Income Tax Ordinance, 2001 — Section 65C: Tax credit for enlistment

65C. Tax credit for enlistment. —(1) Where a taxpayer being a company opts for enlistment in any registered stock exchange in Pakistan2[on or before the 30th day of June, 2022] a tax credit equal to 2 [twenty] percent of the tax payable shall be allowed for the tax year in which the said company is enlisted 2[“and for the following 2[three tax years:] [Provided that the tax credit for the last two years shall be ten per cent of the tax payable.] 3 Added by the Finance Act, 2011. 4 Section 65D omitted by the Finance Act, 2021. The omitted section read as follows: “65D. Tax credit for newly established industrial undertakings. — (1) Where a taxpayer being a company formed for establishing and operating a new industrial undertaking 4[including corporate dairy farming] sets up a new industrial undertaking4[including a corporate dairy farm], it shall be given a tax credit equal to 4[“an amount as computed in sub-section (1A)”] of the tax payable 4 [, including on account of minimum tax and final taxes payable under any of the provisions of this Ordinance,] on the taxable income arising from such industrial undertaking for a period of five years beginning from the date of setting up or commencement of commercial production, whichever is later. 4 [“(1A) The amount of a person’s tax credit allowed under sub-section (1) for a tax year shall be computed according to the following formula, namely: A x (B/C) where A is the amount of tax assessed to the person for the tax year before allowance of any tax credit for the tax year; B is the equity raised through issuance of new shares for cash consideration; and C is the total amount invested in setting up the new industrial undertaking.”]

(2)Tax credit under this section shall be admissible where

(a)the company is incorporated and industrial undertaking is setup between the first day of July, 2011 and 30th day of June, 4[4[“2021”]];

(b)industrial undertaking is managed by a company formed for operating the said industrial undertaking and registered under the Companies Ordinance, 1984 (XLVII of 1984) and having its registered office in Pakistan;

(c)the industrial undertaking is not established by the splitting up or reconstruction or reconstitution of an undertaking already in existence or by transfer of machinery or plant from an industrial undertaking established in Pakistan at any time before 1st July 2011; and

(d)the industrial undertaking is set up with 4[“at least seventy per cent”] equity4[raised through issuance of new shares for cash consideration:] Provided that short term loans and finances obtained from banking companies or non-banking financial institutions for the purposes of meeting working capital requirements shall not disqualify the taxpayer from claiming tax credit under this section.] [ ]

(4)Where any credit is allowed under this section and subsequently it is discovered, on the basis of documents or otherwise, by the Commissioner Inland Revenue that4[“the business has been discontinued in the subsequent five years after the credit has been allowed or”] any of the 4[conditions] specified in this section [were] not fulfilled, the credit originally allowed shall be deemed to have been wrongly allowed and the Commissioner Inland Revenue may, notwithstanding anything contained in 131 Chapter III – Tax on Taxable Income 1[65E. Tax credit for industrial undertakings established before the first day of July, 2011.—2[(1) Where a taxpayer being a company, setup in Pakistan before the first day of July, 2011, invests any amount, with 3[at least seventy per cent] new equity raised through issuance of new shares, in the purchase and installation of plant and machinery for an industrial undertaking, including corporate dairy farming, for the purposes of

