Income Tax Rules, 2002, as published 30 June 2002

This is the Income Tax Rules, 2002 as it stood on 30 June 2002. It runs to 248 pages and contains 226 sections, with 0 amendment footnotes.

What this document is

Published by the Federal Board of Revenue as part of the Income Tax Rules, 2002 collection. A consolidation of this kind folds every amendment made up to its cover date into the text, so it shows the law as it stood on 30 June 2002 rather than as originally enacted.

The date above was taken from the file name rather than a consolidation statement on the cover, so treat it as approximate.

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The operative text holds roughly 79,588 words across 226 sections.

What changed since the previous version

This is the earliest version of the Income Tax Rules, 2002 in this collection, so there is nothing here to compare it against. It is the baseline for the versions that follow.

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The full text of this version

All 226 sections as they appear in this document, reproduced from the source PDF. Amendment footnotes follow at the end.

1. Short title and commencement

(1) These rules may be called the Income Tax Rules, 2002.

(2) They extend to the whole of Pakistan.

(3) They shall come into force on the first day of July, 2002; except rules 3 to 9 which shall be applicable in respect of income earned on or after first day of July. 2002, and other rules covered by the rule on “Saving”.

An irrevocable Bank Guarantee shall be furnished in all cases, unless specifically exempted by the Competent Authority of Pakistan, on the format as prescribed as under: To, The President of Pakistan acting through and represented by the Commissioner 2[“Inland Revenue”], [INSERT: LTU/RTO] Government of Pakistan [INSERT: City] Bank Guarantee Bank Guarantee as security for keeping the recovery of Tax Demand in abeyance during the pendency of the proceedings of Mutual Agreement Procedure (MAP) under the Agreement for Avoidance of Double Taxation. This Deed of Bank Guarantee made this __________ day of ___________, 20, by [INSERT: Name and Address of Guaranteeing Bank] (hereinafter called “the Bank”, which expression shall, unless excluded by or repugnant to the context, include its successors and assignees) to the President of Pakistan acting through and represented by the Commissioner 3[ ] [INSERT: LTU/RTO], Government of Pakistan, [INSERT: City], (hereinafter called “the Government”) WHEREAS the Government has agreed that [INSERT: Name, Address, and National Tax Number of the Taxpayer] (hereinafter called “the Taxpayer”, which expression shall, unless excluded by or repugnant to the context, include its successors and assignees) shall furnish a Bank Guarantee in respect of a demand of Rs.[INSERT: Amount of Tax in dispute] for the tax year(s)…, in lieu of which the recovery of any part of such demand shall not be enforced until thirty days after the Commissioner receives written notice of the MAP Agreement arrived at between the Competent Authorities of the Governments of Pakistan and the [INSERT: Name of the Country] AND WHEREAS THE Bank has, at the request of the Taxpayer, agreed to execute these presents: NOW THEREFORE THIS DEED WITNESSES AS FOLLOWS: In consideration of the Government agreeing to treat the Taxpayer as not in default for Rs.[INSERT: Amount of Tax in dispute, plus interest specified in paragraph 1 below] for the tax year(s)…., 1. The Bank irrevocably guarantees and undertakes, for the term provided in paragraph 2 that the Bank shall indemnify and keep indemnified the Government to the extent of the said sum of Rs.[INSERT: Amount of Tax in dispute] (Rupees [written text] and the recurring additional tax accruing at the rate specified in the Ordinance. The Bank further guarantees and undertakes that on advice from the Government that the Taxpayer has failed and neglected to observe any of its obligations to the Government with regard to the terms and conditions of any agreements between the Taxpayer and the Government or between the Competent Authority of Pakistan and that of the country on whose request MAP proceedings were initiated that may underlie or subsequently cover and encompass this Bank Guarantee, the decision of the Government as to whether any amount should be paid out by the Bank to the Government hereunder shall be final and binding. 2. The Bank further agrees that the guarantee herein contained shall remain in full force and effect for a period of one year from the date hereof or till [INSERT: date]; and if the 1 Rule inserted by SRO 714(I)/2006, dated July 05, 2006, originally numbered as “19D”, erroneously, later renumbered as “19G” by SRO 1032(I)/2006, October 03, 2006. 2 The words “Income Tax Enforcement” substituted by SRO 1218(I)/2015 dated 08.12.2015. 3 The words “Income Tax Enforcement” omitted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 51

Government, in case the MAP proceedings are not finalized till the aforementioned date, does not receive a renewal of this Bank Guarantee or a substitute Bank Guarantee for the amounts of tax and interest in dispute prior to thirty days before the expiration date of this Bank Guarantee, the Government may instruct the Bank to pay the guaranteed amounts prior to expiration of the Bank Guarantee. Provided that, notwithstanding any other thing contained herein, the liabilities of the Bank shall be limited to the maximum of the guaranteed amount of Rs.[INSERT: Amount of tax in dispute] (Rupees [INSERT: written text] ), as increased by interest pursuant to paragraph 1 during the term of this Bank Guarantee; and unless a claim in writing is lodged with the Bank, or action to enforce the claim under the guarantee is filed or initiated against the Bank, within six months from the date of expiry of the guarantee period fixed hereunder or where such period is extended under the terms of this guarantee from the date of such extended period as the case may be, all the rights of the Government under this guarantee shall be forfeited and the Bank shall be relieved and discharged from liabilities hereunder. 3. The obligations of the Bank to the Government under this Bank Guarantee will terminate on issuance of the Notification by the Commissioner drawing down upon the bank guarantee upon the occurrence of any of the following; namely:-

(i) the payment by the Bank or the Taxpayer to the Government of the guaranteed amounts;

(ii) the payment by the taxpayer to the government of all amounts owed, as agreed to by the Competent Authorities in a MAP Agreement;

(iii) a MAP Agreement by the Competent Authorities proclaiming that the government will not seek to recover any part of the previously-demanded amount; or

(iv) the taxpayer furnishes to the Government afresh security from the Bank, or a similar security from another Bank. 4. The guarantee herein contained shall not be discharged or affected by any change in the constitution either of the taxpayer or of the Bank. 5. The Government shall have the fullest liberty without affecting the guarantee to postpone for any time, or from time to time, any of the powers exercisable by it against the taxpayer, or to either enforce or forbear any of the terms and conditions under this guarantee or under the Ordinance and the rules, and the Bank shall not be released from its liabilities under this guarantee by any exercise by the government of the liberty with reference to the matter aforesaid or by reasons of time being given to the taxpayer, or by any other act of forbearance or enforcement on the part of the Government, or by any indulgence by the Government to the taxpayer, or by any other matter or thing whatsoever which under the law relating to sureties would but for these provision have the effect of so releasing the Bank from its such liability. 6. The Bank hereby agrees and undertakes that any claim which the Bank may have against the taxpayer shall be subject and subordinate to the prior payment and performance in full of all the obligations of the Bank hereunder and the Bank will not without prior written consent of the Government exercise any legal rights or remedies of any kind in respect of any such payment or performance so long as the obligations of the Bank hereunder remain owing and outstanding, regardless of the insolvency, liquidation or bankruptcy of the taxpayer or otherwise howsoever. The Bank will not counter claim or set off against its liabilities to the Government hereunder any sum outstanding to the credit of the Government with it. 7. This Bank Guarantee shall be governed by and construed in accordance with the laws of the Islamic Republic of Pakistan (without regard to its principles of conflict of laws). 8. The Bank undertakes not to revoke this guarantee during its currency except with the prior consent of the Government in writing. Income Tax Rules, 2002 52

CHAPTER - V TAXATION OF NON-RESIDENTS

9. Notwithstanding anything hereinbefore contained liability of the Bank under this guarantee is restricted to Rs.[INSERT: Amount of Tax in dispute, plus interest specified in paragraph 1 above] (Rupees [written text]) and is valid for the period(s) described in paragraph 2 above. Unless a demand or claim under this guarantee is lodged with the Bank on or before [INSERT: date, as established in paragraph 2 above], all rights of the Government under the said guarantee shall be forfeited and the Bank shall be relieved and discharged from all liabilities there under whether or not this document shall have been returned to the Bank.

IN WITNESS WHEREOF, the Bank, through its duly authorized representative, has set its hand stamp on this ________________.day of ________________ at ________________

[Attorney per power of Attorney No.___________

Income Tax Rules, 2002 53

CHAPTER - VI TRANSFER PRICING CHAPTER - VI TRANSFER PRICING

2. Definitions

(1) In these rules, unless there is anything repugnant in the subject or context,-

(a) 3[“Federal Board of Revenue” means the Federal Board of Revenue, established under the Federal Board of Revenue Act, 2007;] Note: Notification No. SRO.1102 (I)/91(Oct 5, 1991) - The reference “Board” wherever appearing in the Rules includes a reference to “Regional Commissioners of Tax’” and “Commissioner of Tax”, as the case may be. [(aa) “Computerized Payment Receipt” means a computer generated receipt issued by the State Bank of Pakistan or the National Bank of Pakistan acknowledging payment of tax;

(ab) “digital certificate” or “digital signatures” means a digital certificate or digital signatures issued by an agency approved by the 5Federal Board of Revenue to issue such certificate or signatures; The words “Central Board of Revenue” substituted by the Finance Act, 2007. 2 The words “Central Board of Revenue” substituted by the Finance Act, 2007. Substituted by the Finance Act, 2007. The substituted definition read as follows:“Central Board of Revenue” means the Central Board of Revenue, established under the Central Board of Revenue Act, 1924 (IV of 1924); “ 4 Clauses “(aa) to (ac)” inserted by SRO 516(I)/2006, dated June 01, 2006. The words “Central Board of Revenue” substituted by the Finance Act, 2007 Income Tax Rules, 2002 1

CHAPTER - I

(ac) “e-intermediary” means a person registered as,-

(i) Chartered Accountant with the Institute of Chartered Accountants of Pakistan;

(ii) Cost and Management Accountant with the Institute of Cost and Management Accountants of Pakistan;

(iii) a legal practitioner entitled to practice in any Court in Pakistan;

(iv) a member of the Association of Chartered Certified Accountants, UK; or

(v) an Income Tax Practitioners, registered with Tax Bar affiliated with All Pakistan Tax Bar Association.]

(b) “electronic transmission” means a facsimile or electronic-mail transmission;

(c) “Ordinance” means Income Tax Ordinance, 2001 (XLIX of 2001), where however, context so provides, Income Tax Ordinance, 1979 (XXXI of 1979) till its relevance in a particular context; 1[ ]

(d) “section” means section of the Ordinance 2[; 3[ ]] 4[(e) “schedule“ means a schedule to these rules 5[; and]] 6[(f) “transmission“ means to transmit data through a computer network.]

(2) All other expressions used but not defined in these rules shall have the meaning assigned to them under the Income Tax Ordinance, 2001. 1 Word “and” omitted by Notification No. SRO 651(I)/2004, dated July 30, 2004. 2 Substituted for full stop by Notification No. SRO 651(I)/2004, dated July 30, 2004. 3 Word “and” omitted by Notification No. SRO 516(I)/2006, dated June 01, 2006. 4 Clause “(e)” inserted by Notification No. SRO 651(I)/2004, dated July 30, 2004. 5 Substituted for full stop by Notification No. SRO 516(I)/2006, dated June 01, 2006. 6 Clause “(f)” inserted by Notification No. SRO 516(I)/2006, dated June 01, 2006. Income Tax Rules, 2002 2

CHAPTER - II DETERMINATION OF INCOME - HEADS OF INCOME 1[PART-l: SALARY

3. Valuation of perquisites, allowances and benefits

For the purposes of computing the income chargeable to tax under the head “salary”, the value of all perquisites, allowances and benefits provided by the employer to the employee shall be included in the said income in accordance with the rules 4 to 7.

(a) __________________________________

(b) __________________________________

(c) __________________________________

(d) __________________________________ 1 Rule 218 renumbered as sub-rule (1) by SRO 392(I)/2009, dated May 19, 2009. 2 Word and figure “or 214” omitted by SRO 392(I)/2009, dated May 19, 2009. 3 Words inserted by SRO 392(I)/2009, dated May 19, 2009. 4 Substituted for “Regional Commissioner of Income Tax” by SRO 392(I)/2009, dated May 19, 2009. 5 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 139

5. Whether the organization has been registered under 1[the Companies Ordinance, 1984, or] the Societies Registration Act, 1860 (XXI of 1860), or the Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961 (XLVI of 1961), or any other law in substitution thereof relating to the registration of welfare organization or established in pursuance of a Trust Deed. Please give/state the law and the number and date of registration ____________________________. 6. Whether constitution, memorandum and articles of association, trust deed, rules and regulations or bye-laws, as the case may be, conform(s) to the provisions of sub-rule

(1) of rule 213. If so, please give the number of Article/ Clause/ Rule etc., for each provision. 7. Whether the organization ensures for the benefit of the general public or a particular community or class of persons only (give full details). 8. The number of members/ trustees of the organization on the date of application. Name. (in block letters) _______________________ Designation ________________________________ 2[(2) The 3[“Chief Commissioner”], Regional Tax Office or Large Taxpayer Unit shall make a decision on the appeal of the organization within sixty days of its filing.]

4. Valuation of accommodation

The value of accommodation provided by an employer to the employee shall be taken equal to the amount that would have been paid by the employer in case such accommodation was not provided. Provided that the value taken for this purpose shall, in any case, not be less than forty five percent of the minimum of the time scale of the basic salary or the basic salary where there is no time scale. 2[:] 2[Provided further that where House Rent Allowance is admissible @ thirty percent, the value taken for the purpose of this rule shall be an amount not less than thirty percent of minimum of the time scale of basic salary or the basic salary where there is no time scale.]

5. Valuation of conveyance

The value of conveyance provided by the employer to the employee shall be taken equal to an amount as below:-

(i) Partly for personal and 5% of: partly for official use

(a) the cost to the employer for acquiring the motor vehicle; or,

(b) the fair market value of the motor vehicle at the commencement of the lease, if the motor vehicle is taken on lease by the employer;

(ii) For personal use only 10% of:

(a) the cost to the employer for acquiring the motor vehicle; or,

(b) the fair market value of the motor vehicle at the commencement of the lease, if the motor vehicle is taken on lease by the employer; and 6. For the purpose of this part, “employee” includes a director of a company. 7. These rules shall be applicable for the salary income received after thirtieth of June, 2006.] 3[ ] 4[ ] 1 Part I substituted by Notification No. SRO 668(I)/2006, dated June 27, 2006, earlier it was substituted by Notification No. SRO 609(I)/2002, dated September 10, 2002. 2 Proviso inserted and before it colon substituted for full stop by SRO 716(I)/2008, dated July 02, 2008. Rule “8” omitted due to substitution of “Part-I” vide SRO 668(I)/2006, dated 27.06.2006. 4 Rule “9” omitted due to substitution of “Part-I” vide SRO 668(I)/2006, dated 27.06.2006 Income Tax Rules, 2002 3

PART-II : INCOME FROM BUSINESS

10. Entertainment expenditure

(1) For the purpose of clause (d) of section 21, which provides for a limitation on the deduction of entertainment expenditure, and subject to sub-rule (2), a deduction for entertainment expenditure shall be limited to expenditure incurred by a person that satisfies the conditions laid down in sub-section (1) of section 20 and which is-

(a) expenditure incurred outside Pakistan on entertainment in connection with business transactions or where such expenditure is allocated as head office expenditure;

(b) expenditure incurred in Pakistan on entertainment of foreign customers and suppliers;

(c) expenditure incurred on entertainment of customers and clients at the person’s business premises;

(d) expenditure incurred on entertainment at a meeting of shareholders, agents, directors or employees; or

(e) expenditure incurred on entertainment at the opening of branches. 1[ ]

(2) A person shall be allowed a deduction under sub-rule (1) only for expenditure incurred on the entertainment of persons related directly to the person’s business.

(3) In this rule, “entertainment” means the provision of meals, refreshments, and reasonable leisure facilities in accordance with the tradition of business and subject to overall norms and customs of business in Pakistan.

11. Agricultural produce as raw materials

(1) This rule applies to a person who is a cultivator or receiver of agricultural produce as rent-in- kind and who uses agricultural produce raised or received as raw materials in a business the income from which is chargeable to tax under the head “Income from Business”.

(2) In determining the amount of income of a person to whom this section applies, the market value of any agricultural produce raised or received as rent-in-kind by the person and used as raw materials in the person’s business shall be allowed as a deduction.

(3) For the purposes of sub-rule (2), the market value of agricultural produce shall be-

(a) where the agricultural produce is ordinarily sold in the market in its raw state or after application of any process ordinarily employed by a cultivator or receiver of agricultural produce as rent-in-kind to render it fit to be taken to market, the market price for the produce at the time it is used as raw materials in the person’s business; or

(b) in any other case, the sum of the following amounts, namely:-

(i) the expenses of cultivation; and

(ii) the land revenue rent paid for the area in which the produce is grown.

(4) No deduction shall be allowed for any expenditure incurred by a person as cultivator or receiver of agricultural produce as rent-in-kind, other than as specified in sub-rule (2). 1 Clause “(f)” omitted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 4

12. Particulars required to be furnished for claiming depreciation deduction or initial allowance amortization deduction

(1) The following particulars shall be furnished by a taxpayer at the time of furnishing a return of income for any tax year in order to claim a depreciation deduction under section 22, an initial allowance under section 23 or an amortization deduction under section 24 read with the Third Schedule to the Ordinance, namely:-

(a) a description of each depreciable asset and intangible in respect of which a deduction is claimed;

(b) where a depreciable asset or intangible is used in the tax year only partly in deriving income from business chargeable to tax, the extent of such part use; 1[ ]

(d) if the depreciable asset or intangible was acquired in the tax year, the date of acquisition;

(e) the written down value of each depreciable asset at the beginning of the tax year computed in accordance with sub-section (5) of section 22 and the cost of each intangible as determined under sub-section (11) of section 24;

(f) the amount of capital expenditure incurred in the tax year on additions, alterations. improvements or extensions in relation to any depreciable asset or intangible and where the depreciable or amortizable amount of such expenditure is limited under the Ordinance, the lower amount shall also be stated;

(g) the total value of each depreciable asset for which a depreciation deduction is allowable for the tax year (this is the sum of the amounts specified in clauses (e) and (f), less any initial allowance allowed for the asset in that year;

(h) the prescribed rate of depreciation and initial allowance (if any) for each depreciable asset or class of asset for the tax year, and the normal useful life for each intangible;

(i) the amount of depreciation deduction and initial allowance (if any) for each depreciable asset for the year and the amount of amortization deduction for each intangible for the year;

(j) the total depreciation deduction, initial allowance and amortization deduction allowed for the tax year; and

(k) the written down value of each depreciable asset and the cost of intangible at the end of the tax year, and the remaining normal useful life. Explanation: Addition to intangible to be separately shown.

(2) The following particulars shall be furnished by a taxpayer at the time of furnishing a return of income for any tax year in which a depreciable asset or intangible is disposed of in the year,

(a) the consideration received for the asset or intangible;

(b) the written down value of the asset or intangible disposed of at the beginning of the tax year; and

(c) the excess or deficit of the consideration received in relation to the written down value (i.e., clause (b) less clause (a) or clause (a) less clause (b), as the case may be). 1 Clause “(c)” omitted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 5

12A. Decommissioning certificate

As required under sub-rule (4A) of rule 2 of Part-I of Fifth Schedule to the Income Tax Ordinance, decommissioning certificate shall be submitted, as set out in Part-XA of the Second Schedule to these rules.]

13. Apportionment of expenditures

(1) This rule applies for the purposes of section 67, which provides for apportionment of expenditure incurred for more than one purposes.

(2) Any expenditure that is incurred for a particular class or classes of income shall be allocated to that class or classes, as the case may be. 2[(3) (a) Any common expenditure excluding financial expenses relatable or attributable to non-business advances or loans and the amount referred to in sub-rule(2) relatable to business including presumptive and exempt income, shall be allocated to each class of income according to the following formula, namely:- A x B/C where- A is the amount of the expenditure incurred; B is the total amount of gross receipts (without deduction of expenditures) for the tax year for the class of income; and C is the total amount of gross receipts (without deduction of expenses) and net gains for the tax year of all classes of income;

(b) Where, however, net gain, brokerage, commission and other income is to be taken into account on turnover of such transactions, such income shall be compared with gross profit from business for adopting figures for components “B” and “C” of the formula at (a) above 3[:] ] 4[Explanation.- The terms gross receipt means net off receipts or turnover of Sales Tax or EFD paid.”]

(4) Where expenditures are to be allocated among different classes of income under sub-rule (3) consideration shall be given to the nature and source of each class of income, on reasonable basis to earn each class of income (particularly, in allocating selling expenses).

(5) Where the allocation of expenditures is made in accordance with sub-rule (3) a certificate by the Chartered Accountants or Cost and Management Accountant stating the basis of allocation shall be accepted unless significant variations are found; and where books 5[of accounts] are not required to be audited, the reasonable basis based on the 6[sub-rules] (3) and (4) may be adopted which would be accepted by 3[the] Commissioner, unless variation is found. Significant variations would be beyond the limits of 10 ± in collection as in sub-rule (3) under any head of account. 7[(6)] In this rule.- 1 Rule 12A inserted by SRO 357(I)/2011, dated May 04, 2011. 2 Sub-rule (3) substituted by SRO 392(I)/2009, dated May 19, 2009. 3 The full stop substituted by SRO 1218(I)/2015 dated 08.12.2015. 4 Inserted by SRO 1218(I)/2015 dated 08.12.2015. 5 Inserted by SRO 392(I)/2009, dated May 19, 2009. 6 Substituted for “sub-rule” by SRO 392(I)/2009, dated May 19, 2009. 7 Substituted for “(8)” by SRO 392(I) 2009, dated May 19, 2009. Income Tax Rules, 2002 6

“class of income” means -

(a) Pakistan-source income chargeable under the head “Salary”;

(b) foreign-source income chargeable under the head “Salary”;

(c) Pakistan-source income chargeable under the head “Income from Property”;

(d) foreign-source income chargeable under the head “Income from Property”;

(e) Pakistan-source income chargeable under the head “Income from Business” (other than income subject to section 19);

(f) foreign-source income chargeable under the head “Income from Business” (other than income subject to section 19);

(g) Pakistan-source income from a speculation business chargeable under the head “Income from Business”;

(h) foreign-source income from a speculation business chargeable under the head “Income from Business”;

(i) Pakistan-source income chargeable under the head “Capital Gains”;

(j) foreign-source income chargeable under the head “Capital Gains”;

(k) Pakistan-source income chargeable under the head “Income from Other Sources”; (I) foreign-source income chargeable under the head “Income from Other Sources”;

(m) income exempt from tax;

(n) Chargeable to tax under section 5, 6 or 7; and

(o) amounts to which section 169 applies 1[ ] and “common expenditure” means expenditure that is not clearly allocable to any particular class or classes of income, such as general administrative and other such allocable expenditures. 2[PART-III: COMPUTATION OF CAPITAL GAIN ON DISPOSAL OF SECURITIES UNDER SECTION 37A OF THE INCOME TAX ORDINANCE, 2001

13A. Acquisition of securities

(1) A security may be acquired through purchase, exchange, bonus issue, right issue, gift, bequest, inheritance, leverage schemes and derivative contracts.

(2) A security may be acquired in the electronic book entry form or in the form of physical certificate.

(3) A security may be acquired through the trading platform provided by a stock exchange or through off market transactions.

(4) In case of securities other than units of an open mutual fund, broker’s bill for the purchase, broker generated computerized ledger statement of the investor’s brokerage account, CDC statement of the investor’s CDC sub account and payment of cost of acquisition through cheques shall be supportive evidence of acquisition of securities. 1 Words etc. “except proceed realised from exports from which separate provision is made as sub-rule (8)” omitted by SRO 392(I)/2009, dated May 19, 2009. 2 Part III inserted by SRO 112(I)/2011, dated February 11, 2011. Income Tax Rules, 2002 7

(5) In case of units of an open end mutual fund, certified statement of investor’s account provided by the asset management company shall be supportive evidence of acquisition of securities.

13B. Disposal of securities

(1) A security may be disposed of through sale, gift, exchange or transfer by the security holder in any other way.

(2) A security may be disposed of in the electronic book entry form or in the form of physical certificate.

(3) A security may be disposed of through the trading platform provided by a stock exchange or through off market transactions.

(4) In case of securities other than units of an open mutual fund, broker’s sale proceeds or difference bill, broker generated computerized ledger statement of the investor’s brokerage account, CDC statement of the investor’s CDC sub-account and proof of payment through cheques shall be supportive evidence of disposal of securities.

(5) In case of units of an open end mutual fund, certified statement of investor’s account provided by the asset management company shall be supportive evidence of disposal of securities.

13C. Holding period

(1) Securities held for a period upto a maximum of one eighty-two days and for a period upto maximum of three sixty-five days shall be taken as held for six months and one year respectively.

(2) In case of short positions, holding period shall be the period intervening between the date when a security is sold short and the date when the security is purchased to cover the short position.

(3) In case of futures contracts, holding period shall be the period intervening between the date of entry into a futures contract and the date of exit from such contract.

13D. Computation of capital gain or loss

(1) Capital gain or loss arising on the disposal of any security shall be computed on the basis of First In First Out (FIFO) inventory accounting method.

(2) Capital loss arising on disposal of securities in any tax year shall be set off against capital gain arising from the disposal of securities during that tax year to determine the taxable capital gain arising from the disposal of securities.

(3) Capital loss arising on disposal of securities in any tax year shall not be carried to a subsequent tax year.

13E. Computation of capital gain or loss on derivatives

(1) In case of long position in deliverable futures contracts, capital gain or loss shall be computed as the difference between cost of acquisition of securities underlying the futures contract and the consideration from disposal of those securities to close the long position at or before maturity of the contract.

(2) In case of short position in deliverable futures contracts, capital gain or loss shall be computed as the difference between the consideration from short sale of securities underlying the futures contract and the cost of acquisition to purchase those securities to close the short position on or before maturity of the contract. Income Tax Rules, 2002 8

(3) In case of cash settled futures contracts, capital gain or loss shall be the cash payment which the investor respectively receives from or makes to the other party to such contract to settle the contract on or before maturity of the contract.

(4) In case of options, capital gain or loss shall be the difference between exercise price of the options and the consideration from disposal of the securities underlying such options.

(5) In case of contracts of right, capital gain or loss shall be the difference between cost of acquisition of right shares underlying the contract and the consideration from disposal of those shares. 1[(6) Profit made on sale of borrowed shares shall be treated as capital gain when such shares are acquired for their return to Authorized Intermediary. Period intervening between acquisition and disposal of such borrowed shares shall determine the holding period in which the capital gain or loss falls. Specific Identification Method shall be used to determine the acquisition cost and consideration for disposal of such securities. The difference between cost of acquisition and consideration received against disposal (net off all borrowing costs) of such shares shall be treated as capital gain or loss. This rule shall be applicable to the securities borrowed in accordance with the Securities Lending and Borrowing Scheme approved by Securities and Exchange Commission of Pakistan.

(7) Profit made on disposal of shares acquired under Margin Finance Scheme, Margin Trading Scheme or other Financing or Leverage schemes approved by Securities and Exchange Commission of Pakistan shall be treated as capital gain. The difference between cost of acquisition (inclusive of borrowing cost) and consideration received against disposal of such shares shall determine the quantum of capital gain or loss.]

13F. Capital loss adjustment disallowed in certain cases

(1) Capital loss adjustment as provided in rules 13D and 13E shall not be admissible in the following cases, namely:- 2[(a) Wash Sales where capital loss realized on sale of specific security by an investor in preceded or followed in one month’s period by purchase of the same securities by the same investor whereby the transaction falls within one month between same two parties or their related parties where one was seller and other was buyer and they change places becoming buyer and seller respectively, thus, maintaining the portfolio.]; Explanation.- Wash sale is sale of security at loss and repurchase of the same security soon before or afterwards the sale so as to realize an unrealized loss to make it claimable as a set off against capital gain. The security sold in a wash sale is repurchased with the aim to re-acquiring it at or near its sale value in order to maintain the risk return profile of portfolio;

(b) Cross Trades where coordinated reshuffle of securities between two related accounts of the same investor. between two related accounts of the related investors between two membership cards of the same broker or between two related brokerage houses is undertaken and securities accumulating unrealized losses are sold to related accounts to artificially realize capital losses in one account without actually selling the securities to an outsider and the artificial losses so realized in an account are then used to minimize capital gain tax liability on the capital gain realized in the same account; and

(d) Tax Swap Sales where the investor having realized loss (as in the case of a wash sale) on a particular security does not repurchase the same security but chooses another similar security in the same sector thus not only minimizing or eliminating altogether 1 Sub-rules (6) and (7) inserted by SRO 1149(I)/2011, dated December 27, 2011. 2 Clause “(a)” substituted by SRO 1149(I)/2011, dated December 27, 2011. Income Tax Rules, 2002 9

liability on account of tax on capital gain. but also maintaining the portfolio broadly at the same risk return profile.

13G. Exemption from tax on capital gain

Exemption shall be applicable as provided under the Ordinance.

13H. Payment of tax on capital gain

(1) Every investor shall calculate tax on capital gain arising on securities held for a period upto six months, and above six months to one year, after the end of each tax year at the prescribed rates.

(2) Every investor other than individual investor shall e-file statement of advance tax on capital gain on the prescribed format within 1[twenty one] days after the end of each quarter with the tax authority having jurisdiction in the case.

(3) The liability to pay the due tax on capital gain shall lie on the investor who held the securities during the period for which tax on capital gain is to be paid and, in case of any benami accounts, on the investor who de facto owns the securities carried in such accounts.

13I. Maintenance of records

(1) Every investor shall maintain accounts and records separately for each of his brokerage accounts regarding his securities business which sufficiently enable for verification of the discharge of his obligations under these rules.

(2) Without prejudice to the generality of the foregoing provision, every investor shall maintain in particular the following accounts and records, namely:-

(a) fortnightly ledger statements of the investor’s brokerage account or each brokerage account if there are more than one account whether in the investor’s own name or any benami accounts, generated by his broker;

(b) fortnightly CDC statements of the investor’s CDC sub account or each CDC sub account corresponding to each brokerage account, if there are more than one brokerage account whether held in the investor’s own name or any benami accounts;

(c) record of security holdings and their value carried in the investor’s brokerage account on 30th June of each year;

(d) record of cash carried in the investor’s brokerage account as on 30th June of each year;

(e) record of funds deposited in the investor’s brokerage account; and

(f) record of funds withdrawn from the investors brokerage account. [13J. Exchange of information.- Information regarding member, broker, investor of a stock exchange required by the 3Federal Board of Revenue shall be obtained directly from National Clearing Company of Pakistan Limited (NCCPL).]

13K. Violations and penalties

1 Substituted for “seven” by SRO 1149(I)/2011, dated December 27, 2011. 2 Rule 13J substituted by SRO 1149(I)/2011, dated December 27, 2011. The words “Central Board of Revenue” substituted by the Finance Act, 2007 Income Tax Rules, 2002 10

Any investor who, in discharge of his obligations under these rules, violates any provision of the rules shall be liable to penalty and other charges provided in the Ordinance.

13L. Definitions

(1) In this Part, unless the context otherwise requires,-

(a) borrowed security means a security which an investor borrows under any security lending and borrowing scheme approved by the Securities and Exchange Commission of Pakistan, with an aim to returning the security to its lender, at any later date;

(b) capital gain means the difference between consideration from disposal of a security and the price paid or would have been paid for acquisition of such security when former exceeds the later, provided that capital gain, in case of a borrowed security, means the difference between consideration received from short selling of the borrowed security and the price paid or payable to purchase it for its return to the lender of such security;

(c) capital loss means the difference between cost of acquisition of a security and the consideration from disposal of that security when the former exceeds the later;

(d) cost of acquisition of any security means the market price of the security which the investor pays or would have paid to purchase such security, provided that cost of acquisition,-

(i) in case of a right share, means the discounted price at which the right shares are issued to a shareholders by the issue;

(ii) in case of a security acquired through bequest or inheritance means the market price of security at which the deceased person making bequest or leaving the inheritance, as the case may be, paid or would have paid to purchase such security; [ 2[“(iii)”] in case of bonus shares:

(i) shall be ex-bonus price if tax has already been paid under section 236M;

(ii) the value determined under section 236N, if tax is paid under section 236N; and

(iii) shall be zero, if no tax is paid under section 236M and 236N.

(iv) in case of initial public offering, the actual price paid to the issuer shall be treated as the cost of acquisition of such securities.]

(e) consideration from disposal of any security means the market price of a security which the investor receives or would have received on the sale of that security;

(f) derivative products means a financial product which derives its value from the underlying security or other asset, may be traded on a stock exchange of Pakistan and includes deliverable futures contracts, cash settled futures contracts, contracts of rights and options;

(g) date of acquisition shall be determined as under, namely:- 1 Clause “(d)(iii)” substituted by SRO 161(I)/2015, dated February 23, 2015. 2 The letter “(d)” re-numbered by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 11

(i) in case of security in electronic book entry form, earlier of the dates on which the investor makes the purchase or otherwise gets title to the security and the security is transferred to the investor’s brokerage account, CDC sub account or the concerned broker’s or stock exchange’s member’s CDC Group Account;

(ii) in case of any security in the physical certificate form, earlier of the dates on which selling broker or stock exchange’s member sells the security, the date on which an investor acquires physical possession of the security, the date on which investor’s name is entered on the security or the date on which the issuing company enters the investor’s name in the record of its security holders;

(iii) in case of acquisition of a security on account of a nomination under section 80 of the Companies Ordinance, 1984 (XLVII of 1984) under bequest or inheritance, the date of death of the person making such bequest or leaving such inheritance, or the date of transmission by succession or under a will by the deceased, as the case may be, whichever is earlier;

(iv) in case of acquisition of a security under a futures contract, the date of entry into the futures contract;

(v) in case of a borrowed security, the date on which the investor purchases the security to cover his short position and to return the security to the security lender; and

(vi) in case of conversion of global depository receipts into shares, the closing price of shares on the day of such conversion shall be treated as acquisition cost of such shares.

