to consolidate and amend the law relating to income-tax and super-tax

WHEREAS it is expedient to consolidate and amend the law relating to income tax and super tax for the purposes hereinafter appearing;

AND WHEREAS the President is satisfied that circumstances exist which render it necessary to take immediate action;

NOW, THEREFORE, in pursuance of the Proclamation of the fifth day of July, 1977 read with the Laws (Continuance in Force) Order, 1977 (CMLA Order No. 1 of 1977), and in exercise of all powers enabling him in that behalf, the President is pleased to make and promulgate the following Ordinance:-

1. Short title, extent and commencement.-(1) This Ordinance may be called the Income Tax Ordinance, 1979.
(2) It extends to the whole of Pakistan.
(3) It shall come into force on the first day of July, 1979.

2. Definitions.-In this Ordinance, unless the context otherwise requires,-
(1) "agricultural income" means-
(a) any rent or revenue derived from land which is situated in Pakistan and is used for agricultural purposes;
(b) any income derived from such land by-
(i) agriculture; or
(ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him 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 him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii);

(c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator, or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any operation mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on:

Provided that 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 his connection with the land, requires as a dwelling-house, or as a store-house, or other out-building;

(2) "Appellate Additional Commissioner" means a person appointed to be an Appellate Additional Commissioner of Income Tax under section 4;

(3) "Appellate Tribunal" means the Appellate Tribunal constituted under section 133;

(4) "approved gratuity fund" means a gratuity fund which has been, and continues to be, approved by the Commissioner in accordance with the rules contained in Part III of the Sixth Schedule;

(5) "approved superannuation fund" means a superannuation fund, or any part of a superannuation fund, which has been, and continues to be, approved by the Commissioner in accordance with the rules contained in Part II of the Sixth Schedule;

(6) "assessee" means a person by whom any tax or any other sum of money is payable under this Ordinance, and includes-
(a) every person in respect of whom any proceeding under this Ordinance has been taken for the assessment of his income or the income of any other person in respect of which he is assessable or of the amount of refund due to him or to such other person;
(b) every person who is required to file a return of total income under section 55, section 72 or section 81; and
(c) every person who is deemed to be an assessee, or an assessee in default, under any provision of this Ordinance.

(7) "assessment" includes re-assessment and additional assessment and the cognate expressions shall be construed accordingly;

(8) "assessment year" means the period of twelve months beginning on the first day of July next following the income year and includes any such period which is deemed, under any provision of this Ordinance, to be the assessment year in respect of any income or any income year;

(9) "average rate of tax" means the rate arrived at by dividing the amount of tax calculated on the total income by such income;

(10) "banking company" has the same meaning as in the Banking Companies Ordinance, 1962 (LVII of 1962), and includes any body corporate formed by, or under, any law for the time being in force which transacts the business of banking in Pakistan;

(11) "business" includes any, trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture;

(12) "capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include-
(i) any stock-in-trade (not being stocks and shares), consumable stores or raw materials held for the purposes of his business or profession;
(ii) personal effects, that is to say, movable property (including wearing apparel, jewellery and furniture) held for personal use by the assessee or any member of his family dependent on him; and
(iii) any land from which the income derived by the assessee is agricultural income;

(13) "Central Board of Revenue" means the Central Board of Revenue consti-tuted under the Central Board of Revenue Act, 1924 (IV of 1924);

(14) "charitable purpose" includes relief of the poor, education, medical relief and the advancement of any other object of general public utility;

(15) "Commissioner" means a person appointed to be a Commissioner of Income Tax under section 4 and includes a Director of Tax Withholding and a Director of Intelligence and Investigation;

(16) "company" means-
(a) company as defined in the Companies Act, 1913 (VII of 1913); or
(b) a body corporate formed by or under any law for the time being in force; or
(bb) a trust formed by or under any law for the time being in force; or
(c) a body corporate incorporated by or under the law of a country outside Pakistan relating to incorporation of companies; or
(cc) a modaraba as defined in the Modaraba Companies and Modarabas (Floatation and Control) Ordinance, 1980 (XXXI of 1980);
(d) the Government of a Province;
(e) a foreign association, whether incorporated or not, which the Central Board of Revenue may, by general or special order, declare to be company for the purposes of this Ordinance for such assessment year or years (whether commencing before, on or after the first day of July, 1979) as may be specified in the said order;

(17) "co-operative society" means a co-operative society registered under the Co-operative Societies Act, 1912 (XI of 1912) or under any other law for the time being in force in Pakistan for the registration of co-operative societies;

(17A) "Deputy Commissioner" means a person appointed to be a Deputy Commissioner of Income Tax under section 4 and includes an Assistant Commissioner of Income Tax, an Income Tax Officer, a Special Officer and a Tax Recovery Officer, a Deputy Director of Tax Withholding, an Assistant Director of Tax Withholding, a Deputy Director of Intelligence and Investigation, an Assistant Director of Intelligence and Investigation.

