided that references in the said provisions to the
assessee shall be construed as references to a person to whose business this
Act applies.
(2) Any reference in this Act to the Income‑tax
Act, 1922, shall, in relation to the profits of any chargeable accounting
period and to the state of affairs and all the circumstances necessary to
determine the charge to business profits tax, mean the said Act as in force in
the relevant period;
Provided that whatever be the relevant period,
references to section 46 of the said Act shall be deemed to include reference
to sub‑sections (8), (9) and (10) of that section.
20. Income-tax papers to be available for this
purposes of this Act‑(1)
Notwithstanding anything contained in the Income-tax Act, 1922, all information
contained in any statement or return made or furnished under the provisions of
that Act or obtained or collected for the purposes of that Act may be used for
the purposes of this Act.
(2) All information contained in any statement or
return made or furnished under the provisions of this Act or obtained or
collected for the purposes of this Act may be used for the purposes of the
Income‑tax Act, 1922.
21. Failure to deliver returns or statements--- If any person fails, without reasonable cause or
excuse, to furnish in due time any return or statement, or to produce, or cause
to be produced, any accounts or documents required to be produced under section
11, he shall be punishable with simple imprisonment which may extend to three
months or with fine which may extend to five hundred rupees or with both.
[Subs. by the Income‑tax and Business Profits
Tax (Amdt.) Act, 1949 (6 of 1950), s. 19, for certain words.]
22. False statements---- If a person makes in any return required under section 11 any
statement which is false, and which he either knows or believes to be false or
does not believe to be true, he shall be punishable with imprisonment which may
extend to three years and with fine.[ Subs. ibid., s. 20, for certain words.]
23. Institution of Proceedings and composition of
offences‑(1) A person shall not
be proceeded against for an offence under section 21 or section 22 except at
the instance of the Inspecting Assistant Commissioner of Income‑tax.
(2) No prosecution for an. offence punishable under
section 21 or section 22 or under the Pakistan Penal Code shall be instituted
in respect of the same facts as those in respect of which a penalty has been
imposed under this Act.
(3) The Inspecting Assistant Commissioner of Income‑tax
may, either before or after the institution of proceedings, compound any
offence punishable under section 21 or section 22.
24. Power to make rules‑(1) The Central Board of Revenue may, make
rules for carrying out the purposes of this Act.
(2) Without prejudice to the generality of the
foregoing power, such rules may,---
(a) prescribe the procedure to be followed on appeals,
applications for rectification of mistakes, and applications for funds;
(b) provide for any matter which by, or under, this
Act is to be prescribed.
(3) The power to make rules conferred by this section
shall be exercised in like manner as the power to make rules under a section 59
of the Income‑tax Act, 1922.
SCHEDULE I
[See section 2(16)]
RULES FOR THE COMPUTATION OF PROFITS FOR PURPOSES OF
BUSINESS PROFITS TAX.
1. The profits of a business during any chargeable
accounting period shall be separately computed, and shall, subject to the
provisions of this Schedule, be computed in accordance with the provisions of
section 10 of the Income‑tax Act, 1922:---
Provided that any sums other than any interest paid by
a firm to a partner of the firm excluded under the proviso to clause (iii) of
sub‑section (2) or clause (a) of sub‑section (4) of that section
from the allowances made in computing the profits of the business for the
purposes of income‑tax shall, if paid, be included in those allowances
when computing the profits of the business for the purposes of business profits
tax:---
Provided further,---
(a) that any sums received or credited in a chargeable
accounting period which by virtue of rule 9 of Schedule I to the Excess Profits
Tax Act, 1940, have been treated as business receipts for the purpose of
assessment to 1 excess profits tax, and
(b) any expenditure or loss incurred in any chargeable
accounting period, allowance in respect of which has been made for excess
profits tax purposes, shall be disregarded in computing the profits or losses
of the chargeable accounting period:---
Provided further that where a chargeable accounting
period is not an accounting period, the profits or losses of the business
during the accounting periods wholly or partly included within the chargeable
accounting period shall be so computed as aforesaid, and such division and
apportionment to specific periods of those profits or losses and such
aggregation of those profits and losses, or any apportioned part thereof, shall
be made as appears necessary to arrive at the profit during the chargeable
accounting period; and any such apportionment shall be made in proportion to
the number of days in the respective periods.
2.‑(1) The principle of adding the allowance for
depreciation for any one period to the allowance for depreciation for any
subsequent period and deeming it to be part of the allowance for such
subsequent period shall not be followed.
(2) Nothing in this Act shall be construed as
permitting the application, in computing profits for the purposes of business
profits tax, of the provisions of sub‑section (2) of section 24 of the
Income‑tax Act, 1922.
