Income Tax Ordinance, 2001 — Section 65G: Tax credit for specified industrial undertakings

65G. Tax credit for specified industrial undertakings.- (1) When making certain eligible capital investments as specified in sub-section (2), the eligible taxpayers defined in sub-section (3) shall be allowed to take an investment tax credit of twenty five percent of the eligible investment amount, against tax payable under the provisions of this Ordinance including minimum and final taxes. The tax credit not fully adjusted during the year of investment shall be carried forward to the subsequent tax year subject to the condition that it may be carried forward for a period not exceeding two years.

(2)For the purposes of this section, the eligible investment means investment made in purchase and installation of new machinery, buildings, equipment, hardware and software, except self-created software and used capital goods.

(3)For the purpose of this section, eligible person means

(a)green field industrial undertaking as defined in clause (27A) of section 2 engaged in

(i)the manufacture of goods or materials or the subjection of goods or materials to any process which substantially changes their original condition; or

(ii)ship building: Provided that the person incorporated between the 30th day of June, 2019 and the 30th day of June, 2024 and the person is not formed by the splitting up or reconstitution of an undertaking already in existence or by transfer of machinery, plant or building from an undertaking established in Pakistan prior to commencement of the new business and is not part of an expansion project; and

(b)industrial undertaking set up by the 30th day of June 2023 and engaged in the manufacture of plant, machinery, equipment and items with dedicated use (no multiple uses) for generation of renewable energy from sources like solar and wind, for a period of five years beginning from the date such industrial undertaking is set up.] 135 Chapter III – Tax on Taxable Income 1[ ] 1 Section 65H shall be omitted and shall be deemed to have been omitted with effect from 2 nd March, 2022 through Finance Act, 2022. The omitted section read as follows: "65H. Tax credit for foreign investment for industrial promotion.- (I) Where a taxpayer being

(a)a non-resident Pakistani citizen having continued non-residential status for more than five years; or

(b)a resident individual having foreign assets declared in terms of section 116 or 116A by the 31" December, 2021, invests in a company incorporated on or after the 1st March, 2022, to set up an industrial undertaking in Pakistan with equity, not less than fifty million rupees, with funds remitted into Pakistan through proper banking channel as per the procedure to be prescribed by the State Bank of Pakistan, at any time up to the 31st December, 2022, that company shall be entitled to a one-time tax credit equal to one hundred percent of the amount remitted and credited in rupees in the bank account of such company against tax liability for the tax year in which commercial production commences.

(2)Where no tax is payable by the taxpayer in respect of the tax year in which the commercial production has commenced or where the tax payable is less than the amount of credit as aforesaid, 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 taxpayer in respect of the following tax year and so on, but no such amount shall be carried forward for more than five tax years in the case of investment referred to in sub-section (1), however, the deduction made under this section shall not exceed in aggregate the limit specified in sub-section (1).

(3)This section shall not apply to a company or an industrial undertaking established by splitting up or reconstitution of a company or an industrial undertaking already in existence or by transfer of machinery or plant from an industrial undertaking established at any time before the 1 st March, 2022.

(4)The provisions of sub-section ( I) shall apply if commercial production commences by the 30th June, 2024.

(5)Where any credit is allowed under this section and subsequently it is discovered by the Commissioner Inland Revenue 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 Commissioner, notwithstanding anything contained in this Ordinance, shall 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.” 136 Chapter IV – Common Rules CHAPTER IV COMMON RULES PART I GENERAL