(h) date of disposal of any security in the electronic book entry form means,-

(i) the date on which the investor sells or otherwise disposes of the security and the security is transferred from the investor’s brokerage account, CDC sub-account or the concerned broker’s or stock exchange’s member’s CDC Group Account, whichever is earlier;

(ii) in case of any security in the physical certificate form means the date on which selling broker sells the security or the date on which the issuing company deletes the seller’s name from the record of its security holders, whichever is earlier;

(iii) in the case of a security underlying a futures contract, means the date of exit from futures contract; and

(iv) in the case of a borrowed security means the date on which the borrower short sells the borrowed security after borrowing it from the security lender;

(i) date of entry into futures contract means, in case of a long position, the date on which securities underlying the futures contract are purchased and are transferred to the investor’s brokerage account and, in case of a short position, the date on which securities underlying the futures contract are sold short;

(j) date of exit from futures contract means, in case of a long position, the date on which securities underlying the futures contract are sold and are transferred from the investor’s brokerage account and, in case of a short position, the date on which securities underlying the futures contract are purchased to cover the short position;

(k) date of exercise of option means the date of acquisition of a security underlying Income Tax Rules, 2002 12

an option and is the date on which option is exercised to acquire the underlying security;

(l) exercise price is the cost of acquisition of a security underlying an option and is the price of securities underlying an option which the investor paid to purchase the underlying securities on exercise of the option;

(m) holding period shall be calculated as prescribed under the provisions of sub- section (2) of section 37A of the Income Tax Ordinance, 2001;

(n) investor means every person who invests in securities and includes every broker who makes investments in such securities; and

(o) jurisdiction of tax authority means the jurisdiction of the tax office in which business of the securities is being carried on by a person and where such business is carried on in more than one place, the person’s principal place of business.

(2) All other words and expressions not specifically defined in these rules shall have the meanings assigned to them under the Ordinance.

13M. Quarterly statements

Quarterly statements shall be e-filed in the following format, namely:- Statement of Capital gains tax liability Part-I Particulars of Investor’s account 1. Investor‟s Name(s) (i) (ii)

(iii) 2. Complete Address(es)

(i) (ii)

(iii) 3. Brokerage Account No. ________________________________________________________ 4. Date of Opening of Brokerage Account ____________________________________________ 5. Type of Account (individual, joint, AOP, firm, company) _______________________________ 6. Name of Brokerage Firm/ Company ______________________________________________ 7. Contact No. and Address of Brokerage Firm/ Company _______________________________ 8. CDC sub account No. _________________________________________________________ 9. Total value of shares carried in account as on 30th June_ _____________________________ 10. Total cash carried in account as on 30th June ______________________________________ Income Tax Rules, 2002 13

11. Tax period (tax year/quarter) ____________________________________________________ 12. Capital gain during the tax period ________________________________________________ 13. Capital loss during the tax period ________________________________________________ 14. Net gain/loss ________________________________________________________________ 15. Tax on capital gain payable for the tax period _______________________________________ (Calculated in part II, III & IV of summary of transactions) Investor‟s Name ____________________________ Part-II Summary of shares held upto six months - tax payable @ 10% Capital Gain CGT Sales Purchases (Loss) Payable Sale Purchase Price Particulars Price Total Particulars No. of per Sale Date of of No. of per Purchase Date of sale of shares shares Share Proceeds purchase shares shares Share price Investor‟s Name ____________________________ Brokerage Account No. _______________________ Part-III Summary of shares held above six months to one year - tax payable @ 7.5% Capital Gain CGT Sales Purchases (Loss) Payable Sale Purchase Price Particulars Price Total Particulars No. of per Sale Date of of No. of per Purchase Date of sale of shares shares Share Proceeds purchase shares shares Share price Investor‟s Name ____________________________ Brokerage Account No. _______________________ Part-IV Summary of shares held for more than one year - no tax payable Capital Gain CGT Sales Purchases (Loss) Payable Sale Purchase Price Particulars Price Total Particulars No. of per Sale Date of of No. of per Purchase Date of sale of shares shares Share Proceeds purchase shares shares Share price Income Tax Rules, 2002 14

Investor‟s Name ____________________________ Brokerage Account No. _______________________ PART-V Affidavit I _____________________________ S/o. _____________________________ CNIC No. ________________ resident of _________________________________________________________ holding brokerage account No.___________________ with the brokerage firm __________________________ and holding CDC sub account No.____________________ with Central Depositary Company do hereby solemnly affirm that particulars of my account given in Part I and the particulars of share transactions conducted during the tax period given in Part-II, III and IV of the summary of share transactions are true and correct and in accordance with the ledger statements and CDC statements of my account for the above mentioned tax period. I further affirm that nothing has been concealed or incorrectly stated regarding my account. I know that in case any particulars of my account and share transactions conducted during the above mentioned tax period and given under rule 13M of the Income Tax Rules, 2002 as mentioned above are found to be false being not in conformity with ledger statements and CDC statements of my account, I am liable to be penalized in accordance with rule 13K of the Income Tax Rules, 2002. Deponent (Investor‟s Name) ___________________

13N. Special procedures for computation of capital gains and collection of tax

(1) NCCPL shall, in accordance with this rule, collect tax on capital gains as provided in Eighth Schedule to the Ordinance, hereinafter in this Part called as the said Eight Schedule.

(2) The provisions of the said Eighth Schedule and these rules shall apply to capital gains derived from listed securities on or after the 24th April, 2012, except in the case of instrument of redeemable capital where such provisions shall be applicable on capital gain derived from the 1st July, 2012 2[:] 3[Provided that in case of Foreign Institutional Investors, provisions of the said Eighth Schedule and these rules shall be applicable on capital gain derived from the first day of July, 2014. Explanation: For the removal of doubt, it is clarified that all Foreign Institutional Investors shall be subject to the regime as laid down in Eighth Schedule and no exemption whatsoever from withholding tax under Eighth Schedule or under these rules is available to Foreign Institutional Investors for any reason.]

(3) In computing capital gains, NCCPL shall take into account transactions and their values as reported to or provided to or extracted from the systems or procedures in place with 4[NCCPL], stock exchanges 5[.] The Central Depository Company of Pakistan Limited 1[and clearing members in case of Foreign Institutional Investors]. 1 New Rules inserted vide SRO 1119(I)/2012 dated 12th September, 2012 2 Substituted for full stop by SRO 161(I)/2015, dated February 23, 2015. 3 Proviso and explanation inserted by SRO 161(I)/2015, dated February 23, 2015. 4 Substituted for “NCPPL” by SRO 161(I)/2015, dated February 23, 2015. 5 Full stop inserted by SRO 161(I)/2015, dated February 23, 2015. Income Tax Rules, 2002 15

(4) The gain arising on the disposal of a security by a person shall be computed in accordance with the following formula, namely:- A - B Where - A is the consideration received by the person on disposal of the security; and B is the cost of acquisition of the security.

(5) Capital gain or loss arising on the disposal of listed securities shall be computed on the basis of First In First Out (FIFO) inventory accounting method: Provided that while applying FIFO method, market based transactions shall be taken into account first: Provided further that the FIFO method shall not apply in respect of sale of shares purchased on the same trading day or in same futures or derivative contract and capital gain or loss shall be computed by applying average method.

(6) Capital loss arising on disposal of listed securities as determined by NCCPL in any financial year shall be set off against capital gain arising from the disposal of securities during that financial year to determine the taxable capital gain arising from the disposal of listed securities.

(7) Capital loss arising on disposal of listed securities in any financial year shall not be carried to a subsequent financial year.

(8) NCCPL shall deduct or add 0.5 percent for client‟s trade and 0.25 percent for broker‟s proprietary trade of the consideration received on disposal or cost of acquisition of securities respectively, in lieu of brokerage, commission, transaction fee, levy, Laga or any other similar incidental expenses incurred by the person while disposing or acquiring a security, subject to the condition that such deduction shall only be allowed in respect of market based transactions.

(9) NCCPL shall also deduct financing cost from the consideration received if financing is availed through NCCPL‟s leveraged market products.

(10) NCCPL shall collect an amount as computed in the manner laid down in the said Eighth Schedule and these rules on monthly basis in respect of transactions settled in a month, after adjustment of losses and repayment of amount collected in previous month or months of same financial year, to ensure that at the end of any given month NCCPL possesses an amount equal to the estimated amount of tax liability on capital gains.

(11) Amount computed in the manner laid down in the said Eighth Schedule and these rules shall be collected by NCCPL from or through the clearing member on net capital gains derived by person, taxable under the said Eighth Schedule.

(12) Any person, if not satisfied with the computation of capital gain or tax thereon or both made by NCCPL for the purpose of the said Eighth Schedule, such person may re-compute the capital gain and lodge claim of refund, if any, with the Commissioner after filing of return of income and the Commissioner shall refund the amount of tax in accordance with provisions of Part VI of Chapter X of the Ordinance.

(13) For the purpose of the said Eighth Schedule and this rule, the provisions of rules 13F, 13H and 13I shall not apply.

(14) The provisions of rule 13J shall not apply to the person whose tax liability on capital gains is discharged under the said Eighth Schedule, however the brokerage account of the investor shall not be closed until and unless such person obtains a clearance certificate from NCCPL. 1 Words etc. inserted by SRO 161(I)/2015, dated February 23, 2015. Income Tax Rules, 2002 16

(15) NCCPL shall issue certificate as provided in clause (4) of rule 1 of the said Eighth Schedule, as set out in Part I of rule 13O, 1[verifying] capital gains and tax thereon, if any, to each person subject to tax under the said Eighth Schedule within thirty days from the end of the financial year.

(16) NCCPL shall furnish electronically to the Board a quarterly statement of amount collected, within thirty days from the end of each quarter as set out in Part II of rule 13O.

(17) The person who has opted out of the scheme of taxation provided in the said Eighth Schedule shall file an undertaking to NCCPL in the form prescribed in Part III of rule 13O 2[along with the evidence of obtaining prior approval of Commissioner under rule 5 of the said Eighth Schedule]. 3[Provided that the Commissioner shall not accord prior approval, unless the taxpayer is a filer]

(18) Statements referred in rule 2 of the said Eighth Schedule shall be furnished on the format prescribed in Part IV of rule 13O. 4[(18A) Where an irrevocable option has been filed to NCCPL by a person, after obtaining prior approval of the Commissioner to opt out of Eighth Schedule for determination and payment of capital gains tax, NCCPL shall submit to the Board details of capital gains and tax thereon of such person or persons for the tax year or part thereof in respect of which capital gain tax collection has not been made by NCCPL.]

(19) The period of forty-five days or one hundred twenty days, as the case may be, as referred in rule 2 of the said Eighth Schedule, shall be the period or periods in aggregate to, forty-five days or one hundred twenty days, as the case may be, during the period as provided in rule 2(1)(b) and 2(2)(b) of the said Eight Schedule.

(20) For the purpose of rule 2 of the said Eighth Schedule, the investment shall be the time weighted average of the invested amount arranged in descending order for forty-five days or one hundred twenty days, as the case may be. The amount of investment at any particular day shall be netted off with the market value of net open sale position in futures and derivative contract of the same security to the extent of the amount of investment representing such security, before calculating aforementioned time weighted average.

(21) For the purpose of clarity in computing, determining, collecting and depositing the tax on capital gains by NCCPL, certain transactions and their tax treatments as well as the amount and period of investment referred to in rule 2 of the said Eighth Schedule are as enunciated in rule 13P: Provided that in case of any confusion in respect of such computation, determination, collection or deposit, NCCPL, after computing, determining, collecting or depositing, may refer the case to the Board for clarification and make adjustments, if required, after such clarification.

(22) Definitions For the purposes of this part,-

(a) “clearing member” shall have meaning as defined in NCCPL Regulations, 2003;

(b) “leveraged market” shall have the meaning as defined in the Securities (Leveraged Markets and Pledging) Rules, 2011; 1 Substituted for “showing computation of” by SRO 161(I)/2015, dated February 23, 2015. 2 Words inserted by SRO 161(I)/2015, dated February 23, 2015. 3 Proviso inserted by SRO 161(I)/2015, dated February 23, 2015. 4 Sub-rule (18A) inserted by SRO 161(I)/2015, dated February 23, 2015 Income Tax Rules, 2002 17

(c) “market based transaction” means transaction executed at any registered stock exchange in Pakistan or NCCPL‟s platform; and

(d) “UIN” means Unique Identification Number as defined in NCCPL Regulations, 2003.

(23) Notwithstanding anything contained in these rules, for the purpose of computation of capital gains and collection of tax thereon, the date of acquisition 1[, except in the case of foreign institutional investors,] and disposal, the consideration received and cost of acquisition shall be determined in the following manner, namely:-

(a) for the purpose of computation of capital gains, securities held on the 23rd April, 2011 shall be deemed as having held for a period of more than one year and the cost of such securities shall be deemed to be the market price (day-end price) of the securities, as on the 23rd April 2011;

(b) where physical securities have been deposited in an account maintained with Central Depository Company of Pakistan Limited between the 24th April, 2011 and the 23rd April, 2012 (both days inclusive), the date of acquisition of such securities shall be deemed as the 23rd April, 2011 and the cost of securities shall be deemed as market price (day-end price) as on the 23rd April, 2011;

(c) where securities have been acquired or disposed between the 24th April, 2011 and the 23rd April, 2012 (both days inclusive), the cost of acquisition and consideration received for disposal shall be determined in the following manner, namely:-

(i) in case of market-based transactions, the transaction price of the securities;

(ii) in case of transactions other than market-based transactions deal price provided by the stock exchange; and

(iii) in all other cases, the market price (day-end price);

(d) where physical securities are deposited on or after the 24th April, 2012 in an account maintained with Central Depository Company of Pakistan Limited, the actual date of acquisition and market price (day-end price) prevailing on such date shall be taken into account for computation of capital gains tax; and

(e) in all other cases, where actual or deal price is not known to NCCPL, the market price (day-end price) shall be taken into account for computation of capital gains tax. 2[(24) Notwithstanding anything contained in these rules, for the purpose of computation of capital gains and collection of tax thereon with respect to foreign institutional investors, the date of acquisition and disposal, the consideration received and cost of acquisition shall be determined in the following manner, namely:-

(a) for the purpose of computation of capital gains, securities held on the 30th June, 2012 shall be deemed as having held for a period of more than two years and the cost of such securities shall be deemed to be the market price (day-end price) of the securities, as on the 30th June 2012;

(b) where securities have been acquired or disposed of between the 1st July, 2012 and the 30th June, 2014 (both days inclusive), the cost of acquisition and consideration received for disposal shall be determined in the following manner, namely:-

(i) in case of market-based transactions, the transaction price of the securities;

(ii) in case of transactions other than market-based transactions deal price provided by the stock exchange; and 1 Words etc. inserted by SRO 161(I)/2015 dated February 23, 2015. 2 Sub-rules (24) and (27) inserted by SRO 161(I)/2015, dated February 23, 2015. Income Tax Rules, 2002 18

(iii) in all other cases, the market price (day-end price);

(c) where physical securities are deposited on or after the 1st July, 2014 in an account maintained with Central Depository Company of Pakistan Limited, date and cost of acquisition shall be taken into account as follows:-

(i) the actual date of acquisition and market price (day-end price) prevailing on such date shall be taken into account for computation of capital gains tax, where such securities are acquired after April 23, 2011; and

(ii) the cost of such securities and date of acquisition shall be deemed to be the market price (day-end price) of the securities, as on the 23rd April 2011, where such securities are acquired on or before April 23, 2011; and

(iii) in all other cases, where actual or deal price is not known to NCCPL, the market price (day-end price) shall be taken into account for computation of capital gains tax.

(25) Foreign Institutional Investor may apply to NCCPL for separate Unique Identification Numbers (UIN) for each of its sub-funds under its umbrella.

(26) Where separate UINs have been obtained by Foreign Institutional Investor for each of the sub- funds under its umbrella, capital gain or loss shall be computed separately for each sub-fund and loss under one UIN shall not be allowed to be set off against capital gain arising to another sub- fund with separate UIN.

(27) Where a Foreign Institutional Investor opts not to apply to NCCPL under sub-rule (25), loss arising to any sub-fund shall not be allowed to be set off against capital gain of any sub- fund. However, such loss of a sub-fund may be adjusted against gain arising to such sub-fund at the time of filing of return by the sub-fund.]

13O. Statements and forms

Statements and forms as mentioned in sub-rules (15), (16),(17) and (18) of rule 13N, shall be filled in the following format, namely:- Part-I Format of annual certificate of capital gains to be issued by NCCPL to taxpayer under rule 1(4) of the Eighth Schedule to the Ordinance [See rule 13N(15)] Original/Duplicate Date of issue__________________ Sr. No 1. Name of taxpayer 2. UIN 3. CNIC/NTN 4. Period July 1, 20___ to June 30, 20___ 5. Clearing members Name (a) (b)

(c) 1[6. Amount of capital gains for holding period of: . 1 Substituted fo. r Sr. 6 & 7 by SRO 161(I)/2015, dated February 23, 2015 Income Tax Rules, 2002 19

(ii) 12 months or more but less than 24 months Rupees ____________ Rupees ____________

7. Amount of capital loss for holding period of: (effective July 1, 2015) (ii) 12 months or more but less than 24 months Rupees () Rupees ()]

8. Amount of tax liability on capital gains (effective July 1, 2015) (ii) 12 months or more but less than 24 months (10%) Rupees _____________ Rupees 0__ Rupees _____________

9. Amount of tax liability on capital gains collected and deposited Rupees ____________ by NCCPL

This is to further certify that the tax collected has been deposited in the Federal Government Account.

Name of authorized person ___________________

Part-II Format of quarterly Statement to be filed by NCCPL to the Board under rule 1(5) of the Eighth Schedule to the Ordinance

[See rule 13N(16)]

Telephone Fax________________ Email________________________

Provisional amount of capital gains tax liability as at Holding period of 12 months or I, ____________________________ holder of CNIC No._________________ in my capacity as Principal Officer / Representative of NCCPL do hereby solemnly declare that to the best of my knowledge and belief the

1 Column (4) of Table II substituted by SRO 161(I)/2015, dated February 23, 2015.

Income Tax Rules, 2002 20

information given in this statement is correct and complete and in accordance with the applicable provisions of the Income Tax Ordinance, 2001 and Income Tax Rules, 2002. Date ______________________________ (dd/mm/yyyy) Signature ______________________________ Part-III Format of irrevocable option to be filed by the taxpayer under rule 5 of the Eighth Schedule to the Ordinance, who opts out of the mechanism for determination and payment of tax liability on capital gains laid down in the Eighth Schedule to the Ordinance [See rule 13N(17)] To,(NCCPL) In terms of rule 5 of the Eighth Schedule to the Ordinance, I / we (name of person), hereby undertake to opt out of the mechanism for determining and payment of tax liability laid down in the said Eighth Schedule. My other particulars are as under: UIN NTN / CNIC Business address Residence address Telephone No. E-mail address I do hereby solemnly declare that information stated above is complete and correct to the best of my knowledge and belief. ____________________________ Signature of the authorized person Dated: ______________________ Part-IV Statement of investments to be filed by taxpayer with the Commissioner under rule 2(1) of the Eighth Schedule to the Ordinance [See rule 13N(18)] To, The Commissioner, Inland Revenue. I hereby declare my investments in listed securities as of __________ 1[20____], in terms of rule 2(1) of the Eighth Schedule to the Ordinance, as under:- S.No. Name of Security Rupees My other particulars are as under: 1 Substituted for “2012” by SRO 161(I)/2015, dated February 23, 2015. Income Tax Rules, 2002 21

Name NTN / CNIC Business address Residence address Telephone No. E-mail address I do hereby solemnly declare that information stated above is complete and correct to the best of my knowledge and belief. _____________________________ Signature of the authorized person Dated ___________________________

13P. Clarifications and explanations

Clarification and explanation as mentioned in sub-rule (21) of rule 13N regarding computation of capital gains and tax payable thereon under the Eighth Schedule to the Ordinance, and the amount and period of investment referred to in rule 2 of the said Eighth Schedule are as under:-

(a) Sales transactions:-

(i) Details of the transaction An investor, holding securities, sells such securities in a stock exchange. The transaction is settled by transferring the securities sold from his account maintained in Central Depository System to the investor(s) buying the securities with credit of sale proceeds to the account of investor disposing of the securities.

(ii) Tax treatment Disposal of security is to be taken as taxable event, at settlement date. Capital gain will be computed by applying FIFO method. If the securities holding period is more than one year, then no CGT shall be collected, otherwise, as per holding period, CGT shall be collected as per the holding period.

(iii) Example A, being a client of a broker, has 2,000 shares of company ABC in his account. He acquired 1,000 shares on the 1st January, 2011 at Rs.15 per share, 500 on the 1st July, 2012 at Rs.16 per share and 500 on the 1st January, 2012 at Rs.14 per share. He disposed off 500 shares on the 1st February, 2012 at Rs.13 per share, 500 shares on the 7th February, 2012 at Rs.14 per share, 500 shares on the 21st February, 2012 at Rs.15 per share and 500 shares on the 28th February, 2012 at Rs.22 per share. The cost of acquisition is deemed to include 0.50% of the acquisition cost as incidental expenses incurred. NCCPL shall collect CGT as per following example: Purchases / Acquisitions Disposal No. of 1st Feb, 7th Feb, 21st Feb, 28th Feb, Date shares Price Cost* 2012 2012 2012 2012 Total 1-Jan-11 1,000 15 15,000 500 500 1,000 1-Jul-11 500 16 8,000 500 500 1-Jan-12 500 14 7,000 500 500 2,000 30,000 500 500 500 500 500 Income Tax Rules, 2002 22

CHAPTER - II DETERMINATION OF INCOME - HEADS OF INCOME

Less: 0.50% of sale proceeds as expense 32.50 35 37.50 55 160

• Cost has been deemed to include 0.50% of cost of acquisition for ancillary expenses, hence not separately mentioned.

(b) Squaring up transactions in ready, futures and derivatives

(i) Details of the transaction

An investor holding shares disposes of such shares, but on the same day or in same futures or derivative contract he buys same quantity of shares. The system does not change the inventory balances of the person in his account. The net difference of sale and purchase is either paid being profit or recovered being loss from the investor.

(ii) Tax treatment

Since there is no movement in the account, the net difference is payable to the investor, the same shall be taken as capital gain for holding period less than 6 months and the net difference will be subject to tax collection at 10%. If the net difference is recoverable, then the same shall be treated as loss and no tax shall be collected.

(iii) Example

In the example given in clause(a)(iii), in addition to the above, if A on the 28th February 2013 sold 500 shares, at Rs.23, purchased 500 shares at Rs.21 and then sold 500 shares at Rs.22.

In this case, the average selling price of the two sales would be Rs.22.5 per share which will be taken as the basis for computing capital gains. Consequently, gain of Rs.750 (500 x (22.5-21)) shall be taken as taxable at 10%. Whereas, on remaining 500 shares sold the taxable gain, if any, will be computed by taking sale consideration at Rs.22.5 per share by apply FIFO method on inventory held by A in his account.

(c) Transfer owing to privatization

(i) Details of the transaction

Owing to privatization, the shares of Government owned entities may be offered to public through stock exchanges. In such case, the Government shareholding is placed in the account of Privatization Commission and, after subscription, the shares are transferred from Privatization Commission‟s account to the accounts of the buyers.

Income Tax Rules, 2002 23

(ii) Tax treatment Transfer of shares by the Federal or Provincial Government in an entity will not be subject to capital gains tax due to exemption contained in section 49 of the Ordinance. Acquisition of shares shall not be subject to any tax. The cost of acquisition of the shares shall be the price paid by the buyers to acquire the shares and such cost base shall be taken into account for computation of capital gain on any subsequent disposal of shares by the buyers.

(d) Negotiated deal transactions

(i) Details of the transaction Certain investors holding shares may sell through negotiated deal at a price agreed with the buyer e.g. a strategic sale and purchase of shares to acquire or dispose of controlling shares. Such transactions are reported as negotiated deal transactions at the relevant stock exchange through a stock broker in the manner prescribed by such stock exchange.

(ii) Tax treatment The price reported as selling price or the market price, whichever is higher, shall be taken into account to compute capital gain on the basis of holding period of such securities.

(iii) Example A holding 51% shares in company ABC (51,000 shares acquired at Rs.10). He negotiated a price of Rs.30 per share with a foreign investor who intends to hold company ABC. The transaction is reported to the stock exchange through the broker. In case the market price of such shares on that date of transaction is Rs.25, the capital gain shall be computed at the price of Rs.30 being higher of reported selling price and market price. Gain will be computed at Rs.20 per share (Rs.30 less Rs.10). In case the market price of such shares on that date of transaction is Rs.35, the capital gain shall be computed at the price of Rs.35 being higher of reported selling price and market price. In this case gain will be computed at Rs.25 per share (Rs.35 less Rs.10).

(e) Transfer owing to acquisition

(i) Details of the transaction Certain transactions in listed securities, fulfilling the rules and regulations, are entered into to acquire voting shares and takeovers under the Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Ordinance, 2002. Such transaction may be entered into at negotiated price or may be executed through the pricing mechanism of stock exchange.

(ii) Tax treatment The actual selling price, negotiated or quoted, whichever is higher, in accordance with the provisions of relevant laws, as reduced by the cost of securities on FIFO basis, shall be taken as capital gain or loss and considering the example given in clause (a)(iii), any taxable gain shall attract collection of tax at applicable rate. Income Tax Rules, 2002 24

(f) Buy-back of shares

(i) Details of the transaction Pursuant to section 95A of the Companies Ordinance, 1984, a company may buy back its shares from its shareholders. If an investor holding shares exercise option then shares held by him are transferred to the company.

(ii) Tax treatment The transfer of shares under buy-back arrangement will be taken as disposal and the price paid by the company to acquire the shares shall be taken as sale price to compute capital gain and collect tax thereon, if such gain is taxable.

(g) Transfer from one account of investor to his another account

(i) Details of the transaction An investor holding shares in his one account transfers shares to another. In case where shares are transferred from singly owned account to another singly owned account that may be maintained with different participant or from a joint account to another joint account with same combination of joint holders this will be treated as portfolio transfer as no change has occurred in overall portfolio of the investor. However, in case of transfer of shares from a singly owned or joint account to an account where ownership structure is different, such transfers shall be treated as disposal.

(ii) Tax treatment In case of portfolio transfer where ownership of shares does not change, no capital gain tax shall be computed. Whereas in all other cases, such transfer shall be treated as disposal and shall be taxed accordingly.

(h) Securities lending and borrowing (SLB)

(i) Details of the transaction An investor borrows securities from a person holding such security for a specified period under an outright purchase and re-sale contract. Investor sells the borrowed security in the market and on or before contract completion date repurchases it to return to the lender. The borrowing investor while returning the security to the lender pays financial charges for the period of use of security.

(ii) Tax treatment In accordance with rule 13L(1)(b), the net difference in the hands of the borrower resulting in completing the whole transaction, including the financial charges incurred on borrowing the securities, is to be treated as capital gain or loss, as the case may be. The income of the lender, being mark-up income, shall not be subject to capital gain tax.

(iii) Example A borrowed 1,000 shares from B for short term. The agreed value of the borrowed shares is Rs.100 per share on which mark-up for the specified period is to be paid by the borrower at the time of returning the borrowed securities. A sold such borrowed securities at Rs.101 per share and subsequently on the date agreed to return the shares to the lender, re-purchased 1000 shares at Rs.90. At Income Tax Rules, 2002 25

the time of settlement, the borrower also paid a sum of Rs.2 per share as mark up on borrowed security to the lender. No of Net gain / loss of the borrower shares Price Amount Sale of borrowed shares 1,000 101 101,000 Repurchase of shares and returned to the lender (1,000) 90 (90,000) O.50% of sale proceeds as incidental expenses on sale (505) 0.50% of repurchase price being incident expenses on (450) acquisition Financial cost paid to the lender 2 (2,000) Net gain / (loss) 0 8,045 Tax to be collected @ 10% on net gain 804.50 Financial income of the lender 2,000 No CGT to be collected 0 For the lender, on return of the borrowed shares by the borrower, the cost and date of acquisition shall remain the same as was before lending the shares to the borrower.

(i) Transfer / transmission upon death

(i) Details of the transaction Upon death of an individual, the securities held are transferred to the executor or beneficiary.

(ii) Tax treatment In accordance with section 79 of the Ordinance, no gain or loss is recognized on transmission of an asset to an executor or the beneficiary on the death of a person. Accordingly, no capital gain tax is required to be computed and collected at the time of such transfer. The date of acquisition and cost of the shares in the hands of executor or beneficiary will be the same as was in the hands of deceased person.

(j) Transfer for / against GDRs

(i) Details of the transaction A person holding shares of a company, for which GDR is issued, may deposit the shares with the Depository for issuance of shares. Conversely, the GDR issued may either be redeemed at specified time or cancelled before time in which case the Depository issues shares to the GDR holder.

(ii) Tax treatment When the person deposits shares into the Depository and get issued GDRs, the shares will be taken as disposed of and consequently, capital gain will be required to be computed. Since the value of GDRs issued will not be available to NCCPL, therefore, the market price (day-end price) of the date of transfer shall be taken as consideration received by the person for the purpose of computation and collection of capital gain tax. Income Tax Rules, 2002 26

Similarly, when GDRs are converted into shares, the deposit of shares in the person‟s account shall not be a taxable event, being an acquisition of shares. However, as the value for which GDRs converted into shares will not be available with NCCPL, therefore, the cost of acquisition for such shares shall be taken the market price (day- end price) of the date on which the shares are deposited.

(k) Gift (to family members or to members other than family members)

(i) Details of the transaction Securities may be transferred from an investor‟s account to another account belonging to his family or another member not belonging to family by reason of a gift, by use of reason code established under Central Depository System.

(ii) Tax treatment In accordance with section 79 of the Ordinance, no gain or loss is recognized on disposal of an asset by reason of a gift of the asset. Accordingly, such transfer will not attract capital gain tax. The date of acquisition and cost of the securities shall remain same in the hands of transferee as were in the hands of transferor.

(l) Reversal of erroneous transfers

(i) Details of the transaction Sometime, securities may be transferred from one investor‟s account erroneously, which are then returned from the participants account to whom such erroneous delivery is made.

(ii) Tax treatment If at the time of transaction such an error is not identified, NCCPL will compute and collect tax on transfer of shares at first stage, if applicable. However, since subsequent reversal of erroneous transfers is not due to disposal therefore such rectification of mistake to correct the inventory in participants‟ accounts will not be considered as taxable event.

(iii) Example A sold 500 shares which were bought by B. Erroneously, 5,000 shares were transferred from A‟s account to C‟s account. On detection of error, C‟ returns 5,000 shares to A and then A transfers 500 shares to B. At the time of first transfer of 5,000 shares the system will record the transaction and compute capital gain tax, if applicable. Subsequent reversals, will be made through erroneous transfer reason code, and being there no actual disposal involved, no gain or loss shall be computed in the case of transfer of shares from C to A and then A to B. The respective persons, if need arises, may seek adjustments for actual results in their return of income, including refund for excess collection of tax due to erroneous transfer by the investor.

(m) Global custodian related market based transaction

(i) Details of the transaction Foreign institutional investors not only deal in shares for their own account but also on behalf of other investors through global custodians. Income Tax Rules, 2002 27

(ii) Tax treatment 1[CGT shall be charged to the final settlement account of the person settling the underlying trade and such clearing member shall be responsible to collect and deposit with NCCPL, CGT computed on such transactions]. 2[(iii) Example: ABC Company, a foreign institutional investor, sells 20,000 shares of XYZ Company on its own behalf and on behalf of other investors as follows: Final Settlement Holding First Account for Capital Gain/ Period Capital Settlement CGT Name Qty (Loss) (days) Rate Gain Tax Account Collection ABC Co. 8,000 Rs.35,000 300 12.5% Rs.4,375 ABC ABC Company- Company Proprietary UIN Mr. P 5,000 Rs.31,000 390 10% Rs.3,100 ABC Mr. P Company- IBD UIN Mr. Q 3,000 Rs.(11,000) 410 NA NA ABC Mr. Q Company- IBD UIN Mr. R 4,000 Rs.27,000 750 0% 0 ABC Mr. R Company- IBDUIN Total 20,000 Rs,7,475 As illustrated above, foreign institutional investors (ABC Company) sold shares, on its own behalf and on behalf of other investors. Thus, capital gain tax shall be charged to the final settlement account of the person settling the underlying trade and such clearing member shall be responsible to collect and deposit with NCCPL CGT computed on such transactions. Further, IBD UIN of foreign institutional investor used as a transitional account shall be exempt from capital gain tax. Similarly, for purchase transactions, final settlement account shall be used for the purpose of inventory maintenance of the clients of foreign institutional investors and inventory shall not be maintained for the IBD UIN of foreign institutional investor.]

