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43. Procedure for computation of the capital employed for the purpose of tax credit.- (1) For the purpose of section 48 and rule 4 of Part II of the Fifth Schedule to the Ordinance, the capital employed in an industrial undertaking to which the said section or, as the case may be, an undertaking to which the said rule, applies shall be taken to be the amount by which the value of its assets, computed in accordance with this rule, exceeds the amount of its liabilities so computed.

(2) In respect of assets for which the assessee is entitled to depreciation, the value shall be taken to be-

(a) if they have been acquired on or before the first day of the computation
period and used in the undertaking throughout the computation period - the written down value of the assets on the first day of the said period;

(b) if they have been acquired on or before the first day of the computation period and used in the undertaking for only a part of the computation period -one half of the written down value of the assets on the first day of the said period; and

(c) if they have been acquired after the first day of the computation period and are in use in the undertaking at the end of that period - one half of the cost of the assets.

(3) In respect of land or other fixed assets being the property of the assessee for which he is not entitled to depreciation, the value shall be taken to be-

(a) if they have been acquired on or before the first day of the computation period and used in the undertaking throughout the computation period - the cost of the assets;

(b) if they have been acquired on or before the first day of the computation period and used in the undertaking for only a part of that period - one half of the cost of the assets; and

(c) if they have been acquired after the first day of the computation period and are in use in the undertaking at the end of that period - one half of the cost of the assets:

Provided that in the case of assets representing capital expenditure on scientific research or on the construction of an educational institution or hospital, the cost of the assets shall be reduced by the amount of the allowance made in computing profits in accordance with the provisions of clauses (xii), (xiii) and (xiv) of sub-section (1) of section 23.

(4) In respect of trading stock or raw materials, the value shall be taken to be the mean of the value of such stock or materials at the beginning and at the end of the computation period.

(5) In respect of assets being debts due to the assessee, the value shall be
taken to be the nominal amounts of such debts at the end of the computation period as reduced by the amount of the allowance made in computing profit in accordance with clause (x) of sub-section (1) of section 23.

(6) In respect of assets other than those provided for in the foregoing sub-rules, the value shall be taken to be such sum representing the average amount of the capital employed in the undertaking as the Deputy Commissioner of Income Tax may determine.

(7) The liabilities of the assessee shall include any borrowed money or other debts owned by the assessee and any liability on account of income tax, super tax, surcharge and wealth tax, if any, whether on the basis of an assessment or by way of advance payment. The amount of borrowed money and of debts deductible as aforesaid shall be the amount of the principal in the case of borrowed money and the nominal amounts due in the case of debts and taxes at the end of the computation period, whether they are payable on that date or not.

(8) Any investment, the income from which is not to be included in computing the profits of the undertaking, and any such investment the income from which is exempted from tax under any other provision, shall be left out of account, but where any such investment is left out of account the sum, if any, to be deducted under sub-rule (7) in respect of borrowed money shall be computed as if the principal of the borrowed money were reduced by the amount of the investment.

(9) For the purpose of this rule,-
(a) "computation period" means the period for which the profits and gains of the undertaking are computed under section 22 or section 26;
(b) "depreciation" means the allowance admissible under clause (v) of sub-section (1) of section 23;
(c) "written down value" has the meaning assigned to it in the Third Schedule as read with clause (v) of sub-section (1) of section 23, the reference to the "income year" in the said schedule being construed, where necessary, as a reference to the computation period; and
(d) the expression "borrowed money" includes a bank overdraft.

44. Procedure and conditions for approval of shares or debentures of Equity Participation Fund entitled to tax credit under section 105.- (1) An application, for approval of shares and debentures issued by the Equity Participation Fund established under the Equity Participation. Fund Ordinance, 1970 (I of 1970), hereinafter referred to as "the Fund" for the purpose of tax credit under section 105 shall be made in duplicate to the Board setting out the following particulars, namely:-

(a) Paid up capital of the Fund as on the date of application;

(b) The amount of share capital contributed by the institutional investors and the classes of shares and their value;

(c) In case the proposed issue pertains to share capital,-
(i) the total amount and classes of shares proposed to be issued alongwith individual denomination of such shares;
(ii) the terms and conditions proposed to govern the new issue; and
(iii) the rate of dividends, if any, distributed among share-holders during the last five years.

(d) In case the proposed issue is in the nature of debentures,-
(i) the total amount and classes of debentures proposed to be issued;
(ii) the prescribed rate of interest and redemption period of these debentures; and
(iii) the terms and conditions proposed to govern the issue.

(e) Whether the approval of the competent authority under the Capital Issues (Continuation of Capital) Act, 1947 (XXIX of 1947), has been obtained for the proposed issue; and
(f) Investment policy of the fund as on the date of application.

(2) On receipt of an application under sub-rule (1), the Board may make such enquiries and call for such further information as may be deemed necessary.

(3) The Board shall, if it is satisfied that the shares or debentures which are the subject of application made under sub-rule (1) should be declared as approved, issue a declaration to that effect and notify the fact in the official Gazette and to the Fund.

45. Procedure and conditions for approval of debentures or negotiable bonds entitled to tax credit under section 105A.- (1) An application for approval of debentures or negotiable bonds issued by the Government or a Corporation owned by the Government for the purpose of tax credit under section 105A shall be made in duplicate to the Board setting out the following particulars, namely:-
(a) Name of the Government or Corporation issuing the debentures or bonds;
(b) Total value and individual denomination of the debentures or bonds;
(c) The prescribed rate of interest and redemption period; and
(d) The date of issue.

