Concepts

Concepts
Index

1. Section 1. Short title, extent and commencement............................. 3

2. Section 2. Definitions........................................................................ 3
3. Section 9. Taxable income................................................................ 6
4. Section 10. Total income. ................................................................... 6
5. Section 69. Receipt of income. ........................................................... 6
6. Section 74. Tax year. .......................................................................... 7
7. Section 68. Fair market value. ............................................................ 8
8. Section 70. Recouped expenditure...................................................... 9
9. Section 71. Currency conversion. ....................................................... 9
10. Section 101. Geographical source of income. .................................... 10
11. Section 3. Ordinance to override other laws................................... 10
12. Section 4. Tax on taxable income. .................................................. 10
13. Section 11. Heads of income. ........................................................... 11
14. Section 41. Agricultural income. ...................................................... 12
15. Section 90. Transfers of assets.......................................................... 13
16. Section 66. Income of joint owners. ................................................. 15
17. Section 67. Apportionment of deductions. ....................................... 15
18. Section 44. Exemptions under international agreements.................. 16
19. Section 73. Rules to prevent double derivation and double
deductions. ..................................................................... 17
20. Section 223. Appearance by authorised representative. ..................... 17
21. Section 2(41). Permanent establishment................................................ 20
22. Section 107. Agreements for the avoidance of double
taxation and prevention of fiscal evasion....................... 21
23. Section 85. Associates. ..................................................................... 22
24. Section 108. Transactions between associates.................................... 24
25. Section 109. Recharacterisation of income and deductions................ 24
26. Section 72. Cessation of source of income ....................................... 25
27. Section 53. Exemptions and tax concessions in the Second
Schedule......................................................................... 25
28. Section 54. Exemptions and tax provisions in other laws ................ 26
29. Section 172. Representatives .............................................................. 27
30. Section 173. Liability and obligations of representatives................... 29
31. Section 175. Power to enter and search premises ............................... 30
32. Section 176. Notice to obtain information or evidence ...................... 32
33. Section 180. Power to collect information regarding exempt
income............................................................................ 33
34. Section 181. National Tax Number Certificate................................... 33
35. Section 216. Disclosure of information by a public servant............... 34

1
Concepts

36. Section 217. Forms and notices; authentication of

documents.0 ................................................................... 37
37. Section 218. Service of notices and other documents......................... 38
38. Section 206. Circulars......................................................................... 39
39. Section 237. Power to make rules....................................................... 39
40. Section 239. Savings........................................................................... 41

2
Concepts Section 2. Definitions.

1. Section 1. Short title, extent and commencement.

(1) This Ordinance may be called the Income Tax Ordinance, 2001.

(2) It extends to the whole of Pakistan.

(3) It shall come into force on such date as the Federal Government
may, by notification in Official Gazette, appoint.
(1979: Sec 1)

2. Section 2. Definitions.
(29) “income” includes any amount chargeable to tax under this
Ordinance, any amount subject to collection 1[or deduction] of tax
under section 148, 2[150, 152(1), 153, 154, 156, 156A, 233, 233A
and], sub-section (5) of section 234, 3[any amount treated as
income under any provision of this Ordinance] and any loss of
income but does not include, in case of a shareholder of a 4[
]company, the amount representing the face value of any bonus
share or the amount of any bonus declared, issued or paid by the
company to the shareholders with a view to increasing its paid up
share capital;
(1979: Sec 2(24))

(11A) “charitable purpose” includes relief of the poor, education, medical

relief and the advancement of any other object of general public
utility;
(New)

(36) “non-profit organization” means any person other than an

individual, which is –

(a) established for religious, educational, charitable, welfare or

development purposes, or for the promotion of an amateur
sport;

1
Inserted by the Finance Act, 2003.
2
The figures, commas and word “153, 154 and 156,” substituted by the Finance Act, 2005.
3
Inserted by the Finance Act, 2003.
4
The word “domestic” omitted by the Finance Act, 2003.

3
Concepts Section 2. Definitions.

(b) formed and registered under any law as a non-profit

organization;

(c) approved by the Commissioner for specified period, on an

application made by such person in the prescribed form and
manner, accompanied by the prescribed documents and, on
requisition, such other documents as may be required by
the Commissioner;

and none of the assets of such person confers, or may

confer, a private benefit to any other person;
(New)

(40) “Pakistan-source income” means Pakistan-source income as

defined in section 101;
(1979: Sec 12)

(44) “prescribed” means prescribed by rules made under this

Ordinance;
(1979: Sec 2(33))

(3) “approved gratuity fund” means a gratuity fund approved by the

Commissioner in accordance with Part III of the Sixth Schedule;

(1979: Sec 2(4))

(4) “approved superannuation fund” means a superannuation fund, or

any part of a superannuation fund, approved by the Commissioner
in accordance with Part II of the Sixth Schedule;

(1979: Sec 2(5))

(48) “recognised provident fund” means a provident fund recognised by

the Commissioner in accordance with Part I of the Sixth Schedule;

(1979: Sec 2(37))

(56) “Schedule” means a Schedule to this Ordinance;

(New)

(63) “tax” means any tax imposed under Chapter II, and includes any
penalty, fee or other charge or any sum or amount leviable or
payable under this Ordinance;

4
Concepts Section 2. Definitions.

(1979: Sec 2(43))

(64) “taxable income” means taxable income as defined in section 9;

(New)

(65) “taxpayer” means any person who derives an amount chargeable to

tax under this Ordinance, and includes –
(1979: Sec 2(6))

a) any representative of a person who derives an amount

chargeable to tax under this Ordinance;

b) any person who is required to deduct or collect tax under

Part V of Chapter X and Chapter XII; or

c) any person required to furnish a return of income or pay tax

under this Ordinance;

(67) “tax treaty” means an agreement referred to in section 107;

(New)

(68) “tax year” means the tax year as defined in sub-section (1) of
section 74 and, in relation to a person, includes a special year or a
transitional year that the person is permitted to use under section
74;
(1979: Sec 2(26))

(69) “total income” means total income as defined in section 10;

(1979: Sec 2(44))

(11) “Central Board of Revenue” means the Central Board of Revenue

established under the Central Board of Revenue Act, 1924 (IV of
1924);
(1979: Sec 2(13))

(48A) “Regional Commissioner” means a person appointed as a Regional

Commissioner of Income Tax under section 208 and includes a
Director-General of Income Tax and Sales Tax;

(1979: Sec 2(37A))

5
Concepts Section 69. Receipt of income.

(49A) “repealed Ordinance” means Income Tax Ordinance, 1979 (XXXI

of 1979);
(New)

(29A) “income year” means income year as defined in the repealed

Ordinance;
(1979: Sec 2(26))

3. Section 9. Taxable income.

(New)

The taxable income of a person for a tax year shall be the total income of
the person for the year reduced (but not below zero) by the total of any
deductible allowances under Part IX of this Chapter of the person for the
year.

4. Section 10. Total income.

(1979: Sec 2(44))

The total income of a person for a tax year shall be the sum of the person’s
income under each of the heads of income for the year.

5. Section 69. Receipt of income.

(New)

For the purposes of this Ordinance, a person shall be treated as having

received an amount, benefit, or perquisite if it is –

(a) actually received by the person;

(b) applied on behalf of the person, at the instruction of the person or

under any law; or

(c) made available to the person.

6
Concepts Section 74. Tax year.

6. Section 74. Tax year.

(1979: Sec 2(26))

(1) For the purpose of this Ordinance and subject to this section, the
tax year shall be a period of twelve months ending on the 30th
day of June (hereinafter referred to as ‘normal tax year’) and
shall, subject to sub-section (3), be denoted by the calendar year
in which the said date falls.