(n) Failure in delivery or payment

(i) Details of the transaction Where a person has sold the securities but unable to settle the transaction by delivery, as per stock market mechanism, the securities are bought from another investor and delivered to the buyer(s). The person in default is charged with certain penalties or charges for his failure to complete the transaction. Similarly, a buyer may default in making payment for securities purchased. The securities so purchased by him are retrieved and sold to settle his liability towards the seller. 1 Substituted for “Provisions of Eighth Schedule to the Ordinance shall not apply on the transactions of foreign institutional investor” by SRO 161(I)/2015, dated February 23, 2015. 2 Sub-clause (iii) inserted by SRO 161(I)/2015, dated February 23, 2015. Income Tax Rules, 2002 28

(ii) Tax treatment Where the seller fails to deliver securities, and the transaction is settled by purchase of securities from another investor to settle the transaction, the person in default shall not be treated as seller of the securities in accordance with criteria of section 75 of the Ordinance. Rather, the person from whom the securities were purchased to settle the transaction is to be taken as person disposing the securities and accordingly he will be subject to capital gain tax, if applicable. Where a buyer defaults in taking the delivery of security by not making payment due, the securities sold on his behalf will be taken as disposal by him and if any gain arises in the hands of buyer in default such gain will be subject to capital gain tax, if applicable.

(o) Failed/ un-affirmed transaction

(i) Details of the transaction Clearing Member (CM) of one stock exchange (Originating CM) deals with a CM of another stock exchange (Transacting CM) for sale or purchase of shares. When, the Originating CM does not confirm the transaction to the NCCPL, NCCPL completes the transaction by executing sale or purchase through Transacting CM. To complete the transaction, shares are delivered to/from the account of Transacting CM.

(ii) Tax treatment Since such transactions are settled by the Transacting CM, NCCPL shall compute capital gain in respect of such transaction from such Transacting CM.

(p) Pledge call

(i) Details of the transaction When a borrower defaults in payment to the lender, and shares were pledged as collateral, the borrower is entitled to transfer such shares from the person in default to his own account.

(ii) Tax treatment When the shares are transferred from the account of person in default to the lender‟s account, such transfer will be treated as disposal for tax purposes. The system price (day-end price) will be taken as deemed consideration for the purpose of computation of capital and tax thereon. Since no proceeds will be due to the person in default, thus, NCCPL may not be able to collect tax from such person. However, NCCPL shall report such capital gain and the amount tax, if any, in the statements. 1[(q) Disposal of bonus shares

(i) Details of the transaction.- A company issues bonus shares to its shareholders, which are subsequently sold by the shareholder in the market.

(ii) Tax treatment.- Effective from July 1, 2014 for computation of capital gain tax, the cost of bonus shares would be the price prevailing on first day of book closure (ex-bonus price). Subsequently, when such bonus shares are disposed of, such cost will be taken for computation of capital gain and tax thereon. Similarly, the cost of old shares would remain same before and after bonus shares are issued, and when the old shares are disposed of, such cost will be taken for computation of capital gain and tax thereon, 1 Clause (q) substituted by SRO 161(I)/2015, dated February 23, 2015. Income Tax Rules, 2002 29

CHAPTER - II DETERMINATION OF INCOME - HEADS OF INCOME

even if these are sold prior to the crediting of bonus shares in the shareholder‟s account, but after the date of entitlement of bonus shares.

(iii) Example:-

A, being a client of a broker, has 4 shares of company A in his account. He acquired these shares on the 1st January, 2015 at Rs.20 per share. On the same day i.e. 01- 01-2015, the company declared bonus shares @ 25%, and date of entitlement of the shares was declared as 1-04-2015 and the shares were to be credited in the account of A on 15-5-2015. The market value (ex-bonus price) of these shares on 31-03-2015 is Rs.25 per share. He disposed of 2 shares on the 15th April, 2015 at Rs.20 per share and the remaining 3 shares (including bonus share) @ Rs.20 on the 18th May 2015.

The cost of acquisition is deemed to include 0.50% of the acquisition cost as incidental expenses incurred and sale proceeds are deemed to include 0.5% of the consideration as incidental expenses.

NCCPL shall collect CGT as per following example:

(Date of credit 15-05-2015)

(r) Right issue

(i) Details of the transaction

A Company may grant letter of rights to its shareholders to acquire further shares in the company at a given price. Such rights are credited to the respective shareholders account and such rights are also traded on stock exchange. A shareholder granted the right, or an investor who bought the right from the stock market, subscribe the shares of the company by making payment of given price of the shares. Shares so acquired may then be disposed of.

(ii) Tax treatment

When a person disposes of Letter of Rights (LORs) before subscription, the sale proceeds shall be treated as capital gain. Upon expiry/exercise of right, the disposal of LORs shall be recorded at zero price for the purpose of computation of CGT. Whereas normal sale/purchase of LORs shall be treated in a same manner as provided in clause (a).

When a person disposes shares acquired through right, the subscription cost of the right shares shall be treated as cost of acquisition of such shares and capital gain or loss shall be computed accordingly.

Income Tax Rules, 2002 30

(s) Merger

(i) Details of the transaction Securities are moved pursuant to order or directive of authorities like SECP, SBP, High Court etc.

(ii) Tax treatment Since no change of ownership of the shareholder is involved therefore such transfer will not be taken as taxable event and no CGT will be collected on such transfer.

(iii) Example A holds 1,000 shares in ABC which he acquired at Rs.10 each on the 1st January, 2013. ABC merged into company XYZ through scheme approved by the High Court. XYZ issues 1 share for each 2 shares of company ABC. Consequently, in A‟s account, 1,000 shares in company ABC are replaced with 500 shares of company XYZ. The extinguishment of 1,000 shares in company ABC will be treated as tax neutral event, and 500 shares in XYZ will have the same cost base i.e. Rs.10,000 (Rs.20 per share). If subsequently, A sells shares of XYZ, capital gain will be computed taking into account the date of acquisition i.e. the 1st January, 2013.

(t) De-merger

(i) Details of the transaction Consequent to the order of the court, SECP or State Bank of Pakistan, a company may de-merged and split into two companies. Consequently, the shareholding of existing company is also divided into shares of the two companies i.e. existing company and the new company. In Central Depository System, in a shareholders account the existing company‟s shareholding is reduced to the revised shareholding whereas new shareholding in the new company is also recognized.

(ii) Tax treatment Pursuance to section 97A of the Ordinance, the splitting will be tax neutral event. The cost base of existing shareholding shall be divided in proportion to the revised shareholding in the existing company and the new company. The date of acquisition of shares in the existing company will remain same for the revised shareholding in the two companies.

(u) Capital reduction / Splitting of shares / Conversion

(i) Details of the transaction A company may consider reducing its paid capital or splitting the shares under the relevant laws. In such, the existing shareholders are either required to surrender the existing shares and obtain new shares in the ratio approved, or the existing shares are divided into specified numbers of new shares.

(ii) Tax treatment Since the existing shareholders are issued with new shares in exchange of their existing shares due to the corporate requirements, and no change in ownership occurs, therefore, the cancellation of existing shares is not to be treated as „disposal‟ for tax purposes. Further, the cost and date of acquisition of new shares will remain same, as it was for existing shares. Income Tax Rules, 2002 31

(v) Specie dividend

(i) Details of the transaction A company declares dividend in specie, whereby, the dividend is paid in the form of shares in a company (other than the shares of the company declaring dividend). Such shares held in the account of the company are transferred to the respective shareholders‟ account. The shareholders who received such shares in other company may then dispose of such shares.

(ii) Tax treatment When a person will be transferring shares in other company to its shareholders as specie dividend, then such shares will be taken as disposed of and will be subject to capital gain tax. The shares will be added in the share holders‟ account and the cost 1[of such shares shall be taken as zero], whereas, the acquisition date will be the date on which shares are credited. Such cost base shall be taken into account for computation of gain or loss at the time of disposal of shares received as specie dividend and original shares.

(w) Offer for sale

(i) Details of the transaction Pursuant to section 61 of the Companies Ordinance, 1984, transactions for issuance or sale of securities can be carried out as offer for sale.

(ii) Tax treatment When securities are issued by the company under offer for sale, the issuance is not a taxable event. The date on which such securities are credited to the investor‟s account shall be taken as acquisition date and the price paid for acquiring such securities shall be taken as cost of acquisition of such securities. Such date and cost base shall then be considered for computation of capital gains tax if such securities are disposed of by the investor subsequently. If under offer for sale, a person disposes of securities held by him, then such disposal will be taxable event and subject to capital gains tax.

(x) Court orders

(i) Details of the transaction There could be certain orders of the courts whereby transfer of securities may be required from an investor‟s account to another investor‟s account or any other person, e.g. deposit of securities with Nazir of the Court, transfer of securities in case of dispute among legal heirs, award of decree etc. etc.

(ii) Tax treatment Capital gains tax on transfer under a court order will depend on the contents of the order. For example, in case of an order in dispute among legal heirs, the transfer of securities may not be taxable being covered under section 79 of the Ordinance. Similarly, in case of mergers or de-mergers, transfers would be tax neutral event. Whereas, in case of a decree against an investor, transfer of securities from his account may constitute taxable event. 1 Substituted for “will be calculated as calculated for Bonus shares in Example 1.17.3,” by SRO 161(I)/2015, dated February 23, 2015. Income Tax Rules, 2002 32

NCCPL shall be responsible to compute capital gains tax, where a clearing member report transfer under a court order as taxable event through Central Depository System.

(y) Computation of investment amount for the purpose of rule 2 of the Eighth Schedule to the Ordinance The period of investment and amount eligible under rule 2 of Eighth Schedule to the Ordinance shall be determined as per following examples: Example-1 Statement of Net Investment With Age - clause 2(1) of Eighth Schedule Value of open No Cost of Derivatives Net of Accumulative Date Description Investment Sale Position Investment days Investment 23-Apr-12 Opening Balance 5,000,000 1,000,000 4,000,000 24 4,000,000 17-May-12 Disposal (2,000,000) - (2,000,000) 8 3,000,000 25-May-12 Disposal - 1,500,000 (1,500,000) 12 1,500,000 06-Jun-12 Acquisition 4,000,000 - 4,000,000 17 7,000,000 23-Jun-12 Disposal (5,000,000) - (5,000,000) 7 2,000,000 30-Jun-12 Closing balance 2,000,000 Sorted in Descending Order Calculation of Time Weighted Average Time Accumulative No of Accumulative Weighted No of days Investment days Investment Product Average 17 7,000,000 17 7,000,000 119,000,000 24 4,000,000 24 4,000,000 96,000,000 8 3,000,000 4 3,000,000 12,000,000 7 2,000,000 45 227,000,000 Time Weighted Average = Total product/No 12 1,500,000 5,044,444 of days As per clause 2(1), of the Eighth Schedule, amount of investment made prior to April 23, 2012 shall be considered as investment for the purposes of the said clause. The investment has to remain invested for at least 45 days. The above example indicate that amount invested has increased during the 45 days and therefore it is established that the amount of investment as on April 23, 2012 i.e. Rs.4,000,000 remains invested for 45 days till June 30, 2012. If it has been decreased from Rs.4,000,000, the decreased amount should have been taken for the purposed of the said clause 2(1). Example-2 Statement of Net Investment With Age - clause 2(2) of the Eighth Schedule Value of open Cost of Derivatives Net No of Accumulative Date Description Investment Sale Position Investment days Investment 24-Apr-12 Acquisition 10,000,000 - 10,000,000 14 10,000,000 08-May-12 Disposal (2,000,000) 500,000 (2,500,000) 17 7,500,000 25-May-12 Disposal (3,000,000) - (3,000,000) 30 5,000,000 24-Jun-12 Acquisition 4,000,000 - 4,000,000 29 9,000,000 23-Jul-12 Disposal (1,000,000) 1,500,000 (2,500,000) 258 6,500,000 07-Apr-13 Acquisition 500,000 - 500,000 416 8,500,000 Income Tax Rules, 2002 33

CHAPTER - II DETERMINATION OF INCOME - HEADS OF INCOME

28-May-14 Disposal (6,000,000) - (6,000,000) 31 2,500,000 28-Jun-14 Acquisition 12,000,000 - 12,000,000 1 14,500,000 29-Jun-14 Disposal (2,000,000) 3,000,000 (5,000,000) 1 9,500,000 30-Jun-14 Closing balance 12,500,000 5,000,000 7,500,000

Sorted in Descending Order Calculation of Time Weighted Average Time No of days Investment days Investment Product Average

Time Weighted Average = Total product/No :]

1[(z) Free of Payment transactions (transactions executed outside Pakistan).

Certain foreign institutional investors holding shares may sell through negotiated deal at a price agreed with the buyer outside Pakistan e.g. a strategic sale and purchase of shares to acquire or dispose of controlling shares. Such transactions are reported to respective clearing member of foreign institutional investors to transfer the shares from seller account to buyer account. In such transactions, respective clearing member does not know the transaction price and merely transfers shares from one account to other on the instructions of its foreign client.

Respective clearing member receiving the instructions from foreign institutional investors shall be responsible to report such transactions in the negotiated deal market at the relevant stock exchange through a stock broker in the manner prescribed by such stock exchange or through reporting interface provided by NCCPL for this purpose. The price reported as selling price or the market price (day-end price of the date of transaction), whichever is higher, shall be taken into account to compute capital gain on the basis of holding period of such securities as illustrated in clause (d).

(za) Capital gains on disposal of debt security

Tax treatment

By including debt securities in the definition of security in section 37A, the gain or loss on disposal of debt securities shall be computed, collected and paid as provided in Eighth Schedule, unless opted out with the approval of Commissioner. However companies shall not be subject to this regime and will continue to be taxed as in the past with the rates applicable to the companies and not the rates as amended in Division VII of Part I of First Schedule. Individuals on the other hand shall be subject to mechanism as laid down in the Eighth Schedule to the Ordinance, in respect of debt securities for which settlements are undertaken by NCCPL]

1 Clauses “(z) and (za)” inserted by SRO 161(I)/2015, dated February 23, 2015.

Income Tax Rules, 2002 34

CHAPTER - III PERSONS CHAPTER - III PERSONS

14. Resident individual

(1) This rule applies for the purposes of section 82, which provides for the determination of persons as resident individuals.

(2) The following rules apply for the purposes 1[ ] of section 82 in computing the number of days an individual is present in Pakistan in a tax year, namely:-

(a) subject to clause (c), a part of a day that an individual is present in Pakistan (including the day of arrival in, and the day of departure from, Pakistan) counts as a whole day of such presence;

(b) the following days in which an individual is wholly or partly present in Pakistan count as a whole day of such presence, namely:-

(i) a public holiday;

(ii) a day of leave, including sick leave;

(iii) a day that the individual‟s activity in Pakistan is interrupted because of a strike, lock-out or delay in receipt of supplies; or

(iv) a holiday spent by the individual in Pakistan before, during or after any activity in Pakistan; and

(c) a day or part of a day where an individual is in Pakistan solely by reason of being in transit between two different places outside Pakistan does not count as a day present in Pakistan. 1 Words “of clauses (a) and (b)” omitted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 35

CHAPTER - IV TAXATION OF FOREIGN-SOURCE INCOME OF RESIDENTS CHAPTER - IV TAXATION OF FOREIGN-SOURCE INCOME OF RESIDENTS

15. Foreign income tax

(1) This rule applies for the purposes of sections 102 and 103, which provide resident persons with relief from international double taxation.

(2) A foreign levy is a foreign income tax if the following conditions are satisfied, namely:-

(a) the levy is a tax; and

(b) the tax is substantially equivalent to the income tax imposed by the Ordinance.

(3) Subject to sub-rules (4) and (5), a foreign levy is a tax if it requires a compulsory payment pursuant to the authority of the foreign country to levy taxes.

(4) A penalty, fine, interest or similar obligation is not a tax for the purposes of this Chapter.

(5) A foreign levy is not a tax to the extent that a person subject to the levy receives or is entitled to receive, directly or indirectly, a specific economic benefit from the foreign country in exchange for the payment pursuant to the levy.

(6) Subject to sub-rule (7), a foreign tax is substantially equivalent to the income tax imposed under the Ordinance if the following conditions are satisfied, namely:-

(a) the tax is imposed in respect of events that would result in the derivation of income, gains or profits under the Ordinance;

(b) the taxable amount is computed under the foreign tax by subtracting from gross receipts any significant expenses and the depreciation or amortization of capital costs attributable to such receipts, or, where the tax is imposed under the foreign law or any other basis; and

(c) Dividend or interest income earned from foreign source, on being so taken by the FBR, may be treated to have same character for the resident person, as it has under the Ordinance.

(7) The following foreign taxes are substantially equivalent to the income tax imposed under the Ordinance, namely:-

(a) a withholding tax imposed on dividends, gross receipts payable to non-resident persons as final tax; or

(b) tax on wages by withholding imposed as a final tax on salary.

(8) In this rule,

(a) “economic benefit” includes -

(i) any property;

(ii) any service;

(iii) any fee or other payment;

(iv) any right to use, acquire or extract natural resources, patents, or other property owned or controlled by the foreign country; or

(v) any reduction or discharge 1[of ] or a contractual obligation; and 1 Substituted for “or” by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 36

CHAPTER - IV TAXATION OF FOREIGN-SOURCE INCOME OF RESIDENTS

(b) “specific economic benefit” means an economic benefit that is not available on substantially the same terms -

(i) all persons subject to the income tax generally imposed by the foreign country; or

(ii) if there is no generally imposed income tax, the population of the country in general.

16. Foreign tax credit

(1) This rule applies for the purposes of section 103, which provides for the foreign tax credit.

(2) A resident taxpayer claiming a foreign tax credit for a tax year shall submit an application for the credit with the taxpayer’s return of income for that year.

(3) An application for a foreign tax credit shall be in the form as specified in Part I of the First Schedule to these rules.

(4) Subject to sub-rule (5), an application for a foreign tax credit shall be accompanied by the following [documents], namely:-

(a) where the tax has been deducted at source, a declaration by the payer of the income tax has been deducted and a certified copy of the receipt that the payer has received from the foreign tax authority for the deducted tax; or

(b) in any other case, the original or a certified copy of the receipt that the taxpayer has received from the foreign tax authority for the tax paid.

(5) Where a resident taxpayer cannot obtain evidence of the deduction of tax from the payer of income as required under clause (a) of sub-rule (4), the Commissioner may accept such secondary evidence of the deduction as is determined by him. 1 Substituted for “documentation” by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 37

CHAPTER - V TAXATION OF NON-RESIDENTS

17. Application of chapter

The rules in this Chapter apply for the purposes of sub-clause (ii) of clause (a) of sub-section (2) of section 237, which provides for the making of rules concerning the manner in, and procedure by, which the income, profits and gains chargeable to tax, and the tax payable thereon, under the Ordinance shall be determined in the case of non-resident persons.

18. Income from royalty

The income of a non-resident person by way of 1[royalty] received from a resident person or a permanent establishment in Pakistan of a non-resident person shall be-

(a) in the case a royalty 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 gross amount of the royalty less the deductions allowed under section 40; or

(b) in any other case, to which sub-section (2) of section 6 does not apply, the gross amount of the royalty less 2[than] the following expenditure-

(i) any expenditure incurred In Pakistan to earn such royalty, wherever paid;

(ii) any expenditure incurred outside Pakistan in pursuance of such agreement not exceeding ten percent of gross amount of royalty. [ ]

(c) in the case of royalty received in pursuance to any other agreement, the gross amount of the royalty less the following expenditures only, namely:-

(i) any expenditure incurred in Pakistan in earning such income;

(ii) any expenditure incurred in Pakistan in respect of any work done in pursuance of such agreement; and

(iii) any expenditure incurred outside Pakistan in respect of any work done in pursuance of such agreement not exceeding ten percent of the gross amount of such royalty.

(d) The provisions of [clauses] (b) and (c) would not apply where, royalty is covered by section 169. 1 Substituted for “royalties” by SRO 392(I)/2009, dated May 19, 2009. 2 Substituted for “then” by SRO 392(I)/2009, dated May 19, 2009. 3 Proviso omitted by SRO 590(I)/2004, dated July 07, 2004. 4 Substituted for “sub-rule” by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 38

19. Fee for technical services

(1) The income of a non-resident person by way of 1[fee] for technical services received from a resident person or a permanent establishment in Pakistan of a non-resident person shall be-

(a) in the case of 1[fee] 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 only in such cases, the gross amount of the 1[fee] less the deductions allowed under section 40;

(b) in the case of 1[fee] received in pursuance of an agreement made on or after 8th day of March, 1980 but before the 4th day of May, 1981, the gross amount of the [fee] less the deductions allowed under section 40 with a maximum total deduction equal to twenty percent of the gross amount of such 1[fee]; or

(c) in any other case to which sub-section (2) of 2[Section 6] of the Income Tax Ordinance, 2001 does not apply, the gross amount of 3[fee for technical services] less the following perquisites:-

(i) any expenditure incurred in Pakistan to earn such 3[fee for technical services], wherever paid.

(ii) any expenditure incurred outside Pakistan in pursuance of such agreement not exceeding ten percent of gross amount of 3[fee for technical services]. Provided that a non-resident may opt for taxation under section 6 of Income Tax Ordinance, 2001, by filing a written declaration option within 15 days of the commencement of contract. Such option shall remain operative till completion of the said contract. 4[clause] (c) would not apply where the fee for technical service is covered by the

(d) provisions of section 169. [19A. Certificate of residence.-

(1) Where any person, resident in Pakistan, seeks to obtain a certificate of residence from the Competent Authority of Pakistan for its presentation before the tax authorities of another country with which Pakistan has signed an Agreement for the Avoidance of Double Taxation and Fiscal Evasion, for the purposes of obtaining tax credit or fiscal relief, the person may submit an application in this behalf in the Form prescribed below, namely:- 1 Substituted for “fees” by SRO 392(I)/2009, dated May 19, 2009. 2 Substituted for “Section 5” by SRO 392(I)/2009, dated May 19, 2009. 3 Substituted for “royalty” by SRO 392(I)/2009, dated May 19, 2009. 4 Substituted for “sub-rule” by SRO 392(I)/2009, dated May 19, 2009. 5 Rules 19A, 19B and 19C inserted by SRO 619(I)/2006, dated June 08, 2006. Later Rules 19A to 19D have been inserted by SRO 714(I)/2006, dated July 05, 2006. Due to confusion both sets of Rules 19A to 19C have been reproduced till clarification by CBR. Income Tax Rules, 2002 39

Form of Application for Obtaining Certificate of Residence To The Competent Authority of Pakistan, 1Federal Board of Revenue, Constitution Avenue, Islamabad. Sir, Whereas the applicant is resident in Pakistan by way of [INSERT: Entitlement to residence………………………………….] in respect of the Tax year ending on [INSERT: Date…………], and has earned [INSERT: Type/Head of Income…………………….………….] income in [INSERT: Name of the country……………….], during the period [INSERT: From…………….To……………….…]; and that Pakistan and [INSERT: Name of the other country …………………….….] have signed an Agreement for the Avoidance of Double Taxation and Fiscal Evasion, dated…………………., which entitles the applicant to a reduced tax rate/tax credit/tax sparing credit/fiscal relief in [INSERT: Name of the Country………………………….] upon issuance of a Certificate of Residence by the Competent Authority of Pakistan, for which purpose, all relevant particulars are as under, namely:- 1 Name / Nomenclature of the Applicant 2 Whether Individual, AOP or Company? 3 CNIC / Registration / Incorporation No 4 Address in Pakistan 5 Telephone / Fax / email address 6 National Tax Number 7 Income declared for the Tax Year 8 Name and Designation of Tax Authority to which the Certificate is intended for presentation 9 Type (s) / Particulars of Income Earned Copies of the following documents in support of our claim are enclosed, namely:-

(1) Proof of earning of income in the foreign country;

(2) Copy of NIC;

(3) Copy of NTN Certificate;

(4) Copy of the Certificate of Incorporation (if applicable) ; and

(5) Copy of the Income Tax Return for the latest tax year (if applicable) Verification I _____________________________________ son/daughter/wife of Mr. solemnly declare that to the best of my knowledge and belief, the information given in this application and the annexures and statements accompanying it is correct. The words “Central Board of Revenue” substituted by the Finance Act, 2007 Income Tax Rules, 2002 40

CHAPTER - V TAXATION OF NON-RESIDENTS

2. I also declare that to the best of my knowledge, I have not concealed any fact or information which could be relevant for deciding my application.

3. I further declare that I am making this application in my capacity as (designation) and that I am competent to make this application and verify it.

(2) The Competent Authority of Pakistan, if required, shall cause to call for a report from the Commissioner concerned.

(3) The Commissioner after verifying all the relevant facts as stated by the taxpayer in the application shall submit his report 1[within thirty days of the receipt of the application by him from the 2Federal Board of Revenue].

(4) The Competent Authority of Pakistan shall decide upon the request of the taxpayer and issue the Certificate of Residence as per the Form prescribed below within forty five days of the submitting of the application, namely:-

Form of Certificate of Residence Issued by the Competent Authority

[CERTIFICATE OF RESIDENCE FOR PRESENTATION BEFORE THE TAX AUTHORITIES OF IN RESPECT OF THE TAX YEAR]

I certify that Mr./Ms/M/s. __________________________ is resident in Pakistan by way of ________________________________, and subject to taxes in Pakistan covered in the Agreement for Avoidance of Double Taxation and Fiscal Evasion between Pakistan and ________________________. The particulars relating to his/ her/ its person and the details of economic activities and tax paid in Pakistan during the Tax Year are as under, namely:-

(d) CNIC/Registration/Passport No.

1 Substituted for “within fifteen days of the receipt of the application by him” by SRO 392(I)/2009, dated May 19, 2009. The words “Central Board of Revenue” substituted by the Finance Act, 2007

Income Tax Rules, 2002 41

(i) Income Declared/Assessed for the Tax year:

(j) Total Tax Paid/Payable for the Tax year:

(k) LTU/ RTO: THE COMPETENT AUTHORITY [Member (Inland Revenue) or his Authorized Officer]

(5) In respect of each tax year a separate application shall be submitted by the taxpayer, and a separate Certificate shall be issued by the Competent Authority of Pakistan 2[or his Authorized Officer].

(6) In case the Competent Authority of Pakistan decides not to issue a Certificate of Residence, it shall communicate its decision along with reasons of rejection thereof to the applicant taxpayer within forty five days of the submitting of the application.

19B. Certificate of payment of tax in Pakistan

(1) Where any person, non-resident in Pakistan, seeks to obtain a certificate of payment of tax in Pakistan by way of deduction, collection or otherwise, which attains finality or which is a final tax under any provision of the Ordinance or that of the Agreement for the Avoidance of Double Taxation and Fiscal Evasion between Pakistan and the country of residence of the applicant taxpayer, for presentation before the tax authorities of the country of his residence, the person may submit an application to the Competent Authority of Pakistan in the Form prescribed below, namely:- Form of application for obtaining certificate of payment of tax in Pakistan To The Competent Authority of Pakistan, 3Federal Board of Revenue, Constitution Avenue, Islamabad. Sir, Whereas the applicant was resident in [INSERT: Name of the country………………….], by reason of [INSERT: Nationality, Incorporation, Situs of Management………………………], and thus non-resident in Pakistan in respect of the Tax year ending on ………………….; and that Pakistan and [INSERT: Name of the country of residence………………….] have signed an Agreement for the Avoidance of Double Taxation and Fiscal Evasion dated…………………., which entitles the applicant to a tax credit / fiscal relief in respect of the tax paid in Pakistan, in the country of his residence upon issuance of a Certificate of Payment of Tax Paid by the Competent Authority of Pakistan. The relevant details in this regard are as under, namely:- 1. Name / Nomenclature of the Applicant 1 Substituted for “Member (Direct Taxes)” by SRO 725(I)/2011, dated July 28, 2011. 2 Words inserted by SRO 725(I)/2011, dated July 28, 2011. The words “Central Board of Revenue” substituted by the Finance Act, 2007 Income Tax Rules, 2002 42

2. Country of Residence 3. Personal Status [Individual, AOP, Company] 4. Tax Year 5. Particulars / details of income earned in Pakistan 6. Total tax paid in Pakistan for the Tax Year 7. Has any appeal been filed against the imposition of the aforementioned tax in Pakistan? 8. Have you applied or intend to apply for the refund or adjustment of the tax paid against demand of any other year? Copies of the following documents in support of our claim are enclosed, namely:-

(i) Proof of income earned in Pakistan

(ii) Proof of tax paid in Pakistan

(iii) Proof of residence in the other country Verification I son/daughter/wife of Mr. solemnly declare that to the best of my knowledge and belief, the information given in this application and the annexures and statements accompanying it is correct. 2. I also declare that to the best of my knowledge, I have not concealed any fact or information which could be relevant for deciding my application. 3. I further declare that I am making this application in my capacity as (designation) and that I am competent to make this application and verify it. Date Signatures: Place Name:

(2) The Competent Authority of Pakistan, if required, shall cause to call for a report from the Commissioner concerned.

(3) The Commissioner after verifying all the relevant facts as stated by the taxpayer in the application shall submit his report 1[within thirty days of the receipt of the application by him from the Federal Board of Revenue].

(4) The Competent Authority of Pakistan shall decide upon the request of the taxpayer, and issue a certificate of payment of tax in Pakistan, as per the Form prescribed below within forty five days of the submitting of the application, namely:- 1 Substituted for “within fifteen days of the receipt of the application by him” by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 43

CHAPTER - V TAXATION OF NON-RESIDENTS

Form of Certificate of Payment of Tax in Pakistan Issued by the Competent Authority

[CERTIFICATE OF TAX PAID IN PAKISTAN FOR PRESENTATION BEFORE THE TAX AUTHORITIES OF _______________ IN RESPECT OF THE TAX YEAR ________

I certify that Mr./Ms/M/s………………………………………….being non-resident in Pakistan has paid income tax in Pakistan in respect of the Tax Year ending on ………………………as per the following details:-

Note: Average exchange rate prevalent during the year was US$ 1 = PKR

THE COMPETENT AUTHORITY [Member (Inland Revenue) or his Authorized Officer]

(5) After issuance of the certificate of payment of tax in Pakistan, the Commissioner shall earmark the amount of tax covered by the certificate against refund or adjustment in lieu of tax demand of the taxpayer in respect of any prior or subsequent tax year, under any circumstances.

(6) In case the Competent Authority of Pakistan decides not to issue a certificate of payment of tax in Pakistan, it shall communicate its decision along with the reasons of rejection thereof to the applicant taxpayer within sixty days of the submitting of the application at the available address in Pakistan.

19C. Certificate for tax sparing credit

[(1)] Where any person, non-resident in Pakistan, seeks to obtain a certificate for tax sparing credit in respect of income earned through a permanent establishment situated in Pakistan, under a provision, if any contained therein, of the Agreement for the Avoidance

1 Substituted for “Member (Direct Taxes)” by SRO 725(I)/2011, dated July 28, 2011. 2 Figure and bracket inserted by SRO 392(I)/2009, dated May 19, 2009.

Income Tax Rules, 2002 44

of Double Taxation and Fiscal Evasion between Pakistan and the country of residence of such taxpayer, may submit an application to the Competent Authority of Pakistan in the Form prescribed below namely:- Form of Application for Obtaining Certificate for Tax Sparing Credit To The Competent Authority of Pakistan, 1Federal Board of Revenue, Constitution Avenue, Islamabad. Sir, Whereas the applicant was resident in [INSERT: Name of the country……………..……………….], by reason of [INSERT: Nationality, Incorporation, Situs of Management………..…………………], and thus non-resident in Pakistan in respect of the Tax year ending on …………………….; and that Pakistan and [INSERT: Name of the country of residence ……….………………….] have signed an Agreement for the Avoidance of Double Taxation and Fiscal Evasion dated …….…………., which entitles the applicant to a tax credit / fiscal relief in respect of the tax paid in Pakistan, in the country of his residence upon issuance of a Certificate of Payment of Tax Paid by the Competent Authority of Pakistan. The relevant details in this regard are as under, namely:- 1. Name / Nomenclature of the Applicant 2. Country of Residence 3. Personal Status [Individual, AOP, Company] 4. Tax Year 5. Particulars/ details of income earned in Pakistan 6. Admitted tax liability paid / payable in Pakistan Total tax payable in Pakistan in case tax incentives / fiscal benefits would not have been allowed Has any appeal been filed against any order of any tax authority in Pakistan? 7. Amount qualifying for normal tax credit 8. Amount qualifying for tax sparing credit Copies of the following documents in support of our claim are enclosed, namely:-

(i) Proof of income earned in Pakistan

(ii) Proof of tax paid in Pakistan

(iii) Proof of residence in the other country The words “Central Board of Revenue” substituted by the Finance Act, 2007 Income Tax Rules, 2002 45

Verification

I _______________________________ son/daughter/wife of Mr. solemnly declare that to the best of my knowledge and belief, the information given in this application and the annexures and statements accompanying it is correct.

2. I also declare that to the best of my knowledge, I have not concealed any fact or information which could be relevant for deciding my application.

3. I further declare that I am making this application in my capacity as (designation) and that I am competent to make this application and verify it.

(2) The Competent Authority of Pakistan, if required, shall cause to call for a report from the Commissioner concerned.

(3) The Commissioner after verifying all the relevant facts as stated by the taxpayer in the application shall submit his report 1[within sixty days of the receipt of the application by him from the Federal Board of Revenue].