3. Income received from investments or other property
shall be included in the profits only as provided in this rule, that is to
say,---
(a) in the case of the business of a building society,
or a banking business, insurance business or business consisting wholly or
mainly in the dealing in or holding of investments or other property, the
profits shall include all income received from investments or other property;
or
(b) in the case of a business part of which consists
in banking, insurance or dealing in investments or other property, not being a
business to which clause (a) applies, the profits shall include all income
received from investments or other property held for the purposes of that part
of that business:---
Provided that,---
(i) income received directly or indirectly by way of
dividend or distribution of profits from a body corporate carrying on business
as defined in this Act, and
(ii) income to which the persons carrying on the
business are not beneficially entitled, shall in no case be included.
4.‑(1) In the case of a business carried on in
any accounting period which constitutes or includes a chargeable accounting
period, by a company, the directors whereof have throughout that accounting
period a controlling interest therein, no deduction shall be made in respect of
directors’ remuneration in computing the profits for that accounting period.
(2) Where, in the case of a business carried on by a
company in any accounting period which constitutes or includes a chargeable
accounting period, the directors of the company have during any part of that
accounting period a controlling interest therein, and the case is not one to
which sub‑rule (1) applies, the profits of the accounting period shall be
computed as if the directors of the company had no controlling interest
therein, and to the part thereof appropriate to the chargeable accounting
period ascertained in accordance with the third proviso to rule 1 shall be
added the directors’ remuneration for that part of the chargeable accounting
period during which the directors of the company had a controlling interest
therein.
(3) In this rule the expression “directors’
remuneration” includes all remuneration payable by a company to a director
thereof in respect of any services rendered to or employment with the company
in any capacity whatever but does not include,---
(a) the remuneration of any director who is required
to devote substantially the whole of his time to the service of the company in
a managerial or technical capacity and is not the beneficial owner of, or able,
either directly or through the medium of other companies or by any other
indirect means, to control more than five per cent. of the ordinary share
capital of the company, or
(b) the remuneration of any managing agent where such
remuneration is included in the profits of the managing agent’s business for
the purposes of the business profits tax.
5.‑(1) In computing the profits of any
chargeable accounting period no deduction shall be allowed in respect of
expenses in excess of the amount which the Income‑tax Officer considers
reasonable and necessary, having regard to the requirements of the business,
and, in the case of directors’ fees or other payments for services, to the
actual services rendered by the person concerned:---
Provided that no disallowance under this rule shall be
made by the Income‑tax Officer unless he has obtained the prior authority
of the Inspecting Assistant Commissioner of Income‑tax.
(2) Any person who is dissatisfied with the decision
of the Income‑tax Officer under this rule may appeal in the prescribed
time and manner to the Appellate Tribunal referred to in section 17.
SCHEDULE II
[See section 2 (1)]
RULES FOR COMPUTING THE CAPITAL OF A COMPANY FOR
PURPOSES OF BUSINESS PROFITS TAX.
1.‑For the purposes of ascertaining the
abatement under this Act in respect of any chargeable accounting period, the
capital of a company shall be computed in accordance with the following rules.
2.‑‑(1) Where the company is one to which
rule 3 of Schedule I applies, its capital shall be the sum of the amounts of
its paid‑up share capital and of its reserves in so far as they have not
been allowed in computing the profits of the company for the purposes of the
Income‑tax Act, 1922, diminished by the cost to it of its investments or
other property the income from which is not to be included in the profits, so
far as that cost exceeds any debt for money borrowed by it.
(2) In all other cases, the capital shall be the sum
ascertained in accordance with the first part of sub‑rule (1), diminished
by the cost to the company of its investments so far as that cost exceeds any
debt for money borrowed by it.
Explanation.‑A reserve or paid‑up share
capital brought into existence by creating or increasing (by revaluation or
otherwise) any book asset is not capital for the purposes of ascertaining the
abatement under this Act in respect of any chargeable accounting period.
2A. Notwithstanding anything contained in rule 2,
where only a part of the profits of a company is chargeable under the
provisions of this Act, its capital shall be the sum ascertained in accordance
with the said rule diminished by an amount which bears to that sum the same
proportion as the amount of its profits not so chargeable bears to its total
profits.
3. So much of the premium realized by a company from
the issue of any of its shares as is retained in the business shall be regarded
as forming part of its paid‑up capital for the purposes of rule 2.
4. Any deposits with the Central Government under
section 10 of the Finance Act, 1942, or section 2 of the Excess Profits Tax
Ordinance, 1943, shall not be regarded as investment or other property for the
purposes of this Schedule.
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