CHAPTER X
REFUND AND TAX CREDIT

96. Refunds.- (1) Where any person satisfies the Deputy Commissioner that the amount of tax paid by him, or on his behalf, for any year exceeds the amount with which he is properly chargeable under this Ordinance for that year, he shall be entitled to a refund of the amount so paid in excess.

(2) Where any advance or loan, to which sub-clause (e) of clause (20) of section 2 applies, is repaid by an assessee, he shall be entitled to a refund of the tax, if any, paid by him as a result of such advance or loan having been treated as dividend under the aforesaid provision.

97. Persons entitled to claim refund in certain cases.- (1) Where the income of any person is included under any provisions of this Ordinance in the total income of any other person, such other person only shall be entitled to a refund under section 96 or section 98, as the case may be, in respect of such income.

(2) Where any person is unable to claim or receive any refund under section 96 or section 98, as the case may be, on account of incapacity, insolvency, liquidation, death or any other cause, his legal representative or the trustee, or guardian or receiver, as the case may be, shall be entitled to claim or receive such refund for the benefit of such person or his estate.

98. Refund where salary, etc. is paid in arrears.- Where, by reason of,-
(a) income chargeable under the head "Salary" being paid in arrears or in advance; or
(b) any interest chargeable under the head "Interest on securities" being received in arrears, an assessee's total income is assessable at a rate higher than that at which it would otherwise have been assessed, the Deputy Commissioner may, on an application made by the assessee within one year of the date of receipt thereof, determine the tax payable as if the said income or interest had been received by him during the income year to which it relates and may refund the amount of tax, if any, paid in excess thereof.

99. Form of application, disposal of claims for refund and limitation.- (1) An application for refund under section 96, 97 or 98 shall be made in the prescribed form and verified in the prescribed manner.

(2) An application under sub-section (1) shall be made,-
(a) in any case to which sub-section (2) of section 96 applies, within one year or the end of the income year in which the advance or loan is repaid; and
(b) in other cases, within two years of the end of the assessment year to which it relates:

Provided that an Deputy Commissioner may, after obtaining the previous approval in writing of the Inspecting Additional Commissioner, admit an application made after the expiration of the aforesaid period, if he is satisfied that the assessee was prevented by sufficient cause from making the application within that period.

(3) When an application for refund is made under sub-section (1), the Deputy Commissioner shall, subject to the provisions of this Ordinance, determine, by an order in writing, the amount of refund on being satisfied that such amount is due to the assessee, and, where he is not so satisfied, he may, by an order in writing, reject the application.

(4) The Deputy Commissioner may, before making an order under sub-section (3), call for such particulars, documents or evidence as he may require.

(5) Where no order is made under sub-section (3) on or before the thirtieth day of June of the financial year next following the date on which the application for refund under sub-section (2) was made, the amount of refund claimed in the said application shall be deemed to be due to the assessee.

(6) The provisions of sub-section (5) shall not apply unless a notice stating that no order under sub-section (3) has been made, is served on the Commissioner on or before the thirty-first day of May of the said financial year.

100. Refund on assessment and appeal, etc.- Whereas as a result of any order passed under section 59, 59A, 62 or 63 or in appeal, revision, [--] or other proceedings under the Ordinance (not being an order setting aside an assessment), refund of any amount becomes due to the assessee, the Deputy Commissioner shall, except as otherwise provided in this Ordinance, refund the amount to the assessee irrespective of whether he has or has not made any claim in that behalf [:]

Provided that where a refund becomes due to an assessee, who had paid the tax under section 85 read with section 129, as a result of the decision of the Income Tax Appellate Tribunal, a sum at the rate of fifteen per cent per annum shall be payable to him after three months from the receipt of such decision.

101. Correctness of assessment, etc., not to be questioned through refund applications.- Nothing in this Chapter shall entitle any assessee to question the correctness of any assessment or other matter which has become final.

102. Additional payment for delayed refunds.- (1) Where a refund due, or deemed under sub-section (5) of section 99 to be due, to an assessee is not paid within three months of the date on which it becomes due, there shall be paid to the assessee, a further sum by way of compensation at the rate of fifteen per cent per annum of the amount of refund from the expiration of the said three months up to the date on which the refund order is made.

(2) For the purposes of this section, a refund shall be deemed to have become due,-
(a) in any case where the refund is required to be made in consequence of any order on an appeal or a revision or an appeal to the High Court or an appeal to the Supreme Court, on the date of receipt of such order by the Deputy Commissioner;
(b) in any case to which sub-section (5) of section 99 applies, on the thirtieth day of June of the financial year next following the date on which the application for refund was made; and
(c) in other cases, on the date on which the refund order is made.

(3) In computing the period for which the further sum referred to in such-section (1) is payable, the period for which the refund is withheld under section 103 shall be excluded.

