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CHAPTER B.-- INCOME FROM HOUSE PROPERTY
19. Unrealised rent to be allowed as deduction.-- Under clause
(i) of Sub-section (1) of section 20, deduction shall be allowed from the income
chargeable to tax under the head "Income from house property" of a sum as is
equal to the amount of net payable but not paid by a tenant of the assessee and so proved
to be lost and irrecoverable where--
(a) the tenancy is bona-fide;
(b) the defaulting tenant has vacated, or steps have been taken to compel him to vacate
the property;
(c) the defaulting tenant is not in occupation of any other property of the assessee;
(d) the assessee has taken all reasonable steps to institute legal proceedings for the
recovery of the unpaid rent or satisfies the
CHAPTER C.-- INCOME FROM BUSINESS OR PROFESSION
20.
Deduction of head office expenditure in the case of non-residents.-- In the case of an
assessee, being a non-resident, no allowance shall be made in computing the income
chargeable under the head "Income from business or profession" in respect of so
much of the expenditure of the nature of head office expenditure referred to in clause (e)
of section 24 as in excess of the amount as bears to the turn-over of the assessee in
Pakistan the same proportion as its total head office expenditure bears to its total would
turn-over.
21. Entertainment expenditure.-- For the purpose of clause (f) of
section 24, the following expenditure on entertainment shall be allowed, namely:--
(i) expenditure incurred abroad on entertainment in connection with business transactions;
(ii) expenditure incurred in Pakistan on entertainment of foreign customers and suppliers;
(iii) expenditure incurred on entertainment at the meetings of shareholdings, agents,
directors and employees;
(iv) expenditure incurred in the office on entertainment of customers and clients;
(v) expenditure incurred on entertainment at the opening of branches; and
(vi) expenditure incurred on entertainment of persons related directly to business.
22. Particulars required to be furnished for claiming depreciation
allowance, etc.-- The following particulars shall be furnished by an assessee at time
of filing a return of total income for any assessment year in order to claim allowance for
depreciation under clause (v) of sub-section (1) of section 23 read with the Third
Schedule to the Ordinance, namely:-
A. Assets in use:
1. Depreciation of building furniture and machinery and plant according to the class of
assets specified in the table to rule 2 of the Third Schedule.
2. If any building furniture or machinery and plant has not been used wholly for the
purpose of business or profession, the pat allocable to business or profession.
3. Written down value of each class of assets as at the beginning of the income year.
4. Capital expenditure incurred on additions, alterations, improvements and extensions.
5. Where any (but not all) asset or assets in a class of assets has or have been disposed
of during the income year, sale process thereof.
6. Written down value of the class of assets disposed of during the year in respect of
which depreciation allowance is inadmissible under clause (a) of rule 7 of the Third
Schedule.
7. Total value of each of assets on which depreciation is allowable (items 3+4 - items 5
or 6).
8. Prescribed rate:-
(a) Normal.
(b) Initial.
9. Depreciation allowable:--
(a) Normal.
(b) Initial.
10. Number of days of multiple shift working:-
(a) Double shift:
(b) Triple shift:
11. Depreciation allowable on multiple shift working.
12. Total depreciation allowance (item 9 + item 11).
B. Assets disposed of during the income year:
1. Sale process of the class of assets disposed of during the income year.
2. Written down value of the class of assets mentioned at item 1 as at the beginning of
the income year.
3. The excess or deficit of sale proceeds in relation to the written down value (item 2 -
item 1 or item 1 - item 2, as the case may be).
23. Income from royalties or fees for technical services.- For
the purpose of sub-section (4) of section 31, the income of a foreign company by way of
royalty or fees for technical services received from a Pakistani concern in pursuance of
any agreement made by the foreign company with the Pakistani concern shall be computed in
the following manner, namely:-
(1) In case the said income is by way of royalty,-
(a) when received in pursuance of an agreement made before the 8th day of March, 1980, or
an agreement made on or after the said date the proposal in respect of which was approved
by the Government before the said date, the deductions admissible under section 31 shall
be allowed in accordance with the provisions of the said section; and
(b) when received in pursuance of any agreement made on or after the 8th day of March,
1980, no deduction in respect of any expenditure or allowance shall be made under the said
section 31 from the gross amount of royalty.