(18) "director" and "manager", in relation to a company, have the meaning assigned to them in the Companies Act, 1913 (VII of 1913);

(19).Director-General of Intelligence and Investigation means a person appointed to be a Director-General of Intelligence and Investigation under section 4;

(19A) "Director-General of Training and Research" means a person appointed to be a Director-General of Training and Research under section 4 and includes a person appointed to be a Director of Training and Research, an Additional Director of Training and Research, a Deputy Director of Training and Research, an Assistant Director of Training and Research or any other officer, howsoever designated, appointed by the Central Board of Revenue for the purposes of any or all functions performed by the Director-General of Training and Research and any other function that may be assigned to him;

(19AA) Director-General of Tax Withholding means a person appointed to be a Director-General of Tax Withholding under section 4;

(20) "dividend" includes-
(a) any distribution by a company of accumulated profits to its shareholders or modaraba certificate holders, whether capitalised or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company;
(b) any distribution by a company, to its shareholders or modaraba certificate holders, of debentures, debenture stock or deposit certificates in any form, whether with or without interest, and any distribution to its preference shareholders of shares by way of  bonus,or bonus shares to the extent to which the company possesses accumulated profits whether capitalized or not;
(c) any distribution made to the shareholders or modaraba certificate holders 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 capitalised or not;
(d) any distribution by a company to its shareholders or modaraba certificate holders on the reduction of its capital, to the extent to which the company possesses accumulated profits, whether such accumulated profits have been capitalised or not; and
(e) any payment by a private company of any sum (whether as representing a part of the assets of the company or otherwise) by way of advance or loan to a shareholder or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company, in either case, possesses accumulated profits;

but does not include-
(i) a distribution made in accordance with sub-clause (c) or sub-clause (d) in respect of any share for full cash consideration, or redemption of debentures or debenture-stock, where the holder of the share or debenture is not entitled in the event of liquidation to participate in the surplus assets;
(ii) any advance or loan made to a shareholder by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company;
(iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clauses(c), to the extent to which it is so set off.

Explanation.-The expression "accumulated profits",-
(a) wherever it occurs in this clause, includes any reserve made up wholly or partly of any allowance, deduction or exemption admissible under this Ordinance or the repealed Act, but does not include capital gains arising before the first day of April, 1946 or after the thirty-first day of March, 1949 and before the eighth day of June, 1963;
(b) as used in sub-clauses (a), (b), (d) and (e), includes all profits of the company up to the date of such distribution or such payment, as the case may be; and
(c) as used in sub-clause (c), includes all profits of the company up to the date of its liquidation.

(21) "domestic company" means a Pakistani company and includes any company which, in respect of its income liable to tax under this Ordinance had made the prescribed arrangements for the declaration and payment, within Pakistan, of the dividends (including dividends on preference abates) payable out of such income and for the deduction of tax from such dividends;

(21A) "finance society" includes a co-operative society which accepts money on deposit or otherwise for the purpose of advancing loans or making investments in the ordinary course of business;

(22) "firm", "partner", and "partnership" have the meanings respectively assigned to them in the Partnership Act, 1932 (IX of 1932); and the expression "partner" includes any person, who being a minor, has been admitted to the benefits of partnership;

(23) "foreign company" means a company which is not a domestic company;

(24) "income" includes-
(a) any income, profits or gains, from whatever source derived, chargeable to tax under any provision of this Ordinance under any head specified in section 15;
(b) any loss of such income, profits or gains.
(c) any sum deemed to be income, or income accruing or arising or received in Pakistan under any provision of this Ordinance,and

but does not include, in the case of a shareholder of a domestic company, the amount representing the face value of any bonus shares or the amount of any bonus declared, issued or paid by the company to its share-holders with a view to increasing its paid-up share-capital;
"(d)    in the case of shareholder of a domestic company, the amount representing the face value of any bonus shares or the amount of any bonus declared, issued or paid by the company to its shareholders with a view to increasing its paid-up share capital," ; and


[25. ]

(25A) "Income Tax Panel" means a panel comprising an Inspecting Additional Commissioner, as its Chairman, and one or more Deputy Commissioners.

(26) "income year", in relation to any assessment year (hereafter in this clause, referred to as 'the said assessment year'), means-
(a) the financial year next preceding the said assessment year; or
[ (b) ]
(c) such period as the Central Board of Revenue may, in the case of any person or class of persons or any source of income, specify by notification in the official Gazette,

and includes any period which, under any provision of this Ordinance, is deemed to be an income year, or in respect of which a return of total income is required to be furnished, or any income is liable to be determined or assessed, or any tax is payable.