(2) Where a person’s income year, under the repealed Ordinance, is

different from the normal tax year, or where a person is allowed,
by an order under sub-section (3), to use a twelve months’ period
different from normal tax year, such income year or such period
shall be that person’s tax year (hereinafter referred to as ‘special
tax year’) and shall, subject to sub-section (3), be denoted by the
calendar year relevant to normal tax year in which the closing
date of the special tax year falls.
5
[(2A) The Central Board of Revenue,-

(i) in the case of a class of persons having a special tax year

different from a normal tax year may permit, by a
notification in the official Gazette, to use a normal tax year;
and

(ii) in the case of a class of persons having a normal tax year

may permit, by a notification in the official Gazette, to use
a special tax year.]

(3) A person may apply, in writing, to the Commissioner to allow him

to use a twelve months’ period, other than normal tax year, as
special tax year and the Commissioner may, subject to sub-section
(5), by an order, allow him to use such special tax year.

(4) A person using a special tax year, under sub-section (2), may apply
in writing, to the Commissioner to allow him to use normal tax
year and the Commissioner may, subject to sub-section (5), by an
order, allow him to use normal tax year.

(5) The Commissioner shall grant permission under sub-section (3) or

(4) only if the person has shown a compelling need to use special
5
Added by the Finance Act, 2004.

7
Concepts Section 68. Fair market value.

tax year or normal tax year, as the case may be, and the permission
shall be subject to such conditions, if any, as the Commissioner
may impose.

(6) An order under sub-section (3) or (4) shall be made after providing
to the applicant an opportunity of being heard and where his
application is rejected the Commissioner shall record in the order
the reasons for rejection.

(7) The Commissioner may, after providing to the person concerned

an opportunity of being heard, by an order, withdraw the
permission granted under sub-section (3) or (4).

(8) An order under sub-section (3) or (4) 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.

(9) Where the tax year of a person changes as a result of an order

under sub-section (3) or sub-section (4), 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 separate tax
year, to be known as the “transitional tax year”.

(10) In this Ordinance, a reference to a particular financial year shall,

unless the context otherwise requires, include a special tax year or
a transitional tax year commencing during the financial year.

(11) A person dissatisfied with an order under sub-section (3), (4) or (7)
may file a review application to the Central Board of Revenue, and
the decision by the Central Board of Revenue on such application
shall be final.]

7. Section 68. Fair market value.

(1979: Sec 29(3))

(1) For the purposes of this Ordinance, the fair market value of any
property 6[or rent], asset, service, benefit or perquisite at a
particular time shall be the price which the property 7[or rent],
asset, service, benefit or perquisite would ordinarily fetch on sale
or supply in the open market at that time.
6
Inserted by the Finance Act, 2003.
7
Inserted by the Finance Act, 2003.

8
Concepts

(2) The fair market value of any property 8[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.
9
[(3) Where the price referred to in sub-section (1) is not ordinarily
ascertainable, such price may be determined by the
Commissioner.]

8. Section 70. Recouped Expenditure.

(1979: Sec 25(a))

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 under a head of income and, subsequently, the person
has received, in cash or in kind, any amount in respect of such expenditure
or loss, the amount so received shall be included in the income chargeable
under that head for the tax year in which it is received.

9. Section 71. Currency conversion.

(New)

(1) Every amount taken into account under this Ordinance shall be in
Rupees.

(2) Where an amount is in a currency other than rupees, the amount

shall be converted to the Rupee at the State Bank of Pakistan 10[ ]
rate applying between the foreign currency and the Rupee on the
date the amount is taken into account for the purposes of this
Ordinance.

8
Inserted by the Finance Act, 2003.
9
Added by the Finance Act, 2003.
10
The word “mid-exchange” omitted by the Finance Act, 2003.

9
Concepts Section 4. Tax on taxable income.

10. Section 101. Geographical source of income.

(1979: Sec 12)

(16) An amount shall be foreign-source income to the extent to which it

is not Pakistan-source income.

10.1 Section 2.

(27) “foreign-source income” means foreign-source income as defined in

subsection (16) of section 101.
(New)

11. Section 3. Ordinance to override other laws.

(New)

The provisions of this Ordinance shall apply notwithstanding anything to

the contrary contained in any other law for the time being in force.

12. Section 4. Tax on taxable income.

(1979: Sec 9)

(1) Subject to this Ordinance, income tax shall be imposed for each tax
year, at the rate or rates specified in Division I or II of Part I of the
First Schedule, as the case may be, on every person who has
taxable income for the year.

(2) The income tax payable by a taxpayer for a tax year shall be
computed by applying the rate or rates of tax applicable to the
taxpayer under this Ordinance to the taxable income of the
taxpayer for the year, and from the resulting amount shall be
subtracted any tax credits allowed to the taxpayer for the year.

(3) Where a taxpayer is allowed more than one tax credit for a tax
year, the credits shall be applied in the following order –

(a) any foreign tax credit allowed under section 103; then

(b) any tax credit allowed under Part X of Chapter III; and then

(c) any tax credit allowed under sections 11[ ] 147 and 168.

11
The figure and comma “140,” omitted by the Finance Act, 2003.

10
Concepts Section 11. Heads of income.

(4) Certain classes of income (including the income of certain classes

of persons) may be subject to –

(a) separate taxation as provided in sections 5, 6 and 7; or

(b) collection of tax under Division II of Part V of Chapter X

or deduction of tax under Division III of Part V of Chapter
X as a final tax on the income or the person.

(5) Income referred to in sub-section (4) shall be subject to tax as

provided for in section 5, 6 or 7, or Part V of Chapter X, as the
case may be, and shall not be included in the computation of
taxable income in accordance with section 8 or 169, as the case
may be.

13. Section 11. Heads of income.

(1979: Sec 15)

(1) For the purposes of the imposition of tax and the computation of
total income, all income shall be classified under the following
heads, namely:–

(a) Salary;

(b) Income from Property;

(c) Income from Business;

(d) Capital Gains; and

(e) Income from Other Sources.

(2) Subject to this Ordinance, the income of a person under a head of

income for a tax year shall be 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.

(3) Subject to this Ordinance, where the total deductions allowed

under this Ordinance to a person for a tax year under a head of
income exceed the total of the amounts derived by the person in
11
Concepts Section 41. Agricultural income.

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 the excess.

(4) A loss for a head of income for a tax year shall be dealt with in
accordance with Part VIII of this Chapter.

(5) 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.

(6) 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.

14. Section 41. Agricultural income.

(1979: Sec 2(1) read with 2nd Sch. Part I Clause(1))

(1) Agricultural income derived by a person shall be exempt from tax

under this Ordinance.

(2) In this section, “agricultural income” means, -

(a) any rent or revenue derived by a person from land which

is situated in Pakistan and is used for agricultural
purposes;

(b) any income derived by a person from land situated in

Pakistan from –

(i) agriculture;

(ii) the performance by a cultivator or receiver of rent-

in-kind of any process ordinarily employed by such
person to render the produce raised or received by
the person fit to be taken to market; or

(iii) the sale by a cultivator or receiver of rent-in-kind of

the produce raised or received by such person, in
respect of which no process has been performed
other than a process of the nature described in sub-
clause (ii); or

12
Concepts Section 90. Transfers of assets.-

(c) any income derived by a person from –

(i) any building owned and occupied by the receiver of

the rent or revenue of any land described in clause
(a) or (b);

(ii) any building occupied by the cultivator, or the

receiver of rent-in-kind, of any land in respect of
which, or the produce of which, any operation
specified in sub-clauses (ii) or (iii) of clause (b) is
carried on,

but only where the building is on, or in the immediate

vicinity of the land and is a building which the receiver of
the rent or revenue, or the cultivator, or the receiver of the
rent-in-kind by reason of the person’s connection with the
land, requires as a dwelling-house, a store-house, or other
out-building.

