Income Tax Oridinance, 2001

Assignment 1

Instructor name: Prof.Gulam Murtaza

Student Name: Muhammad Usman

Registration No: L1S10MBAM 2137

Course: Income Tax Laws

Section: B

Program: MBA

University of central Punjab

1|Page
 Income Tax Oridinance, 2001

Permanent establishment [2(41)]:

“Permanent establishment” in relation to a person, means a [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, [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;
[(Ba) an agricultural, pastoral or forestry property;]
(c) A building site, a construction, assembly or installation project [but only where such site,
project and Its connected supervisory activities continue for a period or periods aggregating more
than ninety days Within any twelve-months period] or supervisory activities connected with such
site or project;
(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 e on behalf of the other person; or
(f) Any substantial equipment installed, or other asset or property capable of activity giving rise
to Income;

Dividend [2(19)]:

(a) Any distribution by a company of accumulated profits to its shareholders, whether capitalized
or not, if such distribution entails the release by the company to its shareholders of all or any part
of the assets including money of the company;

(b) Any distribution by a company, to its shareholders of debentures, debenture-stock or deposit

certificate in any form, whether with or without profit, to the extent to which the company
possesses accumulated Profits whether capitalized or not;

2|Page
 Income Tax Oridinance, 2001

(c) Any distribution made to the shareholders of a company on its liquidation, to the extent to
which the Distribution is attributable to the accumulated profits of the company immediately
before its liquidation, whether capitalized or not;

(d) Any distribution by a company to its shareholders on the reduction of its capital, to the extent
to which the company possesses accumulated profits, whether such accumulated profits have been
capitalized or Not;

(e) Any payment by a private company [as defined in the Companies Ordinance, 1984 (XLVII of
1984)] Trust of any sum (whether as representing a part of the assets of the company or trust, or
otherwise) by way Of advance or loan to a shareholder or any payment by any such company or
trust on behalf, or for the Individual benefit, of any such shareholder, to the extent to which the
company or trust, in either case, Possesses accumulated profits;

[(f) [remittance of] after tax profit of a branch of a foreign company operating in Pakistan;]

Income [2(29)]:

Income is the flow of returns over a period of time from providing factor of production i.e.
(natural resources, labor and capital) in the form of rent, wages, interest profit etc. but for the
purposes of Income Tax it includes Any incomes, profits or gains chargeable to tax under any
provision of the I.T. Ord. 2001. Income chargeable to tax may be classified as under:

Salary

Income from Property

Income from business

Capital gains and

Income from other sources

Tax year [2(68) &74]:

“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; it has following three types

1. Normal tax year

2. Special tax year

3. Transitional tax year

The concept of tax year has been introduced in income tax law through income tax ordinance,
2001. Tax year is a period of time for which tax is to be calculated regarding a person. The tax

3|Page
 Income Tax Oridinance, 2001

year may be of three types: 1.Normal tax year it is a period of twelve months ending on 30th June
and is known by the calendar year in which the ending date falls. Such a tax year is known as
normal tax year. 2.Special tax year In case of any person or class of persons or any source of
income Federal Board of Revenue may specify a period of twelve months as their tax year. For
example, in case of all companies manufacturing cotton textiles central board of revenue has
specified that their tax year will commence on 1st October and will end on 30th September
following this period of 12 months is tax year for all companies engaged in cotton textiles
manufacturing. Such a tax year is called special tax year and is known by the calendar year
relevant to normal tax year in which the ending date falls. 3.Transitional tax year When tax year
of any class of persons or a single person is changed as a result of an order by the Federal Board
of Revenue or commissioner of income tax, it results in the emergence of a changing period
which is known as “transitional tax year” and is treated to be a separate tax year. It consists of the
period between the end of last year before change and the start of the changed tax year

Assessment [2(5)]:

Assessment means the determination of taxable income and the tax liability of a taxpayer or the
refund to him. Assessment includes re-assessment and amended assessment and the cognate
expressions shall be construed accordingly.

4|Page