(4) The Competent Authority of Pakistan shall decide upon the request of the taxpayer, and issue a certificate for tax sparing credit, as per the Form prescribed below within 2[ninety] days of the submitting of the application, namely:-

Form of Certificate for Tax Sparing Credit issued by the Competent Authority

[CERTIFICATE FOR TAX SPARING CREDIT FOR PRESENTATION BEFORE THE TAX AUTHORITIES OF …………………IN RESPECT OF THE TAX YEAR ……………]

I certify that Mr/Ms/M/s…………………………………………. being non-resident in Pakistan has paid income tax in Pakistan in respect of the Tax Year ending on ………………………as per the following details:-

1 Substituted for “within fifteen days of the receipt of the application by him” by SRO 392(I)/2009, dated May 19, 2009. 2 Substituted for “45” by SRO 392(I)/2009, dated May 19, 2009.

(i) Total tax paid during the year:

(j) Total amount of tax spared:

(k) Tax Office : LTU/ RTO: Note: Average exchange rate prevalent during the year was US$ 1 = PKR THE COMPETENT AUTHORITY 1[Member (Inland Revenue) or his Authorized Officer]

(5) In case the Competent Authority of Pakistan decides not to issue a certificate for tax sparing credit, it shall communicate its decision along with the reasons of rejection thereof to the applicant taxpayer within sixty days of the submitting of the application at the available address in Pakistan.] [19D]. Application for initiation of Mutual Agreement Procedure (MAP).-

(1) Where a resident taxpayer, or a Pakistani national residing abroad is aggrieved by any action of the tax authorities of any country outside Pakistan with which Pakistan has signed an Agreement for the Avoidance of Double Taxation for the reason that, according to him, such action is not in accordance with the terms of the agreement with such other country outside Pakistan, he may make an application to the Competent Authority in Pakistan seeking to invoke the provision of the Mutual Agreement Procedure, if any, provided therein, in the Form prescribed in rule 3[19F].

(2) The Competent Authority of Pakistan upon satisfaction that,-

(a) the taxpayer has reasonable grounds to justify Competent Authority“ assistance;

(b) the application has been made within two years from the date of notification of the cause of grievance; and

(c) the double taxation or other impending grievance is more than a mere possibility; shall cause to take up the matter with the Competent Authority of the country concerned and endeavor to resolve the matter through consultative measures.

(3) In case the Competent Authority in Pakistan decides not to intervene in the matter, it will inform the taxpayer applicant within thirty days of the receipt of the application, of its decision and grounds thereof in writing.

(4) If during the course of mutual agreement proceedings, the Competent Authority of the other country requires any clarification, verification of facts, or guarantees, that shall be communicated to the applicant taxpayer, and after the receipt of the same shall be passed on to the Competent Authority of the other country.

(5) At any time, if the terms and conditions of the impending resolution are not satisfactory to the taxpayer, he may withdraw from the MAP proceedings and pursue any right of appeal under the normal course available.

(6) The Competent Authority of Pakistan would communicate the outcome of the Mutual Agreement Proceedings taken up with the other country to the applicant taxpayer in writing.] 1 Substituted for “Member (Direct Taxes)” by SRO 725(I)/2011, dated July 28, 2011. 2 Rule inserted by SRO 714(I)/2006, dated July 05, 2006, originally numbered as “19A”, erroneously, later renumbered as “19D” by SRO 1032(I)/2006, October 03, 2006. 3 Substituted for “19C” by SRO 1032(I)/2006, October 03, 2006. Income Tax Rules, 2002 47

1[19E]. Action by the Competent Authority of Pakistan on an application received through the Competent Authority of a treaty partner country.-

(1) Where a reference is received from the Competent Authority of a country outside Pakistan under an agreement with that country with regard to any action taken by any income-tax authority in Pakistan, the Competent Authority in Pakistan shall call for a report from the Commissioner concerned and, if required, examine the relevant records, and shall endeavour to arrive at a resolution of the case on unilateral basis in terms of the liberal interpretation of the legal provisions applicable.

(2) The Competent Authority of Pakistan shall entertain all such requests from the Competent Authority of a treaty partner country that are about but not limited to -

(a) tax demands that have arisen or are likely to arise as a result of a tax audit, assessment or re-assessment proceedings, or a tax appeal, or a review by a Commissioner of Income Tax of an assessment or re-assessment proceedings on the grounds that it is prejudicial to the interest of the revenue;

(b) Withholding tax on income or other similar advance taxes that are levied under the Ordinance; and.

(c) interpretation and application of any provision of the laws governing the taxes covered in the relevant treaty as applicable to the non-resident person.

(3) The Competent Authority of Pakistan may decline a MAP request made by the Competent Authority of a treaty partner country, if it is not received within two years from the date of notification of the order or notice giving rise to the cause of grievance.

(4) In case the Competent Authority of Pakistan cannot resolve the matter on unilateral basis, it would cause to communicate with the Competent Authority of the other country, and both authorities would endeavor to resolve the matter through a consultative process, and arrive at a mutually agreed settlement.

(5) If during the course of the mutual agreement proceedings, the Competent Authority of Pakistan requires any clarification, verification of facts, or an irrevocable bank guarantee, the same shall be communicated to the applicant taxpayer, under intimation to the Competent Authority of the country through which the reference for mutual agreement proceedings was received.

(6) Wherever required the Competent Authority of Pakistan shall give an opportunity of being heard to the applicant taxpayer in person, through an authorized representative or a counsel.

(7) The resolution arrived at under mutual agreement procedure, in consultation with the competent authority of the country outside Pakistan, shall be communicated, wherever necessary, to the Commissioner concerned, in writing.

(8) During the pendency of the Mutual Agreement proceedings the Competent Authority of Pakistan may, depending on the merits of each case, direct the Commissioner concerned to put on hold the recovery proceedings of any amount of tax, additional tax or penalty that may be outstanding against such taxpayer, if the taxpayer furnishes, as security, an irrevocable Bank Guarantee issued by any scheduled bank, or a Pakistani branch of a foreign bank approved by the State Bank of Pakistan to carry out business of banking in Pakistan as prescribed in rule 2[19G]. 1 Rule inserted by SRO 714(I)/2006, dated July 05, 2006, originally numbered as “19B”, erroneously, later renumbered as “19E” by SRO 1032(I)/2006, October 03, 2006. 2 Substituted for “19D” by SRO 1032(I)/2006, dated October 03, 2006. Income Tax Rules, 2002 48

(9) The amount of the irrevocable Bank Guarantee shall be equal to -

(a) the amount of tax, additional tax or penalty as has been imposed through the order or notice that is the subject matter of MAP proceedings; or

(b) if no amount has yet been imposed through an order or notice, the amount determined by the Commissioner concerned.

(10) The Competent Authority of Pakistan shall endeavor to resolve or close the case within a period of one year from the date on which it receives the reference under the Mutual Agreement Procedure provision as contained in the Agreement for Avoidance of Double Taxation between Pakistan and that other state.

(11) The effect to the resolution arrived at under Mutual Agreement Procedure shall be given by the Commissioner, notwithstanding any time limitations contained in the Ordinance, within thirty days of receipt of the same, if the taxpayer-

(a) gives his acceptance to the resolution delivered under the Mutual Agreement Procedure; and

(b) withdraws his appeal, if any, pending on the issue which was the subject matter for adjudication under Mutual Agreement Procedure.

(12) The amount of tax, additional tax or penalty already determined shall be recomputed in accordance with the decision taken under the Mutual Agreement Procedure in the manner laid down in the Ordinance and the rules in such a way it does not contravene or negate the resolution arrived at.

(13) The Commissioner concerned shall draw-down upon the Bank Guarantee as specified in sub- rule (8) in writing within ten days from the notice of acceptance of MAP resolution given by the application in pursuance to the issuance of the resolution or notification of closure of the MAP proceedings by the Competent Authority of Pakistan]. 1[19F]. Form of application for initiation of MAP Proceedings.- Application under rule 19A shall be submitted on the form prescribed as under: To The Competent Authority of Pakistan, 2Federal Board of Revenue, Constitution Avenue, Islamabad. Sir, Whereas the applicant is aggrieved by the action of the tax authority of _______________________________________________ (name of the country) in respect of the tax year ending on _____________________ for the reasons given hereunder, the matter may kindly be taken up with the competent authority of ______________________________________ (name of the country) under Article ___________________________________ of the __________________________________________________________ (specify the agreement) between Pakistan and country). The relevant details in this regard are as under:- 1 Rule inserted by SRO 714(I)/2006, dated July 05, 2006, originally numbered as “19C”, erroneously, later renumbered as “19F” by SRO 1032(I)/2006, October 03, 2006. The words “Central Board of Revenue” substituted by the Finance Act, 2007 Income Tax Rules, 2002 49

Name of the applicant Present and permanent address in Pakistan Residential status or nationality CNIC and NTN Entitlement to invoke MAP Proceedings (Residence or Nationality) Telephone No. Name and designation of Tax Authority in the foreign country (Treaty Partner) Date of the notice or order giving rise to the action Is the order or action of the income-tax authority of the country outside Pakistan not in accordance with the agreement? If so, the reasons thereof (attach separate sheet if required). Have you filed any appeal in the foreign country against the order or notice giving rise to the cause of grievance? Copies of the following documents in support of our claim are enclosed, namely:-

(1) Order or Notice giving rise to the cause of grievance

(2) Computerized National Identity Card

(3) …………. Verification I. ____________________________ son/ daughter/ wife of Mr. _____________________________ solemnly declare that to the best of my knowledge and belief, the information given in this application and the annexures and statements accompanying it is correct. 2. I also declare that to the best of my knowledge, I have not concealed any fact or information which could be relevant for deciding my application. 3 I further declare that I am making this application in my capacity as (designation) and that I am competent to make this application and verify it. Date Signatures: Place Name: Income Tax Rules, 2002 50

20. Application of this chapter

This chapter applies for the purposes of section 108 mainly, which provide the Commissioner with the power to distribute, apportion or allocate income, expenditures or tax credits between associates in respect of transactions not made in accordance with the arm’s length principle.

21. Interpretation

(1) In this Chapter,-

(a) “comparable uncontrolled transaction”, in relation to a controlled transaction, means an uncontrolled transaction that satisfies one of the following conditions,

(a) the differences (if any) between the two transactions or between persons undertaking the transactions do not materially affect the price in the open market, the resale price margin or the cost plus mark up, as the case may be; or

(b) if the differences referred to in sub-clause (i) do materially affect the price in the open market, the resale price margin or the cost plus mark up, as the case may be, then reasonably accurate adjustments can be made to eliminate the material effects of such differences;

(b) “controlled transaction” means a transaction between associates;

(c) “transaction” means any sale, assignment, lease, license, loan, contribution, right to use property or performance of services;

(d) “uncontrolled persons” means persons who are not associates; and

(e) “uncontrolled transaction” means a transaction between uncontrolled persons. 22. Subject to the other rules in this Chapter, the Commissioner, in applying this Chapter shall also be guided by international standards, case law and guidelines issued by the various tax-related internationally recognized organizations.

23. Arm’s length standard

(1) In determining the income of a person from a transaction with an associate, the standard to be applied by the Commissioner shall be that of a person dealing at arm’s length with a person who is not an associate (referred to as the “arm’s length standard”).

(2) A controlled transactions shall meet the arm’s length standard if the result of the transaction is consistent with the result (referred to as the “arm’s length result”) that would have been realized if uncontrolled persons had engaged in the same transaction under the same conditions.

(3) Subject to sub-rule (6), the following methods shall apply for the purposes of determining an arm’s length result, namely:-

(a) the comparable uncontrolled-price method;

(b) the resale price method;

(c) the cost plus method; or

(d) the profit split method. Income Tax Rules, 2002 54

CHAPTER - VI TRANSFER PRICING

(4) The method in clause (d) shall apply only where the methods in clauses (a), (b) and (c) cannot be reliably applied.

(5) As between clauses (a), (b) and (c), the method that, having regard to all the facts and circumstances, provides the most reliable measure of the arm’s length result as in the opinion of Commissioner shall be applied.

(6) Where the arm’s length result cannot be reliably determined under one of the methods in sub-rule (3) the Commissioner may use any method provided it is consistent with the arm’s length standard.

24. Comparable uncontrolled price method

The comparable uncontrolled price method determines whether the amount charged in a controlled transaction gives rise to an arm’s length result by reference to the amount charged in a comparable uncontrolled transaction.

25. Resale price method

(1) The resale price method determines whether the amount charged in a controlled transaction gives rise to an arm’s length result by reference to the resale gross margin realized in a comparable uncontrolled transaction.

(2) The following steps shall apply in determining the arm’s length result under the resale price method, namely:-

(a) determine the price that a product purchased from an associate has been sold to a person who is not an associate (referred to as the “resale price”); and

(b) from the resale price is subtracted a gross margin (referred to as the “resale gross margin”) representing the amount that covers the person’s selling and other operating expenses and, in light of the functions performed (taking into account assets used and risks assumed), make an appropriate profit;

(c) from that amount is subtracted any other costs associated with the purchase of the product, such as customs duty; and

(d) the amount remaining is the arm’s length result.

(3) The resale price margin of a person in a controlled transaction may be determined by reference to:-

(a) the resale price margin that the person earns on products purchased and sold in a comparable uncontrolled transaction; or

(b) the resale price margin that an independent person earns in comparable uncontrolled transaction.

26. Cost plus method

(1) The cost plus method determines whether the amount charged in a controlled transaction gives rise to an arm’s length result by reference to the cost plus markup realised in a comparable uncontrolled transaction. Income Tax Rules, 2002 55

CHAPTER - VI TRANSFER PRICING

(2) The following steps shall apply in determining the arm’s length result under the cost plus method, namely:-

(a) determine the costs incurred by the person in a controlled transaction;

(b) to this amount is added a mark up (referred to as the “cost plus mark up” to make an appropriate profit in light of the functions performed and market conditions; and

(c) the sum of the amounts referred to in clauses (a) and (b) is the arm’s length result.

(3) The cost plus mark up of a person in a controlled transaction may be determined by reference to:-

(a) the cost plus mark up that the person earns in a comparable uncontrolled transaction; or

(b) the cost plus mark up that an independent person earns In comparable uncontrolled transaction.

27. Profit split method

(1) The profit split method may be applied where transactions are so interrelated that the arm’s length result cannot be determined on a separate basis.

(2) The profit split method determines the arm’s length result on the basis that the associates form a firm and agree to divide profits in the manner that independent persons would have agreed on the basis that they are dealing with each other at arm’s length.

(3) The Commissioner may determine the division of profits on the basis of a contribution analysis, a residual analysis or on any other basis as appropriate having regard to the facts and circumstances.

(4) Under contribution analysis, the total profits from controlled transactions shall be divided on the basis of the relative value of the functions performed by each person participating in the controlled transactions.

(5) Under residual analysis, the total profits from controlled transactions shall be divided as follows:-

(a) each person shall be allocated sufficient profit to provide the person with a basic return appropriate for the type of transactions in which the person is engaged; and

(b) any residual profit remaining after the allocation in clause (a) shall be allocated on the basis of division between independent persons determined having regard to all the facts and circumstances.

(6) For the purposes of clause (a) of sub-rule (5), the basic return shall be determined by reference to market returns achieved for similar types of transactions by independent persons. Income Tax Rules, 2002 56

CHAPTER - VII RECORDS AND BOOKS OF ACCOUNTS CHAPTER - VII RECORDS AND BOOKS OF ACCOUNTS PART-I : PRELIMINARY

28. Application of Chapter

(1) The rules in this Chapter apply for the purposes of section 174.

(2) The purpose of this Chapter is to prescribe the minimum level of books of accounts, documents and records to be maintained by taxpayers

(3) Nothing in this Chapter shall preclude a taxpayer accounting for income chargeable under the head “Income from Business” from

(a) maintaining any books of account, documents or records in addition to those prescribed in these rules;

(b) adding such further columns or particulars in the forms prescribed in these rules for the taxpayer’s own requirement; or

(c) maintaining the books of account. documents or records in the manner prescribed keeping in view the nature of the taxpayer’s business. Interpretation.- ln this Chapter-

(a) “legal practitioner” includes an advocate. pleader, tax practitioner and advisor or consultant on income tax, sales tax. customs. central excise or salt tax laws.

(b) “medical practitioner” includes a doctor, surgeon, Physician, dentist, psychiatrist, Physiotherapist, tabib, homeopath, vaid, veterinarian and any person practicing medicine under any other name. PART-II: BOOKS OF ACCOUNT PRESCRIBED

29. Books of account, documents and records to be maintained

(1) Every taxpayer deriving income chargeable under the head “Income from Business” shall maintain proper books of account, documents and records with respect to-

(a) all sums of money received and expended by the taxpayer and the matters in respect of which the receipt and expenditure takes place;

(b) all sales and purchases of goods and all services provided and obtained by the taxpayer;

(c) all assets of the taxpayer;

(d) all liabilities of the taxpayer; and

(e) in case of a taxpayer engaged in assembly. Production processing, manufacturing, mining or like activities, all items of cost relating to the utilization of materials, labour and other inputs.

(2) If a taxpayer uses fiscal electronic cash register or computerized accounting software. it may issue cash-memo invoice/receipt generated by the electronic cash register or computer.

(3) Duplicate copies and electronic or computer records of the cash-memo invoice receipt patient-slip to be issued under this chapter, shall be retained by the taxpayer and form part of the records to be maintained under this chapter. Income Tax Rules, 2002 57

CHAPTER - VII RECORDS AND BOOKS OF ACCOUNTS

(4) The books of account documents and records to be maintained under this chapter shall be maintained for 1[“six”] years after the end of the tax year to which they relate.

(5) 2[“The provision of sub rule (4) shall not apply where any proceeding under the Ordinance is pending before any authority or court the taxpayer shall maintain the record till final decision of the proceedings.”] 30. In particular, and without prejudice to the generality of the provisions of Rule 29, every taxpayer, other than companies, deriving income chargeable under the head “Income from business” shall issue and maintain the following minimum books of account, documents and records.-

(1) Taxpayers with business income upto Rs. 3[“500,000”] and new taxpayers deriving income from business (excluding taxpayers to whom sub-rules (2). (3) or (4) apply):

(a) Serially numbered and dated cash-memo/ invoice / receipt for each transaction of sale or receipt containing the following:-

(i) taxpayer’s name or the name of his business, address national tax number 4[“or CNIC”] and sales tax registration number, if any; and

(ii) the description quantity and value of goods sold or services rendered: Provided that where each transaction does not exceed Rs.100, one or more cash-memos per day for all such transactions may be maintained;

(b) Daily record of receipts, sales, payments purchases and expenses: a single entry in respect of daily receipts, sales, purchases and different heads of expenses will suffice; and

(c) Vouchers of purchases and expenses.

(2) Taxpayers with business income exceeding Rs. 5[“500,000”] (excluding taxpayers to whom sub-rules (1), (3) or (4) apply) and wholesalers, distributors, dealers and commission agents:-

(a) Serially numbered and dated cash-memo / invoice / receipt for each transaction of sale or receipt containing the following:-

(i) taxpayer’s name or the name of his business, address, national tax number and sales tax registration number, If any;

(ii) the description, quantity and value of goods sold or services rendered; and

(iii) in case of a wholesaler, distributor, dealer and commission agent, where a single transaction exceeds Rs.10,000, the name and address of the customer; Provided that where each transaction does not exceed Rs.100, one or more cash-memos per day for all such transactions may be maintained;

(b) Cash book and/or bank book or daily record of receipts, sales, payments. purchases and expenses; a single entry in respect of daily receipts, sales, 1 The word “five” substituted by SRO 1218(I)/2015 dated 08.12.2015. 2 Sub-rule (5) inserted by SRO 1218(I)/2015 dated 08.12.2015. 3 The figure “200,000” substituted by SRO 1218(I)/2015 dated 08.12.2015. 4 Inserted by SRO 1218(I)/2015 dated 08.12.2015 5 The figure “200,000” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 58

CHAPTER - VII RECORDS AND BOOKS OF ACCOUNTS purchases and different heads of expenses will suffice;

(c) General ledger or annual summary of receipts, sales, payments, purchases and expenses under distinctive heads;

(d) Vouchers of purchases and expenses and where a single transaction exceeds Rs.10.000 with the name and address of the payee; and

(e) Where the taxpayer deals in purchase and sale of goods, quarterly inventory of stock-in-trade showing description, quantity and value.

(3) Professionals (like medical practitioners, legal practitioners, accountants, auditors, architects, engineers etc.):-

(a) Serially numbered and dated patient-slip/ invoice/ receipt for each transaction of sale or receipt containing the following:-

(i) taxpayer’s name or the name of his business or profession, address national tax number and sales tax registration number, if any;

(ii) the description, quantity and value of medicines supplied or details of treatment /case/ services rendered (confidential details are not required) and amount charged; and

(iii) the name and address of the patient/client: Provided that the condition of recording address of the patient on the patient slip under this clause shall not apply to general medical practitioners;

(b) Daily appointment and engagement diary in respect of clients and patients: Provided that this clause-shall not apply to general medical practitioners;

(c) Daily record of receipts, sales, payments, purchases and expenses; a single entry in respect of daily receipts, sales, purchases and different heads of expenses will suffice; and

(d) Vouchers of purchases and expenses.

(4) Manufacturers (with turnover exceeding Rs.2.5 million):

(a) Serially numbered and dated cash-memo/ invoice/ receipt for each transaction of sale or receipt containing the following:-

(i) taxpayer’s name or the name of his business, Address, national tax number and sales tax registration number, if any;

(ii) the description, quantity and, value of goods sold; and

(iii) where a single transaction exceeds Rs.10,000 with the name and address of the customer;

(b) Cash book and/or bankbook;

(c) Sales day book and sales ledger (where applicable);

(d) Purchases day book and purchase ledger (where applicable);

(e) General ledger;

(f) Vouchers of purchases and expenses and where a single transaction exceeds Rs.10,000 with the name and address of the payee; and

(g) Stock register of stock-in-trade (major raw materials and finished goods) Income Tax Rules, 2002 59

CHAPTER - VII RECORDS AND BOOKS OF ACCOUNTS supported by gate in-ward and outward records and quarterly inventory of all items of stock-in-trade including work- in-process showing description, quantity and value.

30A. Electronic tax register

A person required to use an electronic tax register shall - (a). install the electronic tax register (ETR) within seven days of its authentication by Commissioner holding jurisdiction over such case and obtain a register identification number (RIN) for permanent affixture on the Electronic tax register; (b). use the electronic tax register to record only his own sales and ensure that each sale is made through it and print the receipt of each sale containing the information in accordance with sub-rules(3) and (4) of rule 29 and rule 30, and to deliver the original receipt to the purchaser; (c). in case of non-availability for use of the electronic tax register, the sales may be recorded with the use of a substitute electronic tax register, duly authenticated by the Commissioner; (d). prepare a daily and a monthly Accounting report containing the information as prescribed in Chapter VII of these rules; (e). ensure that the electronic tax register operates correctly with particular regard to correct programming of the names of goods and services and the correct allocation of their tax rates; (f). promptly report any malfunctioning of the electronic tax register to the person responsible for its servicing; (g). on demand by an authorized person, produce the electronic tax register for inspection; (h). ensure the inspection of the electronic tax register before the authorized service management after six months; (i). keep copies of electronic tax register reports for a period of five years and produce the same for inspection by the Commissioner whenever required to do so; (j). safely keep the electronic tax register ledger in the electronic tax register‟s casing and produce it whenever required by the Commissioner to do so; and (k). ensure the inspection before further use of an electronic register which has been or is suspected to have been interfered or tempered with.] 31. Every taxpayer deriving income chargeable under the head income from salary property, capital gains or other sources shall issue and maintain the following minimum documents and records.-

(1) Taxpayers deriving income from Salary: Salary certificate indicating the amount of salary and tax deducted there from.

(2) Taxpayers deriving income from property:

(a) Tenancy agreement. if executed;

(b) Tenancy termination agreement, if executed; 1 Rule 30A inserted by SRO 895(I)/2008 dated August 27, 2008. Income Tax Rules, 2002 60

CHAPTER - VII RECORDS AND BOOKS OF ACCOUNTS

(c) Receipt for amount of rent received; and

(d) Evidence of deductions claimed in respect of premium paid to insure the building, local rate, tax, charge or cess, ground rent, profit/interest or share in rent on money borrowed, expenditure on collecting the rent, legal services and unpaid rent.

(3) Taxpayers deriving income from capital gains:

(a) Evidence of cost of acquiring the capital asset;

(b) Evidence of deduction for any other costs claimed; and

(c) Evidence in respect of consideration received on disposal of the capital asset.

(4) Taxpayers deriving income from other sources: 1[(a)] Dividends: Dividend warrants. 1[(b)] Royalty: Royalty agreement 1[(c)] Profit on debt:

(i) Evidence and detail of profit yielding debt;

(ii) Evidence of profit on debt and tax deducted thereon, like certificate in the prescribed form or bank account statement; and

(iii) Evidence of Zakat deducted, if any. 1[(d)] Ground rent, rent from the sub-lease of land or building, income from the lease of any building together with plant or machinery and consideration for vacating the possession of a building or part thereof:

(i) Lease agreement; and

(ii) Lease termination agreement. 1[(e)] Annuity or Pension: Evidence of amount received. 1[(f)] Prize money on bond, winning from a raffle, lottery or cross word puzzle: Evidence of income and tax deducted thereon, like certificate in the prescribed form. 1[(g)] Provision use or exploitation of property: Agreement. 1[(h)] Loan, advance, deposit or gift: Evidence of mode of receipt of a loan, advance, deposit or gift i.e. by a crossed cheque or through a banking channel 1[(i)] General: Evidence of deduction for any other expenditure claimed. 1 Clauses re-lettered by SRO 392(I)/2009 dated May 19, 2009. Income Tax Rules, 2002 61

CHAPTER - VII RECORDS AND BOOKS OF ACCOUNTS PART-III : GENERAL INSTRUCTIONS ABOUT MAINTAINING BOOKS OF ACCOUNTS, DOCUMENTS AND RECORDS

32. General form of books of accounts, documents and records

(1) The books of accounts, records and other documents required to be maintained by a taxpayer in accordance with this Chapter may be kept on electronic media, provided sufficient steps have been taken to ensure the sanctity and safe keeping of such accounts, documents and records.

(2) The books of accounts, documents and records required to be maintained by a company in accordance with this Chapter shall be maintained in accordance with international accounting standards and as required under the Companies Ordinance, 1984.

33. Books of account documents and records to be kept at the specified place

(1) The books of accounts, documents and records required to be maintained by a taxpayer in accordance with this Chapter shall be kept at the place where the taxpayer is carrying on the business or, where the business is carried on in more places than one, at the principal place of business or at each of such places if separate books of accounts are maintained in respect of each place.

(2) Where a person derives income from sources other than from business, the books of accounts, documents and records shall be kept at the person’s place of residence or such other place as may be so declared by such person.

(3) The place or places where the books of accounts, documents and records are kept shall be clearly stated on the tax return form in the column requiring the details of the records maintained. Income Tax Rules, 2002 62

RETURNS, EMPLOYER’S CERTIFICATE, WEALTH STATEMENT CHAPTER - VIII AND STATEMENT TO BE FILED BY CERTAIN PERSONS CHAPTER - VIII RETURNS, EMPLOYER’S CERTIFICATE, WEALTH STATEMENT AND STATEMENT TO BE FILED BY CERTAIN PERSONS

34. Return of income

(1) This rule shall apply to provide for the furnishing of returns of income. 2[(2) A return of income as required to be furnished under section 114 shall be in the form as specified in Annexure-XIII of Part VI of the Second Schedule.]

(3) A return of income shall be verified in the manner specified in the form.

(4) A return of income shall be accompanied by the following, namely:-

(a) applicable documents;

(b) statements;

(c) certificates; 3[ ]

(d) annexes; 4[and] 4[(e) in case of companies, the return of income shall be accompanied by audited accounts and reconciliation of profits as per accounts and taxable income as declared in the return.] 5[ ] 6[ 7[ ] ] 1 Rule 34 substituted by SRO 651(I)/2004, dated July 30, 2004. 2 Sub-rule (2) substituted by SRO 392(I)/2009, dated May 19, 2009. 3 Word “and” omitted by SRO 392(I)/2009, dated May 19, 2009. 4 Word “and” and clause “(e)” inserted by SRO 392(I)/2009, dated May 19, 2009. 5 Word etc. “as are specified in Part-VI of the Second Schedule.” Earlier the words “the annexures to” appearing after the word “in” were omitted by SRO 1032(I)/2006, dated October 03, 2006. 6 Rule 35 substituted by Notification No. SRO 651(I)/2004, dated July 30, 2004. 7 Rule 35 omitted by SRO 1218(I)/2015 dated 08.12.2015. The omitted rule read as under: “ 35. Employer’s certificate in lieu of return of income.-

(1) This rule shall apply to provide for the furnishing of an employer’s certificate in lieu of return of income.

(2) An employer’s certificate in lieu of return of income as required under section 115 shall be in the form specified in Part III of the Second Schedule.

(3) An employer’s certificate in lieu of return of income shall be accompanied by the following, namely:-

(a) applicable documents;

(b) statements;

(c) certificates; and

(d) annexes; as are specified in the annexures to Part VI of the Second Schedule.” Income Tax Rules, 2002 63

RETURNS, EMPLOYER’S CERTIFICATE, WEALTH STATEMENT CHAPTER - VIII AND STATEMENT TO BE FILED BY CERTAIN PERSONS

36. Wealth statement

(1) This rule shall provide for the furnishing of a wealth statement.

(2) A wealth statement shall be-

(a) in the form specified In Part [IV] of the Second Schedule to these rules;

(b) verified in the manner specified in the form; [ ]

(c) accompanied by such documents, statements and certificates as specified in the form, and in the Ordinance, these rules and circulars issued under the Ordinance [and] 3[(d) accompanied by a wealth reconciliation statement.]

37. Return to be furnished by a non-resident ship owner or charterer

(1) This rule shall apply for the Purposes of section 143, which provides for the furnishing of returns by non-resident ship owners or charterers.

(2) A return required to be furnished under section 143 shall be in the following form, Remarks whether Total freight containers charges earned for Total in Respect and other charges goods, 5[of] freight received separately shown in Receipts for services in Pakistan the Normal Return of freight and passengers embarked outside income. If received by passenger, Pakistan (whether 6[Tax amount the agent or assigned Challan Name of Dates of cargo livestock 5[,livestock]em covered by the tax on earnings as to other Person, in that No. & Owner / Arrival / etc. embarked barked outside treaty. Please per columns 4, case rent/lease or Date of Name of ship 4[charterer]. departure from Pakistan Pakistan specify) 5 and 6.] assignment charges payment Remarks 1 2 3 4 5 6 7 8 9 10 Authorized/Representative Signature ____________ Name. ____________________________________ Designation ________________________________ Seal _____________________________________

(3) A return required to be furnished under section 143 shall be accompanied by such documents, statements and certificates as specified in the form, and in the Ordinance, these rules and circulars issued under the Ordinance.

(4) A return required to be furnished under section 143 may be furnished by any of the methods specified in rules 73 and 74. 1 Substituted for “V” by Notification No. SRO 861(I)/2003, dated September 01, 2003. 2 Word “and” omitted by SRO 392(I)/2009, dated May 19, 2009. 3 Word “and” and clause “(d)” inserted by SRO 392(I)/2009, dated May 19, 2009. 4 Substituted for “Charter” by SRO 392(I)/2009, dated May 19, 2009. 5 Words inserted by SRO 392(I)/2009, dated May 19, 2009. 6 Substituted for “Tax amount on earnings as Col:6” by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 64

RETURNS, EMPLOYER’S CERTIFICATE, WEALTH STATEMENT CHAPTER - VIII AND STATEMENT TO BE FILED BY CERTAIN PERSONS

38. Return to be furnished by a non-resident aircraft owner or charterer

(1) This rule shall apply for the purposes of section 144, which provides for the furnishing of quarterly returns by non-resident aircraft owners or charterers.

(2) A return required to be furnished under section 144 shall be in the following form, Remarks whether Total in Respect containers Charges Total freight 3[of] freight and other charges Quarterly earned for received in separately shown in receipts for goods, services Pakistan embarked the Normal Return of freight and passengers outside Pakistan income. If Received by Dates of passenger, 3[,livestock] (whether covered 4[Tax amount on the agent or assigned Challan 1[specificati Name of arrival. cargo lives tock embarked by the tax earnings as per to other Person, in that No.& on of the owner 3[/departur etc. embarked outside treaty. Please columns 4, 5 and case rent/ lease or Date of aircraft] 2[charterer] e] from Pakistan. Pakistan. specify). 6.] assignment charges. payment. Remarks 1 2 3 4 5 6 7 8 9 10 Authorized/Representative Signature ____________ Name. ____________________________________ Designation ________________________________ Seal _____________________________________

(3) A return required to be furnished under section 144 shall be accompanied by such documents, statements and certificates as specified in the form, and in the Ordinance, these rules and circulars issued under the Ordinance.

(4) A return required to be furnished under section 144 may be furnished in any of the methods specified in rules 73 and 74. 5[ ] 1 Substituted for “Name of Air-craft” by SRO 392(I)/2009 dated May 19, 2009. 2 Substituted for “Charter” by SRO 392(I)/2009, dated May 19, 2009. 3 Words inserted by SRO 392(I)/2009, dated May 19, 2009. 4 Substituted for “Tax amount on earnings as Col:6” by SRO 392(I)/2009, dated May 19, 2009. Rule 39 omitted by SRO 1218(I)/2015 dated 08.12.2015. The omitted rule read as under: “39. Statement in lieu of Return of income.-

(1) Where in lieu of Return of income statement is required to be filed namely incomes covered by sections 5,6 and 7 or where tax deduction is to be taken as final discharge of tax liability u/s 169 a statement in the prescribed form shall be filed as prescribed in Part 5[IV] of the Second Schedule to the Rules.

