Income from business
IL
Employee training and facilities
[S.27]
A person shall be allowed for expenditure (other
than capital expenditure) incurred for-
Facility [(a) educational institution or hospital in
Pakistan established for benefits of employees and
their dependents;
training [(b) institute in Pakistan for training of
industrial workers recognized by federal, provincial,
local government;
training [(c) the training of a citizen of Pakistan, in
connection with a scheme approved by the board.
Intangible eligible for amortization
(1) An amortization deduction shall be allowed on
intangible-
(a) that are wholly or partly used by the person
in deriving chargeable income from business; and
(b) that have a normal useful life exceeding 1
year.
(2) No deduction shall be allowed if full cost of
intangible asset is allowed as deduction in the year
of purchase.
(3) the total deduction allowed during ownership of
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intangible shall not exceed the cost of the intangible.
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Intangibles [s.24] Bad Debt [Sec.29]
(1) A person shall be allowed a deduction for a bad
debt in a tax year if the following conditions are
satisfied: Debtor xx
(a) The bad debt was- Sales xx
(i) Previously included in the person income
from business or Bad debt xx
(ii) for a money lent by a financial institution in Debtor xx
deriving income from business
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(b) the debt or part of debt is written off in the
account of person in the tax year; and
(c) there are reasonable grounds for believing that
debt is irrecoverable
(2) The bad debt deduction for a tax year shall not
Definitions
exceed the debt written off in the accounts of the
person
(11) in this section, -
•"cost" in relation to an intangible, means any
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expenditure incurred in in acquiring or creating the
intangible, including any expenditure incurred in
improving or renewing the intangible and
•"Intangible" means any patent, invention, design
or model, secret formula, or process, copyright,
trademark, scientific or technical knowledge,
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computer software, motion picture film, export
quotas, franchise, license. intellectual property,
contractual rights and any expenditure that provides
an advantage or benefit for a period of more than
one year ( other than expenditure incurred to
acquire a depreciable asset or unimproved land) but
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•shall not include self-generated good will or any
adjustment due to any accounting treatment Bad debt Recovery
(3) Where bad debt deduction has been allowed in a
tax year and in a subsequent tax year the person
Method for computation of amortization Tax Gain/(loss) on disposal recovers any amount the following rules shall apply:-
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charge: (a) Where the bad debt recovery is greater than
(8) on the disposal of intangible no amortization the difference between:
(3) the amortization deduction for a tax year shall shall be allowed in the year of disposal and- • Actual bad debt and
be computed as follows:- (ref Example 3) (a) if the consideration exceed the WDV, the • the amount previously allowed as
A/B excess shall be chargeable under the head income deduction
where- from business the excess shall be chargeable under the head
A is the cost of the intangible (b) if the consideration is less than the WDV, the "Income from business in which it is received
B is the normal useful life of intangible in
whole years
(10) An intangible that is available for use on a day
( including a non-working day) is assumed to be
used on that day
(4) where the useful life of an intangible is not
ascertainable, the useful life will be taken as 25
years; (ref example 3)
difference is deduction under the head "income
from business" (ref example 5)
(9) (a) The WDV at the time of disposal shall be
calculated as follows- (ref example 7)
(b) Where the bad debt recovery is less than the
difference between:
• Actual bad debt and
• the amount previously allowed as
deduction
the shortfall shall be allowed as deduction under the
head "Income from business in which it was received
(5) where an intangible is used partly in deriving
income from business and partly for another use, the
amortization will be allowed on proportionate basis
(ref Example 6)
(6) if an intangible is not used whole of the tax year
the deduction shall be computed as follows-
A x B/C
where-
A is the amount of amortization
B is the number of days in the tax year the (b) the consideration received on disposal shall be
intangible is used in deriving income from business determined under section 77
and
C is the number of days in tax year
(Ref# example 4)