MASTER

CAF-2 TX & CAF-7 CL CAF 2 TAX PRACTICES MASTER SHEETS BY SIR TARIQ TUNIO SHEET
BY SIR TARIQ TUNIO
03322130867 INCOME TAX DEFINITIONS & ASSOCIATE 14

ACCUMULATED PROFITS §.2(1) BONUS SHARES §.2(9) ELIGIBLE PERSON §.2(19A) DIVIDEND §.2(19)
Bonus shares includes bonus units in a unit trust. Eligible Person, for the purpose of Voluntary Pension System Dividend includes:
Accumulated profits in relation to distribution or payment of a dividend
include: Rules, 2005, means (a) any distribution of accumulated profits,
(a) any reserve § an individual Pakistani § whether capitalised or not,
BUSINESS §.2(10)
§ who holds a valid NTN [or CNIC or NIC for Overseas § by a company to its shareholders
§ made up wholly or partly of Business Pakistanis] issued by NADRA
§ any allowance, deduction, or exemption admissible under § total tax credit
if such distribution
ITO 2001 § includes any - available for contribution made to approved § entails the release of
(b) all profits of the company o trade, employment pension or annuity scheme and § all or any part of the assets of the company including
o commerce, approved pension fund under VPS Rules, 2005 its money.
§ including income and gains of a trust o manufacture, § should not exceed the limit prescribed or specified in § 63 (b) any distribution
§ up to the date of such distribution or such payment o profession,
(c) includes all profits of the company o vocation or § of debentures, debenture-stock or deposit certificate
EMPLOYEE §.2(20)) § in any form,
o adventure or concern in the nature of trade, commerce,
§ including income & gains of trust up to date of its liquidation § whether with or without profit,
manufacture, profession or vocation, Employee means § by a company to its shareholders
§ but does not include employment. § any individual to the extent to which
APPROVED GRATUITY FUND §.2(3) § engaged in employment § the company possesses
§ accumulated profits
Approved gratuity fund means a gratuity fund approved by the BUSINESS BANK ACCOUNT §.2(10A)
EMPLOYEER §.2(21) § whether capitalised or not.
Commissioner in accordance with Part III of the Sixth Schedule. Business bank account means (c) any distribution
Employer means
§ A bank account utilized by the taxpayer for business transaction § made to the shareholders of a company
APPROVED PENSION FUND §.2(3C) declared to the Commissioner through original or modified § any person § on its liquidation,
registration form prescribed under section 181 § who engages and remunerates an employee. to the extent to which
Approved Pension Fund means
§ Pension Fund § the distribution is attributable
§ approved by Securities and Exchange Commission of Pakistan § to the accumulated profits of the company,
CAPITAL ASSET §.2(11) EMPLOYMENT §.2(22) whether capitalised or not
(SECP) under Voluntary Pension System Rules, 2005, and §
§ managed by a Pension Fund Manager registered with the SECP Capital asset means a capital asset as defined in section 37 of ITO 2001. Employment includes § immediately before its liquidation.
under Voluntary Pension System Rules, 2005. (d) any distribution
§ a directorship or any other office involved in the
CHARITABLE PURPOSE §.2(11A) management of a company; § by a company to its shareholders
ASSESSMENT §.2(5) § a position entitling the holder to a fixed or ascertainable § on the reduction of its capital,
Charitable purpose includes remuneration; or to the extent to which
Assessment includes provisional assessment, re-assessment, amended § relief of the poor,
assessment and the cognate expressions shall be construed accordingly. § the holding or acting in any public office. § the company possesses accumulated profits,
§ education,
§ whether capitalised or not.