(2) Where a taxpayer has income from a source which does not form part of total income and also income under any head of income given in section 11 (except salary), Return is specifically required to be filed on a prescribed statement as well as shall be filed.” Income Tax Rules, 2002 65

CHAPTER - VIIIA BANKING COMPANIES REPORTING REQUIREMENTS 1[CHAPTER - VIIIA BANKING COMPANIES REPORTING REQUIREMENTS 39A. This chapter contains rules for banking companies reporting requirements for the purpose of section 165A of the Ordinance.

39B. Definitions

(1) In this Chapter, unless there is anything repugnant in the subject or context,-

(a) “Account Holders Deposits Statement” means Account Holders Deposits Statement as specified in Form „A’;

(b) “Banking Company Officer” means a senior officer stationed at the head office and nominated by a banking company to coordinate with the Board for provision of any information and documents required by the Board;

(c) “Credit Card Payments Statement“ means Credit Card Payments Statement as specified in Form „B’;

(d) “Currency Transactions Report“ means currency transactions report generated and submitted by a banking company to the Financial Monitoring Unit under the Anti- Money Laundering Act, 2010 (VII of 2010)

(e) “Information” includes Account Holders Deposits Statement, Credit Card Payments Statement, Written Off Loans Statement, currency transactions report, suspicious transactions report, details of any information or data through online access to central data base of the banking company or any other information as required by the Board from the banking company;

(f) “Reporting Banking Company” means a banking company required under section 165A of the Ordinance to provide to the Board all the information and documents electronically or otherwise, mentioned in the said section;

(g) “Suspicious Transactions Report” means suspicious transactions report generated and submitted by a banking company to the Financial Monitoring Unit under the Anti- Money Laundering Act, 2010 (VII of 2010); and

(h) “Written off Loans Statement” means Written off loans Statement as specified in Form „C’;

39C. Furnishing of information

(1) The information, required to be furnished under section 165A of the Ordinance (other than information required under clause (a) of sub-section (1) of section 165A) shall be provided, by the reporting banking company, in the manner as specified in Account Holders Deposits Statement, Credit Card Payments Statement, Written Off Loans Statement, currency transactions report and suspicious transactions report.

(2) The information and online access required to be provided under clause (a) of sub-section (1) of section 165A, shall be provided by the reporting banking company, through online access to 1 Chapter VIIIA inserted by SRO 115(I)/2014 dated February 19, 2014. Income Tax Rules, 2002 66

CHAPTER - VIIIA BANKING COMPANIES REPORTING REQUIREMENTS its central database containing details of its account holders and all transactions made in their accounts.

(3) The information other than information provided in sub-rule (1) and (2), shall be provided by the reporting banking company as specified in a notice issued in terms of section 165A(2) of the Ordinance.

39D. Authorized Persons

(1) Banking company officer, shall be nominated by the reporting banking company not later than thirty days of coming into force of rules contained in this chapter.

(2) Where a banking company officer is not nominated within the time allowed as specified in sub- rule (1), the President or any Principal Officer of the reporting banking company, stationed at the head office shall be treated as banking company officer.

(3) The information required to be reported to the Board shall be provided by the banking company officer to the Chairman, 1Federal Board of Revenue or any officer authorized by the Chairman in this behalf. Provided that the officer authorized by the Chairman shall not be below the rank of Member of the Board.

39E. Time of furnishing information

(1) Every banking company officer, shall furnish to the Board a monthly Account Holders Deposits Statement and Credit Card Payments Statement as specified in Form „A‟ and Form ‘B’ respectively, for immediately preceding calendar month within seven days of the end of the preceding calendar month.

(2) Every banking company officer shall furnish to the Board an annual Written off Loans Statement as specified in Form „C’ for immediately preceding calendar year within three months of the end of the preceding calendar year.

(3) Every banking company officer, shall furnish to the Board a copy of each currency transactions report and suspicious transactions report generated by it at the time it is submitted to the Financial Monitoring Unit under the Anti-Money Laundering Act, 2010 (VII of 2010).

(4) Every banking company officer, shall furnish to the Board any information and documents in addition to those mentioned in sub-rules (1) to (3) within the time allowed by the Board.

39F. Exclusions

(1) The information may not be provided by the banking company officer in respect of a person who holds National Tax Number and has also filed return of income for the immediately preceding tax year.

(2) The information regarding the person mentioned in sub-rule (1) may be provided to the reporting banking company by the Board, on 10th of every month. The words “Central Board of Revenue” substituted by the Finance Act, 2007 Income Tax Rules, 2002 67

CHAPTER - VIIIA BANKING COMPANIES REPORTING REQUIREMENTS FORM-A [See rule 39B(1)(a)] ACCOUNT HOLDERS DEPOSITS STATEMENT REPORTING BANKING COMPANY: ________________________________________________ BANKING COMPANY OFFICER: ___________________________________________________ INFORMATION OF PERSONS WHO HAVE DEPOSITED RS. ONE MILLION OR MORE DURING THE MONTH OF:____________________________ Most recent Amount particulars deposited including during the S.No. Name CNIC address(es) month Remarks

(1) (2) (3) (4) (5) (6) VERIFICATION I, the undersigned, solemnly declare that to the best of my knowledge and belief, the information given in this statement is correct and complete; I, further declare that I am competent to make his declaration and verify it in my capacity as nominee of the reporting Banking Company _____________. Signature. _________________________________ Name _____________________________________ CNIC _____________________________________ FORM-B [See rule 39B(1)(c)] CREDIT CARDS PAYMENTS STATEMENT REPORTING BANKING COMPANY: ________________________________________________ BANKING COMPANY OFFICER: ___________________________________________________ INFORMATION OF PERSONS WHO HAVE MADE CREDIT CARD PAYMENTS OF RS.ONE HUNDRED THOUSAND OR MORE DURING THE MONTH OF: Amount Most recent deposited particulars including during the S.No. Name CNIC address(es) month Remarks

(1) (2) (3) (4) (5) (6) VERIFICATION I, the undersigned, solemnly declare that to the best of my knowledge and belief, the information given in this statement is correct and complete; I, further declare that I am competent to make his declaration and verify it in my capacity as nominee of the reporting Banking Company _____________________________. Signature. _________________________________ Name _____________________________________ CNIC _____________________________________ Income Tax Rules, 2002 68

CHAPTER - VIIIA BANKING COMPANIES REPORTING REQUIREMENTS FORM-C [See rule 39B(1)(h)] WRITTEN OFF LOANS STATEMENT REPORTING BANKING COMPANY: ________________________________________________ BANKING COMPANY OFFICER: ___________________________________________________ INFORMATION IN RESPECT OF LOANS WRITTEN OFF EXCEEDING RS ONE MILLION OR MORE DURING THE CALENDER YEAR:_______________ Amount deposited Most recent particulars during the Remarks S.No. Name CNIC including address(es) month (if any)

(1) (2) (3) (4) (5) (6) VERIFICATION I, the undersigned, solemnly declare that to the best of my knowledge and belief, the information given in this statement is correct and complete; I, further declare that I am competent to make his declaration and verify it in my capacity as nominee of the reporting Banking Company _____________________________. Signature. _________________________________ Name _____________________________________ CNIC _____________________________________ Income Tax Rules, 2002 69

CERTIFICATES, STATEMENTS AND PROCEDURE FOR PAYMENT OF CHAPTER - IX ADVANCE TAX CHAPTER - IX CERTIFICATES, STATEMENTS AND PROCEDURE FOR PAYMENT OF ADVANCE TAX PART I - SECTION 159 CERTIFICATE

40. Exemption or lower rate certificate u/s 159

(1) An application for a certificate under sub-section (1) of section 159 shall be made in the form specified in Part-VII of the First Schedule to these rules.

(2) A certificate issued by the Commissioner under sub-section (1) of section 159 shall be in the form specified in Part VIII of the First Schedule to these rules. 1[(3) An application for a certificate under sub-section (1) of section 159 read with clause (v) of paragraph 1 of Notification No. S.R.O. 947(I)/2008, dated the 5th September, 2008, shall be in the form specified in Part VII(a) of the First Schedule to these rules.

(4) A system based exemption certificate issued by the Commissioner for goods specified under clause (v) of paragraph 1 of Notification No. S.R.O. 947(I)/2008, dated the 5th September, 2008 shall be in the form specified in Part-VIII (a) of the First Schedule to these rules.] 2[PART II COLLECTION OR DEDUCTION OF TAX AT SOURCE DIVISION I EMPLOYER’S CERTIFICATE 3[ ] DIVISION II CERTIFICATE FOR COLLECTION OR DEDUCTION OF TAX (OTHER THAN FROM SALARY)

43A. Advance tax on air tickets

(1) This rule shall apply for the purposes of section 236B and 236L.

(2) Airlines issuing tickets directly to passengers, either manually or electronically, shall charge and collect advance tax, at the rates applicable for sections 236B and 236L, directly from the passengers and shall be paid within the time as prescribed in sub-rule (4). 1 Part II comprising of rules 41 to 45 substituted by SRO 641(I)/2005, dated June 27, 2005. 2 Substituted for “seven days from the end of each fortnight” by SRO 392(I)/2009, dated May 19, 2009. 3 Substituted for full stop and after that proviso inserted by SRO 498(I)/2015, dated July 24, 2015. 4 Division IIIA inserted by SRO 817(I)/2014 dated September 15, 2014. Income Tax Rules, 2002 71

CERTIFICATES, STATEMENTS AND PROCEDURE FOR PAYMENT OF CHAPTER - IX ADVANCE TAX Explanation: For the purpose of this rule, airline means airline issuing tickets for uplifting passengers of any airline, whether having its head office or registered office or an agent in Pakistan or not, if the journey originates in Pakistan. The obligation to charge, collect and deposit tax is in respect of the airline uplifting the passengers in respect of the journey originating in Pakistan.

(3) Where the tickets are issued by persons, other than the Airlines, and the persons issuing tickets on behalf of the Airlines, are charging and collecting advance tax from the passengers and making payment of tax to the Airline directly, or through IATA, or through any other entity authorized in that behalf, the tax so collected by the airlines from such persons shall be paid as per sub-rule (4).

(4) Tax collected by the airlines under sub-rule (3), shall be paid by the 15th day of the following second month in respect of tickets issued upto the last working day of each calendar month: Provided that for the month of May and June, the tax shall be paid by 15th day of June on the basis of average tax paid in respect of July to April. Any short or excess tax paid, in respect of tickets issued during May and June, shall be adjusted in the tax required to be paid by the 15th day of July.

(5) Every Airline issuing international air tickets shall make adequate arrangements for collection of tax under this rule from the persons issuing tickets on its behalf or through electronic means, and in case of default, the said tax shall be collected from the airline, without prejudice to any other liability which it may incur under the Ordinance.

(6) Notwithstanding anything contained in Second Schedule to the Income Tax Rules, 2002, monthly and annual statements of tax collected under section 236B and 236L, shall be submitted by every airline to the respective Commissioner Inland Revenue, in the form and verified in the manner as indicated in sub-rule (8).

(7) Monthly statement for the tax deposited by 15th of each month, under sub-rule (4), shall be filed by 21st of the month: Provided that the monthly statement for the month of September, 2014 shall be furnished along with the monthly statement of October, 2014.

(8) The forms and manner in which the monthly and annual statements are to be filed, are as below: FORM Monthly statement of tax collected under section (236B/236L) ___________ of the Income Tax Ordinance, 2001, during the month of ___________, 20 Airline/Uplifting Airline: Tax Name of Airline for which Gross @ 5% Date of Date of SN tickets issued. Fare or 4% collection Deposit CPR No. I certify that the above statement contains complete information of tax collectible under section 236B of the Income Tax Ordinance, 2001, during the month/year ending on the ___________, 20 Name and Signature of person responsible _______________________ Signature: _______________________ Date: _______________________ Seal _______________________ Income Tax Rules, 2002 72

CERTIFICATES, STATEMENTS AND PROCEDURE FOR PAYMENT OF CHAPTER - IX ADVANCE TAX Annual statement of tax collected under section (236B/236L) ___________ of the Income Tax Ordinance, 2001, for the year ending on the ___________, 20 Airline/Uplifting Airline: Name of Airline Document NIC/ Date Date for which tickets or Passenger Passport Route/ Gross Tax of of CPR SN issued Ticket No. Name No. Sector Fare @ 5% collection Deposit No. I certify that the above statement contains complete information of tax collectible under section 236B of the Income Tax Ordinance, 2001, during the month/year ending on the ___________, 20 Name and Signature of person responsible _______________________ Signature: _______________________ Date: _______________________ Seal _______________________

(9) Provisions of section 236G and 236L, shall not be applicable in the case of a foreign diplomat or a diplomatic mission in Pakistan.] 1[“43B.- Amount actually paid under section 158.- The amount actually paid as per clause (c) of section 158 the Ordinance includes,-Payment of tax collected or deducted,-

(a) amount paid by the person, as withholding agent;

(b) amount paid on behalf of the person, as withholding agent;

(c) amount paid at the instruction of the person, as withholding agent; and

(d) gross amount settled or discharged by the person, as withholding agent, to other person before netting off or adjusting such against any receivable from the said other person.”] DIVISION IV 2[ ] 3[MONTHLY] STATEMENT4[ ] OF TAX COLLECTED OR DEDUCTED

44. Annual statement of tax collected or deducted

6[ ] 7[(2) Pursuant to sub-section (2) of section 165, a person responsible for collecting or deducting tax under Division II or Division III of Part V of Chapter X of the Ordinance or under Chapter XII of the Ordinance shall furnish 8[“or e-file”] a monthly statement 9[“by the 15th day of the month following the month to which withholding tax pertains”] as set out in part X of the Second Schedule to these rules.]

(3) The statement referred to in sub-rule (2) shall be accompanied by the evidence of deposit of tax collected or deducted to the credit of the Federal Government. 1 Rule 43B inserted by the SRO 958(I)/2015 dated 29th September, 2015. 2 The words “Annual and” omitted by SRO 1218(I)/2015 dated 08.12.2015. 3 Substituted for “Quarterly” by SRO 1032(I)/2006, dated October 03, 2006. 4 The letter “s” omitted by SRO 1218(I)/2015 dated 08.12.2015. 5 Part II comprising of rules 41 to 45 substituted by SRO 641(I)/2005, dated June 27, 2005. Rule (1) omitted by SRO 1218(I)/2015 dated 08.12.2015. The omitted rule read as under:- “ (1) An annual statement required to be furnished under sub-section (1) of section 165 for a financial year shall be in the form as set out in Part VIII and Part IX of the Second Schedule to these rules.” 7 Sub-rule (2) substituted by SRO 790(I)/2006 dated August 03, 2006. 8 Inserted by SRO 1218(I)/2015 dated 08.12.2015. 9 The words “within twenty days of the end of each month” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 73

CERTIFICATES, STATEMENTS AND PROCEDURE FOR PAYMENT OF CHAPTER - IX ADVANCE TAX

(4) A person required to furnish the 1[statement] under sub-rule 2[ ] (2) shall, wherever required by the Commissioner, furnish a reconciliation of the amounts mentioned in the aforesaid 3[ ] 4[monthly] statements with the amounts mentioned in the return of income, statements, related annexes and other documents submitted from time to time.

45. Statement of tax deducted under the Sixth Schedule to the Ordinance

The statement required to be furnished under sub-clause (b) of clause 11 of Part II of the Sixth Schedule to the Ordinance for a financial year shall be in the form as set out in Part XI of the Second Schedule to these rules.] 5[ ] 6[ ] 1 The word “statements” substituted by SRO 1218(I)/2015 dated 08.12.2015. 2 The word “(1) or” omitted by SRO 1218(I)/2015 dated 08.12.2015. 3 Omitted by SRO 1218(I)/2015 dated 08.12.2015. 4 Substituted for “Quarterly” by SRO 1032(I)/2006, dated October 03, 2006. 5 Omitted “rule 46” due to substitution by S.R.O. 651(I)/2004, dated 30th July, 2004. Omitted “Part III” by S.R.O. 641(I)/2005, dated 27.06.2005. Income Tax Rules, 2002 74

CHAPTER - X PRESCRIBED FORMS CHAPTER - X PRESCRIBED FORMS

67. Application of Chapter

This chapter prescribes forms to be used for the purposes of the Ordinance.

68. Amended assessment notice

An amended assessment order related issue notice or/ letter issued by the Commissioner under section 122 shall be in the manner or proforma specified in Part II of the First Schedule to these rules.

69. Section 140 notice

A notice issued by the Commissioner under section 140 shall be in the form specified in Part IV of the First Schedule to these rules.

70. Section 145 certificate

A certificate issued by the Commissioner to the Director of Immigration or immigration authority under section 145 shall be in the form specified in Part V of the First Schedule to these rules.

71. Section 170 application

(1) An application under section 170 for a refund of tax shall be in the proforma specified in Part VI of the First Schedule to these rules.

(2) The application shall be verified in the manner specified in the form.

(3) The application shall be accompanied by such documents, statements and certificates as specified in the form, and in the Ordinance and these rules.

72. Section 175 authorization

The authorization of a 1[“officer of Inland Revenue”] for the purposes of section 175 shall be in the manner specified in Part XIII of the First Schedule to these rules. 1 The words “taxation officer” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 75

FURNISHING OF DOCUMENTS; SERVICE OF DOCUMENTS; FORMS CHAPTER - XI AND NOTICES CHAPTER - XI FURNISHING OF DOCUMENTS; SERVICE OF DOCUMENTS; FORMS AND NOTICES

73. Furnishing of documents and returns etc

(1) This rule applies for the purposes of furnishing of documents under the Ordinance or these rules.

(2) Except as provided in the Ordinance or these rules, any application, statement or other document to be furnished to the Commissioner shall be furnished in the following manner, namely:-

(a) by post or courier service;

(b) delivered by hand to the officer having jurisdiction over the person or to such other officer as the Commissioner may specify; or [(c) on computer or by electronic transmission using the specified software in accordance with the specified format or any other requirements including safety valve, security and verification considerations as may be specified by the 2Federal Board of Revenue from time to time.] [(2A) In the case of a Company, electronic filing of income tax return and withholding tax statements shall be mandatory from the first day of July 2007 onwards.] 4[(2AA) In case of Federal Government departments, electronic filing of withholding statements shall be mandatory from the first day of July, 2009 onwards.] 5[(2B) In the case of a non-resident ship owner and aircraft owner or charterer thereof, the electronic filing of the income tax return and application for port clearance shall be mandatory from the 1st day of July 2008 onward.] 6[(2C) In case a person registered for sales tax, electronic filing of income tax return 7[“and withholding tax statements”] shall be mandatory from the first day of July, 2009 onwards.

(2D) In case of an Association of Persons, electronic filing of income tax return and withholding tax statements shall be mandatory from the first day of July, 2009 onwards.] 8[(2E) From Tax Year 2009 onwards, wherever refund of tax is claimed in a non-company case, income tax return shall be filed electronically, and in all cases, whether relating to a company or a non-company, electronic filing of refund application as prescribed in Part-VI of the First Schedule shall be mandatory.]

(3) A return, statement, certificate, application or other document furnished by a person that includes the 9[digital] signature of the person or the person’s 7[e-intermediary] shall be taken to be signed by that person.

(4) A person who furnishes a return, statement, certificate, application or other document by electronic transmission which includes the electronic signature of another person who has not consented to the inclusion of the signature shall commit an offence punishable on 1 Clause (c) substituted by SRO 516(I)/2006, dated June 01, 2006. The words “Central Board of Revenue” substituted by the Finance Act, 2007 3 Sub-rule (2A) inserted by SRO 708(I)/2007, dated July 14, 2007. 4 Sub-rule (2AA) inserted by SRO 392(I)/2009, dated May 19, 2009. 5 Sub-rule (2B) inserted by SRO 695(I)/2008, dated June 26, 2008. 6 Sub-rules (2C) & (2D) inserted by SRO 684(I)/2009 dated July 23, 2009. 7 Inserted by SRO 1218(I)/2015 dated 08.12.2015. 8 Sub-rule (2E) inserted by SRO 986(I)/2009, dated November 17, 2009. 9 Substituted for “electronic” and “representative”, respectively by SRO 516(I)/2006, dated June 01, 2006. Income Tax Rules, 2002 76

FURNISHING OF DOCUMENTS; SERVICE OF DOCUMENTS; FORMS CHAPTER - XI AND NOTICES conviction with a fine or imprisonment not exceeding one year, or both. 1[(5) An Electronic Income Tax Return filed under these rules shall be deemed to be a return for the purposes of sub-section (2A) of section 114 of the Ordinance.] 2[(6) The e-intermediary shall get the authority letter in the manner specified below, from the taxpayer and produce it before the concerned income tax authority whenever demanded, AUTHORITY LETTER I/We _______________________________ S/o. resident of/having registered office at _______________________________, holder of CNIC No/company registration number ____________________, solemnly declare that a signed copy of the return/ certificate/ statement/ document/ annexure/ etc. have been provided to my/our e-intermediary Mr./Ms. _______________________________ (Name & Address) who is a Chartered Accountant /Cost and Management Accountant/ a legal practitioner entitled to practice in any civil Court in Pakistan/ a member of the Association of Chartered Certified Accountants, UK/ ITP registered with Tax Bar affiliated with All Pakistan Tax Bar Association of Pakistan. I/We further authorize the said e-intermediary to transmit my/our return/ certificate/ statement/document/ annexure/etc to the designated officer of 3Federal Board of Revenue. (Signatures) _______________________________ Name: ____________________________________ Address: __________________________________

(7) The return/certificate/statement/document/annexure/ etc and all supporting documents of the taxpayers shall be retained by the e- intermediary who shall provide them to the taxation officer concerned whenever demanded.] 4[(8) The Board may direct that provisions of any of the sub-rules of this rule shall not apply for a tax year.]

74. Service of documents electronically

(1) This rule applies for the purposes of the service of documents under the Ordinance or these rules.

(2) Where a person has notified the Commissioner in writing of an electronic address for service of documents under the Ordinance or rules a document required to be served on the person by the Commissioner or 5[“Chief”] Commissioner shall be considered sufficiently served if sent to that address.

(3) For the purposes of sub-rule (2), a document is considered sent to an electronic address if the sender receives-

(a) in the case of a message sent to a facsimile number, confirmation from the sending facsimile machine that the transmission is sent; 6[ ]

(b) in the case of a message sent to an electronic mail address, confirmation from the server of the recipient that the message has been received 7[; and] 1 Sub-rule (5) substituted by SRO 516(I)/2006, dated June 01, 2006. 2 Sub-rules (6) and (7) substituted by SRO 516(I)/2006, dated June 01, 2006. The words “Central Board of Revenue” substituted by the Finance Act, 2007 4 Sub-rule (8) inserted by SRO 498(I)/2015, dated July 24, 2015. 5 The word “Regional” substituted by SRO 1218(I)/2015 dated 08.12.2015. 6 Word and omitted by SRO 516(I)/2006, dated June 01, 2006. 7 Substituted for full stop by SRO 516(I)/2006, dated June 01, 2006. Income Tax Rules, 2002 77

FURNISHING OF DOCUMENTS; SERVICE OF DOCUMENTS; FORMS CHAPTER - XI AND NOTICES 1[(c) from the Board a digitally signed e-mail acknowledging the receipt of Electronic Income Tax Return 2[or electronic withholding tax statement.].]

(4) In this rule-

(a) “document” means any notice, order or requisition under the Ordinance; and

(b) “electronic address” means a facsimile number or electronic mail address.

75. Forms and notices

Any order, notice, assessment, computation or other document required to be issued under the Ordinance or these rules may be generated by computer and the order, notice, assessment, computation or other document shall not require the signature of the taxation officer whose name and designation is specified thereon. 1 Clause “(c)” inserted by SRO 516(I)/2006, dated June 01, 2006. 2 Words inserted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 78

CHAPTER XII APPEALS

76. Prescribed form of appeal to the Commissioner (Appeals)

An appeal under section 127 shall be in the following form and verified in the manner indicated therein, namely:-

Form of Appeal to the Commissioner (Appeals) FORM OF APPEAL APPEAL NO.____________ APPEAL DATE__________ (For office use only)

To THE COMMISSIONER (APPEALS) ZONE________

Amount of appeal fee paid Date of payment of appeal fee

on return of income.

Amount of tax levied additionally whether requirement

Zone____________________ Circle_____________________ Jurisdiction________________

Name of Appellant

(Pl. encircle the appropriate box)

Address of Appellant

Name of Authorized Representative (if any)

Status of Representative

Name of the Commissioner

Signature of the official _____________________ Who received the appeal _____________________

1 Added by SRO 1218(I)/2015 dated 08.12.2015. 2 The entry “Any other for appeals for AY 2002-2003” omitted by SRO 1218(I)/2015 dated 08.12.2015.

CHAPTER - XII APPEALS Name ____________________________________ (in capital letter) Designation _______________________________ TAX ASSESSED a) Income tax General Guidelines1. Indicate the section b) 1[“Default Surcharge”] and sub-section of the Income Tax Ordinance under which appeal filed. 2. Where payment made on more than one c) Penalty date please give details on a separate Sheet. 2[ ] 3. AOP: Association of Persons e) Others 4. CMA: Cost & Management Accountant. 5. ADV Advocate

(g) Total 6. AR: Authorized Representative (i) Undisputed liability. This shall not be less than the tax due on the basis of return.

(j) 3[ ] Tax Demand 4[“u/s 137 (2)”]

(k) Amount out of (j) paid ____________________

(l) Total amount of (i) and (k) paid ____________________ N.B. (i) The appeal should be filed in duplicate.

(ii) The appeal should be accompanied by the Notice of Demand and/or a copy of the assessment appeal against, as the case may be. GROUNDS OF APPEAL (Attach separate sheets, if required) 1. 2. 3. 4.____________________________________________________________________________ BRIEF CLAIM IN APPEAL/ PAYER VERIFICATION 1. I,__________________ S/o____________ the proprietor/partner/managing director/member of M/s._______________ the appellant, do hereby declare that whatever is stated above is true to the best of my knowledge and belief. 2. I am competent to file the appeal in my capacity as . 3. I further certify that a true copy of this form of appeal has been sent by Registered Post/ AD/ Courier service, or delivered to the concerned officer personally to the Commissioner/ Circle ________ Zone/ Jurisdiction _______ on _________ (date). Signature of Appellant_ Name (in capital letters)________________________ NIC Number of person signing the appeal____________________ The form of appeal and verification form appended thereto shall be signed:-

(a) in case of an individual by the individual himself 1 The words “Additional Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 2 Serial “d) Surcharge” omitted by SRO 1218(I)/2015 dated 08.12.2015. 3 The word “Disputed” omitted by SRO 1218(I)/2015 dated 08.12.2015. 4 Inserted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 80

CHAPTER - XII APPEALS

(b) in case of a company by the principal officer.

(c) In case of AOP by member/partner.- ______________________________________________________________________________ This portion is for official use Appeal received by transfer Date appeal received In ward register No. From Zone/Range by transfer _____________________ Appeal transferred to Date of appeal Outward register No. Zone/Range transferred out _______________________ UDC/LDC/ Officer of Appeal Section _____________ CIT(Appeal) _______________ (Initial) (Initial) APPEAL ACKNOWLEDGEMENT RECEIPT Appeal Zone/ . ________________ City National Tax No. Appeal No. ______________ Appellant” Name___________ Signature of Appellant Date of receipt of Signature, and name of receiving Appeal Official Designation_________________ Income Tax Rules, 2002 81

CHAPTER - XII APPEALS

77. Prescribed form for appeal to the Appellate Tribunal

An appeal under section 131 shall be in the following form and verified in the manner indicated therein,

FORM OF APPEAL TO THE TRIBUNAL UNDER SECTION 131 OF THE INCOME TAX ORDINANCE, 2001 (RULE 77)

NO._________ OF 20____

made and one in which it is located

under which Commissioner passed the order

order

against respondent

1GROUNDS OF APPEAL

– AS PER SEPARATE SHEET ATTACHED –

_______________________________ (Appellant) (Authorised Representative, if any)

VERIFICATION

We _____________________________________, the appellant do hereby declare that what is stated above is true to the best of our information and belief.

Verified today, the __________ day of __________________, 20.

______________________________ (Appellant)

1 Substituted for “GROUND OF APPEAL” BY SRO 392(I)/2009, dated May 19, 2009.

Income Tax Rules, 2002 82

CHAPTER - XII APPEALS N.B. 1. The memorandum of appeal (including the Grounds of Appeal when filed on a separate paper) must be in triplicate and should be accompanied by two copies (at least one of which should be a certified copy) of the order appealed against and two copies of the order of the Commissioner. 2. The memorandum of appeal in the case of an appeal by the taxpayer must be accompanied by a fee. The appeal fee must be credited in the Treasury or a Branch of the National Bank of Pakistan or the State Bank of Pakistan and the triplicate portion of the challan sent to the Tribunal with the memorandum of appeal. The Appellate Tribunal will not accept cheques, hundies or other negotiable instruments. 3. The memorandum of appeal should be set forth, concisely and under distinct heads, the grounds of appeal without any argument or narrative and such grounds should be numbered consecutively. 1[78. Prescribed Form for reference to High Court. An application under sub-section (1) of section 133 to refer to the High Court any question of law shall be in the following form, namely:- FORM OF REFERENCE APPLICATION UNDER SECTION 133 OF THE INCOME TAX ORDINANCE, 2001 Year _______ Before the High Court of _______________. Income Tax Reference Application No. of 20 APPELLANT……………………………………………………………………………… VERSUS RESPONDENT ………………………………………………………………………… Title and number of appeal which gives rise to the reference ___________________________________ The applicant (s) state (s) as follows:- 1. That the appeal noted above was decided by the ____________ Bench of the Income Tax Appellate Tribunal on ___________________ 2. That the order under sub-section (3) of section 132 of the Income Tax Ordinance, 2001 was served on the applicant on ________________ 3. That the facts which are admitted and/or found by the Tribunal, the determination of the Tribunal and the question(s) of law which arises out of its order have been truly stated in the attached statement of the case. 4. That the following questions of law arise out of the order of the Tribunal:- (1) (2)

(3) 1 Rule 78 substituted by Notification No. 678(I)/2005, dated July 04, 2005. Income Tax Rules, 2002 83

CHAPTER - XII APPEALS 5. That the following documents are attached with this application: (1) Statement of the case signed by the Appellant.

(2) Certified copy of the order of the Appellate Tribunal from which the question(s) of law stated above arises.

(3) First Appellate Order (by the Commissioner (Appeals).

(4) Original assessment or other order. 6. That other document (s) or copies thereof, as specified below (the translation in English of the document, where necessary are annexed with the statement of the case. ________________________________ Signed (Appellant) ________________________________ Signed (Authorized Representative, if any) N.B:- 1. The application must be made in triplicate. 2. The application made by taxpayer must be accompanied by a fee of one hundred rupees. The fee be deposited in the Treasury or a Branch of the National Bank of Pakistan or the State Bank of Pakistan alongwith the income tax challan (in quadruplicate) and one copy of the challan be attached with the application. Income Tax Rules, 2002 84

CHAPTER - XIII TAXPAYER’S REGISTRATION CHAPTER - XIII 1[TAXPAYER’S REGISTRATION]

79. Application of Chapter

The rules in this Chapter apply for the purposes of section 181 which provides for registration of taxpayers.] 3[“80. Registration.-

(1) An individual having CNIC required to file return of total income manually shall be treated as registered under sub-section (4) of section 181 on the day he files the return manually.

(2) An individual having CNIC required to e-file return of total income shall be treated as registered, when the individual is e-enrolled.

(3) A company, an association of persons (AOP) or foreign national shall be treated as registered when the company, AOP or the foreign national, is e-enrolled.

(4) An individual having CNIC who failed to file return, shall be registered by the Commissioner having jurisdiction on the basis of CNIC or NICOP when he is satisfied after providing opportunity to be heard that the income of the individual is taxable and is required to file return of income.

(5) An individual not having CNIC and required to file return of total income manually shall be registered in the same manner as specified in sub-rules (1) and (4), either on application by the individual or if Commissioner is satisfied that income of individual is taxable after providing opportunity to be heard.

(6) A company, an AOP or foreign national shall be treated as registered as per sub-rule (3), if the Commissioner, having jurisdiction over the company, an AOP or foreign national, is satisfied after providing opportunity to be heard that the company, the AOP or foreign national requires registration.”] 1[“80A e-enrolment.- Every individual, an AOP or a company required to e-file return of total income shall submit form of e-enrolment as specified in Part IX of the First Schedule to these rules through Board‟s online system.”] 1 Heading substituted for “NATIONAL TAX NUMBER CARD” by SRO 392(I)/2009, dated May 19, 2009. 2 Rule 79 substituted by SRO 392(I)/2009, dated May 19, 2009. 3 Rule 80 substituted by SRO 1076(I)/2015 dated 02.11.2015. the substituted Rule 80 read as follows:

80. Application for National Tax Number Certificate

(1) An application for a National Tax Number Certificate shall be in the form specified in 3[Part IX] of the First Schedule to these rules and shall be accompanied by documentary evidence of the applicant’s identity.