15. Section 90. Transfers of assets.-

(1979: Sec 83)

(1) For the purposes of this Ordinance and subject to sub-section (2),
where there has been a revocable transfer of an asset, any income
arising from the asset shall be treated as the income of the
transferor and not of the transferee.

(2) Sub-section (1) shall not apply to any income derived by a person
by virtue of a transfer that is not revocable during the lifetime of
the person and the transferor derives no direct or indirect benefit
from such income.

(3) For the purposes of this Ordinance, where there has been a transfer
of an asset but the asset remains the property of the transferor, any
income arising from the asset shall be treated as the income of the
transferor.

(4) For the purposes of this Ordinance and subject to sub-section (5),
any income arising from any asset transferred by a person directly
or indirectly to–

(a) the person’s spouse or minor child; or

13
Concepts Section 90. Transfers of assets.-

(b) any other person for the benefit of a person or persons

referred to in clause (a),

shall be treated as the income of the transferor.

(5) Sub-section (4) shall not apply to any transfer made –

(a) for adequate consideration; or

(b) in connection with an agreement to live apart.

(6) For the purposes of clause (a) of sub-section (5), a transfer shall
not be treated as made for adequate consideration if the transferor
has provided, by way of loan or otherwise, to the transferee,
directly or indirectly, with the funds for the acquisition of the asset.

(7) Sub-section (5) does not apply where the transferor fails to produce
evidence of the transfer of the asset by way of its registration or
mutation in the relevant record and the income arising from the
asset shall be treated as the income of the transferor for the
purposes of this Ordinance.

(8) For the purposes of this section, –

(a) a transfer of an asset shall be treated as revocable if –

(i) there is any provision for the re-transfer, directly or

indirectly, of the whole or any part of the asset to
the transferor; or

(ii) the transferor has, in any way, the right to resume

power, directly or indirectly, over the whole or any
part of the asset;

(b) “minor child” shall not include a married daughter; and

(c) “transfer” includes any disposition, settlement, trust,

covenant, agreement or arrangement.

14
Concepts Section 67. Apportionment of deductions.

16. Section 66. Income of joint owners.

(1979: Sec 21)

(1) For the purposes of this Ordinance and subject to sub-section (2),
where any property is owned by two or more persons and their
respective shares are definite and ascertainable –

(a) the persons shall not be assessed as an association of

persons in respect of the property; and

(b) the share of each person in the income from the property
for a tax year shall be taken into account in the computation
of the person’s taxable income for that year.

(2) This section shall not apply in computing income chargeable under
the head “Income from Business”.

17. Section 67. Apportionment of deductions.

(New)
(1) Subject to this Ordinance, where an expenditure relates to –

(a) the derivation of more than one head of income; or

(ab) derivation of income comprising of taxable income and any

class of income to which sub-sections (4) and (5) of section
4 apply, or;]

(b) the derivation of income chargeable to tax under a head of

income and to some other purpose,

the expenditure shall be apportioned on any reasonable basis taking

account of the relative nature and size of the activities to which the
amount relates.

(3) The Central Board of Revenue may make rules under

section 237 for the purposes of apportioning deductions.

15
Concepts Section 44. Exemptions under international agreements.-

18. Section 44. Exemptions under international agreements.-

(New)

(1) Any Pakistan-source income which Pakistan is not permitted to tax

under a tax treaty shall be exempt from tax under this Ordinance.

(2) Any salary received by an individual (not being a citizen of

Pakistan) shall be exempt from tax under this Ordinance to the
extent provided for in an Aid Agreement between the Federal
Government and a foreign government or public international
organization, where –

(a) the individual is either 12[not a resident] individual or a

resident individual solely by reason of the performance of
services under the Aid Agreement;

(b) if the Aid Agreement is with a foreign country, the

individual is a citizen of that country; and

(c) the salary is paid by the foreign government or public

international organisation out of funds or grants released as
aid to Pakistan in pursuance of such Agreement.

(3) Any income received by a person (not being a citizen of Pakistan)

engaged as a contractor, consultant, or expert on a project in
Pakistan shall be exempt from tax under this Ordinance to the
extent provided for in a bilateral or multilateral technical assistance
agreement between the Federal Government and a foreign
government or public international organisation, where –

(a) the project is financed out of grant funds in accordance

with the agreement;

(b) the person is either a non-resident person or a resident

person solely by reason of the performance of services
under the agreement; and

(c) the income is paid out of the funds of the grant in

pursuance of the agreement.

12
Substituted for the words “a non-resident” by the Finance Act, 2003.

16
Concepts Section 223. Appearance by authorised representative.

19. Section 73. Rules to prevent double derivation and double

deductions.
(1979: Sec 11(2))

(1) For the purposes of this Ordinance, where –

(a) any amount is chargeable to tax under this Ordinance on

the basis that it is receivable, the amount shall not be
chargeable again on the basis that it is received; or

(b) any amount is chargeable to tax under this Ordinance on

the basis that it is received, the amount shall not be
chargeable again on the basis that it is receivable.

(2) For the purposes of this Ordinance, where –

(a) any expenditure is deductible under this Ordinance on the

basis that it is payable, the expenditure shall not be
deductible again on the basis that it is paid; or

(b) any expenditure is deductible under this Ordinance on the

basis that it is paid, the expenditure shall not be deductible
again on the basis that it is payable.

20. Section 223. Appearance by authorised representative.

(1979: Sec 157)

(1) Any taxpayer who is entitled or required to attend before the

Commissioner, the Commissioner (Appeals) or the Appellate
Tribunal in connection with any proceeding under this Ordinance
may, except when required under section 176 to attend personally,
attend by an authorised representative.

(2) For the purposes of this section and subject to sub-section (3), an
authorised representative of a taxpayer shall be a person who is a
representative of the person under section 172 and any of the
following persons, namely:–

(a) A relative of the taxpayer;

(b) a current full-time employee of the taxpayer;

17
Concepts Section 223. Appearance by authorised representative.

(c) any officer of a scheduled bank with which the taxpayer

maintains a current account or has other regular dealings;

(d) any legal practitioner entitled to practice in any Civil Court

in Pakistan;

(e) any accountant; or

(f) any income tax practitioner.

(3) For the purposes of this section –

(a) no person who has been dismissed or removed from service

in the Income Tax Department shall be entitled to represent
a taxpayer under sub-section (1);

(b) no person having resigned from service after having been

employed in the Income Tax Department for not less than
two years shall be entitled to represent a taxpayer under
sub-section (1) for a period of two years from the date of
resignation;

(c) no person having retired from service in the Income Tax

Department shall be entitled to represent a taxpayer under
sub-section (1) for a period of one year from the date of
retirement in any case in which the person had made or
approved, as the case may be, any order of assessment,
refund or appeal within one year before the date of
retirement; or

(d) no person who has become insolvent shall be entitled to

represent a taxpayer under sub-section (1) for so long as the
insolvency continues;

(e) no person who has been convicted of an offence in relation

to any income tax proceedings under this Ordinance shall
be entitled to represent a taxpayer under sub-section (1) for
such period as the Commissioner may, by order in writing,
determine.

(4) Where any legal practitioner or accountant is found guilty of

misconduct in a professional capacity by any authority entitled to
take disciplinary action against the legal practitioner or accountant,

18
Concepts Section 223. Appearance by authorised representative.

an order passed by that authority shall have effect in relation to any

right to represent a taxpayer under sub-section (1) as it has in
relation to the person’s right to practice as a legal practitioner or
accountant.