(2) On receipt of an application under sub-rule (1), the Board may make such enquiries and call for such further information as may be deemed necessary.

(3) The Board shall, if it is satisfied that the debentures or negotiable bonds which are the subject of application made under sub-rule (1) may be declared as approved, issue a declaration to that effect and notify the fact in the official Gazette and to the applicant.

(4) Where a credit under section 105A is claimed and allowed for any assessment year in respect of any investment made in shares or debentures approved under this rule, relief shall not be given in respect of it under any other provision of the Ordinance for the same or a later assessment year.

46. Procedure for approval of industrial undertaking under section 106.- (1) A public company desiring to be declared as a company formed for the purposes of, and actually engaged in carrying on, an approved industrial undertaking in Pakistan within the meaning of section 106 shall make an application in duplicate to the Board setting out the particulars specified in sub-rule (1) of rule 36.

(2) If an application under sub-rule (1) is made in respect of an industrial undertaking, which is not set up or has not started commercial production, the applicant company owning such industrial undertaking shall give reasons as to why the approval to such undertaking may be given before the setting up of start of commercial production, as the case may be.

(3) The application referred to in sub-rule (1) shall be signed by the Principal Officer of the applicant company and shall be accompanied by the following documents specified in sub-rule (3) of rule 36.

(4) On receipt of the application referred to in sub-rule (1) the Board may make such enquiries and call for such further information as may be deemed necessary.

(5) If the Board is satisfied that the company should be declared as a company formed for the purpose of, and actually engaged in carrying on, an approved industrial undertaking within the meaning of section 106, it shall issue a declaration to that effect and notify the fact in the official Gazette and to the company.

(6) Where an industrial undertaking is approved before the date of setting up or of commercial production by the said undertaking, the company owning the said undertaking shall,-

(i) intimate the Board the date of actual setting up and of commercial production, within 15 days of the said date.
(ii) furnish to the Board certificates under clauses (a), (d) and (e) of sub-section (2) of section 48 of the Income Tax Ordinance, 1979.
(iii) furnish to the Board a certificate to the effect that the said undertaking is located at a place mentioned in the application under sub-section (1).
The certificate referred to in clauses (ii) and (iii) above shall be endorsed by the Deputy Commissioner of Income Tax hearing jurisdiction to assess the income of the said company.

47. Conditions and procedures for approval of certain industrial undertakings for the purpose of tax credit under section 107.- (1) A company desiring that an industrial undertaking owned and managed by it but not fulfilling the conditions laid down in clauses (a), (d) and (e) of sub-section (2) of section 48 may be approved for the purposes of tax credit under section 107 shall make an application to the Board in duplicate setting out the particulars specified ** to sub-rule (1) of rule 42.

(2) The application referred to in sub-rule (1) shall be signed by the Principal Officer of the company and shall be accompanied by the documents specified in sub-rule (3), of rule 36.

(3) On receipt of the application referred to in sub-rule (1), the Board may make such enquiries and call for such further information as may be deemed necessary.

(4) If the Board is satisfied that the undertaking is one which should be approved for the purposes of section 107, it shall issue a declaration to that effect and notify the fact in the official Gazette and to the company.

48. Procedure for grant of tax credit for replacement, balancing, modernization or extension of machinery under section 107.- (1) Tax credit for replacement, balancing, modernization or extension of machinery under section 107 shall be allowed to an undertaking at the time of assessment on production of the following documents, namely:-

(a) A Certificate from the prescribed authority or a copy of the sanction letter issued by the licencing authority, as the case may be, testifying the fact that the machinery and plant in respect of which tax credit has been claimed was actually required for replacement, balancing, modernization or extension of the machinery and plant already installed in the undertaking;

(b) In the case of local machinery, a certificate by the managing director of the company owning the undertaking to the effect that replacement, balancing, modernization or extension of plant and machinery already installed in the undertaking has not been done by transfer of any plant or machinery used in a business which was already being carried on in Pakistan; and

(c) A certificate from the prescribed authority to the effect that plant and machinery in respect of which tax credit has been claimed has been duly installed in the undertaking.

(2) For the purpose of this rule,-
(a) "plant and machinery" means-
(i) machinery, operated by power of any description, such as is used in any industrial process, including the general transmission and distribution of power, for used in process directly connected with the extraction of minerals and timber, construction of buildings, roads, dams, bridges and similar structures and the manufacture of goods;

(ii) apparatus and appliances, including metering and testing apparatus and appliances specially adapted for use in connection with machinery specified in item (i);

(iii) mechanical and electrical control and transmission gear adapted for use in connection with machinery specified in item (i); and

(iv) component parts, including spare parts of machinery specified in items (i), (ii) and (iii), identifiable as for use in or with such machinery;

(b) "prescribed authority" means the Director or Additional Director of Industries of the Provincial Government concerned, the Secretary, Kashmir Affairs Division, or an officer authorised by him in this behalf or the Resident and Commissioner for Northern Areas, as the case may be, and, in the case of plant and machinery to which Notification No. S.R.O. 200 (I)/81, dated the 14th March , 1981, applies, includes the Assistant Collector of Customs and Central Excise concerned; and

(c) "licencing authority" means the Chief Controller of Imports and Exports and include the Joint Chief Controller, Controller, Joint Controller, Deputy Controller and Assistant Controller of Imports and Exports and such other officer as may be authorised to issue an import licence.

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