(2) In case the said income is by way of fees for technical service:--
(a) when received in pursuance of an agreement made before the 8th day of march, 1980, or
an agreement made on or after the said date the proposal in respect of which was approved
by the Government before the said date the deductions admissible under section 31 shall be
allowed in accordance with the provisions of the said section;
(b) when received in pursuance of an agreement made on or after the 8th day of March,
1980, but before the 4th day of may, 1981, the deductions admissible under section 31
shall not exceed in the aggregate twenty per cent of the gross amount of such fees; and
(c) when received in pursuance of an agreement made on or after the 4th day of may, 1981,
no deduction in respect of any expenditure or allowance, except the following expenditure,
shall be made under section 31 from the gross amount of such fees, namely:--
(i) expenditure incurred in Pakistan on the provision of services of technical or other
personnel, including their salaries earned in Pakistan wherever paid;
(ii) expenditure incurred in Pakistan in respect of any work done in pursuance of such
agreement; and
(iii) expenditure incurred outside Pakistan in respect of any work done in pursuance of
such agreement not exceeding ten per cent of the gross amount of such fees.
24. Determination of income attributable to operations carried out in
Pakistan by non-residents and to transactions with non-residents.-- (1) In any case in
which the Deputy Commissioner of
Income Tax is of the opinion that the actual amount of the
income, profits or gains accruing or arising to a non-resident, whether directly or
indirectly through or from any business connection in Pakistan or through or from any
property or asset or source of income in Pakistan, or through or from transfer of a
capital asset situated in Pakistan cannot be ascertained, the amount of such income,
profits or gain for the purposes of assessment to income tax may be calculated on such
percentage of the turn-over so accruing or arising as the Deputy Commissioner of Income Tax
may consider to be reasonable or on an amount which bears the same proportion to the total
profits of the business of such person (such profits being computed in accordance with the
provisions of the Ordinance) as the receipt so accruing or arising bear to the total
receipt of the business, or in such other manner as the Deputy Commissioner of Income Tax
may deem suitable.
(2) The profits derived from any business carried on in the manner referred to in section
79 may, for the purposes of assessment to income tax, be determined in accordance with the
provisions of sub-rule (1).
25. Income which is partially agricultural and partially from
business.-- (1) In the case of income which is partially agricultural income as
defined in section 2 and partially income from business chargeable to tax under the head.
"Income from business or profession", in determining that part which is
chargeable to tax the market value of any agricultural produce which has been raised by
the assessee or received by him as rent-in-kind and which has been utilised as a
raw-material in such business or the sale receipts of which are included in the accounts
of the business shall be deducted, and no further deduction shall be made in respect of
any expenditure incurred by the assessee as a cultivator or a receiver of rent-in-kind.
(2) For the purpose of sub-rule (1), "market value" shall be deemed to be,-
(a) Where agricultural produce is ordinarily sold in the market in its raw state, or after
application to it of any process ordinarily employed by a cultivator or receiver of
rent-in-kind to render it fit to be taken to market, the value calculated according to the
relevant income year; and
(b) where agricultural produce is not ordinarily sold in the market in its raw state or
after application to it, any process aforesaid, the aggregate of:--
(i) the expenses of cultivation; and
(ii) the land revenue rent paid for the area in which it is grown.
CHAPTER D.-- INCOME FROM OTHER SOURCES
26. Valuation of taxable perquisites, benefits, allowances and
annuities, etc., in the cases of part time directors.-- (1) Subject to the provisions
of sub-rules (20 and (3), for the purposes of assessment under section 30, the allowances,
annuities, benefits and perquisites provided to an assessee or the members of his
household or dependents shall be deemed to be his income.
(2) In the case of entertainment, conveyance and any other allowance receivable in cash,
the amount, if any, by which the sum receivable by an assessee exceeds the amount actually
expended by him wholly, necessarily and exclusively in the performance of the duties of
the office held by him shall be deemed to be his income.
(3) In the case of any benefit, perquisite or annuity other than those specified in
sub-rule (1) provided to an assessee, the members of his household or dependents, the
amount which would have been expended by the assessee on obtaining such benefit,
perquisite pr annuity from an independent source in the same or a similar locality, if it
had not been so provided, as reduced by-
(i) the amount, if any, receivable form or payable by the assessee; and
(ii) the amount, if any, actually expended by the assessee wholly, necessarily and
exclusively in the performance of the duties of the office held by him, shall be deemed to
be his income:
Provided that the provision will not apply to any case where such benefit or perquisite is
in the form of transport provided free of cost or at a concessional rate by an undertaking
engaged in the transport of passengers or the carriage of goods to any part time director
or to any business associate (including the members of his household and dependents) in
any conveyance owned or chartered by the undertaking for the purposes of the transport of
passengers or the carriage of goods.
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