(5) Where any person (other than a person to whom sub-section (4)
applies) is found guilty of misconduct in relation to any income tax
proceeding, the Commissioner may, by an order in writing, direct
that the person cease to represent a taxpayer under sub-section (1)
before the Commissioner, Commissioner (Appeals) or Appellate
Tribunal.

(6) The Commissioner shall not make an order under clause (e) of sub-
section (3) or sub-section (5) in respect of any person, unless the
Commissioner has given the person a reasonable opportunity to be
heard.

(7) Any person against whom an order under clause (e) of sub-section
(3) or sub-section (5) has been made may, within thirty days of
service of notice of the order, appeal to the Central Board of
Revenue to have the order cancelled.

(8) The Central Board of Revenue may admit an appeal after the
expiration of the period specified in sub-section (7) if satisfied that
the appellant was prevented by sufficient cause from lodging the
appeal within the period.

(9) No order made under clause (e) of sub-section (3) or sub-section

(5) shall take effect until thirty days after notice of the order is
served on the person or, where an appeal has been lodged under
sub-section (7), until the disposal of the appeal.

(10) The Central Board of Revenue may make rules under section 237
for the registration of income tax practitioners and related matters,
including establishing a code of conduct for such practitioners.

(11) In this section –

“accountant” means –

(a) a chartered accountant within the meaning of the Chartered

Accountants Ordinance, 1961 (X of 1961);

19
Concepts Section 2(41). Permanent establishment.

(b) a cost and management accountant within the meaning of

the Cost and Management Accountants Act, 1966 (XIV of
1966); or

(c) a member of any association of accountants recognised for

the purposes of this section by the Central Board of
Revenue; and

“income tax practitioner” means a person who is registered as such

by the Central Board of Revenue, being a person who possesses
such qualifications as may be prescribed for the purposes of this
section or who has retired after putting in satisfactory service in the
Income Tax Department for a period of not less than ten years in a
post or posts not below that of Income Tax Officer.

21. Section 2(41). Permanent establishment.

(New)

“permanent establishment” in relation to a person, means a

13
[fixed] place of business through which the business of the
person is wholly or partly carried on, and includes –

(a) a place of management, branch, office, factory or

workshop, 14[premises for soliciting orders, warehouse,
permanent sales exhibition or sales outlet,] other than a
liaison office except where the office engages in the
negotiation of contracts (other than contracts of purchase);

(b) a mine, oil or gas well, quarry or any other place of

extraction of natural resources;
15
[(ba) an agricultural, pastoral or forestry property;]

(c) a building site, a construction, assembly or installation

project or supervisory activities connected with such site or
project 16[but only where such site, project and its connect
supervisory activities continue for a period or periods
aggregating more than ninety days within any twelve-
months period] ;
13
Inserted by the Finance Act, 2006.
14
Inserted by the Finance Act, 2003.
15
Inserted by the Finance Act, 2003.
16
Inserted by the Finance Act, 2006.

20
Concepts Section 107. Agreements for the avoidance of double taxation and prevention of fiscal evasion.-

(d) the furnishing of services, including consultancy services,

by any person through employees or other personnel
engaged by the person for such purpose;

(e) a person acting in Pakistan on behalf of the person

(hereinafter referred to as the “agent”), other than an agent
of independent status acting in the ordinary course of
business as such, if the agent –

(i) has and habitually exercises an authority to conclude

contracts on behalf of the other person;

(ii) has no such authority, but habitually maintains a

stock-in-trade or other merchandise from which the
agent regularly delivers goods or merchandise on
behalf of the other person; or

(f) any substantial equipment installed, or other asset or

property capable of activity giving rise to income;

22. Section 107. Agreements for the avoidance of double

taxation and prevention of fiscal evasion.-
(1979: Sec 163)

(1) The Federal Government may enter into an agreement with the
government of a foreign country for the avoidance of double
taxation and the prevention of fiscal evasion with respect to taxes
on income imposed under this Ordinance and under the
corresponding laws in force in that country, and may, by
notification in the official Gazette make such provisions as may be
necessary for implementing the agreement.

(2) Where any agreement is made in accordance with sub-section (1),

the agreement and the provisions made by notification for
implementing the agreement shall, notwithstanding anything
contained in any law for the time being in force, have effect in so
far as they provide for –

(a) relief from the tax payable under this Ordinance;

(b) the determination of the Pakistan-source income of non-

resident persons;
21
Concepts Section 85. Associates.

(c) where all the operations of a business are not carried on

within Pakistan, the determination of the income
attributable to operations carried on within and outside
Pakistan, or the income chargeable to tax in Pakistan in the
hands of non-resident persons, including their agents,
branches, and permanent establishments in Pakistan;

(d) the determination of the income to be attributed to any

resident person having a special relationship with a non-
resident person; and

(e) the exchange of information for the prevention of fiscal

evasion or avoidance of taxes on income chargeable under
this Ordinance and under the corresponding laws in force in
that other country.

(3) Notwithstanding anything in sub-sections (1) or (2), any agreement

referred to in sub-section (1) may include provisions for the relief
from tax for any period before the commencement of this
Ordinance or before the making of the agreement.

23. Section 85. Associates.

(New)

(1) Subject to sub-section (2), two persons shall be associates where

the relationship between the two is such that one may reasonably
be expected to act in accordance with the intentions of the other, or
both persons may reasonably be expected to act in accordance with
the intentions of a third person.

(2) Two persons shall not be associates solely by reason of the fact
that one person is an employee of the other or both persons are
employees of a third person.

(3) Without limiting the generality of sub-section (1) and subject to

sub-section (4), the following shall be treated as associates –

(a) an individual and a relative of the individual;

(b) members of an association of persons;

22
Concepts Section 85. Associates.

(c) a member of an association of persons and the association,

where the member, either alone or together with an
associate or associates under another application of this
section, controls fifty per cent or more of the rights to
income or capital of the association;

(d) a trust and any person who benefits or may benefit under
the trust;

(e) a shareholder in a company and the company, where the

shareholder, either alone or together with an associate or
associates under another application of this section,
controls either directly or through one or more interposed
persons –

(i) fifty per cent or more of the voting power in the

company;

(ii) fifty per cent or more of the rights to dividends; or

(iii) fifty per cent or more of the rights to capital; and

(f) two companies, where a person, either alone or together

with an associate or associates under another application of
this section, controls either directly or through one or more
interposed persons –

(i) fifty per cent or more of the voting power in both

companies;

(ii) fifty per cent or more of the rights to dividends in

both companies; or

(iii) fifty per cent or more of the rights to capital in both

companies.

(4) Two persons shall not be associates under clause (a) or (b) of sub-
section (3) where the Commissioner is satisfied that neither person
may reasonably be expected to act in accordance with the
intentions of the other.

(5) In this section, “relative” in relation to an individual, means –

23
Concepts Section 109. Recharacterisation of income and deductions.-

(a) an ancestor, a descendant of any of the grandparents, or an

adopted child, of the individual, or of a spouse of the
individual; or

(b) a spouse of the individual or of any person specified in

clause (a).

24. Section 108. Transactions between associates.

(1979: Sec 79)

(1) The Commissioner may, in respect of any transaction between

persons who are associates, distribute, apportion or allocate
income, deductions or tax credits between the persons as is
necessary to reflect the income that the persons would have
realised in an arm’s length transaction.

(2) In making any adjustment under sub-section (1), the Commissioner

may determine the source of income and the nature of any payment
or loss as revenue, capital or otherwise.

25. Section 109. Recharacterisation of income and deductions.-

(New)

(1) For the purposes of determining liability to tax under this

Ordinance, the Commissioner may –

(a) recharacterise a transaction or an element of a transaction that

was entered into as part of a tax avoidance scheme;

(b) disregard a transaction that does not have substantial

economic effect; or

(c) recharacterise a transaction where the form of the transaction

does not reflect the substance.