(4) Nothing contained in this section shall apply in any case where any refund becomes due as a result of an order on appeal, revision or reference setting aside the assessment.

103. Power to withhold refund in certain cases.- Where an order giving rise to a refund is the subject matter of an appeal or further proceedings under this Ordinance, the  Deputy Commissioner may, with the prior approval of the Commissioner, withhold the refund till such time as the Commissioner may determine.

104. Adjustment of refund against tax.- Where, under the provisions of this Ordinance, the repealed Act, the Sales Tax Act, 1951 (III of 1951), the Gift-tax Act, 1963 (XIV of 1963), or the Wealth Tax Act, 1963 (XV of 1963), the central Excise Act, 1944(I of 1944), or the customs Act, 1969, (IV of 1969)   any refund is due to any person, the amount to be refunded or any part thereof, may be set off against the tax payable by that person under this Ordinance, or the repealed Act.

(2) Where any refund is due to any person under this Ordinance, the amount to be refunded or any part thereof, may be set off against the tax payable under any Act referred to in sub-section(1).

105. Substituted for "a reference" by Finance Act, 1997. (1) Where an assessee, being a Pakistani Company invests , at any time before the first day of July, 1991, any amount in the purchase of shares or debentures issued by the Equity Participation Fund established under the Equity Participation Fund Ordinance, 1970 (I of 1970), and approved by the Central Board of Revenue for the purposes of this section, a credit equal to fifty percent of the him to pay the amount specified in the certificate within such time as may be specified in the notice.

(2) The amount of the credit admissible under sub-section (1) shall be deducted from the tax payable by the assessee in respect of the income year in which the investment was made.

(3) Where no tax is payable by the assessee in respect of the assessment year relevant to the income year in which such investment was made, or where the amount of the tax payable is less than the amount of the credit, the amount of the credit or so much of it as is in excess thereof, as the case may be shall be carried forward and deducted in the manner laid down in sub-section (2) from the tax payable by the assessee in the following assessment year and so on, so, however, that the deductions made under sub-section (2) and this sub-section shall not exceed in the aggregate the limit specified in sub-section (1).

(4) Nothing contained in sub-section (1) shall apply in respect of any shares or debentures acquired by an assessee by purchase or transfer from a previous holder thereof, or in respect of any shares or debentures sold, transferred or otherwise disposed of by an assessee within the income year in which they were purchased.

(5) Where any shares or debentures in respect of which any credit has been allowed under sub-sections (1), (2) and (3) are sold, transferred or otherwise disposed of in any subsequent year, the assessee shall, notwithstanding anything to the contrary contained in this Ordinance, be liable to pay, in addition to any tax otherwise payable by it in respect of the income year in which such sale, transfer or disposal took place, additional tax equal to the amount of such credit, and where no such tax is otherwise payable by the assessee in respect of the said income year, the said additional tax shall be deemed to be the tax payable by it in respect of the said income year.

(6) The provisions of sections 96, 97, 99, 100, 103 and 104 shall, so far as may be, apply to tax credit under this section as they apply to refunds.

(7) The Central Board of Revenue may make rules regulating the procedure for the grant of approval under this section and any other matter connected with, or incidental to, the operation of this section.

105A. Tax credit for investment in debentures or negotiable bonds.- (1) Where an assessee invests , at any time before the first day of July, 1991 any amount in the purchase of debentures or negotiable bonds issued by the Government or a corporation owned by the Government and approved by the Central Board of Revenue for the purposes of this section, a credit equal to five per cent of nominal value of such debenture or bond shall be allowed against the tax payable by the assessee in the manner hereinafter provided:

(2) The amount of the credit admissible under sub-section (1) shall be deducted from the tax payable by the assessee in respect of the income year in which the investment is made and in any subsequent year in which the said investment is retained.

(3) Where no tax is payable by the assessee in respect of the assessment year relevant to the income year in which such investment was made, or where the amount of the tax payable is less than the amount of the credit, the amount of the credit or so much of it as is in excess thereof, as the case may be, shall be carried forward and deducted in the manner laid down in sub-section (2) from the tax payable by the assessee in the following assessment year and so on, so, however, that the deductions made under sub-section(2) and this sub-section shall not exceed in the aggregate the limits specified in sub-section (1).

(4) Nothing contained in sub-section (1) shall apply in respect of any debenture or bond-
(a) sold, transferred or otherwise disposed of by an assessee before the 31st December, in any year; and
(b) after fifteen years of the date of its issue.

(5) The provisions of sections 96, 97, 99, 100, 103 and 104 shall, so far as may be, apply to tax credit under this section as they apply to refunds.

(6) The Central Board of Revenue may make rules regulating the procedure for the grant of approval under this section and any other matter connected with, or incidental to the operation of this section.]