§ medical relief and
ASSESSMENT YEAR §.2(5A) § the advancement of any other object of general public utility. MINOR CHILD §.2(33) (e) payment of any sum
§ by
Assessment year means assessment year as defined in repealed Minor child means an individual who is under the age of
Ordinance (i.e. Income Tax Ordinance, 1979) CONCEALMENT OF INCOME §.2(13AA) (1) eighteen years at the end of a tax year. - a private company (as defined in Companies
Ordinance, 1984) or
Concealment of income includes – - a trust
ASSOCIATION OF PERSONS §.2(6) (a) the suppression of any item of receipt liable to tax in whole or in EXCLUSION FROM DIVIDEND § whether the payment represents
AOP means an part, or failure to disclose income chargeable to tax; - part of the assets of company or trust, or
` association of persons as defined in section 80. But does not include:
(b) claiming any deduction or any expenditure not actually incurred; - otherwise,
According to §. 80 “association of persons” includes (c) any act referred to in sub-section (1) of section 111; and (i) distribution made in accordance with sub-clause (c) or (d) in § by way of
(d) claiming of any income or receipt as exempt which is otherwise respect of any share for full cash consideration, or
§ a firm, - advance or
taxable. (ii) redemption of debentures or debenture stock, where the
§ a Hindu undivided family (HUF), - loan to a shareholder or
Explanation: For removal of doubt it is clarified that none of the holder of the share or debenture is not entitled to participate
§ any artificial juridical person and anybody of persons - any payment on behalf, or for the individual
aforementioned acts would constitute concealment of income unless it in the surplus assets in the event of liquidation. benefit, of any such shareholder,
o formed under a foreign law,
o but does not include a company. §80(2)(a) is proved that taxpayer has knowingly and willfully committed these acts. (iii) any advance or loan made to a shareholder by a company in § to the extent to which
the ordinary course of its business, where the lending of
money is a substantial part of the business of the company. - the company or trust
DEDUCTIBLE ALLOWANCE §.2(16) - possesses accumulated profits.
BOARD §.2(8) (iv) any dividend paid by a company which is set off by the
Deductible allowance means company against the whole or any part of any sum previously (f) remittance of
Board means Central Board of Revenue established under Central Board
paid by it and treated as a dividend within the meaning of sub- § after tax profit
of Revenue Act, 1924 (IV of 1924), and on commencement of Federal
§ an allowance that is deductible clause (e) to the extent to which it is so set off; and § of a branch
Board of Revenue Act, 2007, the Federal Board of Revenue established § from total income under Part IX of Chapter III (v) remittance of after-tax profit by branch of Petroleum § of a foreign company operating in Pakistan.
under section 3 thereof.
Exploration and Production (E&P) foreign coy, operating in PK.
 FEE FOR TECHNICAL SERVICES §.2 (23) MEMBER §.2(32) OFFICER OF INLAND REVENUE §.2(38A)
Fee for technical services means Member in relation to an association of persons, includes a partner in a firm. Officer of Inland Revenue means
§ any consideration
§ any Additional Commissioner Inland Revenue,
o whether periodical or lump sum NON-PROFIT ORGANIZATION §.2(36) § Deputy Commissioner Inland Revenue,
Non-profit organization means § Assistant Commissioner Inland Revenue,
o for rendering of
§ Inland Revenue Officer,
- managerial
§ any person other than an individual which is § Inland Revenue Audit Officer,
- technical or
§ District Taxation Officer Inland Revenue,
- consultancy services o established for
§ Assistant Director Audit, or
- including services of technical or other personnel, - religious,
§ any other officer
- educational,
§ but does not include § however designated or appointed by the Board for the purposes of this Ordinance.
- charitable,
o consideration for services - welfare or
- development purposes, or
- rendered in relation to NON-RESIDENT PERSON §.2(37)
- for the promotion of an amateur sport;
- a construction, assembly or like project Non-resident person means
- undertaken by the recipient; or o formed and registered
- under any law § a non-resident person
o consideration - as a non-profit organization § as defined in §.81.
- which would be income of the recipient o approved by the Commissioner for specified period
- chargeable under the head “Salary”. - on an application made by the person in prescribed form and
manner, NON-RESIDENT TAXPAYER §.2(38)
- accompanied by prescribed documents and such other documents Non-resident taxpayer means
INCOME §.2(29) as may be required by the Commissioner RSON §.2(37)
§ a taxpayer
Income includes § and none of the assets of such person § who is a non-resident person.
§ any amount chargeable to tax under ITO-2001
o confers or may confer
§ any amount subject to collection or deduction of final tax under the o a private benefit to any other person. PERMENANT ESTABLISHMENT §.2(41)
provisions of ITO-2001
Permanent establishment in relation to a person, means
§ any amount treated as income under any provision of ITO-2001, and (1)
INDUSTRIAL UNDERTAKING §.2(29C) § a fixed place of business
§ any loss of income.