(2) In this section, “tax avoidance scheme” means any transaction

where one of the main purposes of a person in entering into the
transaction is the avoidance or reduction of any person’s liability to
tax under this Ordinance.

24
Concepts Section 53. Exemptions and tax concessions in the Second Schedule.-

26. Section 72. Cessation of source of income.

(1979: Sec 71)

- Where –

(a) 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; and

(b) if the income had been derived before the business, activity,
investment or other source ceased it would have been
chargeable to tax under this Ordinance,

this Ordinance shall apply to the income on the basis that the business,
activity, investment or other source had not ceased at the time the income
was derived.

27. Section 53. Exemptions and tax concessions in the Second

Schedule.-
(1979: Sec 14)

(1) The income or classes of income, or persons or classes of persons

specified in the Second Schedule shall be –

(a) exempt from tax under this Ordinance, subject to any

conditions and to the extent specified therein;

(b) subject to tax under this Ordinance at such rates, which are
less than the rates specified in the First Schedule, as are
specified therein;

(c) allowed a reduction in tax liability under this Ordinance,

subject to any conditions and to the extent specified therein;
or

(d) exempted from the operation of any provision of this

Ordinance, subject to any conditions and to the extent specified
therein.

25
Concepts Section 54. Exemptions and tax provisions in other laws.-

17
[(1A) Where any income which is exempt from tax under any provision
of the Second Schedule, such income, as may be specified in the
said Schedule and subject to such conditions as may be specified
therein, shall be included in the total income, however the tax shall
not be payable in respect of such income.]

(2) The Federal Government may, from time to time, by notification in

the official Gazette, make such amendment in the Second Schedule
by –

(a) adding any clause or condition therein;

(b) omitting any clause or condition therein; or

(c) making any change in any clause or condition therein,

as the Government may think fit, and all such amendments shall
have effect in respect of any tax year beginning on any date before
or after the commencement of the financial year in which the
notification is issued.

(3) The Federal Government shall place before the National Assembly
all amendments made by it to the Second Schedule in a financial
year.

28. Section 54. Exemptions and tax provisions in other laws.-

(New)

No provision in any other law providing for –

(a) an exemption from any tax imposed under this Ordinance;

(b) a reduction in the rate of tax imposed under this Ordinance;

(c) a reduction in tax liability of any person under this

Ordinance; or

(d) an exemption from the operation of any provision of this

Ordinance,

17
Inserted by the Finance Act, 2003.

26
Concepts Section 172. Representatives

shall have legal effect unless also provided for in this Ordinance 18[:]
19
[Provided that any exemption from income tax 20[or a reduction in the
rate of tax or a reduction in tax liability of any person or an exemption
from the operation of any provision of this Ordinance] provided in any
other law and in force on the commencement of this Ordinance shall
continue to be available unless withdrawn.]

29. Section 172. Representatives

(New)
(1) For the purposes of this Ordinance and subject to sub-sections (2)
and (3), “representative” in respect of a person for a tax year,
means –

(a) where the person is an individual under a legal disability,

the guardian or manager who receives or is entitled to
receive income on behalf, or for the benefit of the
individual;

(b) where the person is a company (other than a trust, a

Provincial Government, or local authority in Pakistan), the
principal officer of the company;

(c) where the person is a trust declared by a duly executed

instrument in writing whether testamentary or otherwise
(including any Wakf deed which is valid under the
Mussalman Wakf Validation Act, 1913 (VI of 1913)), any
trustee of the trust;

(d) where the person is a Provincial Government, or local

authority in Pakistan, any individual responsible for
accounting for the receipt and payment of moneys or funds
on behalf of the Provincial Government or local authority;

(e) where the person is an association of persons, the principal

officer of the association or, in the case of a firm, any
partner in the firm;

18
Substituted for full stop by the Finance Act, 2003.
19
Added by the Finance Act, 2003.
20
Inserted by the Finance Act, 2004.

27
Concepts Section 172. Representatives

(f) where the person is the Federal Government, any individual

responsible for accounting for the receipt and payment of
moneys or funds on behalf of the Federal Government; or

(g) where the person is a public international organisation, or a

foreign government or political sub-division of a foreign
government, any individual responsible for accounting for
the receipt and payment of moneys or funds in Pakistan on
behalf of the organisation, government, or political sub-
division of the government.

(2) Where the Court of Wards, the Administrator General, the Official
Trustee, or any receiver or manager appointed by, or under, any
order of a Court receives or is entitled to receive income on behalf,
or for the benefit of any person, such Court of Wards,
Administrator General, Official Trustee, receiver, or manager shall
be the representative of the person for a tax year for the purposes
of this Ordinance.

(3) Subject to sub-sections (4) and (5), where a person is a non-

resident person, the representative of the person for the purposes of
this Ordinance for a tax year shall be any person in Pakistan –

(a) who is employed by, or on behalf of, the non-resident person;

(b) who has any business connection with the non-resident

person;

(c) from or through whom the non-resident person is in receipt

of any income, whether directly or indirectly;

(d) who holds, or controls the receipt or disposal of any money

belonging to the non-resident person;

(e) who is the trustee of the non-resident person; or

(f ) who is declared by the Commissioner by 21[an order] in

writing to be the representative of the non-resident person.

(4) A bona fide independent broker in Pakistan who, in respect of any

transactions, does not deal directly with, or on behalf of, a non-
resident principal but deals with, or through a non-resident broker,

21
Substituted for the word “notice” by the Finance Act, 2003.

28
Concepts Section 173. Liability and obligations of representatives

shall not be treated as a representative of the non-resident principal

in respect of such transactions, if –

(a) the transactions are carried on in the ordinary course of

business through the first-mentioned broker; and

(b) the non-resident broker is carrying on such transactions in the

ordinary course of its business and not as a principal.

(5) No person shall be declared 22[ ] as the representative of a non-

resident person unless the person has been given an opportunity by
the Commissioner of being heard.

30. Section 173. Liability and obligations of representatives

(New)

(1) Every representative of a person shall be responsible for

performing any duties or obligations imposed by or under this
Ordinance on the person, including the payment of tax.

(2) Subject to sub-section (4), any tax that, by virtue of sub-section

(1), is payable by a representative of a taxpayer shall be
recoverable from the representative only to the extent of any assets
of the taxpayer that are in the possession or under the control of the
representative.

(3) Every representative of a taxpayer who pays any tax owing by the
taxpayer shall be entitled to recover the amount so paid from the
taxpayer or to retain the amount so paid out of any moneys of the
taxpayer that are in the representative’s possession or under the
representative’s control.
23
[(3A) Any representative, or any person who apprehends that he may be
assessed as a representative, may retain out of any money payable
by him to the person on whose behalf he is liable to pay tax
(hereinafter in this section referred to as the “principal”), a sum
equal to his estimated liability under this Ordinance, and in the
event of disagreement between the principal and such a
representative or a person as to the amount to be so retained, such
representative or person may obtain from the Commissioner a
22
The words “or treated” omitted by the Finance Act, 2003.
23
Inserted by the Finance Act, 2003.

29
Concepts Section 175. Power to enter and search premises

certificate stating the amount to be so retained pending final

determination of the tax liability, and the certificate so obtained
shall be his authority for retaining that amount.]

(4) Every representative shall be personally liable for the payment of

any tax due by the representative in a representative capacity if,
while the amount remains unpaid, the representative -

(a) alienates, charges or disposes of any moneys received or

accrued in respect of which the tax is payable; or

(b) disposes of or parts with any moneys or funds belonging to

the taxpayer that is in the possession of the representative
or which comes to the representative after the tax is
payable, if such tax could legally have been paid from or
out of such moneys or funds.