(2) The following shall be provided as documentary evidence of an applicant’s identity-

(a) in the case of an individual-

(i) NIC or a current passport; or

(ii) other documents with photo-identification-driver’s licence.

(b) in the case of a company other than a trust), the certificate of incorporation or registration of the company;

(c) in the case of a trust, the trust deed;

(d) in the case of a firm, the instrument of partnership; or 3[(e) in the case of an association of persons (other than a firm), the instrument of partnership or copies of NICs of the members of the association of persons. Detail of non-resident members be provided along with copies of their passports.]

(3) An application for a National Tax Number Certificate shall be lodged-

(a) by post or delivery by hand to the Commissioner having jurisdiction over the applicant; or by inclusion with the applicant’s first return of income or first employer’s statement furnished in lieu of a return of income. Income Tax Rules, 2002 85

CHAPTER - XIII TAXPAYER’S REGISTRATION 2[“80B Requirement of e-enrolment.-(1) An individual required to be registered under sub-rule (2) of rule 80 shall provide-

(a) number of CNIC,NICOP or Passport;

(b) cell phone number in his name ;

(c) e-mail address;

(d) nationality;

(e) residential address;

(f) accounting period;

(g) in case of business income,

(i) business name;

(ii) business address; and

(iii) principal business activity;

(h) name and NTN of employer in case of salary income;

(i) address of property in case of property income;

(2) A company and an AOP required to be registered under sub-rules (3) and (6) of rule 80 shall provide-

(a) name of company or AOP;

(b) business name;

(c) business address;

(d) accounting period;

(e) phone No of business;

(f) e-mail;

(g) cell phone of principal officer of the company or AOP;

(h) principal business activity;

(i) address of industrial establishment or principal place of business;

(j) company type, like public limited, private limited, unit trust, trust, NGO, society, small company, modaraba or any other;

(k) date of registration;

(l) incorporation certificate by Securities and Exchange Commission of Pakistan (SECP) in case of company;

(m) registration certificate and partnership deed in case of registered firm;

(n) partnership deed in case firm is not registered;

(o) trust deed in case of trust;

(p) registration certificate in case of society;

(q) registration or incorporation from concerned country in case of non- resident company or AOP;

(r) name of representative with his CNIC or NTN;

(s) following particulars of every director and major shareholder having 10% or more shares in case of company or partners in case of an AOP, namely:-

(i) Name; (ii)CNIC/NTN/Passport; and (ii)Share % “] 3[“81. Decision on application of registration or e-enrolment. 1 Rule 80A inserted by SRO 1076(I)/2015 dated 02.11.2015. 2 Rule 80B inserted by SRO 1076(I)/2015 dated 02.11.2015. 3 Rule 81 substituted by SRO 1076(I)/2015 dated 02.11.205. The substituted Rule 81 read as follows:

81. Decision on application for a National Tax Number Certificate

(1) The Commissioner shall make a decision on an application for a National Tax Number 3[Certificate] within fifteen days of the application being properly lodged.

(2) Where the Commissioner decides not to grant a National Tax Number 1[Certificate], the Commissioner shall give the applicant notice in writing of the decision and the reasons for the decision. Income Tax Rules, 2002 86

CHAPTER - XIII TAXPAYER’S REGISTRATION

(1) The Commissioner may, where a person has filed a form of registration or e-enrolment under rule 80 or 80A, after examining available information, particulars, data or documents and making such inquiry as he may deem necessary, grant registration or e-enrolment to the person or after recording reasons, refuse registration or e-enrolment to the person within fifteen days of filing of form of registration or e-enrolment.

(2) Person aggrieved by any decision of the Commissioner under sub-rule (1) may file representation before the concerned Chief Commissioner within thirty days of the said decision. The Chief Commissioner after making such inquiry if necessary shall decide the representation as he deems fit.”]

81A. Taxpayer’s registration by the Commissioner

(1) The Commissioner having jurisdiction over a case may register a person as a taxpayer where he is satisfied that the income of the person is taxable and is required to file a return of income under section 114.

(2) The Commissioner shall issue to the taxpayer a letter under sub-section(2) of section 181 to submit an application for registration prescribed under rule 80 along with documents specified therein within a reasonable time given in the said letter. In case of compliance NTN certificate shall be issued accordingly.

(3) In case of failure of the taxpayer to comply with the letter issued under sub-section (2) of section 181, the Commissioner shall register the taxpayer on a Trial Registration Number (TRN) for which a serially numbered Trial Register shall be maintained by the Commissioner. The Trial Register shall contain the basic information of the taxpayer like name of the person or business, available address, CNIC, nature of income generating activity and any other information regarded useful by the Commissioner. In such case, statutory notices shall be issued for assessment of income or other legal obligation of the taxpayer under the Ordinance on TR Number: Provided that before allotment of Trial Registration Number the Commissioner shall verify and match the particulars of the taxpayer from the NTN Master Index to avoid duplication of registration.

(4) In case any assessment is made or any liability is created by the Commissioner under the Income Tax Ordinance, 2001 against the taxpayer, the Commissioner on the basis of information as contained in Trial Register, allot an NTN to the taxpayer within fifteen days of the date of completion of assessment or creation of a liability under the Ordinance.] [81B. Active Taxpayers List.-

(1) This rule shall apply for the purposes of clauses (23A) and (35C) of section 2 and section 181A. (2) The Board shall publish Active Taxpayers List, hereinafter referred to as ATL, comprising persons who meet the criteria as laid down under sub-rule (4) and shall be made available on the Board’s web portal, by first day of March in each financial year: Provided that for financial year 2014-15, Active Taxpayers List shall be published and made available on the Board’s web portal, by first day of July, 20143[:] 1 Rule 81A inserted by SRO 392(I)/2009, dated May 19, 2009. 2 Rule 81B substituted by SRO 765(I)/2014, dated August 26, 2014. Earlier it was inserted by SRO 328(I)/2011, dated April 27, 2011. 3 Colon substituted for full stop by SRO 267(I)/2015, dated April 02, 2015. Income Tax Rules, 2002 87

CHAPTER - XIII TAXPAYER’S REGISTRATION 1[Provided further that for financial year 2014-15, Active Taxpayers List shall be published and made available at Board’s web portal by the 11th April, 2015.] 1 Proviso inserted by SRO 267(I)/2015, dated April 02, 2015. Income Tax Rules, 2002 88

CHAPTER - XIII TAXPAYER’S REGISTRATION

(3) ATL published in any financial year shall be valid for the period beginning on the date of publish and ending on last day of February, next following 1[:] 2[Provided that Active Taxpayers List published during financial year 2013-14, shall be valid upto the 10th April, 2015.]

(4) ATL shall be updated on 3[every Sunday at 24:00 hours], hereinafter referred to as updation date.

(5) A person’s name shall be included in ATL, if the person has filed a return under section 114 or a statement under section 115 for the tax year for which the last date as specified in section 118 falls during immediately preceding twelve month4[:] 5[Provided that name of a company or an AOP in whose case return is not due to be filed because of incorporation or formation after 30th day of June relevant to the tax year referred above, shall be included in Active Taxpayers List.]

(6) In case a joint account is held in a bank by more than one person, the joint account holders as an entity shall be deemed to have met the criteria as laid down under sub-rule (5), if any of the persons in the joint account meets the criteria as laid down under the said sub-rule (5).

(7) In case an account is held in a bank in the name of a minor, the minor shall be deemed to have met the criteria as laid down under sub-rule (5), if the parent, guardian or any person who has made deposits in the minor’s account meet the criteria as laid down under said sub-rule (5).

(8) A person’s name shall be included in ATL on the: immediately following updation date, if at any time the criteria as laid down under sub-rule (5), is fulfilled by that person.]

81C. Taxpayer Card

(1) This rule shall apply for the purposes of clauses (23A) and (35C) of section 2.

(2) Subject to sub-rule (5), the Board may issue Taxpayer Card by first of March, each year, to a person who meets the criteria as laid down in sub-rule (3): Provided that for the returns filed after the 31st of December. Taxpayer card shall be issued within sixty days of the filing of Return.

(3) A person shall be issued Taxpayer Card, if the person has filed a return under section 114 or a statement under section 115 for the tax year for which the last date as specified in section 118 falls during immediately preceding twelve months.

(4) Taxpayer Card shall be valid for one year, beginning on the date of issue and ending on last day of February of the following year: Provided that Taxpayers Cards issued in respect of tax year 2013, shall be valid upto 28th day of February, 2015.

(5) The Board may authorize National Database and Registration Authority (NADRA), for the purpose of printing and issuing taxpayers cards.] 1 Colon substituted for full stop by SRO 267(I)/2015, dated April 02, 2015. 2 Proviso inserted by SRO 267(I)/2015, dated April 02, 2015. 3 Substituted for “fifteenth day of every month” by SRO 831(I)/2015, dated August 21, 2015. 4 Substituted for full stop by SRO 831(I)/2015, dated August 21, 2015. 5 Proviso inserted by SRO 831(I)/2015, dated August 21, 2015. 6 Rule 81C inserted by SRO 765(I)/2014, dated August 26, 2014. Income Tax Rules, 2002 89

CHAPTER - XIII TAXPAYER’S REGISTRATION 1[“82. Modification or cancellation of registration.-

(1) A person, who after being registered under rule 80 or e-enrolled under rule 80A discovers any omission or wrong statement therein, or notices subsequent occurrence of any change in any information, particulars, data or documents already filed, may, without prejudice to any liability incurred by him under any provision of the Ordinance, file a form of modification as specified in Part IX of the First Schedule to these rules.

(2) The Commissioner may, where a person has filed a form of modification of registration under sub-rule (1), after examining available information, particulars, data or documents and making such inquiry as he may deem necessary, grant or refuse modification to the person.

(3) Person aggrieved by any decision of the Commissioner under sub-rule (2) may file representation before the concerned Chief Commissioner within thirty days of the said decision. The Chief Commissioner after making such inquiry if necessary shall decide the representation as he deems fit.

(4) The Commissioner may, after examining available information, particulars, data or documents, making such inquiry as he may deem necessary and providing reasonable opportunity of being heard to a person, make modifications in registration of a person.

(5) The Commissioner may, based on available information, particulars, data or documents, after making such inquiry as he may deem necessary, after discharge of all outstanding liabilities, without prejudice to any other liability which such person may incur under the Ordinance and after providing reasonable opportunity of being heard to a person, by an order in writing, cancel registration of a taxpayer.”]

83. Displaying and quoting of National Tax Number Certificate

(1) Every person deriving income from business chargeable to tax who has been issued with a National Tax Number 1[Certificate] shall display the person’s National Tax Number at a conspicuous place at every place of business of the person.

(2) Every person referred to in sub-rule (1) shall quote the person’s National Tax Number in the following circumstances, namely:-

(a) in all commercial transactions entered into by the person;

(b) in cash memos issued under rule 30;

(c) in all returns, statements and other documents required to be furnished under the Ordinance and in any correspondence with the Commissioner; and

(d) in all documents relating to the person’s business on the following matters, namely:-

(i) all new connections of utilities, including water, gas, electricity and telephone; Substituted by SRO 1076(I)/2015 dated 02.11.2015. The substituted Rule 82 read as follows: “82. Cancellation of National Tax Number Certificate.-

(1) Where the Commissioner decides that a National Tax Number Certificate was issued to a person under an identity that was not the person’s true identity, the Commissioner may, by notice in writing served on the person, cancel the Certificate.

(2) The Commissioner shall set out in the notice the reasons for the Commissioner‟s decision to cancel the Certificate. Income Tax Rules, 2002 90

CHAPTER - XIII TAXPAYER’S REGISTRATION

(ii) the entering into a loan with a banking company or financial institution;

(iii) the opening of letters of credit; and

(iv) the transfer of urban immovable property. Income Tax Rules, 2002 91

CHAPTER - XIV REGISTRATION OF INCOME TAX PRACTITIONERS CHAPTER - XIV REGISTRATION OF INCOME TAX PRACTITIONERS

84. Application of Chapter XIV

This chapter applies for the purposes of section 223, which provides for the registration and regulation of income tax practitioners.

85. Application for registration as an income tax practitioner

(1) A person satisfying the requirements in rule 86 and desiring to be registered as an income tax practitioner shall make an application 1[to the 2[“Chief Commissioner”], Regional Tax Office] in the form specified in Part X of the First Schedule to these rules.

(2) Every application under this rule shall be accompanied by-

(a) Treasury receipt for five hundred rupees required to be deposited as a non- refundable application fee in any Government Treasury; and

(b) such documents, statements and certificates as specified in the form.

86. Prescribed qualification for registration as an income tax practitioner

(1) For the purposes of the definition of “income tax practitioner” in sub-section (11) of section 223, a person applying for registration as an income tax practitioner shall:-

(a) possess one of the following qualifications, namely:-

(i) a degree in Law at least in the second division, a degree in Commerce (with Income Tax Law and Accounting or Higher Auditing as subjects or parts of subjects, whether compulsory or optional) or a degree in Business Administration or Business Management (with Accounting and Income Tax Law as subjects or parts of subjects, whether compulsory or optional) conferred by a prescribed institution; or

(ii) a pass in a prescribed accounting examination.

(b) have worked for a continuous period of one year as an apprentice under the supervision of a chartered accountant, cost and management accountant, legal practitioners entitled to practice in a civil court in Pakistan 3[or] a registered income tax practitioner 4[and having been registered as a chartered accountant, cost and management accountant, legal practitioner and income tax practitioner] for a period of not less than ten years.

(2) For the purposes of sub-clause (i) of clause (a) of sub-rule (1), a degree conferred by a prescribed institution that is a foreign university or institution shall only qualify if the degree is equivalent to a degree conferred by a Pakistani university and is recognized as such by a Pakistani university.

(3) In this rule,-

(a) “Institute of Chartered Accountants of Pakistan” means the Institute of Chartered Accountants of Pakistan constituted under the Chartered Accountants Ordinance, 1961; 1 Words inserted by SRO 392(I)/2009, dated May 19, 2009. 2 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 3 Substituted for “,and” by SRO 67(I)/2003, dated January 11, 2003. 4 Substituted for “registered” by SRO 67(I)/2003, dated January 11, 2003. Income Tax Rules, 2002 92

CHAPTER - XIV REGISTRATION OF INCOME TAX PRACTITIONERS

(b) “foreign institution” means any institution in a foreign country authorised to grant a degree under the laws of the country;

(c) “foreign university” means any university in a foreign country incorporated by law, or accredited or affiliated by any association of universities or college in the country or by any authority formed for that purpose under the laws of that country;

(d) “prescribed accounting examination” means any of the following examinations,

(i) an examination equivalent to the intermediate examination conducted by the Institute of Chartered accountants of Pakistan;

(ii) an examination equivalent to the intermediate examination conducted by any foreign institute of chartered accountants and recognized by the Institute of Chartered Accountants of Pakistan as equivalent to its intermediate certificate;

(iii) an examination equivalent 1[to] the final examination conducted by the Association of 2[Chartered Certified Accountants, United Kingdom;] or

(iv) Part-III of examination for Cost and Management Accountants conducted by the Institute of Cost and Management Accountants under the Cost and Management Accountants Act, 1966 (XIV of 1966); and

(v) Certified public accountants of USA.

(e) “Prescribed institution” means a university incorporated by any law in force in Pakistan or Azad Kashmir, a foreign university or a foreign institution.

87. Registration of income tax practitioners

(1) On receipt of an application under rule 85, the 3[ 4[“Chief Commissioner”], Regional Tax Office] may make such further enquiries and call for such further information or evidence as may be considered necessary.

(2) If the 3[ 5[“Chief Commissioner”], Regional Tax Office] is satisfied that an applicant qualifies to be registered as an income tax practitioner, the 3[ 6[“Chief Commissioner”], Regional Tax Office] shall cause the applicant’s name to be entered in a register to be maintained for the purpose in the office.

(3) The name of a person entered on the register of income tax practitioners shall be notified to the Commissioner and the Appellate Tribunal.

(4) The 3[ 7[“Chief Commissioner”], Regional Tax Office] shall notify ’the applicant, in writing, of the decision on the application.

(5) Where the 8[ 9[“Chief Commissioner”], Regional Tax Office] decides to refuse an application for registration, the notice referred to in sub-rule (4) shall include a statement of reasons for the refusal.

88. Duration of registration

1 Words inserted by SRO 392(I)/2009, dated May 19, 2009. 2 Substituted for “Certified and Corporate Accountants, London;” by SRO 392(I)/2009, dated May 19, 2009. 3 Substituted for “Regional Commissioner” By SRO 392(I)/2009, dated May 19, 2009. 4 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 5 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 6 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 7 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 8 Substituted for “RCIT” by SRO 392(I)/2009, dated May 19, 2009. 9 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 93

CHAPTER - XIV REGISTRATION OF INCOME TAX PRACTITIONERS Registration of a person as an Income Tax Practitioner shall remain in force until any of the following occurs, namely:-

(a) the person surrenders the registration by notice in writing to the 1[ 2[“Chief Commissioner”], Regional Tax Office].

(b) the person dies; or

(c) the person’s registration is terminated by the 1[ 3[“Chief Commissioner”], Regional Tax Office].

89. Cancellation of registration

(1) Any person (including an income tax authority) who considers that an income tax practitioner is guilty of misconduct in a professional capacity may file a complaint in writing with the 4[ 5[“Chief Commissioner”], Regional Tax Office].

(2) A complaint filed under sub-rule (1) shall be accompanied by affidavits and other documents as necessary to sustain the complaint.

(3) On receipt of a complaint in writing under sub-rule (1), the 2[6[“Chief Commissioner”], Regional Tax Office] shall fix a date, hour and place which shall be no later than twenty one days from the receipt of the complaint for enquiry into the complaint.

(4) Within seven days of receipt of the complaint, the 2[7[“Chief Commissioner”], Regional Tax Office] shall serve a notice of the complaint on the Income Tax Practitioner to whom the complaint relates and such notice shall-

(a) in form the practitioner of the date, hour and place of the enquiry; and

(b) be accompanied by a copy of the complaint and any affidavits and other documents accompanying the complaint.

(5) If, at the date fixed for enquiry, it appears that the notice and accompanying documents referred to in sub-rule (4) have not been served as provided for in that sub-rule, the 2[8[“Chief Commissioner”], Regional Tax Office] shall adjourn the enquiry to a date then to be fixed and may direct that the notice and accompanying documents shall be served by registered post or such other means as the 2[9[“Chief Commissioner”], Regional Tax Office] sees fit.

(6) Not less than two days before the date or adjourned date fixed for the enquiry, the income tax practitioner concerned shall file with the 2[10[“Chief Commissioner”], Regional Tax Office] a signed explanation in writing and any affidavit in reply intended to be used in the enquiry.

(7) On the date or adjourned date of the enquiry, the complainant shall file any affidavits in reply intended to be used at the enquiry.

(8) The 2[11[“Chief Commissioner”], Regional Tax Office] may adjourn the enquiry from time to time to a date and place to be fixed at the time of adjournment and may make such orders and give such directions in regard to the enquiry and all matters relating thereto 1 Substituted for “Regional Commissioner of Income Tax” by SRO 392(I)/2009 dated May 19, 2009. 2 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 3 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 4 Substituted for “Commissioner” by SRO 392(I)/2009 dated May 19, 2009. 5 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 6 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 7 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 8 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 9 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 10 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 11 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 94

CHAPTER - XIV REGISTRATION OF INCOME TAX PRACTITIONERS as the 2[1[“Chief Commissioner”], Regional Tax Office] may think fit.

(9) On the date or adjourned date fixed for the enquiry, the 2[2[“Chief Commissioner”], Regional Tax Office] may-

(a) hear and determine the complaint upon the affidavit and other documents, if any, filed and may allow the complainant and income tax practitioner to be cross- examined on their affidavits; or

(b) hear and determine the complaint upon oral evidence.

(10) If the 3[“Chief Commissioner”], Regional Tax Office decides to hear oral evidence, the procedure generally and as far as practicable shall be that which is followed at the hearing of suits by Civil Courts, provided that the record of oral evidence shall be kept in such manner as the 4[ 5[“Chief Commissioner”], Regional Tax Office] may direct and, if a shorthand writer is employed to take down evidence, the transcript of the writer’s notes shall be a record of deposition of the witnesses.

(11) If the 1[6[“Chief Commissioner”], Regional Tax Office] decides that the income tax practitioner to whom the complaint relates is guilty of professional misconduct, the 7[“Chief Commissioner”], Regional Tax Office shall cancel the practitioner’s registration.

(12) The 1[8[“Chief Commissioner”], Regional Tax Office] shall give the complainant and the income tax practitioner to whom the complaint relates notice, in writing, of the 9[“Chief Commissioner”], Regional Tax Office’s decision on the complaint.

90. Appeal to Federal Board of Revenue

(1) The appeal against the decision of the 11[“Chief Commissioner”], Regional Tax Office shall lie with the Federal Board of Revenue. However, the FBR on filing of an appeal may, pending decision of appeal, allow the ITP to represent cases pending, before decision is made by the 12[“Chief Commissioner”].

(2) The FBR shall decide the case of the ITP within sixty days of the filing of the appeal.] 1 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 2 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 3 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 4 Substituted for “Commissioner” by SRO 392(I)/2009 dated May 19, 2009. 5 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 6 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 7 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 8 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 9 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 10 Rule 90 substituted by SRO 392(I)/2009, dated May 19, 2009. 11 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 12 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 95

RECOGNISED PROVIDENT FUNDS, APPROVED SUPERANNUATION FUNDS AND APPROVED GRATUITY FUNDS PART I RECOGNISED PROVIDENT FUNDS

91. Application for recognition of provident fund

1. An application for recognition of a provident fund shall be made, in writing, by the employer maintaining the fund, setting out the following information, namely:-

(a) the employer’s name and the address of the employer’s principal place of business;

(b) the name of all employees, whether in or outside Pakistan subscribing to the fund;

(c) the place where the accounts of the fund are or will be maintained; and

(d) where the fund is already in existence, a copy of the last balance sheet of the fund and details of the investments of the fund. 2. A verification in the following form shall be annexed to the application, namely:- “We/ I, the trustee(s) of the above named fund, do declare that what is stated in the above application is true to the best of our/my information and belief, and that the documents sent herewith are the originals or true copies thereof.” 3. Subject to sub-rule (4), the application shall be accompanied by the following documents, (a) the original of trust deed to be sighted by the Commissioner;

(b) a copy of the trust deed to be retained by the Commissioner; and

(c) the rules of the fund. Provided that if the original of the trust deed cannot conveniently be produced, the Commissioner may accept, in lieu of the original, a true copy certified either by a Magistrate or in any manner provided for in the Companies Rules, 1984, in which case, an additional copy shall be furnished for retention by the Commissioner. 4. The application shall be lodged with the Commissioner responsible for the area/ jurisdiction in which the accounts of the fund are kept, or, if the accounts are kept outside Pakistan, lodged with the Commissioner responsible for the area/ jurisdiction in which the local headquarters for the employer are situated.

92. Decision on application

(1) The Commissioner may make such enquiries and call for such further information or evidence as the Commissioner may consider necessary to decide the application.

(2) The Commissioner shall notify the applicant, in writing, of the Commissioner’s decision on the application.

(3) Where the Commissioner decides to refuse an application under 1[this] rule, the notice referred to in sub-rule (2) shall include a statement of reasons for the refusal. 1 Inserted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 96

(4) 1[Unless” otherwise specified by the Commissioner], an order according recognition to a provident fund shall take effect from the last day of the month in which the application for recognition is received by the Commissioner or, at the request of the employer, the last day of any later month in the same financial year.

93. Withdrawal of recognition

Where the Commissioner decides to withdraw recognition of a provident fund, the Commissioner shall notify the applicant, in writing, of the Commissioner’s decision and such notice shall include a statement of reasons for the withdrawal.

94. Form of appeal in case of non-recognition or withdrawal of recognition

(1) An appeal under sub-rule (1) of rule 12 of Part I of the Sixth Schedule to the Ordinance 2[against] the Commissioner’s decision to refuse an application for recognition or to withdraw recognition shall be 1[made to Federal Board of Revenue] in the following form 1[and] shall be verified in the manner indicated therein, namely:- FORM OF APPEAL IN CASE OF NON-RECOGNITION OR “WITHDRAWAL OF RECOGNITION To The 3Federal Board of Revenue, Islamabad/Before the Commissioner (Appeals) The petition of _____________________________ employer(s) carrying on business, profession or vocation _______________________ at _______________________ Your petitioner(s) applied to/obtained sanction from the Commissioner under Part I of the Sixth Schedule to the Income Tax Ordinance, 2001 for the recognition of the provident fund maintained by him (them) for the benefit of his (their) employees. The Commissioner has refused recognition/withdrawn recognition for the reason stated in his order, dated of which a copy is attached. For the reasons set out below your petitioner(s) submit(s) that the fund should be contained to be recognized and pray(s) that the 4Federal Board of Revenue may be pleased to. Accord recognition Continue the recognition. GROUND(s) OF APPEAL __________________________________________________________________________

(1) (2)

(3) (4)

(5) 1 Substituted for “Subject to sub-rule (5)” by SRO 392(I)/2009, dated May 19, 2009. 2 Substituted for “to” by SRO 392(I)/2009, dated May 19, 2009. The words “Central Board of Revenue” substituted by the Finance Act, 2007 The words “Central Board of Revenue” substituted by the Finance Act, 2007 Income Tax Rules, 2002 97

__________________________________________________________________________ I/ We named above petition to declare that whatever is stated above is true to the best of our information and belief. Name ____________________ Signature ____________________ Address ____________________ Date ____________________

(2) An appeal referred to in sub-rule (1) shall be accompanied by a copy of a challan for Rs.100/- paid in Government treasury.

95. Accounts required to be maintained by a recognized provident fund

(1) A recognized provident fund shall prepare accounts at intervals of not more than twelve months.

(2) An account shall be maintained for each subscriber to the fund and it shall include the particulars shown in the following form, namely:- Account closed. Date Paid to employee Lapsed to the employer Or to fund Recovery by employer Name _______________________ Date of joining Fund _______________________ Annex Contribution by the Employer Total Interest on the Month and By Of contingent Total in amount shown in year Salary employees Normal nature columns 3,4,5 column 6 I 2 3 4 5 6 7 Balance brought forward July ____________________ August ____________________ June ____________________ Total: ____________________ Exempt Not exempt Employer‟s Interest on sum in Contribution Interest Additions to contribution not Column 6 at % but Column Column 7 total income exceeding not exceeding 4+5 minus minus 10 plus statutory limit statutory limit Column 8 Column 9 Column 11 Remarks 8 9 10 11 12 13 Adjustment on account of temporary Income Tax Rules, 2002 98

Withdrawals account (Column 8 and 9 only). Adjustment on account of non-payable Withdrawals account Columns 10 and 11. Total carried over. If desired column 7 may be divided into sub-columns showing separately the interest on columns and columns 4 and 5 respectively. Non-payable withdrawals Account Temporary withdrawal Account Amount Advance Repayment July Balance brought Forward __________________ July __________________ August August __________________ June June __________________ Total ____________________

(3) The trustees of a recognised provident fund shall furnish to the Commissioner an abstract for the fund’s accounting period of the individual account of each employee participating in the fund whose income under the head “Salary” is Rs.24,000 or more per annum.

(4) The abstract shall-

(a) be in the form prescribed in sub-rule (2), but shall show only the total of the various columns thereof for fund’s accounting period; and

(b) include an account of any temporary withdrawals by the employees during the year and of the repayment thereof.

(5) The abstract shall be furnished by the trustees to the Commissioner responsible for the area in which the accounts of the fund are kept or to such jurisdiction or functional Division as the Commissioner may, in each case, direct.

(6) Subject to rule, the abstract shall be furnished-

(a) in the case of a company, on or before the first day of August next following the fund’s accounting period or within fifteen days of the expiry of six months from the end of the fund’s accounting period, whichever is later; and

(b) in any other case-

(i) where the fund’s accounting period ends at any time between the first day of July and the thirty-first day of December (both days inclusive), on or before the first day of August next following; or

(ii) in any other case, on or before the first day of October next following the end of the fund’s accounting period.

(7) The account to be made under the provisions of sub-rule (1) of rule 7 of Part I of the Sixth Schedule to the Ordinance shall show in respect of each employee-

(a) the total salary paid to the employee during the period of participation in the provident fund;

(b) the total contributions made by, or in respect of, the employee;

(c) the total interest which has accrued thereon; and Income Tax Rules, 2002 99

(d) so far as may be, the percentage of the employee’s salary in accordance with which contributions have been made by the employer and the employee.

96. Time limit for submission of accounts kept outside Pakistan

(1) Where the accounts of a recognized provident fund are kept outside Pakistan, certified copies of the accounts shall be supplied not later than the 15th September in each year to a local representative of the employer in Pakistan.

(2) The Commissioner may, upon application in writing, fix a date later than the 15th September as the date by which the certified copies shall be supplied.

97. Limit on contribution by employers

The Commissioner may relax the limits fixed under clause (c) of sub-rule (1) of rule 2 of Part I of the Sixth Schedule to the Ordinance for contribution of an employer to the individual account of an employee in any year provided that such contribution shall not exceed the following limits, namely:-

(a) the employer’s aggregate contribution in any year including the normal contribution to the individual account of any one employee 1[ ] shall not exceed double the amount of the contribution of the employee in that year; and

(b) the amount of the periodical bonuses and other contribution of a contingent nature which may be credited by an employer in any year to the individual account of anyone employee shall not exceed the amount of the contribution of the employee in that year.

98. Limit on contributions by certain employees

Where an employee of a company owns shares in the company with a voting power exceeding ten percent of the whole of such power, the sum of the exempted contributions of the employee and employer to the recognized provident fund maintained by the company shall not exceed Rs.1,000 in any month.

99. Exclusion from total income of accumulated balances

For the purpose of rule 4 of Part I of the Sixth Schedule to the Ordinance, the accumulated balance due and becoming payable to an employee participating in a recognized provident fund shall be exempt from income tax and shall be excluded from the computation of total income.

100. Treatment of consideration for dealings with beneficial interest

If an employee assigns or creates a charge upon his beneficial interest in a recognized provident fund, the Commissioner shall, on the fact of the assignment or charge coming to his knowledge, give notice to the employee that if he does not secure the cancellation of the assignment or charge within two months of the date of receipt of the notice, the consideration received for such assignment or charge shall be treated as salary received by him in the year in which the fact became known to the Commissioner and shall be assessed accordingly.

101. Treatment in certain cases where recognition is withdrawn

If the Commissioner withdraws recognition from a recognized provident fund, the balance to the credit of each employee at the end of the financial year prior to the date of the withdrawal of recognition shall be paid to the employee free of tax at the time when such employee receives the accumulated balance due to him and the remainder of the accumulated balance due to him shall be liable to tax as if the fund 1 Commas, words etc. “whose salary does not exceed Rs. 1000 per month,” omitted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 100

had never been recognized.

102. Investment of moneys of a recognized provident fund

(1) Where the employer is not company as defined in clause (7) of section 2 of the Companies Ordinance, 1984, the contributions made by employees after the date of recognition of a provident fund and the interest on the accumulated balance of such contribution shall be wholly invested either in securities of the nature specified in clause (2)(b), (c), (d) or (e) of section 20 of the Trusts Act, 1882, and payable both in respect of capital and interest in Pakistan or in a Post Office Savings Bank Account in Pakistan or deposited in National Savings, Federal Government securities or deposits in NCBs or NBP, or, in the other government securities or any other established financial institutions including mutual funds subject to maximum of 20% of such deposits or investment at any time in the year.

(2) Where the employer is a company as defined in clause (7) of section 2 of the Companies Ordinance, 1984, all moneys contributed to a provident fund (whether by the company or by the employees or accruing by way of interest or otherwise to such fund) shall be wholly invested in accordance with the provisions of section 227 of the Companies Ordinance, 1984, or deposited or invested as in sub-rule (1) or with the prior approval of the Commissioner, in purchase of shares of a public limited company offered for sale inviting public offer by the Federal Government so, however, that the securities and deposits in which the contributions made by the employees after the date of recognition of a provident fund and the interest on the accumulated balance on such contributions are invested or deposited are payable in respect of capital, deposit and interest in Pakistan.

If an employee assigns or creates a charge upon his beneficial interest in an approved superannuation fund, the Commissioner shall, on the fact of the assignment or charge coming to his knowledge, give notice to the employee that if he does not secure the cancellation of the assignment or charge within two months of the date or receipt of the notice, the consideration received for such assignment or charge shall be treated as salary received by him in the year in which the fact became known to the Commissioner and shall be assessed accordingly.

