Income Tax Ordinance, 2001 — Section 113C: Alternative Corporate Tax

2[113C. Alternative Corporate Tax.- (1) Notwithstanding anything contained in this Ordinance, for tax year 2014 and onwards, tax payable by a company 3[in respect of income which is subject to tax under Division II of Part I of the First Schedule or minimum tax under any of the provisions of this Ordinance”] shall be higher of the Corporate Tax or Alternative Corporate Tax.

(2)For the purposes of this section.

(a)“Accounting Income” means the accounting profit before tax for the tax year, as disclosed in the financial statements or as adjusted under sub-section (7) or sub-section (11) excluding share from the associate recognized under equity method of accounting;

(b)"Alternative Corporate Tax" means the tax at a rate of seventeen per cent of a sum equal to accounting income less the amounts, as specified in sub-section (8), and determined in accordance with provisions of sub-section (7) hereinafter; 4[“(c) “corporate tax” means higher of tax payable by the company under Division II of Part I of the First Schedule and minimum tax payable under any of the provisions of this Ordinance.”]

(3)The sum equal to accounting income, less any amount to be excluded there from under sub-section (8), shall be treated as taxable income for the purpose of this section.

(4)The excess of Alternative Corporate Tax paid over the Corporate Tax payable for the tax year shall be carried forward and adjusted against the tax payable under Division II of Part I of the First Schedule, for following year. 1 Section 113B omitted by the Finance Act, 2016. The omitted section reads as follows: “113B. Minimum tax on land developers.— (1) Subject to this Ordinance, where a person derives income from the business of development and sale of residential, commercial or other plots, he shall pay minimum tax1[at the rate of two per cent of the value of land notified by any authority for the purpose of stamp duty]. The Federal Government may also specify the mode, manner and time of payment of such amount of tax.

(2)The tax paid under this section shall be minimum tax on the income of the developer from the sale of such residential, commercial or other plots sold or booked."] 2Section 113C inserted by the Finance Act, 2014. 3 Inserted by the Finance Act, 2015 4 Clause (c) Substituted by the Finance Act, 2015. The substituted clause (c) read as follows: “Corporate Tax” means total tax payable by the company, including tax payable on account of minimum tax and final taxes payable, under any of the provisions of this Ordinance but not including those mentioned in sections 8, 161 and 162 and any amount charged or paid on account of default surcharge or penalty and the tax payable under this section. 220 Chapter IX – Minimum Tax

(5)If the excess tax, as mentioned in sub-section (4), is not wholly adjusted, the amount not adjusted shall be carried forward to the following tax year and adjusted as specified in sub-section (4) in that year, and so on, but the said excess cannot be carried forward to more than ten tax years immediately succeeding the tax year for which the excess was first computed. Explanation.- For the purpose of this sub-section the mechanism for adjustment of excess of Alternative Corporate Tax over Corporate Tax, specified in this section, shall not prejudice or affect the entitlement of the taxpayer regarding carrying forward and adjustment of minimum tax referred to in section 113 of this Ordinance.

(6)If Corporate Tax or Alternative Corporate Tax is enhanced or reduced as a result of any amendment, or as a result of any order under the Ordinance, the excess amount to be carried forward shall be reduced or enhanced accordingly.

(7)For the purposes of determining the “Accounting Income”, expenses shall be apportioned between the amount to be excluded from accounting income under sub-section (8) and the amount to be treated as taxable income under sub section (2).

(8)The following amounts shall be excluded from accounting income for the purposes of computing Alternative Corporate Tax:

(i)exempt income; 1[“(ii) income which is subject to tax other than under Division II of Part I of the First Schedule or minimum tax under any of the provisions of this Ordinance;”;]

(xii)income subject to tax credit under section 65D 2[,65E and 100C] 3[ ]

(9)The provisions of this section shall not apply to taxpayers chargeable to tax in accordance with the provisions contained in the Fourth, Fifth and Seventh Schedules. 1Sub-Clause (ii) substituted by Finance Act, 2015. The substituted clause read as follows:

(ii)income subject to tax under section 37A and final tax chargeable under sub-section (7) of section 148, section 150, sub-section (3) of section 153, sub-section (4) of sections 154, 156 and sub-section (3) of section 233;” 2 The word and figure “and 65E” substituted by the Finance Act, 2015 3 Sub-clause (iv) and (v) omitted by Finance Act, 2015. The omitted clause read as follows: “(iv) income subject to tax credit under section 100C;” “(v) income of the company subject to clause (18A) of Part-II of the Second Schedule;” 221 Chapter IX – Minimum Tax

(10)Tax credit under 1[sections 64B and] 65B shall be allowed against Alternative Corporate Tax.

(11)The Commissioner may make adjustments and proceed to compute accounting income as per historical accounting pattern after providing an opportunity of being heard.”;] Chapter X – Procedure CHAPTER X PROCEDURE PART I RETURNS