(5) Nothing in this section shall relieve any person from performing
any duties imposed by or under this Ordinance on the person
which the representative of the person has failed to perform.

31. Section 175. Power to enter and search premises

(1979: Sec 146)

(1) In order to enforce any provision of this Ordinance (including for

the purpose of making an audit of a taxpayer or a survey of persons
liable to tax), the Commissioner or any officer authorised in
writing by the Commissioner for the purposes of this section –

(a) shall, at all times and without prior notice, have full and free
access to any premises, place, accounts, documents or
computer;

(b) may stamp, or make an extract or copy of any accounts,

documents or computer-stored information to which access is
obtained under clause (a);

(c) may impound any accounts or documents and retain them for
so long as may be necessary for examination or for the
purposes of prosecution;

(d) may, where a hard copy or computer disk of information

stored on a computer is not made available, impound and
30
Concepts Section 175. Power to enter and search premises

retain the computer for as long as is necessary to copy the

information required; and

(e) may make an inventory of any articles found in any premises

or place to which access is obtained under clause (a).
24
[(2) The Commissioner may authorize any valuer or expert to enter any
premises and perform any task assigned to him by the
Commissioner.]

(3) The occupier of any premises or place to which access is sought

under sub-section (1) shall provide all reasonable facilities and
assistance for the effective exercise of the right of access.

(4) Any accounts, documents or computer impounded and retained

under sub-section (1) shall be signed for by the Commissioner or
an authorised officer.

(5) A person whose accounts, documents or computer have been

impounded and retained under sub-section (1) may examine them
and make extracts or copies from them during regular office hours
under such supervision as the Commissioner may determine.

(6) Where any accounts, documents or computer impounded and

retained under sub-section (1) are lost or destroyed while in the
possession of the Commissioner, the Commissioner shall make
reasonable compensation to the owner of the accounts, documents
or computer for the loss or destruction.

(7) This section shall have effect notwithstanding any rule of law
relating to privilege or the public interest in relation to access to
premises or places, or the production of accounts, documents or
computer-stored information.

(8) In this section, “occupier” in relation to any premises or place,

means the owner, manager or any other responsible person on the
premises or place.

24
Substituted by the Finance Act, 2003. The substituted sub-section (2) read as follows:
“(2) The Commissioner may authorise any valuer to enter any premises or place to inspect such
accounts and documents as may be necessary to enable the valuer to make a valuation of an
asset for the purposes of this Ordinance.”

31
Concepts Section 176. Notice to obtain information or evidence

32. Section 176. Notice to obtain information or evidence

(1979: Sec 144(a) & 148)

(1) The Commissioner may, by notice in writing, require any person,

whether or not liable for tax under this Ordinance –

(a) to furnish to the Commissioner or an authorised officer, any

information relevant to any tax 25[leviable] under this
Ordinance as specified in the notice; or

(b) to attend at the time and place designated in the notice for the
purpose of being examined on oath by the Commissioner or
an authorised officer concerning the tax affairs of that person
or any other person and, for that purpose, the Commissioner
or authorised officer may require the person examined to
produce any accounts, documents, or computer-stored
information in the control of the person.

(2) The Commissioner may impound any accounts or documents

produced under sub-section (1) and retain them for so long as may
be necessary for examination or for the purposes of prosecution.
26
(3) [The person from whom information is required, may at his
option, furnish the same electronically in any computer readable
media.] Where a hard copy or computer disk of information stored
on a computer is not made available as required under sub-section
(1), the Commissioner may require production of the computer on
which the information is stored, and impound and retain the
computer for as long as is necessary to copy the information
required.

(4) For the purposes of this section, the Commissioner shall have the
same powers as are vested in a Court under the Code of Civil
Procedure, 1908 (Act V of 1908), in respect of the following
matters, namely:–

(a) enforcing the attendance of any person and examining the

person on oath or affirmation;

(b) compelling the production of any accounts, records,

computer-stored information, or computer;

25
The word “imposed” substituted by the Finance Act, 2005.
26
Inserted by the Finance Act, 2005.

32
Concepts Section 181. National Tax Number [Certificate].-

(c) receiving evidence on affidavit; or

(d) issuing commissions for the examination of witnesses.

(5) This section shall have effect notwithstanding any rule of law
relating to privilege or the public interest in relation to the
production of accounts, documents, or computer-stored
information or the giving of information.

33. Section 180. Power to collect information regarding exempt

income
(1979: Sec 164A)

The Central Board of Revenue may, by notification in the official Gazette,

authorise any department or agency of the Government to collect and
compile any data in respect of incomes from industrial and commercial
undertakings exempt from tax under this Ordinance.

34. Section 181. National Tax Number 27[Certificate].-

(1979: Sec 143D)

(1) Every taxpayer shall apply in the prescribed form and in the
prescribed manner for a National Tax Number 28[Certificate].

(2) An application under sub-section (1) shall be accompanied by the

prescribed fee.

(3) The Commissioner having jurisdiction over an applicant under

sub-section (1) may after examination of all relevant documents
and evidence, and after satisfying himself of the genuineness of the
application, may direct issuance of the National Tax Number
29
[Certificate] for a period prescribed by Commissioner.

27
The word “Card” substituted by the Finance Act, 2005.
28
Substituted for the word “Card” by the Finance Act, 2003.
29
Substituted for the word “Card” by the Finance Act, 2003.

33
Concepts Section 216. Disclosure of information by a public servant.

35. Section 216. Disclosure of information by a public servant.

(1979: Sec 150)

(1) All particulars contained in –

(a) any statement made, return furnished, or accounts or

documents produced under the provisions of this Ordinance;

(b) any evidence given, or affidavit or deposition made, in the

course of any proceedings under this Ordinance, other than
proceedings under Part XI of Chapter X; or

(c) any record of any assessment proceedings or any proceeding

relating to the recovery of a demand,

shall be confidential and no public servant save as provided in this

Ordinance may disclose any such particulars.

(2) Notwithstanding anything contained in the Qanun-e-30[Shahadat],

1984 (P.O. Order No. 10 of 1984), or any other law for the time
being in force, no court or other authority shall be, save as
provided in this Ordinance, entitled to require any public servant to
produce before it any return, accounts, or documents contained in,
or forming a part of the records relating to any proceedings under
this Ordinance, or any records of the Income Tax Department
generally, or any part thereof, or to give evidence before it in
respect thereof.

(3) Nothing contained in sub-section (1) shall preclude the disclosure

of any such particulars –

(a) to any person acting in the execution of this Ordinance,

where it is necessary to disclose the same to him for the
purposes of this Ordinance;

(b) to any person authorised by the Commissioner in this behalf,

where it is necessary to disclose the same to such person for
the purposes of processing of data and preparation of
computer printouts relating to returns of income or
calculation of tax;

30
The word “Shadat” substituted by the Finance Act, 2005.

34
Concepts Section 216. Disclosure of information by a public servant.

(c) where the disclosure is occasioned by the lawful employment

under this Ordinance of any process for the service of any
notice or the recovery of any demand;

(d) to the Auditor-General of Pakistan for the purpose of

enabling the Auditor-General to discharge his functions
under the Constitution;

(e) to any officer appointed by the Auditor-General of Pakistan

or the Commissioner to audit income tax receipts or refunds;

(f ) to any officer of the Federal Government or a Provincial

Government authorised by such Government in this behalf as
may be necessary for the purpose of enabling that
Government to levy or realise any tax imposed by it;

(g) to any authority exercising powers under the 31[Federal

Excise Act, 2005], the Sales Tax Act, 1990, the Wealth Tax
Act, 1963 (XV of 1963), or the Customs Act, 1969 (IV of
1969), as may be necessary for the purpose of enabling its
duty to exercise such powers;