Industrial undertaking means
§ through which the business of the person is wholly or partly carried on
(a) an undertaking which is
INCOME YEAR §.2(29A)
§ set up in Pakistan and and includes
Income year means
§ which employs § a place of management, branch, office, factory or workshop, premises for soliciting orders,
§ income year
warehouse, permanent sales exhibition or sales outlet, other than a liaison office except where
§ as defined in the repealed Ordinance (i.e. ITO-1979) o 10 or more persons in Pakistan and the office engages in the negotiation of contracts other than contracts of purchase;
o involves the use of electrical energy or any other form of energy
which is mechanically transmitted and is not generated by human § a mine, oil or gas well, quarry or any other place of extraction of natural resources;
IRIS §.2(30AC) or animal energy;
Iris means a web-based computer programme for operation and § an agricultural, pastoral or forestry property;
OR
management of IR taxes and laws administered by the Board. § a building site, a construction, assembly or installation project or supervisory activities
o 20 or more persons in Pakistan and
o does not involve the use of electrical energy or any other form of connected with such site or project but only where such site, project and its connected
IT ENABLED SERVICES §.2(30AE) energy which is mechanically transmitted and is not generated by supervisory activities continue for a period or periods aggregating more than 90 days within
human or animal energy: any 12 months period
IT enabled services include
§ but not limited to inbound or outbound call centres, § and which is engaged in § the furnishing of services, including consultancy services, by any person through employees or
§ medical transcription, o the manufacture of goods or materials or the subjection of goods or other personnel engaged by the person for such purpose
§ remote monitoring, materials to any process which substantially changes their original
§ graphics design, condition; or § a agent, except when he is independent agent who acts independently in the ordinary course
§ accounting services, o ship-building; or of business, if the agent has and habitually exercises an authority to conclude contracts on
§ Human Resource (HR) services, o generation, conversion, transmission or distribution of electrical behalf of the other person has no such authority, but habitually maintains a stock-in-trade or
§ telemedicine centers, energy, or the supply of hydraulic power; or other merchandise from which the agent regularly delivers goods or merchandise on behalf of
§ data entry operations, o the working of any mine, oil-well or any other source of mineral the other person; or
§ cloud computing services, deposits; and
§ data storage services, § any substantial equipment installed, or other asset or property capable of activity giving rise
§ locally produced television programs and (b) any other industrial undertaking which the Board may by notification in the
to income.
§ insurance claims processing. official gazette, specify.
 RENT §.2(49) COMPANY AOP & FIRM PRINCIPLE OFFICER §.2(44A)
Rent means rent as defined in sub-section (2) of section 15 Company means: 1. AOP Principal officer used with reference to a company or association of
and includes an amount treated as rent under section 16. persons includes
(i) a company as defined in Companies Act, 2017 Association of Persons includes
(ii) a body corporate (a) a director, a manager, secretary, agent, accountant or any similar
§ a firm
RESIDENT COMPANY §.2(50) § a Hindu undivided family (HUF)
officer; and
§ formed by/ under
Resident company means a resident coy as defined in § 83. § any law in force in Pakistan § any artificial juridical person and anybody of persons (b) any person connected with the management or administration of
formed under a foreign law but does not include a the company or AOP upon whom the Commissioner has served a
(iii) a modaraba company. §.80(2) (a) notice of treating him as the principal officer thereof.
RESIDENT INDIVIDUAL §.2(51)
(iv) a body 2. FIRM
Resident individual means resident individual as defined in § incorporated by/ under a law of a foreign country Firm means:
§ relating to incorporation of companies (i.e. foreign § the relation between persons PUBLIC COMPANY §.2(47)
section 82.
company) § who have agreed to share the profits of a business Public company means
§ carried on by all or any of them acting for all. §.80(2)(c)
RESIDENT PERSON §.2(52) (v) ▪ a co-operative society, § a company
§ a finance society or o in which not less than 50% of the shares
Resident person means a resident person as defined in § 81. any other society
§ PROFIT ON DEBT §.2(46) o are held by Federal Govt or Provincial Govt
o established or constituted
Profit on a debt, whether payable or receivable, means § a company
RESIDENT TAXPAYER §.2(53) o by/ under any law
o in which not less than 50% of the shares
(vi) a non-profit organization (a) any profit, yield, interest, discount, premium or other o are held by
Resident taxpayer means a taxpayer who is a resident person.