103. Permitted withdrawals

(1) Subject to these rules, withdrawals by employees from accumulated balance may be allowed by the trustees of a recognized provident fund in the following circumstances, namely:-

(a) to pay expenses in connection with the illness of a subscriber or a member of his family; 1[(aa) to transfer the balance or a part thereof to an approved pension fund, established under Voluntary Pension System Rules, 2005]

(b) to meet the expenditure on purchase of a motor cycle or scooter provided that authenticated copies of documents substantiating such purchase are deposited with the trustees of the fund;

(c) to pay the overseas passage by reason of health or education of a subscriber or a member of his family;

(d) to pay expenses in connection with marriages, funerals or ceremonies, which, by the religion of the subscriber, it is incumbent upon him to perform and in connection with which it is obligatory that expenditure should be incurred;

(e) to pay expenses in connection with the performance of Haj by the subscriber;

(f) to meet the expenditure on building or purchasing a house or a site for a house, provided that the documents substantiating the building or purchase of such house, or the purchase of such site, are deposited with the trustees of the fund;

(g) to meet the expenditure on repairs, renovation or extension of a residential house belonging to the subscriber;

(h) to pay premiums on policies of insurance on the life of the subscriber or of his wife provided that the policy is assigned to the trustees of the fund or at their 1 Clause “(aa)” inserted by SRO 815(I)/2008, dated August 01, 2008. Income Tax Rules, 2002 101

discretion deposited with them and that the receipt granted by the insurance company for the premiums is from time to time handed over to the trustees for inspection by the Commissioner;

(i) to purchase shares of a public limited company for investment as per rules of this Chapter;

(j) in the case of a subscriber who has attained the age of fifty years on the date on which withdrawal is permitted-

(i) subject to sub-rule (2), to meet the expenditure on the purchase of a house or construction of a house on land owned by him or a member of his family anywhere in Pakistan;

(ii) subject to sub-rule (3), to meet expenditure on the purchase of agricultural land from Government;

(iii) to repay a loan taken from a financial institution, provided that the subscriber shall, within a period of two weeks from the date of withdrawal produce satisfactory evidence before the trustees to show that the advance has been utilized for the purpose for which it was drawn failing which the entire amount of withdrawal together with interest accrued thereon shall forth with become repayable to the fund in a lump- sum; and

(iv) without assigning any reason; or

(k) in the case of an employee proceeding on leave preparatory to retirement, at the discretion of the trustees of the fees, without assigning any reason, provided that where an employee rejoins duty on the expiry of his leave, the amount withdrawn together with the interest accruing thereon at the rate allowed by the fund shall be repaid forthwith in to the fund in a lump-sum.

(2) The first installment of a withdrawal under sub-clause (i) or clause (j) of sub-rule (1) shall be allowed to be drawn only after an agreement has been executed between the subscriber and the trustees of the fund to the effect that the subscriber shall expend the full amount of the said advance towards the purchase or the building of a houses as claimed at the earliest possible opportunity and if the actual amount so expended is less than the amount of permitted withdrawal the subscriber shall repay the difference into the fund forthwith and further that if the said house is sold or otherwise alienated by its owner to any other person while the subscriber is still in service, the subscriber shall forthwith repay into the fund the entire amount of the withdrawal together with interest accrued thereon in lump-sum.

(3) The first installment of a withdrawal under sub-clause (ii) of clause (j) of sub-rule (1) shall be allowed to be drawn only after an agreement has been executed between the subscriber and the trustees of the fund to the effect that the subscriber shall expend the full amount of the said advance towards the purchase of the said piece of land at the earliest possible opportunity and if the actual amount so expended is less than the amount of permitted withdrawal the subscriber shall repay the difference into the fund forthwith and further that if the said house is sold or otherwise alienated by its owner to any other person while the subscriber is still in service, the subscriber shall forthwith repay into the fund the entire amount of the withdrawal together with interest accrued thereon in lump-sum.

104. Limits on Withdrawals

(1) Withdrawals permitted under these rules shall not exceed the following limits, namely:-

(a) in the case of withdrawals permitted under clauses (a), (b), (c) or (d) of sub-rule (1) of rule 103, six months‟ salary of the subscriber or the total of accumulated balance to his credit, whichever is the less; Income Tax Rules, 2002 102

1[(aa) in the case of withdrawals permitted under clause (aa) of sub-rule (1) of rule 103, the accumulated balance to the credit of subscriber;]

(b) in the case of withdrawals permitted 2[under clause (e) of sub-rule (1) of rule 103], six months salary of the subscriber or twenty five thousand rupees or/ of the total of the accumulated balance to his credit, whichever is the lowest;

(c) in the case of withdrawals permitted under clause (f) or (g) of sub-rule (1) of rule 3[103], thirty-six month‟s salary of the subscriber or the total of the accumulated balance to his credit, whichever is the less;

(d) in the case of withdrawals permitted under clause (h) of sub-rule (1) of rule 3[103], eighteen months salary of the subscriber or the total of the accumulated balance to his credit, whichever is the less, provided that this restriction shall apply to each withdrawal and not to the total withdrawal;

(e) in the case of withdrawals permitted under clause (i) of sub-rule (1) of rule 3[103], six months‟ salary of the subscriber or ten thousand rupees or the total of the accumulated balance to his credit, whichever is the lowest;

(f) in the case of withdrawals permitted under sub-clauses (i), (ii) and (iii) of clause (j) of sub-rule (1) of rule 3[103], twenty-four months‟ salary of the subscriber or eighty percent of the total of the accumulated balance to his credit, whichever is the less;

(g) in the case of withdrawals permitted under sub-clause (iv) of clause (j) of sub-rule (1) of rule 3[103], sixty percent of the total of the accumulated balance to 3[credit of] the subscriber; and

(h) in the case of withdrawals permitted under clause (k) of sub-rule (1) of rule 3[103], ninety percent of the accumulated balance to the subscriber.

(2) For the purpose of rule and this rule:-

(a) “accumulated balance” means the total of the accumulations of exempted contributions and exempted interest contained in the balance to the credit of the employee at the time of withdrawals;

(b) “family” means the employee’s wife, legitimate children, step children, parents, sisters and brothers who reside with the employee and are wholly dependent on him; and

(c) “salary” means the salary as defined in clause (h) of rule 14 of Part I of the Sixth Schedule to the Ordinance to which the employee is entitled at the time when the withdrawal is granted.

105. Second withdrawals

(1) Save as provided in sub-rules (2), (3), (4) and (5), no second withdrawal from a recognized provident fund shall be permitted until the sum first withdrawn has been fully repaid.

(2) A withdrawal may be permitted for the purposes specified in clause (h) of sub-rule (1) of rule 110, notwithstanding that the sum withdrawn for any other purpose has not been repaid.

(3) Subsequent withdrawals for the purposes specified in clause (h) of sub-rule (1) of rule 103 may be permitted, notwithstanding that the sum or sums previously drawn for the same 1 Clause “(aa)” inserted by SRO 815(I)/2008, dated August 01, 2008. 2 Substituted for “under clause (d) of sub-rule (1) of rule” by SRO 392(I)/2009 dated May 19, 2009. 3 Inserted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 103

purpose has or have not been repaid.

(4) A withdrawal for anyone of the purposes specified in sub-rule (1) of rule 103 other than that specified in clause (a) of that sub-rule may be permitted notwithstanding that the sum or sums withdrawn for the purposes of clause (e) of sub-rule (1) has or have not been repaid.

(5) A withdrawal for any of the purposes specified in sub-rule (1) of rule 103 other than those specified in clauses (f) and (h) of that sub-rule may be permitted notwithstanding that the sum previously withdrawn for the purposes of clause (d) of sub-rule (1) has not been repaid. 1[(6) Subsequent withdrawals for the purposes specified in clause (aa) of sub-rule (1) of rule 103 shall be permitted.]

106. Repayment of amounts withdrawn

(1) Where any withdrawal is allowed for a purpose specified in clauses 2[(aa),] (f), (h), (i), (j) or (k) of sub-rule (1) of rule 103, the amount withdrawn need not be repaid.

(2) Subject to sub-rules (3) and (4), where a withdrawal is allowed for a purpose other than those referred to in sub-rule (1), the amount withdrawn shall be repaid in not more than forty- eight equal monthly installments and shall bear profit in accordance with the following, namely:-

(a) Withdrawals which are repaid The rate of mark-up fixed by the Federal in not more than twelve Government under rule 3(b) of Part-I of the Sixth monthly installments Schedule to the Ordinance payable in the form of one additional installment.

(b) Withdrawals which are repaTidh e rate of mark-up fixed by the Federal Government in more than twelve but not under rule 3(b) of Part-I of the Sixth Schedule to the more than twenty-four monthly Ordinance payable in the form of two additional installments installments.

(c) Withdrawals which are repaid The rate of mark-up fixed by the Federal in more than twenty-four but Government under rule 3(b) of Part-I of the Sixth not more than thirty-six Schedule to the Ordinance payable in the form of monthly installments. three additional installments.

(d) Withdrawals which are repaid The rate of mark-up fixed by the Federal in more than thirty-six Government under rule 3(b) of Part-I of the Sixth 3[monthly] installments. Schedule to the Ordinance payable in the form of four additional installments.

(3) For the purposes of sub-rule (2) and at the discretion of the trustees of the fund, profit may be recovered on the amount withdrawn or the balance thereof outstanding from time to time at 1 percent above the rate which is payable for the time being on the balance in the fund to the credit of the subscriber.

(4) Where an employee contributing to the fund elects not to receive any profit accruing on his accumulated balance, no profit shall be charged on the amount withdrawn by him from the fund.

(5) The employer shall deduct such installments payable under sub-rule (2) from the employee’s salary and pay them to the trustees commencing from the second monthly payment made after the withdrawal or, in the case of an employee on leave without pay, from the second monthly installment after his return to duty. 1 Sub-rule (6) inserted by SRO 815(I)/2008, dated August 01, 2008. 2 Inserted by SRO 815(I)/2008, dated August 01, 2008. 3 Substituted for “months” by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 104

In the case of default of repayment of installments under sub-rules (2) and (5), the Commissioner may at his discretion, order that the amount of withdrawal or the amount outstanding shall be added to the total income of the employee for the year in which the default occurs and the employee shall be assessed accordingly.

107. Power to relax conditions

Notwithstanding anything contained in rules 103, 104, 105 or 106, the Commissioner may in special circumstances to be recorded in writing relax the conditions for withdrawals from and repayment to the fund. PART II APPROVED SUPERANNUATION FUNDS

108. Application for approval of a superannuation fund

(1) The application required to be made under sub-rule (1) of rule 3 of Part II of the Sixth Schedule to the Ordinance for approval of a superannuation fund shall contain the following information, namely:-

(a) the employer’s name and the address of the employer’s principal place of business;

(b) the classes and number of employees, whether in Pakistan or outside Pakistan, entitled to the benefits of the fund;

(c) the age of retirement prescribed in the fund’s regulations;

(d) the place where the accounts of the fund are or will be maintained; and

(e) where the fund is already in existence, details of investments of the fund.

(2) A verification in the following form shall be annexed to the application, namely:- “We/I, the trustees of the above named fund, do declare that what is stated in the application is true to the best of our/my information and belief and that the documents sent herewith are the originals or true copies thereof”.

109. Returns, statements and other documents that may be required to be furnished

The trustees of an approved superannuation fund and any employer who contributes to an approved superannuation fund may be required by notice, in writing, from the Commissioner under rule 8 of Part II of the Sixth Schedule to the Ordinance to-

(a) furnish a return containing such particulars of contributions as the notice may require;

(b) prepare and deliver a return containing -

(i) the name and place of residence of every person in receipt of an annuity from the fund;

(ii) the amount of the annuity payable to each annuitant;

(iii) particulars of every contribution (including interest on contributions), if any, returned to the employer or to employees; and

(iv) particulars of sums paid in commutation or in lieu of annuities; and Income Tax Rules, 2002 105

(c) furnish a copy of the accounts of the fund to the last date prior to such notice in which such amounts have been made up together with such other information and particulars as may be reasonably required with the permission of the 1Federal Board of Revenue.

110. Limits on contribution by the employer

(1) The ordinary annual contribution by the employer to an approved superannuation fund in respect of any particular employee shall be made on a reasonable definite basis as may be approved by the Commissioner with regard to the earnings, the contributions or the number of members of the said fund so however that such contributions shall not exceed twenty percent of the employee’s salary for each year.

(2) Subject to any condition which the Commissioner may think fit to specify under this rule, the amount to be allowed as a deduction on account of initial contribution which an employer may make in respect of the past service of an employee admitted to the benefits of a fund shall not exceed twenty percent of the employee’s salary for each year of his past services with the employer.

(3) Notwithstanding the provisions of sub-rules (1) and (2), an employer may, with the prior approval of the Commissioner, make a special contribution to an approved superannuation fund to meet the deficit in the fund, if any.

111. Investment and deposit of moneys of superannuation fund

All moneys contributed to an approved superannuation fund and interest on the accumulated balance of such contributions, if any, shall be utilized for making payments under a scheme of insurance or a contract of annuity with the State Life Insurance Corporation of Pakistan, an insurance company carrying on life insurance business and registered under section 3 of the Insurance Act, 1938 (IV of 1938), or the Pakistan Post Office Insurance Department having for its main object the provision of annuities for the beneficiaries, or deposited or invested in accordance with the provisions 2[ ] of rule

113. Circumstances in which approval may be withdrawn

The Commissioner may withdraw approval accorded under Part II of the Sixth Schedule to the Ordinance in the case of a fund which ceases to satisfy the requirements of the said Part or fails to fulfill the requirements of rules 110, 111 and 112. The words “Central Board of Revenue” substituted by the Finance Act, 2007 2 Words etc omitted for “of sub-rule (1)” by SRO 1209(I)/2005, dated 6 December 2005. Income Tax Rules, 2002 106

114. Form of appeal in case of refusal to approve or withdrawal of approval

(1) An appeal under sub-rule (1) of rule 10 of Part II of the Sixth Schedule to the Ordinance shall be in the following form and shall be verified in the manner indicated therein, namely:- FORM OF APPEAL IN CASE OF NON-APPROVAL OR WITHDRAWAL OF APPROVAL To The 1Federal Board of Revenue, Islamabad. The petition of __________________ employer(s) carrying on business, profession or vocation __________________ at your petitioner(s) applied to/obtained sanction from the Commissioner under Part II of the Sixth Schedule to the Income Tax Ordinance, 2001 for the approval of the superannuation fund maintained him (them) for the benefit of his (their) employees. The Commissioner has refused/ _____________________ withdrawn the approval for the reasons stated in his order, dated of which a copy is attested. For the reasons set out below your petition(s) submit(s) that the fund should be recognised and pray(s) that the 2Federal Board of Revenue may be pleased to. GROUNDS OF APPEAL We/l ____________________________________ the petitioner(s) named in the above petition do declare that stated therein is true to the best of our my information and belief. Signature ____________________ Name ____________________ Address ____________________

(2) An appeal shall be accompanied by a copy of a challan for Rs.100 paid in the Government treasury. PART III APPROVED GRATUITY FUNDS

115. Application for approval of a gratuity fund

(1) The application required to be made under sub-rule (1) of rule 3 of Part III of the Sixth Schedule to the Ordinance for approval of gratuity fund shall contain the following information,

(a) the employer’s name and the address of employer’s principal place of business;

(b) the classes and number of employees, whether in Pakistan or outside Pakistan, entitled to the benefits of the fund;

(c) the age of retirement prescribed in the fund’s regulations;

(d) the minimum period of service prescribed in the fund’s regulation as a condition of eligibility to receive the gratuity in case of termination of employment; The words “Central Board of Revenue” substituted by the Finance Act, 2007 The words “Central Board of Revenue” substituted by the Finance Act, 2007 Income Tax Rules, 2002 107

(e) the place where the accounts of the fund are or will be maintained; and

(f) where the fund is already in existence, details of investments of the fund.

(2) A verification in the following form shall be annexed to the application, namely:- “We/ I, the trustees of the above named fund, do declare what is stated 1[in] that the application is true to the best of our/my information and belief and that the comments sent herewith are the original or true copies thereof.”

116. Returns, statements and other documents that may be required to be furnished

The trustees of an approved gratuity fund and ,an employer who contributes to an approved gratuity fund may be required by notice, in writing, from the Commissioner under rule 7 of Part III of the Sixth Schedule to the Ordinance to:-

(a) furnish a return containing such particulars of contributions as the notice may require;

(b) prepare and deliver a return containing:

(i) the name and place of residence of every person in receipt of a gratuity from the fund; and

(ii) the amount of the gratuity paid to each employee; and

(c) furnish a copy of the accounts of the fund to the last date prior to such notice in which such accounts have been made up together with such other information and particulars as may be reasonably required with the permission of the Commissioner.

117. Limits on contribution by the employer

(1) The ordinary annual contribution by the employer to an approval gratuity fund in respect of any particular employee shall be made on a reasonable definite basis, as may be approved by the Commissioner, with regard to the length of service of the employee so however that such contribution shall not exceed salary of the employee for the last month of each financial year.

(2) Subject to any condition which the Commissioner may think fit to specify under this rule, the amount to be allowed as a deduction on account of initial contribution which an employer may make in respect of the past services of an employee admitted to the benefits of a fund shall not exceed salary of the employee for the last month of each financial year during the course of his past services with the employer.

(3) Notwithstanding the provisions of sub-rules (1) and (2), an 2[employer] may with the prior approval of the Commissioner, make a special contribution to an approved gratuity fund to meet the deficit in the fund, if any.

118. Investment or deposits of moneys of a gratuity fund

All money contributed to an approved gratuity fund and interest on the accumulated balances of such contributions shall be deposited or invested in accordance with the provisions of 3[rule 102].

119. Treatment of consideration for dealings with beneficial interest

1 Substituted for “that” by SRO 392(I)/2009, dated May 19, 2009. The SRO mentions substitution of the word “that” appearing for the first time while it is clearly intended to replace the word appearing for the second time. The amendment has been made accordingly. 2 Substituted for “employee” by SRO 392(I)/2009, dated May 19, 2009. 3 Substituted for “sub-rule (1) of rule 109” by Notification No. SRO 590(I)/2004, dated July 7, 2004. Income Tax Rules, 2002 108

If an employee assigns or creates a charge upon his beneficial interest in an approved gratuity fund, the Commissioner shall, on the fact of the assignment or charge coming to his knowledge, give notice 1[to] the employee that if he does not secure the cancellation of the receipt of the notice, the consideration received for such assignment of charge shall be treated as salary received by him in the year in which the fact became 2[known] to the Commissioner and shall be assessed accordingly.

120. Circumstances in which approval may be withdrawn

The Commissioner may withdraw approval awarded under Part III of the Sixth Schedule to the Ordinance in the case of a fund which ceases to satisfy the requirements of the said Part or fails to fulfill the requirements of rule.

121. Form of appeal in case of refusal to approve or withdrawal of approval

An appeal under sub-rule (1) of rule 9 of Part III of the Sixth Schedule to the Ordinance shall be in the following form and shall be verified in the manner indicated therein, namely:- FORM OF APPEAL IN CASE OF NON-APPROVAL OR WITHDRAWAL OF APPROVAL To The 3Federal Board of Revenue, Islamabad. The petition of employer(s) carrying on business, profession or vocation _______________ at your petitioner(s) applied to/obtained sanction from the Commissioner under Part III of the Sixth Schedule to the Income Tax Ordinance, 2001 for the approval of the gratuity fund maintained him (them) for the benefit of his (their) employees. The Commissioner has refused/ _______________ withdrawn the approval for the reasons stated in his order, dated ______________________ of which a copy is attested. For the reasons set out below your petition(s) submit(s) that the fund should be recognized and pray(s) that the 4Federal Board of Revenue may be pleased to. GROUNDS OF APPEAL We/ l :___ the petitioner(s) named in the above petition do declare that stated therein is true to the best of our/my information and belief. Signature ____________________ Name ____________________ Address ____________________

(2) An appeal shall be accompanied by a copy of a challan for Rs.100/- paid in the Government treasury. 1 Words inserted by SRO 392(I)/2009, dated May 19, 2009. 2 Substituted for “know” by SRO 392(I)/2009, dated May 19, 2009. The words “Central Board of Revenue” substituted by the Finance Act, 2007 The words “Central Board of Revenue” substituted by the Finance Act, 2007 Income Tax Rules, 2002 109

CHAPTER - XVI INCOME TAX RECOVERY RULES PART - I

122. Definitions

For the purposes of 1[these] rules, unless there is anything repugnant in the subject or context,-

(a) “Tax Recovery” means recovery of debt due to the Federal Government under the Income Tax Ordinance, 2001;

(b) “defaulter” means the taxpayer mentioned in the notice;

(c) “execution”, in relation to a Notice, means steps taken for the recovery of arrears under these rules; 2[(ca) “notice”, in this Chapter means a notice under sub-section (1) of section 138 of the Income Tax Ordinance 2001.]

(d) “officer” means a person authorized by the commissioner to execute an order of attachment or sale under these rules; and

(e) “share in a corporation” includes stock, debenture stock, debentures or bonds.

(f) for the purpose of this Chapter, “Commissioner” means Commissioner of 3[“Inland Revenue”] as defined under clause 13 of section 2 and includes any taxation officer delegated powers by the Commissioner to act, exercise powers and functions under this Chapter, in respect of a taxpayer(s) by general or specific orders, or under scheme of enforcement in the tax recovery matters designed by the FBR.

123. Form of notice of recovery to be issued by Commissioner

4[(1) The notice required to be served upon the taxpayer under sub-section (1) of section 138 shall be in the form as prescribed in part-III of First Schedule to these rules.]

124. Mode of service of notice

The notice referred to in rule 123 and other notices under rules contained in this part shall be served as provided in section 218 of the Income Tax Ordinance, 2001.

125. Time limit for execution of the notice

No step in execution of the notice referred to in rule 123 shall be taken until the period specified in the said notice has elapsed since the date of service of the notice. Provided that if the Commissioner is satisfied that the defaulter is to cancel, remove or dispose of the whole or any part of such of his moveable property as would be liable to attachment in execution of a notice that the realization of the amount of Notice would in consequence be delayed or obstructed, he may at any time after the issue of the notice under rule direct, for reasons to be recorded in writing, an attachment of the whole or part of such property: 1 Words inserted by SRO 392(I)/2009, dated May 19, 2009. 2 Clause “(ca)” inserted by SRO 392(I)/2009, dated May 19, 2009. 3 The words “Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 4 Sub-rule (1) substituted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 110

Provided further that if the defaulter whose property has been so attached furnishes security to the satisfaction of the Commissioner, such attachment shall be cancelled from the date on which such security is accepted by the Commissioner.

126. Disposal of proceeds of execution

Whenever assets are realized, by sale or otherwise in execution of a Notice, they shall be disposed of in the following manner, namely:-

(a) there shall be paid to the Commissioner the amount due under the 1[notice] in execution of which the assets were realized; and

(b) the balance, if any, shall be paid to the defaulter.

127. Determination of disputes

Except as otherwise expressly provided in these rules, every question arising between the Commissioner and the defaulter or their representatives, relating to the execution, discharge or satisfaction of a 2[notice duly issued] under these rules, or relating to confirmation or setting aside by an order under these rules of a sale held in execution of such Certificate, shall be determined by order of the Commissioner before whom such question arise.

128. Exemption from attachment

The following shall not be liable to attachment and sale under these rules, namely:-

(a) the necessary wearing apparel, cooking vessels, beds and bedding of the defaulter, his wife and children, and such personal ornaments, as, in accordance with religious usage, cannot be parted with by any women;

(b) tools of artisans, and, where the defaulter is an agriculturist, his implements of husbandry and such cattle and seed grain as may, in the opinion of the Commissioner, be necessary to enable him to earn his livelihood as such;

(c) houses and other buildings (with the materials and the sites thereof and the land immediately appurtenant thereto and necessary for their enjoyment) belonging to an agriculturist and occupied by him;

(d) books of account;

(e) a mere right to sue for damages;

(f) any right of personal service;

(g) stipends and gratuities allowed to a pensioner of the Government, or payable out of any service family pension fund notified in official Gazette by the Federal Government or the Provincial Government in this behalf, and political pensions;

(h) the wages of labourers and domestic servants, whether payable in money or in kind;

(i) salary to the extent of the first hundred rupees and one half of the remainder: Provided that where such salary is the salary of the servant of Government or servant of a railway or local authority, and 3[ ] whole or any part of the portion of such salary 1 Substituted for “certificate” by SRO 392(I)/2009, dated May 19, 2009. 2 Substituted for “Certificate duly filed” by SRO 392(I)/2009, dated May 19, 2009. 3 Letter “III” omitted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 111

liable 1[to] attachment has been under attachment, whether continuously intermittently for a total period of twenty four months, portion shall be exempt from attachment until the expiry of further period of twelve months and, where such attachment been made in execution of one and the same certificate, shall be finally exempt from attachment in execution of that notice;

(j) the pay and allowances of persons to whom the Pakistan 1[Army] Act, 1952 (XXXIX of 1952), applies, or of persons other than Commissioned Officers to whom the Pakistan Navy Ordinance, 1961 (XXXV of 1961), applies;

(k) all compulsory deposits and other sums in or derived from fund to which the Provident Funds Act, 1925 (XIX of 1925), the time being applies in so far as they are declared by the Act not to be liable to attachment;

(l) any allowance forming part of the emoluments of any servant of Government or of any servant of a railway or local authority which the appropriate Government may, by notification in the official Gazette, declare to be exempt from attachment, and any subsistence grant or allowance made to any such servant while under suspension;

(m) any expectancy of succession by survivorship or other 2[merely] contingent or possible right or interest; and

(n) a right to future maintenance. Explanation 1.- The particulars mentioned in clauses (g), (h), (i), (j) and (l) are exempt from attachment or sale whether before or 3[after] they are actually payable, and in the case of salary other 4[than] salary of a servant of the Government or a servant of railway local authority the attachable portion thereof is exempt from attachment until it is actually payable. Explanation 2.- ln clauses (h) and (i), “wages” or “salary” means the total monthly emoluments, excluding any allowance declared exempt from attachment under the provisions of clause (l), derived by a person from his employment whether on duty or on leave. Explanation 3.- ln clause (l), “appropriate Government” means-

(i) as respects any person in the service of the Federal Government, or any servant of Railway Board, a cantonment! authority or of the port authority or a major port, the Federal Government; and

(ii) as respect any person in the service of a Provincial Government or a servant of any local authority, the Provincial Government.

129. Investigation by Commissioner

(1) Where any claim is preferred to, or any objection is made to the attachment or sale of, any property in execution of a 5[notice] on the ground that such property is not liable to such attachment or sale, the Commissioner shall proceed to investigate the claim or objection: Provided that no such investigation shall be made when the Commissioner considers that the claim or objection was designedly or unnecessarily delayed. 1 Word inserted by SRO 392(I)/2009 dated May 19, 2009. 2 Substituted for “me” by SRO 392(I)/2009, dated May 19, 2009. 3 Words inserted by SRO 392(I)/2009, dated May 19, 2009. 4 Substituted for “t” by SRO 392(I)/2009, dated May 19, 2009. 5 Substituted for “Certificate” by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 112

(2) Where the property to which the claim or objection relates has been advertised for sale, the Commissioner ordering the sale may postpone it during the investigation of the claim or objection, upon such terms as to security or otherwise as the Commissioner may deem fit.

(3) The claimant or objector shall adduce evidence to show that at the date on which the Notice was originally issued by the Commissioner for the recovery of the arrears, he had some interest in, or was possessed of the property in question.

(4) Where, upon the said investigation the Commissioner is satisfied that, for the reason stated in the claim or objection, such property was at the said date in the possession of the defaulter or of some person in trust for him or in the occupancy of a tenant or other person paying rent to him, or being in the possession of the defaulter at the said date, it was so in his possession, not on his own account or as his own property, but on account of or in trust for some other person the Commissioner shall make an order releasing the property, wholly or to such extent as it was not 1[ ] in possession of the defaulter on his own account, from attachment or sale.

(5) Where the Commissioner is satisfied that the property was, at that date, in the possession of the defaulter as his own property and not on account of any other person, or was in possession of some other person in trust for him or in the occupancy of a tenant or other person paying rent to him, the Commissioner shall disallow the claim.

130. Removal of attachment on satisfaction or cancellation of Certificate

Where the amount due is paid to the Commissioner 2[the attachment] shall be deemed to be withdrawn and, in case of immovable property, the withdrawal shall, if the defaulter so desired, be proclaimed at his expense, and a copy of the proclamation shall be affixed in manner provided by these rules for a proclamation of sale of immovable property.

131. Officer entitled to attach and sell

The attachment and sale of immovable property may be made by such officer as the Commissioner may from time to time direct.

132. Adjournment or stoppage of sale

(1) The Commissioner may adjourn sale hereunder to a specified day and hour; and the officer conducting any such sale may adjourn the sale, recording his reasons for such adjournment: 3[Provided that, where the sale is being conducted in or within the precincts of the office of the concerned Commissioner 4[ ], the officer shall not adjourn the sale without prior permission of the Commissioner.]

(2) Where a sale of immovable property is adjourned under sub-rule (1) for a longer period than one calendar month, a fresh proclamation of sale under rules shall be made unless the defaulter consents to waive it.

(3) Every sale shall be stopped if, before the lot is knocked down, the amount 5[due is] tendered to the officer conducting the sale, or proof is given to his satisfaction 6[that the] amount has been paid to the Commissioner who ordered the sale. 1 Word “it” omitted by SRO 392(I)/2009, dated May 19, 2009. 2 Words inserted by SRO 392(I)/2009, dated May 19, 2009. 3 Proviso substituted by SRO 392(I)/2009, dated May 19, 2009. 4 The words “of income tax” omitted by SRO 1218(I)/2015 dated 08.12.2015. 5 Words inserted by SRO 392(I)/2009, dated May 19, 2009. 6 Substituted for “e” by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 113

133. Defaulter not to mortgage, etc., any property

Where a notice has been served on a defaulter under rule 123 the defaulter or his representative in interest shall nor sell, mortgage, charge, lease or otherwise deal with any property belonging to him except with the permission of the Commissioner.

134. Prohibition against biding or purchase by officer

No officer or other person having any duty to perform in connection with any sale under these rules shall, either directly or indirectly, bid for, acquire or attempt to acquire any interest in the property sold.

135. Assistance by police

Any officer authorized to attach or sell any property or to arrest the defaulter or charged with any duty to be performed under these rules, may apply to the officer-in-charge of the nearest police station for such assistance as may be necessary in the discharge of his duties. PART - II ATTACHMENT AND SALE OF MOVABLE PROPERTY ATTACHMENT

136. Person authorized to act, etc

(1) The Commissioner may authorize any person to execute an order of attachment or sale under the rules in this part and in Part III and, where he does not so authorize any person references, in the said rules to “officer”, so far as may be, be construed 1[as] references to the Commissioner.

(2) Except as otherwise provided in these rules, when any movable property is to be attached, the officer shall be furnished by the Commissioner with a warrant in writing and signed with his name specifying the name of the defaulter and the amount to be realized. 2[(3) The warrant of attachment of movable property to be issued by the Commissioner under sub- rule (2) shall be in the following form, namely:- WARRANT OF ATTACHMENT OF MOVEABLE PROPERTY (Rule 136(2) of the Income Tax Rules, 2002) Commissioner ___________________________ No._____________ dated _______________ To ____________________________ S/O. ________________________ You Mr./Mrs.M/s. ___________________________________________________ have failed to pay Rs._______ (Rupees ____________________) which was due as income tax arrears in spite of service of a notice under section 138(1) of the Income Tax Ordinance, 2001, dated ________. In view of the said default and in pursuance of recovery of tax arrears, it is hereby ordered to attach moveable property belonging to Mr/Mrs/M/s._____________, the defaulter of the said amount. 1 Words inserted by SRO 392(I)/2009, dated May 19, 2009. 2 Sub-rule (3) substituted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 114

Mr. __________________________ is authorized under rule 136(1) of the Income Tax Rules, 2002, to execute this warrant. This order is given under my hand and seal at (name of city) _____________________ on this day of __________ (month) ________________ (year) _____. Commissioner of 1[“Inland Revenue”]]

137. Service of copy of warrant

The officer shall cause a copy of the warrant to be served on the defaulter.

138. Attachment

If, after service of the copy of warrant, the amount is not paid forthwith, the officer shall proceed to attach the movable property of the defaulter. Provided that the standing crops of the agricultural produce lying in the field stored in or near the dwelling house of the defaulter or stored on the land owned or cultivated by the defaulter, which represents the agricultural produce of the land owned, leased or cultivated by the defaulter, shall not be attached.

139. Property in defaulter’s possession

Where the property to be attached is movable property in the possession of the defaulter, the attachment shall be made by actual seizure and the officer shall keep the property in his own custody or in the custody of one of his subordinates and shall be responsible for due custody thereof. Provided that when the property seized is subject to speedy and natural decay or when the expense of keeping it in custody is likely to exceed its value, the officer may sell it at once.

140. Debts and shares, etc

(1) In the case of-

(a) a debt not secured by a negotiable instrument,

(b) a share in a corporation, or

(c) other movable property not in the possession of the defaulter except property deposited in, or in the custody of, any court, the attachment shall be made by a written order, prohibiting,-

(i) in the case of the debt, the creditor from recovering the debt and the debtor from making payment thereof until the further order or the Commissioner;

(ii) in the case of the share, the person in whose name the share may be standing from transferring the same or receiving any dividend thereon; and

(iii) in the case of other movable property except as aforesaid, the person in possession of the same from giving it over to the defaulter. 1 The words “Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 115

(2) A copy of such order shall be affixed on some conspicuous part of the office of the Commissioner, and another copy shall be sent, in the case of the debt, to the debtor, in the case of the share in a corporation, to the proper officer of the corporation and in the case of other movable property (except as aforesaid), to the person in possession of the same.

(3) A debtor prohibited under clause (i) of sub-rule (1) shall, on receipt of order of the Commissioner, pay the amount of his debt to the Commissioner, and such payment shall discharge him as effectually as payment to the party entitled to receive the same.