(h) occasioned by the lawful exercise by a public servant of

powers under the Stamp Act, 1899 (II of 1899) to impound
an insufficiently stamped document;

(i) to the State Bank of Pakistan to enable it to compile financial

statistics of international investment and balance of payment;

(j) as may be required by any order made under sub-section (2)

of section 19 of the Foreign Exchange Regulation Act, 1947
(VII of 1947), or for the purposes of any prosecution for an
offence under section 23 of that Act;

(k) to the Securities and Exchange Commission or the

Monopolies Control Authority for the purposes of the
Securities and Exchange Ordinance, 1969 (XVII of 1969),
the Monopolies and Restrictive Trade Practices (Control and
Prevention) Ordinance, 1970 (VI of 1970), the Companies
Ordinance, 1984 (XLVII of 1984) or the Securities and
Exchange Commission of Pakistan Act, 1997, as the case
may be;

31
The words, comma, figure and brackets “Central Excises Act, 2944 (I of 1944)” substituted by the Finance
Act, 2005.

35
Concepts Section 216. Disclosure of information by a public servant.

(l) relevant to any inquiry into a charge of misconduct in

connection with income tax proceedings against a legal
practitioner or an accountant;

(m) to a Civil Court in any suit or proceeding to which the

Federal Government or any income tax authority is a party
which relates to any matter arising out of any proceedings
under this Ordinance;

(n) for the purposes of a prosecution for any offence under the
Pakistan Penal Code, 1860 (XLVI of 1860), in respect of any
such statement, returns, accounts, documents, evidence,
affidavit or deposition, or for the purposes of a prosecution
for any offence under this Ordinance;

(o) relevant to any inquiry into the conduct of an official of the

Income Tax Department to any person or officer appointed to
hold such inquiry, or to a Public Service Commission,
established under the Federal Public Service Commission
Ordinance, 1977 (XLV of 1977), when exercising its
functions in relation to any matter arising out of such inquiry;

(p) as may be required by any officer or department of the

Federal Government or of a Provincial Government for the
purpose of investigation into the conduct and affairs of any
public servant, or to a Court in connection with any
prosecution of the public servant arising out of any such
investigation;

(q) to an authorised officer of the government of any country

outside Pakistan with which the Government has entered into
an agreement under section 107 for the avoidance of double
taxation and the prevention of fiscal evasion as may be
required to be disclosed in pursuance of that agreement; or

(r) to the Federal Tax Ombudsman appointed under the

Establishment of the Office of Federal Tax Ombudsman
Ordinance, 2000 (XXXV of 2000).

(4) Nothing in this section shall apply to the production by a public

servant before a Court of any document, declaration, or affidavit
filed or the giving of evidence by a public servant in respect
thereof.

36
Concepts Section 217. Forms and notices; authentication of documents.

(5) Nothing contained in sub-section (1) shall prevent the

Commissioner from publishing, with the prior approval of the
Federal Government, any such particulars as are referred to in that
sub-section.

(6) Nothing contained in sub-section (1) shall prevent the Federal

Government from publishing particulars and the amount of tax
paid by a holder of a public office as defined in the National
Accountability Bureau Ordinance, 1999 (XVIII of 1999).

(7) Any person to whom any information is communicated under this

section, and any person or employee under the first-mentioned
person’s control, shall be, in respect of that information, subject to
the same rights, privileges, obligations, and liabilities as if the
person were a public servant and all the provisions of this
Ordinance, so far as may be, shall apply accordingly.

(8) No prosecution may be instituted under this section except with the
previous sanction of the Central Board of Revenue.

36. Section 217. Forms and notices; authentication of

documents.
(New)

(1) Forms, notices, returns, statements, tables and other documents

required under this Ordinance may be in such form as determined
by the Central Board of Revenue for the efficient administration of
this Ordinance and publication of such documents in the official
Gazette shall not be required.

(2) The Commissioner shall make the documents referred to in sub-

section (1) available to the public in the manner prescribed.

(3) A notice or other document issued, served or given by the

Commissioner under this Ordinance shall be sufficiently
authenticated if the name or title of the Commissioner, or
authorised taxation officer, is printed, stamped or written on the
notice or document.

37
Concepts Section 218. Service of notices and other documents.

37. Section 218. Service of notices and other documents.

(1979: Sec 154)

(1) Subject to this Ordinance, any notice, order or requisition required

to be served on a resident individual (other than in a representative
capacity) for the purposes of this Ordinance shall be treated as
properly served on the individual if –

(a) personally served on the individual or, in the case of an

individual under a legal disability or a non-resident
individual, the representative of the individual;

(b) sent by registered post or courier service to the place

specified in clause (b) 32[of sub-section (2)] or to the
individual’s usual or last known address in Pakistan; or

(c) served on the individual in the manner prescribed for service

of a summons under the Code of Civil Procedure, 1908 (V of
1908).

(2) Subject to this Ordinance, any notice, order or requisition required

to be served on any person (other than a resident individual to
whom sub-section (1) applies) for the purposes of this Ordinance
shall be treated as properly served on the person if –

(a) personally served on the representative of the person;

(b) sent by registered post or courier service to the person’s

registered office or address for service of notices under this
Ordinance in Pakistan, or where the person does not have
such office or address, the notice is sent by registered post to
any office or place of business of the person in Pakistan; or

(c) served on the person in the manner prescribed for service of a

summons under the Code of Civil Procedure, 1908 (V of
1908).

(3) Where an association of persons is dissolved, any notice, order or

requisition required to be served under this Ordinance on the
association may be served on any person who was the principal
officer or a member of the association immediately before such
dissolution.

32
Inserted by the Finance Act, 2003.

38
Concepts Section 237. Power to make rules

(4) Where section 117 applies, any notice, order or requisition

required to be served under this Ordinance on the person
discontinuing the business may be served on the person personally
or on any individual who was the person’s representative at the
time of discontinuance.

(5) The validity of any notice issued under this Ordinance or the
validity of any service of a notice under this Ordinance shall not be
called into question after the return to which the notice relates has
been furnished or the notice has been otherwise complied with.

38. Section 206. Circulars

(1979: Sec 8)

(1) To achieve consistency in the administration of this Ordinance and

to provide guidance to taxpayers and officers of the Central Board
of Revenue, the Central Board of Revenue may issue Circulars
setting out the Board’s interpretation of this Ordinance.
33
[(2) A circular issued by the Central Board of Revenue 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).]

(3) A Circular shall not be binding on a taxpayer.

39. Section 237. Power to make rules

(1979: Sec 165)

(1) The Central Board of Revenue may, by notification in the official

Gazette, make rules for carrying out 34[ ] the purposes of this
Ordinance.

(2) In particular, and without prejudice to the generality of the

foregoing power, such rules may provide for all or any of the
following matters, namely:–

33
Substituted by the Finance Act, 2006. The substituted sub-section (2) read as follows:
“(2) A Circular shall be binding on the Central Board of Revenue, other than the Commissioner
(Appeals).”
34
The word “of” omitted by the Finance Act, 2005.

39
Concepts Section 237. Power to make rules

(a) the manner in, and procedure by, which the income, profits
and gains chargeable to tax and the tax payable thereon under
this Ordinance shall be determined in the case of –

(i) income derived partly from agriculture and partly

from other business; or

(ii) non-resident persons;

35
[(ab) ascertainment or determination of any income or class of
income to be included in the total income of a taxpayer and
any deduction from such income;]
(b) fees and other charges to be paid in respect of any matter
referred to in this Ordinance;

(c) anything which is to be or may be prescribed under this

Ordinance;

(d) the procedure for furnishing returns and other documents as

required under this Ordinance, including on computer media
or through electronic medium or for issuance of orders or
notices, or levy of additional tax or penalty through
electronic medium;
36
[(da) the procedure for approval of a non-profit organization;]

(e) contain provisions of a saving or transitional nature

consequent upon the making of this Ordinance; and

(f) penalties for the contravention of the rules made under this
Ordinance.