106. Tax credit for investment in share-capital of industrial companies.-(1) Where an assessee, being a company, invests , at any time before the first day of July, 1991, any amount in the purchase of shares issued by any other Pakistani company which fulfils the condition specified in Sub-section (7), credit for the amount so invested shall be allowed to the assessee against the tax payable by it in the manner and to the extent hereinafter provided.

(2) The credit under sub-section (1) shall be allowed at the following rates, namely:-

Where the industrial undertaking set up by the company is located in-

(3) The amount of the credit admissible under this section shall be deducted from the tax payable by the assessee in respect of the income year m which the investment was made.

(4) Where no tax is payable by an assessee in respect of the assessment year relevant to the income year in which such investment was made, or where the amount of the tax payable is less than the amount of the credit, the amount of the credit, or so much of it as is in excess thereof, as the case may be, shall be carried forward and deducted from the tax payable by the company in the following assessment year and so on, so, however, that the deductions made under sub-section (3) and this sub-section shall not exceed in the aggregate the limits specified in sub-section (2).

(5) Nothing contained in sub-section (1) shall apply in respect of any shares acquired by an assessee by purchase or transfer from a previous holder thereof or in respect of any shares sold or transferred or otherwise disposed of by an assessee within five years from the date of their purchase.

(5A) Notwithstanding anything contained in this section, a banking company or a financial institution shall not be entitled to tax credit under this section.

(6) Where any credit is allowed under this section and it is subsequently discovered by the Deputy Commissioner that-

(a) any shares, investment in which has resulted in the said credit, are sold, transferred or otherwise disposed of within five years of the date of their purchase; or

(b) the approved industrial undertaking referred to in sub-section (7)-
(i) was not set up within the period specified in the order of approval; or
(ii) was set up in an area other than that specified in the order of approval and in consequence of that the assessee was not entitled to any credit; or
(iii) was set up in an area other than that specified in the order of approval and in consequence of that the assessee was entitled to an amount of credit which is less than the amount actually allowed; or
(iv) has not started commercial production within the period specified in the order of approval,

the assessee shall, notwithstanding anything contained in this Ordinance, be liable to pay, in addition to any tax otherwise payable by it in respect of the income year in which such infringement was discovered, additional tax equal to,-

(i) in the case referred to in sub-section (iii) of clause (b), the difference in the amount actually allowed and the amount Of credit allowable; and
(ii) in other cases, the full amount of credit actually allowed, and

where no such tax is otherwise payable by the assessee in respect of the said income year, the said additional tax shall be deemed to be the tax payable by it in respect of the said income year.

(7) The following are the conditions referred to in sub-section (1), namely:-
(a) that the company is a public company; and
(b) that the company is formed for the purpose of, and is actually engaged in, carrying on in Pakistan an approved industrial undertaking owned by it.

Explanation.- As used in this sub-section,-
(a) "approved industrial undertaking" means an industrial undertaking which is set up in Pakistan after the fourteenth day of August, 1947 and is approved by the Central Board of Revenue for the purposes of this section; and

(b) "industrial undertaking" means-
(i) any undertaking which fulfils the conditions specified in clauses (a), (d) and (e) of sub-section (2) of section 48; and
(ii) any other industrial undertaking, which is approved by the Central Board of Revenue for the purposes of this section,

and includes any expansion of an industrial undertaking to which this section applies, were such expansion constitutes-

(a) an identifiable industrial unit for the production of any goods or class of goods; or
(b) a similar unit for the carrying on of an identifiable industrial process.

(7A) Notwithstanding anything contained in this section, the Central Board of Revenue may, in the case of any company applying for approval of an industrial undertaking owned by it, grant approval under this section before the said undertaking is set up or has commenced commercial production or may grant approval from such date, whether preceding or following the date on which the approval is granted, as it may specify in this behalf.

(8) The provisions of sections 96, 97, 99, 100,103 and 104 shall, so far as may be, apply to tax credit under this section as they apply to refunds.

(9) The Central Board of Revenue may make rules regulating the procedure for the grant of approval under this section and any other matter connected with, or incidental to, the operation of this section.

107. Tax credit for replacement, balancing and modernisation of machinery or plant.- (1) Where an assessee being a Pakistani company invests any amount in the purchase of plant and machinery for installation at any time between the first day of July, 1976 and the thirtieth day of June, 1988 or between the first day of July, 1990 and the thirtieth day of June, 1991, in an industrial undertaking set up in Pakistan and owned by it, for the purposes of replacement, balancing or modernisation of the machinery and plant already installed therein, credit at the rate of fifteen per cent of the amount so invested shall be allowed against the tax payable by it in the manner hereinafter provided.