(i)expansion of the plant and machinery already installed therein; or

(ii)undertaking a new project, a tax credit shall be allowed against the tax payable in the manner provided in sub section (2) and sub-section (3), as the case may be, for a period of five years beginning from the date of setting up or commencement of commercial production from the new plant or expansion project, whichever is later.] 4[(2) Where a taxpayer maintains separate accounts of an expansion project or a new project, as the case may be, the taxpayer shall be allowed a tax credit equal to one 5[an amount as computed in sub-section (3A)] of the tax payable, including minimum tax and final taxes payable under any of the provisions of this Ordinance, attributable to such expansion project or new project.] 6[(3) In all other cases, the credit under 7[sub-section (3A)] shall be such proportion of the tax payable, including minimum tax and final taxes payable under this Ordinance, re-compute the tax payable by the taxpayer for the relevant year and the provisions of this Ordinance shall, so far as may be, apply accordingly.] [(5) For the purposes of this section and sections 65B and 65E, an industrial undertaking shall be treated to have been setup on the date on which the industrial undertaking is ready to go into production, whether trial production or commercial production.] Chapter III – Tax on Taxable Income any of the provisions of this Ordinance, as is the proportion between the new equity and the total equity including new equity.] 1[(3A) The amount of a person’s tax credit allowed under sub-section (1) for a tax year shall be computed according to the following formula, namely: A x (B/C) where A is the amount of tax assessed to the person for the tax year before allowance of any tax credit for the tax year; B is the equity raised through issuance of new shares for cash consideration; and C is the total amount invested in the purchase and installation of plant and machinery for the industrial undertaking.] 2[(4)The provisions of sub-section (1) shall apply if the plant and machinery is installed at any time between the first day of July, 2011 and the 30th day of June, 3[ 4[2021] .] 5[(5) The amount of credit admissible under this section shall be deducted from the tax payable, including minimum tax and final taxes payable under any of the provisions of this Ordinance, by the taxpayer 6[, for a period of five years beginning from the date of setting up or commencement of commercial production from the new plant or expansion project, whichever is later.] 7[(6)] Where any credit is allowed under this section and subsequently it is discovered, on the basis of documents or otherwise, by the Commissioner Inland Revenue that 8[“the business has been discontinued in the subsequent five years after the credit has been allowed or”]any of the condition specified in this section 1 Inserted by the Finance Act, 2016. 2 Sub-section (4) substituted by the Finance Act, 2012. The substituted sub-section (1) read as follows: “(4) Where no tax is payable by the taxpayer in respect of the tax year in which such plant or machinery is installed, or where the tax payable is less than the amount of tax credit, the amount of such credit or so much of it as is in excess thereof, shall be carried forward and deducted from the tax payable by the taxpayer in respect of the following tax year: Provided that no such amount shall be carried forward for more than four tax years: Provided further that deduction made under sub-section (1) and under this sub-section shall not exceed in aggregate the limit of the tax credit specified in sub-section (1).” 3 The figure “2016” substituted by the Finance Act, 2016. 4 The figure “2019” substituted by Finance Act, 2018. 5 Inserted by the Finance Act, 2012. 6 The words “in respect of the tax year in which the plant or machinery referred to in sub-section (1) is installed and for the subsequent four years” substituted by Finance Act, 2015. 7 Sub-section (5) renumbered by the Finance Act, 2012. 8 Inserted by the Finance Act, 2016. 133 Chapter III – Tax on Taxable Income was not fulfilled, the credit originally allowed shall be deemed to have been wrongly allowed and the Commissioner Inland Revenue may, notwithstanding anything contained in this Ordinance, re-compute the tax payable by the taxpayer for the relevant year and the provisions of this Ordinance shall apply accordingly. 1[(7) For the purposes of this section, ‘new equity’ means equity raised through fresh issue of shares against cash by the company and shall not include loans obtained from shareholders or directors: Provided that short term loans and finances obtained from banking companies or non-banking financial institutions for the purposes of meeting working capital requirements shall not disqualify the taxpayer from claiming tax credit under this section.] 2 [65F. Tax credit for certain persons.– (1) Following persons or incomes shall be allowed a tax credit equal to one hundred per cent of the tax payable under any provisions of this Ordinance including minimum, alternate corporate tax and final taxes for the period, to the extent, upon fulfillment of conditions and subject to limitations detailed as under: Chapter III – Tax on Taxable Income

(a)return has been filed;

(b)withholding tax statements for the relevant tax year have been filed in respect of those provisions of the Ordinance, where the person is a withholding agent; and

(c)sales tax returns for the tax periods corresponding to relevant tax year have been filed if the person is required to file Sales Tax Return under any of the Federal or Provincial sales tax laws.