(3) The power to make rules conferred by this section shall be, except
on the first occasion of the exercise thereof, subject to the
condition of previous publication.

(4) Where rules made under this section –

(a) adversely affect a person;

(b) are of a transitional nature; and

35
Inserted by the Finance Act, 2003.
36
Inserted by the Finance Act, 2003.

40
Concepts Section 239. Savings.

(c) are made within twelve months after commencement of this

Ordinance,

these may provide that they shall take effect from the date on which this
Ordinance comes into force or a later date.

40. Section 239. Savings.

(1979: Sec 166)

(1) Subject to sub-section (2), in making any assessment in respect of

any income year ending on or before the 30th day of June, 2002,
the provisions of the repealed Ordinance in so far as these relate to
computation of total income and tax payable thereon shall apply as
if this Ordinance had not come into force.

(2) The assessment, referred to in sub-section (1), shall be made by an

income tax authority which is competent under this Ordinance to
make an assessment in respect of a tax year ending on any date
after the 30th day of June, 2002, and in accordance with the
procedure specified in section 59 or 59A 37[or 61] or 62 or 63, as
the case may be, of the repealed Ordinance.

(3) The provisions of 38[sub-sections] (1) and (2) shall apply, in like
manner, to the imposition or charge of any penalty, additional tax
or any other amount, under the repealed Ordinance, as these apply
to the assessment, so however that procedure for such imposition
or charge shall be in accordance with the corresponding provisions
of this Ordinance.

(4) Any proceeding under the repealed Ordinance pending on the

commencement of this Ordinance before any income tax authority,
the Appellate Tribunal or any Court by way of appeal, reference,
revision or prosecution shall be continued and disposed of as if this
Ordinance has not come into force.

(5) Where the period prescribed for any application, appeal, reference
or revision under the repealed Ordinance had expired on or before
the commencement of this Ordinance, nothing in this Ordinance
shall be construed as enabling such application, appeal, reference

37
Inserted by the Finance Act, 2003. Earlier this was inserted by S.R.O. 633(I)/2002, dated 14.09.2002 which
stands rescinded by SRO 608(I)/2003, dated 24.06.2003 with effect from 01.07.2003.
38
The word “sub-section” substituted by the Finance Act, 2005.

41
Concepts Section 239. Savings.

or revision to be made under this Ordinance by reason only of the

fact that a longer period is specified or provision for an extension
of time in suitable cases by the appropriate authority.

(6) Any proceeding for prosecution in respect of an assessment for an

income year ending on or before the 30th day of June 2002 shall be
taken and continued as if this Ordinance has not come into force.

(7) Any income tax, super tax, surcharge, penalty, additional tax, or
other amount payable under the repealed Ordinance may be
recovered under this Ordinance, but without prejudice to any
action already taken for the recovery of the amount under the
repealed Ordinance.

(8) Any election or declaration made or option exercised by any

person under any provision of the repealed Ordinance and in force
immediately before the commencement of this Ordinance shall be
treated as an election or declaration made, or option exercised
under the corresponding provisions, if any, of this Ordinance.

(9) Anything done or action taken under the repealed Ordinance in so

far as it is not inconsistent with the 39[provisions] of this Ordinance
shall, without prejudice to anything already done or any action
already taken, be treated as having been done or taken under this
Ordinance.

(10) Any agreement entered into, appointment made, approval given,

recognition granted, direction, instruction, notification, notice,
order or rule issued or made under any provision of the repealed
Ordinance and in force or valid at the commencement of this
Ordinance shall, so far as it is not inconsistent with the
corresponding provision of this Ordinance or any agreement,
appointment entered into, approval given, recognition granted,
direction, instruction, notification, notice, order or rule issued or
made under this Ordinance, be treated as entered into, made, given,
granted or issued, as the case may be, under that corresponding
provision and shall unless revoked, cancelled or repealed by, or
under, this Ordinance, continue in force accordingly.

(11) Any appointment, act of authority or other thing made or done by

any authority or person and subsisting or in force at the

39
The word “provision” substituted by the Finance Act, 2005.

42
Concepts Section 239. Savings.

commencement of this Ordinance which would have been made or

done under any substantially corresponding provision of this
Ordinance by any authority or person other than the one specified
in the repealed Ordinance, or in any manner other than as specified
in the repealed Ordinance shall continue in force and have effect as
if it has been made or done under the corresponding provision of
this Ordinance by the authority or person, or in the manner
specified in the corresponding provision as if such provision had
been in force when it was made or done.

(12) Any notification issued under section 50 of the repealed Ordinance

and in force on the commencement of this Ordinance shall
continue to remain in force, unless 40[amended, modified],
cancelled or repealed by, or under, this Ordinance.

(13) The authority which issued any notification, notice, direction or

instruction, or made any rule, agreement or appointment, or
granted any approval or recognition, referred to in sub-sections
(10) and (12), shall have the power to 41[amended, modified],
cancel or repeal any such notification, notice, direction, instruction,
rule, agreement, appointment, approval or recognition.
42
[(14) Any yield from National Saving Schemes of Directorate of
National Savings where investment was made on or before 30th
June, 2001 and any income derived from Mahana Amdani Account
where monthly instalment does not 43[exceed] one thousand rupees
shall continue to remain exempt and any person paying such yield
or income shall not deduct tax under section 151 therefrom and the
recipient of such yield or income shall not be required to produce
an exemption certificate under section 159 in support of the said
exemption.]

(15) Section 107AA of the repealed Ordinance shall continue to apply

until the 30th day of June, 2002.

40
The word “revoked” substituted by the Finance Act, 2005.
41
The word “revoke” substituted by the Finance Act, 2005.
42
Substituted by the Finance Act, 2003. The substituted sub-section (14) read as follows:
A
[(14) Clause (77C) of Part I of the First Schedule of the repealed Ordinance shall continue to apply to the
st
yield on National Savings Deposit Certificates issued before 1 July, 2001, and a person paying yield on such
a Certificate shall not deduct tax under section 151 from the payment, and the holder of such Certificate shall
not be required to acquire an exemption certificate under section 159 to give effect to the said exemption.]
A
Earlier this clause was inserted by Finance Act, 2002.
43
The word “exceeds” substituted by the Finance Act, 2005.

43
Concepts

(16) The Income Tax Rules made under the repealed Ordinance, on the
valuation of perquisites shall continue to apply in respect of any
income year ending on or before the 30th day of June 2002.

(17) Item 8(5)(h) of the Third Schedule to the repealed Ordinance shall
continue to apply to assets covered by the item.
44
[ ]

44
Omitted by the Finance Act, 2003. Earlier this was omitted by S.R.O. 633(I)/2002, dated 14.09.2002 which
stands rescinded by SRO 608(I)/2003, dated 24.06.2003 with effect from 01.07.2003. The omitted sub-
section (18) read as under:-
“(18) In this section, ‘Income Tax authority’ means an Income Tax authority as specified in section 3 of
the repealed Ordinance.”
Earlier this was substituted by Finance Act, 2002. The substituted sub-section (18) read as follows:
“(18) In this section, -
“assessment year” means assessment year as defined in the repealed Ordinance;
“income tax authority” means income tax authority as defined in section 3 of the repealed
Ordinance;
“income year” means income year as defined in the repealed Ordinance; and
“repealed Ordinance” means the Income Tax Ordinance, 1979 (XXXI of 1979).”

44