Explanation.-As used in this sub-section,-

(a) "amount", in case of plant and machinery acquired on lease, means the amount expended by the lessor in the purchase of the said plant and machinery; and

(b) "purchase of plant and machinery" includes acquisition of plant and machinery on lease from a scheduled bank, a financial institution or a leasing company on such terms and conditions as may be approved by the Central Board of Revenue.

(2) The amount of credit admissible under this section shall be deducted from the tax payable by the assessee in respect of the income year in which the machinery or plant in the purchase of which the amount referred to in sub-section (1) is invested is installed.

(3) Where no tax is payable by the assessee in respect of the assessment year relevant to the income year in which such plant or machinery is installed, or where the tax payable is less than the amount of the credit, the amount of the credit or so much of it as is in excess thereof, as the case may be, shall be carried forward and deducted from the tax payable by the assessee in respect of the following assessment year, and so on, but no such amount shall be carried forward for more than two assessment years so, however, that the deductions made under sub-section (2) and this sub-section shall not exceed in the aggregate the limit specified in sub-section (1).

(4) The provisions of sub-section (1) and (2) shall also apply in the like manner to any plant and machinery installed, for the purposes of extension of the industrial undertaking:-

(i) on or after the first day of July, 1978, and before the thirtieth day of June, 1983 in the territories of Pakistan; or
(ii) on or after the first day of July, 1983, in the territories of Pakistan (excluding Talukas of Karachi and Hyderabad, and Tehsils of Faisalabad and Lahore, and such adjoining areas of Lahore Tehsil as may be notified in this behalf by the Federal Government).

(5) Where any credit is allowed under this section and subsequently it is discovered by the Deputy Commissioner that any one or more of the conditions specified in this section was or were not fulfilled, as the case may be, the credit originally allowed shall be deemed to have been wrongly allowed and the Deputy Commissioner may, notwithstanding anything contained in this Ordinance, recompute the tax payable by the assessee for the relevant year and the provisions of section 65 shall, so far as may be, apply accordingly, the period of ten years specified in sub-section (3) of that section being reckoned from the end of the assessment year relevant to the income year in which the infringement was discovered.

(6) The provisions of sections 96, 97, 99, 100, 103 and 104 shall, so far as may be, apply to tax credit under this section as they apply to refunds.

(7) As used in this section, "industrial undertaking" means an undertaking which fulfils the conditions laid down in clauses (a), (d) and (e) of sub-section (2) of section 48 or which is engaged in the business of exploration or extraction of coal deposits and includes any such undertaking which is approved by the Central Board of Revenue for the purposes of this section.

(8) The Central Board of Revenue may make rules regulating the procedure for the grant of approval under this section and any other matter connected with, or incidental to, the operation of this section.

107A. Tax Credit.- (1) Notwithstanding anything contained in this Ordinance, the Central Board of Revenue may make scheme or schemes for the provisions of tax credit, and such credit shall be available to such persons or classes of persons, in such manner, at such rates and in such areas as may be specified in such scheme or schemes.

(2) The Central Board of Revenue may, by-notification in the official Gazette, make provisions relating to the adjustment of tax credit, or any other matter connected with or incidental to, the tax credit.

107AA. Tax Credit for Investment.- Where an assessee being a Pakistani company invests any amount in the purchase of plant and machinery for installation, at any time between the first day of July, 2000 and the 30th day of June, 2002, in an industrial undertaking set up in Pakistan and owned by it, credit equal to ten per cent of the amount so invested shall be allowed against the tax payable by it in the manner hereinafter provided.

(2) The amount of credit admissible under this section shall be deducted from the tax payable by the assessee in respect of the income year in which the machinery or plant in the purchase of which the amount referred to in sub-section (1) is invested, is installed.

(3) Where no tax is payable by the assessee in respect of the assessment year relevant to the income year in which such plant or machinery is installed, or where the tax payable is less than the amount of the credit, the amount of the credit, or so much of it, as is in excess thereof, as the case may be, shall be carried forward and deducted from the tax payable by the assessee in respect of the immediately following assessment year only.

(4) Where any credit is allowed under this section and subsequently it is discovered by the Deputy Commissioner of Income Tax that any one or more of the conditions specified in this section was, or were, not fulfilled, as the case may be, the credit originally allowed shall be deemed to have been wrongly allowed and the Deputy Commissioner, may, notwithstanding anything contained in this Ordinance, recompute the tax payable by the assessee for the relevant year and the provisions of section 65 shall, so far as may be, apply accordingly.

(5) The provisions of sub-section (1) and (2) shall also apply in the like manner to any plant and machinery installed, for the purposes of balancing, modernization and replacement.

(6) Nothing contained in rule 5A of the Third Schedule to the Ordinance, shall apply to an industrial undertaking which claims tax credit under sub-section (1).