Explanation.-
(a) Where, in any case,-
[ i & ii ]
(iii) both sub-clause (a) and sub-clause (c) apply, the income year as specified under clause (c) shall be deemed to be the income year of the assessee in respect of his income from all sources; and
(iv) the sources of income of an assessee include two or more sources in respect of which income years have been specified under clause (c), the income year of the said income years ending last shall be deemed to be the income year of the assessee in respect of his income from all sources except the sources to which clause (c) applies; and
(b) as used in sub-clause (c), "period" means any period of twelve months, or any period of more or less than twelve months, and includes any such period as may commence from, or end on, any date, including a date falling before the commencement, or after the end, as the case may be, of the financial year next preceding the said assessment year;

(27) "Inspecting Additional Commissioner" means a person appointed to be an Inspecting Additional Commissioner of Income Tax under section 4 and includes an Additional Director of Tax Withholding and an Additional Director of Intelligence and Investigation;

(28) "Inspector of Income Tax" means a person appointed to be an Inspector of Income Tax under section 4 and includes an Auditor of Tax Withholding and an Inspector of Intelligence and Investigation;

(29) "interest" means interest payable in any manner in respect of any money borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the money borrowed or debt incurred or in respect of any credit facility which has not been utilised;

(29A) "modaraba", "modaraba company" and "Modaraba Certificate" have the meaning respectively assigned to them in the Modaraba Companies and Modarabas (Floatation and Control) Ordinance, 1980 (XXXI of 1980);

(30) "non-resident" means a person who is not resident;

(31) "Pakistani company" means a company formed and registered under the Companies Act, 1913 (VII of 1913), or a body corporate formed by, or under any law for the time being in force in Pakistan, having in either case its registered office in Pakistan and includes a trust formed by or under any law for the time being in force and the Government of a Province of Pakistan;

(32) "person" includes an individual, a firm, an association of persons, a Hindu undivided family, a company, a local authority and every other artificial juridical person;

(33) "prescribed" means prescribed by rules made under this Ordinance;

(34) "principal officer", used with reference to a local authority, or a company or any association of persons, includes-
(a) managing director, secretary, treasurer, manager, agent or accountant, by whatever designation known, of the authority, company or association; and
(b) any person connected with the management or administration of the local authority, company, or association upon whom the Deputy Commissioner has served a notice of his intention of treating him as the principal officer thereof;

(35) "profession" includes vocation;

(36) "public servant" has the same meaning as in the Pakistan Penal Code (XLV of 1860), and includes any income tax authority and any person employed-in the execution of this Ordinance;

(37) "recognised provident fund" means a provident fund which has been, and continues to be, recognised by the Commissioner in accordance with the rules contained in Part I of the Sixth Schedule;

(37A) "Regional Commissioner" means a person appointed to be a Regional Commissioner of Income Tax under section 4 and includes a Director - General of Tax Withholding and an Director -General of Intelligence and Investigation;

(38) "registered firm" means a firm which has been, and continues to be, registered under section 68;

(39) "repealed Act" means the Income Tax Act, 1922 (XI of 1922);

(40) "resident", in relation to any income year, means-
(a) an individual, who-
(i) is in Pakistan in that year for a period of, or for periods amounting in all to, one hundred and eighty two days or more; or
(ii) is in Pakistan for a period of, or periods amounting in all to, ninety days or more in that year and who, within the four years preceding that year, has been in Pakistan for a period of, or periods amounting in all to, three hundred and sixty-five days or more; or
(b) a Hindu undivided family, firm, or other association of persons, the control and management of whose affairs is situated wholly or partly in Pakistan in that year; or
(c) a Pakistani company or any other company, the control and management of whose affairs is situated wholly in Pakistan in that year;

(41) "return of total income" means the return of total income in the prescribed form, setting forth such particulars and accompanied by such statements, certificates and other documents, and verified in such manner, as may be prescribed;

(42) "share-holder" includes a preference share-holder;

(43) "tax" means income tax, super tax, surcharge and additional tax chargeable or payable under this Ordinance, and includes any penalty, fee or other charge or any sum or amount leviable or payable under this Ordinance;

(44) "total income" means the total amount of income referred to in section 11 computed in the manner laid down in this Ordinance; and includes any income which, under any provision of this Ordinance, is to be included in the total income of an assessee;

(45) "unregistered firm" means a firm which is not a registered firm; and

(46) "valuer" means a person appointed to be a valuer under section 4.