amount, owing under a debt, other than a return of - a foreign Government, or
(vii) ▪ a trust, capital; or - a foreign company owned by a foreign Government
§ an entity or a body of persons
ROYALTY §.2(54) o established or constituted (b) any service fee or other charge in respect of a debt, § a company
o by or under any law for the time being in force including any fee or charge incurred in respect of a o whose shares were traded on a registered stock exchange in
Royalty means any amount paid or payable, however described
credit facility which has not been utilized; Pakistan at any time in the tax year and
or computed, whether periodical or a lump sum, as (viii) a foreign association
o which remained listed on that exchange at the end of that year;
consideration for:
§ incorporated or not,
§ that is declared by the FBR PRIVATE COMPANY §.2(45) § a unit trust
(a) the use of, or right to use any patent, invention, design
o by general or special order o whose units are widely available to the public and
or model, secret formula or process, trademark or other Private Company means a company that is not a public
to be a company for the purposes of ITO 2001 o any other trust as defined in the Trusts Act, 1882.
like property or right; § company;
(b) the use of, or right to use any copyright of a literary, (ix) a Provincial Government
artistic or scientific work, including films or video tapes (x) a Local Government in Pakistan, or ASSOCIATES OR ASSOCIATE PERSONS [FOR BOTH IT AND ST]
for use in connection with television or tapes in
(xi) a small company (as defined in §. 2 of ITO-2001) §.80(2)(b) Associates or associated persons mean:
connection with radio broadcasting, but shall not include (i) a member of an AOP and the association where the member
consideration for the sale, distribution or exhibition of
cinematograph films; SMALL COMPANY (v) two persons who are associated with each other in a way that § either alone or together with an associate or associates
their relationship is such that § under another application,
(c) the receipt of, or right to receive, any visual images or Small Company means coy registered on or after 1/7/2005, under § controls fifty per cent or more of the rights to income or
sounds, or both, transmitted by satellite, cable, optic § one may reasonably be expected to act in accordance with capital of the association.
CA 2017 which (1) has paid up capital + undistributed reserves not
the intentions of the other, or
fibre or similar technology in connection with television, exceeding Rs. 50 M (2) has employees not exceeding 250 any time
§ both persons may reasonably be expected to act in (ii) a trust and any person who benefits or may benefit under the
radio or internet broadcasting; during the year (3) has annual turnover not exceeding Rs. 250 M trust
accordance with the intentions of a third person.
(d) the supply of any technical, industrial, commercial or (4) is not formed by splitting up or reconstitution of coy already
in existence, and (5) is not a small and medium enterprise as Ø Two persons shall not be associates solely by reason of the (iii) a shareholder in a company and the company,
scientific knowledge, experience or skill;
defined in clause (59A). fact that
(e) the use of or right to use any industrial, commercial or § where the shareholder,
scientific equipment; § § one person is an employee of the other or § either alone or together with an associate or associates
TRUST § both persons are employees of a third person. under another application,
(f) the supply of any assistance that is ancillary and Trust means: § controls either directly or through one or more interposed
subsidiary to, and is furnished as a means of enabling the (vi) an individual and a relative of the individual. persons:
§ an obligation annexed to the ownership of property and
application or enjoyment of, any such property or right § arising out of the confidence reposed in and accepted by Individual & relative shall not be associates if CIR is satisfied that - 50% or more of the voting power in the company;
as mentioned in subclauses (a) through (e); and the owner, or neither person may reasonably be expected to act in/acc/with the - 50% or more of the rights to dividends; or
§ declared and accepted by the owner for the benefit of intentions of other. - 50% or more of the rights to capital; and
(g) the disposal of any property or right referred to in sub-
clauses (a) through (e). another, or
“Relative” means: (iv) two companies
§ of another and the owner, and
\
§ includes a unit trust. §.80(2)(d) (a) an ancestor, a descendant of any of the grandparents, or an § where a person,
TAX YEAR §.2(68) adopted child of the individual, or of the individual's spouse; § either alone or together with an associate or associates
or § under another application,
Tax year means UNIT TRUST (b) a spouse of the individual or of any of the above persons. § controls either directly or through one or more interposed
§ the tax year as defined in sub-section (1) of section 74 persons:
Unit trust means any trust under which:
§ beneficial interests are divided into units (c) members of an association of persons - 50% or more of the voting power in both companies;
§ and, in relation to a person, includes a special year or a
transitional year § such that the entitlements of the beneficiaries to income Members of an AOP shall not be associates if CIR is satisfied that - 50% or more of the rights to dividends in both
§ that the person is permitted to use under section 74 or capital neither person may reasonably be expected to act in accordance with companies; or
§ are determined by the number of units held. §.80(2)(e) the intentions of the other. - 50% or more of the rights to capital in both companies.