(4) Where the execution of a document or the endorsement of the defaulter in whose name a negotiable instrument or a share in a corporation is standing is required to transfer such negotiable instrument or share, the Commissioner such other officer as he may authorize in this behalf may execute such document or make such endorsement as may be necessary, and such execution or endorsement have the effect as an execution or endorsement by the defaulter.

(5) Until the transfer of such negotiable instrument or share, the Commissioner or any other officer authorized by him in this behalf may receive any interest or dividend due thereon and sign a receipt for the same. Any receipt so signed shall be as valid and effectual for all purposes as if the same had been signed by the defaulter himself.

141. Share in movable property

Where the property to be attached consists of the share or interest of the defaulter in movable property belonging to him and another as co-owners, the attachment shall be made by a notice to the defaulter prohibiting him from transferring such share or interest or subjecting same to a charge in any manner.

142. Attachment of negotiable instrument

Where the property is a 1[negotiable] instrument not deposited in a Court, nor in the custody of a public officer, the attachment shall be made by actual seizure, and the instrument shall be brought before the Commissioner and held subject to 2[his] orders.

143. Payment of tax collected or deducted

As required under section 160 and under the Sixth Schedule to the ordinance the tax collected or deducted under Division II or Division III of Part V of Chapter X of the Ordinance, Chapter XII of the Ordinance or Sixth Schedule to the Ordinance shall be paid to the Commissioner by way of credit to the Federal Government,-

(a) where the tax has been collected or deducted by the Federal Government or a Provincial Government on the day the tax was collected or deducted; or

(b) where the tax has been collected or deducted by a person other than the Federal Government or a Provincial Government, by remittance to the Government Treasury or deposit in an authorized branch of the State Bank of Pakistan or the National Bank of Pakistan, within 2[Seven days from the end of each week ending on every Sunday]3[:] 3[Provided that the tax collected by a banking company upto 19th July, 2015 in respect of advance tax on banking transactions under section 236P of Ordinance may be deposited into the Government Treasury by 31st July, 2015.] [Division IIIA ADVANCE TAX ON AIR TICKETS

Where the property to be attached is in the custody of any public officer, the attachment be made by a notice to such officer requesting that such property and any interest or dividend becoming payable thereon may be held subject to the further 3[orders] of the Commissioner by whom the notice is issued.

144. Attachment of property in partnership

(1) Where the property to be attached consists of an interest of the defaulter, being a partner, in the partnership property, the Commissioner may make an order charging the 4[share] of such partner in the partnership property and profits, with payment of amount due under the notice, and may, by the same or a subsequent 1[order], appoint a receiver the share of such partner in the profits, whether already declared or accruing, and of any other money which may become due to in respect of the partnership, and direct maintenance or rendition of accounts and inquiries and make an order for the sale of such interest or such order as the circumstances of the case may require. 1 SRO 392(I)/2009 dated May 19, 2009 seeks to substitute the word “liable” by “negotiable”, whereas the word “negotiable” already appears there. 2 Substituted for “this” by SRO 392(I)/2009, dated May 19, 2009. 3 Substituted for “s” by SRO 392(I)/2009, dated May 19, 2009. 4 Words inserted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 116

(2) The other partners shall be at liberty at any time to redeem the interest charged or; in the case of a sale being directed, to purchase the same.

145. Inventory

In the case of attachment of movable property by actual seizure the officer shall, after attachment of the property prepare an inventory of all the property attached, specifying in it the place where it is lodged or kept, and shall forward the same to the Commissioner and deliver a copy thereof to the defaulter.

146. Attachment not to be excessive

The attachment by seizure shall not be excessive, that is to say, the property attached shall be as nearly as possible proportionate to the amount specified in the warrant.

147. Seizure between sunrise and sunset

Attachment by seizure shall be made after sunrise and before sunset and not otherwise.

148. Entry into building by officer, etc

The officer may break open any inner or other door or window of any building and enter any building in order to seize any movable property if the officer has reasonable grounds to believe that such building contains movable property liable to seizure under the warrant and the officer has notified his authority and intention of breaking open if admission is not given. He shall, however, give all reasonable opportunity to women 1[to] withdraw.

149. Sale

The Commissioner may direct that any movable property attached under these rules or such portion thereof as may seem necessary to satisfy the certificate shall be sold.

150. Issue of proclamation

When any sale of movable property is ordered by the Commissioner, he shall issue a proclamation of the intended sale specifying the time and place of sale and whether the sale is subject to confirmation or not.

151. Proclamation how made

(1) The proclamation shall be made by the beat of drum or other customary mode, and the contents of the proclamation shall be explained in the language of the district-

(a) in the case of property attached by actual seizure-

(i) in the village in which the property was seized or, if the property was seized in a town or city, then, in the locality in which it was seized; and

(ii) at such other places as the Commissioner of Tax may direct; and

(b) in the case of property attached otherwise than by actual seizure, in such places, if any, as the Commissioner may direct. Income Tax Rules, 2002 117

(2) A copy of the proclamation shall also be affixed at a conspicuous place in the office of the Commissioner.

(3) Where the Commissioner so directs, such proclamation may also be published in one or two newspapers.

152. Sale after fifteen days

Except where the property is subject to speedy and natural decay or when the expense of keeping it in custody is likely to exceed its value, no sale of movable property under these rules shall, without the consent in writing of the defaulter, take place until after the expiry of at least fifteen days from the date on which a copy of the proclamation of sale was affixed in the office of the Commissioner.

153. Sale to be by auction or by tender

The property shall be sold by public auction or by tender, in one or more lots, as the officer may consider advisable and, if the amount to be realized by sale may be satisfied by the sale of a portion of the property, the sale shall be only with respect to that portion of the property.

154. Sale by public auction

(1) Where movable property is sold by public 1[auction], the price of each lot shall be paid at the time of sale or as soon thereafter the officer holding the sale directs and in default of payment the property shall 2[ ] be re-sold.

(2) On payment of the purchase money, the officer holding the sale shall grant to the purchaser a certificate specifying the property purchased, the price paid the name of the purchaser, and the sale shall thereupon become absolute.

(3) Where the movable property to be sold is a share in goods belonging to defaulter and a co- owner, and two or more persons, of whom one is such co-owner, respectively bid the same sum for such property or for any lot, the bid of co-owner shall have preference.

155. Irregularity not to vitiate sale

Any error or irregularity in publishing or conducting the sale of movable property shall not vitiate the sale if provisions of these rules have been substantially complied with.

156. Negotiable instruments or share in a corporation

Notwithstanding anything contained in these rules, where the property to be sold 3[is] negotiable instrument or a share in a corporation, the Commissioner instead of directing the sale to be made by public auction, authorize the sale of such instrument or share through a broker.

157. Order for payment of coin or currency notes to the Commissioner

Where the property attached is current coin or currency notes, the Commissioner may, at any time during the continuance of the attachment, direct that such coin or notes, or a part thereof sufficient to satisfy the Notice, be paid over to the Commissioner. 1 Substituted for “on” by SRO 392(I)/2009, dated May 19, 2009. 2 Word “with” omitted by SRO 392(I)/2009, dated May 19, 2009. 3 Word inserted by SRO 392(I)/2009 dated May 19, 2009. 4 The words “of Income Tax” omitted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 118

PART - III ATTACHMENT AND SALE OF IMMOVABLE PROPERTY ATTACHMENT

158. Attachment

1[(1)] Attachment of the immovable property of the defaulter be made by an order prohibiting the defaulter from transferring or subjecting the property to a charge in any manner and prohibiting all persons from taking any benefit under such transfer or charge. 1[(2) The order of attachment of immovable property to be issued by the Commissioner under this rule shall be in the following form, namely:- ORDER OF ATTACHMENT OF IMMOVABLE PROPERTY (Rule 158 of the Income Tax Rules, 2002) To, _____________________________ S/o.__________________________ You have failed to pay a sum of Rs.__________ (Rupees ___________________) payable by you, for which a notice under section 138(1) of the Income Tax Ordinance, 2001, dated has already been served upon you. In view of the said default and in pursuance of recovery of income tax arrears you Mr/Mrs/M/s. ___________________________ are hereby prohibited and restrained until further orders of the undersigned from transferring of immovable property No. located at (address) ____________________________ or subjecting the same to a charge in any manner and, that all persons are prohibited from taking any benefit under such transfer or charge. Given under my hand and seal at (name of city) __________________ on this day of (month) __________ (year) _______________ Commissioner of 2[“Inland Revenue”]]

159. Service of notice of attachment

A copy of the order of attachment be served on the defaulter.

160. Proclamation of attachment

The order of attachment shall be 3[proclaimed] at some place on or adjacent to the property attached by beat of drum or customary mode, and a copy of the order shall be affixed at a conspicuous of the property and also at a conspicuous place of the office of the Commissioner.

161. Sale and proclamation of sales

(1) The Commissioner of Tax may direct that any immovable property which has been attached, or such portion of as may seem necessary to satisfy the notice, shall be sold. 1 Rule 158 renumbered as sub-rule (1) and sub-rule (2) by SRO 392(I)/2009, dated May 19, 2009. 2 The words “Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 3 Substituted for “aimed” by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 119

(2) Where any immovable property is ordered to be sold, the Commissioner shall cause a proclamation of the intended sale to be made in the language of the district.

162. Contents of proclamation

(1) A proclamation of sale of immovable property shall be drawn up after service of notice to the defaulter, and shall state time and place of sale and also specify-

(a) the location of the property to be sold;

(b) as fairly and accurately as possible the revenue or rent, if any, assessed upon the property or any part thereof; and

(c) the amount for the recovery of which the sale is ordered.

(2) The proclamation may also specify any other thing which the Commissioner considers material for a purchaser to know in order to judge the nature and value of the property.

163. Mode of making proclamation

(1) Every proclamation for the sale of immovable property shall be made at some place on or near such property by beat of drum or other customary mode, and a copy of the proclamation shall be affixed at a conspicuous place of the property and also at a conspicuous 1[part] of the office of the Commissioner.

(2) Where the Commissioner so directs, such proclamation may be published in one or two newspapers.

(3) Where the property is divided into lots for the purpose of being sold separately, it shall not be necessary to make a separate proclamation for each lot, unless proper notice of the sale cannot, in the opinion of the Commissioner otherwise be given.

164. Time of sale

No sale of immovable property under these rules shall, without the consent in writing of the defaulter, take place until after 2[the] expiration of at least thirty days from the date on which a copy of the proclamation of sale has been affixed on the property or in the office of the Commissioner, whichever is later.

165. Sale to be by auction or by tender

The sale shall be made by public auction or by tender to the highest bidder and shall be subject to confirmation by the Commissioner.

166. Deposit by purchaser and re-sale in default

(1) On every sale of immovable property, the person declared to be the purchaser shall pay, immediately after such declaration, a deposit of twenty-five percent of the amount of his purchase money to the officer conducting the sale; and in default of such deposit the property shall forthwith be resold. 1 Word inserted by SRO 392(I)/2009 dated May 19, 2009. 2 Substituted for “tile” by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 120

(2) The full amount of purchase money payable shall be paid by the purchaser to the Commissioner on or before the fifteenth day from the date of the sale of the property.

167. Procedure in default of payment

In default of payment within the period mentioned in rule 166 twenty percent of deposit made under sub-rule (1) of that rule shall be forfeited and the rest shall be kept as deposit to be dealt with as mentioned in dealt 168 and the property shall be re-sold and the defaulting purchaser shall forfeit all claims to the property or to any part of the, sum for which it may be subsequently sold except to such sums as may be found refundable to him under rule 168.

168. Amount recoverable from purchaser in default

Any deficiency of price which may happen on a re-sale by reason of the purchaser’s default including all expenses attending such re-sale, shall be recoverable from the defaulting purchaser upto the maximum of eighty percent of the deposit made by him under sub-rule (1) of rule 173 and kept as a deposit under rule 166 and if there is any surplus after meeting the deficiency the same shall be refunded to the defaulting purchaser.

169. Authority to bid

All persons bidding at the sale shall be required to declare if they are bidding on their own behalf, or on behalf of their principals and, in the latter case, they shall be required to deposit their authority, and in default their bids shall be rejected.

170. Application to set aside sale of immovable property on deposit

(1) Where immovable property has been sold in execution of a 1[notice], the defaulter, or any person whose interests are affected by the sale, may, at any 2[time] within thirty days from the date of the sale, apply to the Commissioner to set aside the sale, on his depositing-

(a) for payment to the Commissioner, the amount specified in the proclamation of sale as that for the recovery of which the sale was ordered with interest thereon at the rate of eight percent per annum, calculated from the date of proclamation of sale to the date when the deposit is made; and

(b) for payment to the purchaser, as penalty, a sum equal to ten percent of the purchase money.

(2) Where a person makes an application under rule 171 for setting aside the sale of his immovable property, he shall not, unless he withdraws that application, be entitled to make or prosecute an application under this rule.

171. Application to set aside sale of immovable property on ground of non-service of notice or irregularity

Where immovable property has been 3[sold] in execution of a notice, 4[ ] the defaulter, or any person whose interests are affected by the sale, may, at any time within thirty days from the date of the sale, apply to the Commissioner to set aside the sale of the immovable property on the ground that notice was not served on the defaulter to pay the arrears as required by these rules or 1 Substituted for “Certificate” by SRO 392(I)/2009, dated May 19, 2009. 2 Word inserted by SRO 392(I)/2009 dated May 19, 2009. 3 Word inserted by SRO 392(I)/2009 dated May 19, 2009. 4 Words “the Commissioner of Income Tax,” omitted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 121

on the ground of a material irregularity in publishing or conducting the sale: Provided that-

(a) no sale shall be set aside on any such ground unless the Commissioner is satisfied on the basis of evidence, produced before him that the applicant has sustained loss by reason of the non-service or irregularity; and

(b) an application made by a defaulter under this rule shall be disallowed unless he deposits the amount recoverable from him in execution of the notice.

172. Setting aside sale where defaulter has no saleable interest

At 1[any] time within thirty days of the sale, the purchaser may apply to the Commissioner to set aside the sale on the ground that the defaulter had no saleable interest in the property sold.

173. Confirmation of sale

(1) Where no application is made for setting 2[aside] the sale under the foregoing rules or where such an application is made and 3[disallowed] by the Commissioner, he shall, if the full amount of the purchase money has been paid, make 4[an] order confirming the sale, and 5[thereupon] the sale shall become absolute.

(2) Where such application is made and allowed, and where, in the case of application made to set aside the sale on deposit of the amount 6[of tax penalty and additional tax], the deposit is made within thirty days from the date of sale, the Commissioner shall make an order setting aside the sale. Provided that no such order shall be made unless notice of the application has been given to the persons affected thereby.

174. Return of purchase money in certain cases

Where a sale of immovable property is set aside, any money paid or deposited by the purchaser on account of the purchase, together with the penalty, if any, deposited for payment to the purchaser, shall be paid to the purchaser.

175. Sale certificate

(1) Where a sale of immovable property has become absolute, the Commissioner shall grant a certificate specifying the property sold, and the name of the person who at the time of sale was declared to be the purchaser.

(2) Such certificate shall state the date on which the sale become absolute.

176. Postponement of sale to enable defaulter to raise amount due under notice

(1) Where an order for the sale of immovable property has been made and the defaulter 1 Word inserted by SRO 392(I)/2009 dated May 19, 2009. 2 Substituted for “Certificate” by SRO 392(I)/2009, dated May 19, 2009. 3 Substituted for “owed” by SRO 392(I)/2009, dated May 19, 2009. 4 Substituted for “1’in” by SRO 392(I)/2009, dated May 19, 2009. 5 Substituted for “upon” by SRO 392(I)/2009, dated May 19, 2009. 6 Substituted for “and penalty, interest” by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 122

satisfies the Commissioner of Tax that there is reason to believe that the amount of the notice may be raised by mortgage or lease or private sale of such property, or some part thereof, or of any other immovable property of the defaulter, the Commissioner of Tax may, on the application of the defaulter, postpone the sale of the property specified in the order for sale, on such terms and for such period as he thinks proper, to enable the defaulter to raise the amount.

(2) In such case, the Commissioner shall grant a certificate to the defaulter authorizing him, within a period to be mentioned therein and notwithstanding anything contained in these rules, to make the proposed mortgage, lease or sale: Provided that all money payable under such mortgage, lease or sale shall be paid, not to the defaulter, but to the Commissioner: Provided further that no mortgage, lease or sale under this rule shall become absolute until it has been confirmed by the Commissioner.

177. Fresh proclamation before resale

Every re-sale of immovable property, in default of payment of the purchase money within the period allowed for such payment, shall be made after the issue of a fresh proclamation in the manner and for the period herein-before provided for the sale.

178. Bid of co-sharer to have preference

Where the property sold is a share of undivided immovable property and two or more persons, of whom one is a co-sharer, respectively bid the same sum for such property or for any lot, the bid of the co-sharer shall have preference. PART - IV APPOINTMENT OF RECEIVER

179. Appointment of receiver for business

(1) Where the property of Defaulter consists of a business, the Commissioner may attach the business and appoint a person as receiver to manage the business.

(2) Attachment of a business under this rule shall be made by an order prohibiting the defaulter from transferring or subjecting the business to a charge in any manner and prohibiting all persons from taking any benefit under such transfer or charge and intimating that the business has been attached under this rule. A copy of the order of attachment shall be served on the defaulter and another copy shall be affixed on a conspicuous part of the premises in which the business is carried on and at a conspicuous place in the office of the Commissioner.

(3) Where the Commissioner so directs, such order shall also be published in a newspaper.

180. Appointment of receiver for immovable property

Where immovable property is attached, the Commissioner may, instead of directing sale of the property, appoint a person as receiver to manage such property. Income Tax Rules, 2002 123

181. Power of receivers, etc

(1) Where it appears to the 1[Officer] to be just and convenient, the Officer may by order-

(a) remove any person from the possession or custody of the property;

(b) commit the same to the possession, custody or management of the receiver; and

(c) confer upon the receiver all such powers, as to bringing and defending suits and for the realization, management, protection, preservation and improvement of the property, the collection of the rents and profits thereof, the application and disposal of such rents and profits, and the execution of documents as the owner himself has or such of those powers as the Commissioner thinks fit: Provided that nothing in this rule shall authorize the Commissioner to remove from the possession or custody of property any person whom any party to recovery proceedings has not a present right so to remove.

(2) The Commissioner may by general or special order fix the amount to be paid as remuneration for the services of the receiver.

(3) Every receiver appointed by the Commissioner shall -

(a) furnish such security, if any, as the Commissioner thinks fit, to account duly for what he shall receive in respect of the property;

(b) submit his accounts at such periods and in such form as the Commissioner directs;

(c) pay the amount due from him as the Commissioner of Income directs; and

(d) be responsible for any loss occasioned to the property by his willful default or gross negligence.

(4) The profits or rents and profits, of such business or other property after defraying the expenses of management, be adjusted towards discharge 2[of] arrears, and the balance, if any, shall be paid to the defaulter.

182. Withdrawal of management

The attachment and management under this part may be withdrawn at any time at the discretion of the Commissioner, or if the arrears are discharged by receipt of such profits and rents or are otherwise paid. PART - V ARREST AND DETENTION OF THE DEFAULTER

183. Notice to show cause

(1) No order for the arrest and detention in civil prison of a defaulter shall be made unless the Commissioner has issued and served a notice upon the defaulter, calling upon him to appear before him on the date specified in the notice and to show cause why he should not be committed to the civil prison, and unless the Commissioner, for reasons to be recorded in writing, is satisfied- 1 Substituted for “Commissioner” by SRO 392(I)/2009 dated May 19, 2009. 2 Word inserted by SRO 392(I)/2009 dated May 19, 2009. Income Tax Rules, 2002 124

(a) that the defaulter, with the object or effect of obstructing the execution of the 1[notice] has, after the receipt of the 1[notice] in the office of the Commissioner, dishonestly transferred, concealed or removed any part of his property, or

(b) that the defaulter has, or has had since the receipt of the notice in the office of the Commissioner, the means to pay the arrears or some substantial part thereof and refuses or neglects or has refused or neglected to pay the same.

(2) Notwithstanding anything contained in sub-rule (1) a warrant for the arrest of the defaulter may be issued by the Commissioner, if he is satisfied, by affidavit or otherwise, that, with the object or effect of delaying the execution of the notice, the defaulter is likely to abscond or leave the local limits of the jurisdiction of the Commissioner.

(3) Where appearance is not made in compliance to a notice issued and served under sub-rule (1), the Commissioner may issue a warrant for the arrest of the defaulter.

(4) Every person arrested in pursuance of a warrant of arrest under sub-rule (2) or sub-rule (3) shall be brought before the Commissioner as soon as practicable and in any event within twenty-four hours of his arrest, 2[exclusive of] the time required for the journey: Provided that if the defaulter pays the amount entered in the warrant 3[of] arrest as due to the officer arresting him, such officer shall at once release him. 4[(5) The warrant of arrest of the defaulter to be issued by the Commissioner under sub-rule shall be in the following form, namely:- WARRANT FOR ARREST OF THE DEFAULTER (Rule 183(2) of the Income Tax Rules, 2002) Commissioner ___________________________ No._____________ dated _______________ To ________________________ S/O.________________________ Whereas a notice u/s 138(1) of the Income Tax Ordinance, 2001, dated was issued and served upon Mr. ___________________________ son of _______________________ (full address) _____________________ _____________________________________ for recovery of arrears. An amount due from the said defaulter is detailed as below:- Amount as per notice u/s 138(1): ________________________ Cost and charges: ________________________ Total: ________________________ Inspite of the service of the said notice, the said arrears have not been paid. Accordingly, you are hereby commanded to arrest the said defaulter and produce him before the undersigned as soon as practicable in any event within 24 hours of his arrest (exclusive of time required for the journey) unless the defaulter pays to you the amount of arrears of Rs.___________ (Rupees ____________) and Rs. (Rupees _______________________) being the cost of executing the process. 1 Substituted for “Certificate” by SRO 392(I)/2009, dated May 19, 2009. 2 Substituted for “exclusively” by SRO 392(I)/2009, dated May 19, 2009. 3 Substituted for “ii” by SRO 392(I)/2009, dated May 19, 2009. 4 Sub-rule (5) inserted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 125

You are hereby further commanded to return the warrant on or before the day of __________________ with an endorsement given on the day on which and the manner in which it has been executed or the reasons why it has not been executed. Given under my hand and seal at (city) ________________ on this _________________ day of (month) _____________________ (year) ______. Commissioner of 1[“Inland Revenue”]]

184. Hearing

When a defaulter appears before the Commissioner in compliance to a notice to show cause or is brought before the Commissioner under rule 183 the Commissioner shall give the defaulter an opportunity of showing cause why he should not be committed to the civil prison.

185. Custody pending hearing

Pending the conclusion of the inquiry, the Commissioner may order the defaulter to be detained in the custody of such officer as the Commissioner of Income Tax may think fit or release him on his furnishing security to the satisfaction of the Commissioner for his appearance when required.

186. Order of detention

(1) Upon the conclusion of the inquiry, the Commissioner may make an order for the detention of the defaulter in the civil prison and shall in that event cause him to be arrested if he is not, already under arrest: Provided that in order to give the defaulter an opportunity of satisfying the arrears, the Commissioner may, before making the order of detention leave the defaulter in the custody of the officer arresting him or of any other officer for specified period not exceeding fifteen days, or release him on his furnishing security to the satisfaction of the Commissioner for his appearance at the expiration of the specified period if the arrears are not so satisfied.

(2) When the Commissioner does not make an order of detention under sub-rule (1), he shall, if the defaulter is under arrest, direct his release. 2[(3) The warrant for detention of the defaulter in civil prison to be made by the Commissioner under this rule shall be in the following form, namely:- WARRANT FOR DETENTION OF THE DEFAULTER IN CIVIL PRISON (Rule 186(1) of the Income Tax Rules, 2002) Commissioner _________________ No. ____________ dated ___________________________ To The Officer In charge of the civil prison __________________________________ Where Mr. _____________________________ S/o. _______________________ (Full address) ___________ ____________________________________ has been brought before the undersigned under a warrant in execution of a notice under section 138(1) of the Income Tax Ordinance, 2001, for recovery of tax arrears. 1 The words “Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 2 Sub-rule (3) inserted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 126

And whereas he has not satisfied the undersigned that he is entitled to be discharged from custody and has not paid the amount due from him as specified below:- Income Tax _____________________ Penalty ______________________ Additional Tax ______________________ Cost and charges ______________________ Total ______________________ And whereas the undersigned is satisfied that the said defaulter _______________________ should be committed to the civil prison and an order to that effect has been passed by the undersigned on this _____ day of (month) ________________ (year) , You are hereby commanded and required to take and receive the said defaulter _________________________ in the civil prison and to keep him imprisoned therein for a period of __________________ or until the amount aforesaid together with further additional tax at a rate equal to ______________________ percent per annum u/s.205 of the Income Tax Ordinance, 2001 on the amount unpaid being Rs.___________ for the period commencing immediately after the date of issue of this warrant to the date on which it is paid to you on behalf of the Commissioner of income tax or until you receive an order of his release from the undersigned. The undersigned does hereby fix Rs.________________ per day (calculated under rule 198 of the Income Tax Rules, 2002) as a rate for subsistence allowance for the period of his detention. Given under my hand and seal at (name of city) ___________________ on this day of _________ (month)________ (year) _______ Commissioner of 1[“Inland Revenue”]]

187. Detention in and release from prison

(1) Every person detained 2[in] the civil prison in execution of a 3[notice] may be so detained-

(a) where the 2[notice] is for a demand of an amount exceeding twenty five thousands, for a period of six months, and

(b) in any other case for a period of six weeks: Provided that he shall be released from such detention-

(i) on the amount mentioned in the warrant for his detention being paid to the Officer-in-charge of the civil prison, or

(ii) on the request of the Commissioner who has issued the notice or of the Commissioner on any ground other than the grounds mentioned in 4[rules] 193(1) and 196: Provided further that where he is to be released on the request of the Commissioner, he shall not be released without the order of the Commissioner.

(2) A defaulter released from detention under this rule shall not, merely by 5[reason] of his release, be discharged from his liability for the arrears; but he shall liable to be re-arrested under the notice in execution of which he was detained in the civil prison. 1 The words “Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 2 Inserted by SRO 392(I)/2009, dated May 19, 2009. 3 Substituted for “certificate” by SRO 392(I)/2009, dated May 19, 2009. 4 Substituted for “rule” by SRO 392(I)/2009, dated May 19, 2009. 5 Inserted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 127

188. Release

(1) The Commissioner may order the release of a defaulter who has been arrested in execution of a notice upon being satisfied that he has disclosed the whole of his property and has placed it at the disposal of Commissioner and that he has not committed any act in bad faith.

(2) If the Commissioner has ground for believing the disclosure made 2[by] the defaulter under sub-rule (1) to have been untrue, he may order the re-arrest of the defaulter in execution of the notice but the period of his detention in the prison shall not in the aggregate exceed that authorized by rule 187.

189. Release on ground of illness

(1) At any time after a warrant for the 1[arrest] of a defaulter has been issued, the Commissioner may cancel it on ground of the serious illness of the defaulter.

(2) Where a defaulter has been arrested, the Commissioner may 2[release] him if, in the opinion of the Commissioner of Tax, he is not in a fit state of 2[mind] to be detained in the civil prison.

(3) Where a defaulter has been committed to the civil prison, he may be, 2[released] therefrom by the Commissioner on the ground of the existence of any infectious or contagious disease or on the ground of his suffering from any illness.

(4) A defaulter released under this rule may be re-arrested, but the period 2[of his] detention in the civil prison shall not in the aggregate exceed that authorized by rule 164.

190. Entry into dwelling house

For the purpose of making an arrest under these rules,-

(a) no dwelling house shall be entered after sunset and before sunrise;

(b) no outer door of a dwelling house shall be broken open unless such dwelling house or a portion thereof is in the occupancy of the defaulter and he or any other occupant of the house refuses or in any way prevents access thereto; but, when the person executing any such warrant has duly gained access to any dwelling house, he may break open the door or any room or apartment if he 2[has] reason to believe that the defaulter is likely to be found there; and

(c) no room, which is in the actual occupancy of a woman who, according to the custom of the country, does not appear in public shall be entered into unless the officer authorized to make the arrest has given notice to her that she is at liberty to withdraw and has given her reasonable time and facility for withdrawing.

191. Prohibition against arrest of woman or minor, etc

The Commissioner shall not order the arrest or detention in the civil prison of-

(a) a woman, or

(b) any person who, in his opinion, is a minor or of unsound mind. 1 Inserted by SRO 392(I)/2009, dated May 19, 2009. 2 Substituted for “bas” by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 128

PART - VI MISCELLANEOUS

192. Continuance of Notice

No notice shall cease to be in force by reason of the death of the defaulter.

193. Procedure on death of defaulter

If, at any time after the issue of a Notice 1[by] the Commissioner, the defaulter dies, the proceedings under these rules (except arrest and detention) may be continued against the legal representative of the defaulter who shall be liable to pay out of the estate of the deceased person to the extent to which the estate is capable of meeting the arrears demand and the provisions of these rules shall 2[ ] apply as if the legal representative were the defaulter.

194. Appeal

3[(1) Where -

(a) the Commissioner passes any order under Chapter XVI, the appeal against such order shall lie to the 4[“Chief Commissioner”], Regional Tax Office or Large Taxpayer Unit, as the case may be; and

(b) any 5[”officer of Inland Revenue”] or authority to whom powers have been delegated passes any order under the said Chapter, an appeal against such order shall lie to the Commissioner,]

(2) Every appeal under this rule shall be presented within thirty days from the date of the order appealed against.

(3) The appellate authority (hereinafter referred to as “the authority”) after hearing the party or his representative may admit the appeal for hearing or reject it summarily if he is of the opinion that the appeal is without any substance.

(4) Where the appeal is admitted for hearing under sub-rule (3), the authority hearing appeal shall fix a date for hearing 6[for] which notice shall be given to the 7[concerned parties].

(5) If, on the date of hearing, no step is taken on behalf of either party, the authority hearing appeal may forthwith take up the appeal for ex-parte disposal or dismiss it for default, as the case may be: Provided that the appeal may be adjourned to some other date for hearing on sufficient cause being shown by either party by an application in that behalf. 8(6) After hearing both the parties or their representatives or when the appeal is taken up for exparte order, the appellate authority may make an order, to confirm, modify, reverse or remand the case for fresh decision in the light of directions that the appellate authority may think appropriate to give, being not inconsistent with these rules.]

(7) Pending the decision of any appeal, execution of the 9[notice] may be stayed if the 1 Substituted for “to” by SRO 392(I)/2009, dated May 19, 2009. 2 Word “be” omitted by SRO 392(I)/2009, dated May 19, 2009. 3 Sub-rule (1) substituted by SRO 392(I)/2009, dated May 19, 2009. 4 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 5 The words “taxation officer” substituted by SRO 1218(I)/2015 dated 08.12.2015. 6 Substituted for “of” by SRO 392(I)/2009, dated May 19, 2009. 7 Substituted for “other party” by SRO 392(I)/2009, dated May 19, 2009. 8 Sub-rule (6) substituted by SRO 392(I)/2009, dated May 19, 2009. 9 Substituted for “Certificate” by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 129

appellate authority so directs, but not otherwise.

195. Review

Any order passed under these rules may, after notice to all persons interested. be reviewed by the officer who made the order, or by his successor in office, on account of any mistake apparent from the record.

196. Recovery from surety

Where any person has under these rules 1[become] surety for the amount due by the defaulter, he may be proceeded against 3[under] these rules as if he were the defaulter.

197. Receipt to be given

If any amount is received by any officer or other person in pursuance of these rules, he shall issue a receipt of the amount so received.

198. Subsistence allowance

2[ ] When a defaulter is arrested or; detained in the civil prison, the sum payable for the subsistence of the defaulter 3[during detention or] arrest until he is released shall be borne by the Commissioner. 199. The sum under rule 198, shall be calculated on the scale fixed by the Provincial Government for the subsistence of judgement-debtors arrested in execution 4[decree] of a civil court.

200. Delivery of property in occupancy of defaulter

Where the immovable property sold is in the occupancy of the defaulter or of some person on his 4[behalf], or of some person claiming under a title created by the defaulter subsequently to the attachment of such property and a 5[notice] in respect thereof has been made, the Commissioner shall, on the application of the purchaser, order delivery to be made by putting such purchaser or any person whom he may appoint to receive delivery on his behalf in possession of the property and if be by removing any person who refuses to vacate the same.

201. Delivery of property in occupancy of tenant

Where the immovable property sold is in the occupancy of a tenant or other person entitled to occupy the same and a certificate in respect thereof has been granted, the Commissioner shall, on the application of the purchaser, order delivery to be made by affixing a copy of the certificate of sale at some conspicuous place on the property, and proclaiming to the occupant by beat of drum or other customary mode, at some convenient place that the interest of the defaulter has been transferred to the purchaser.

202. Resistance or obstruction to possession of immovable property

(1) Where the holder of a certificate for the possession of immovable property or the purchaser of any such property sold in execution of a 6[notice is resisted or] obstructed 1 Substituted for “e” and “r” respectively by SRO 392(I)/2009, dated May 19, 2009. 2 Bracket and figure “(1)” omitted by SRO 392(I)/2009, dated May 19, 2009. 3 Substituted for “from the definition or of” by SRO 392(I)/2009, dated May 19, 2009. 4 Inserted by SRO 392(I)/2009, dated May 19, 2009. 5 Substituted for “Certificate” by SRO 392(I)/2009, dated May 19, 2009. 6 Substituted for “Certificate is resisted” by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 130

by any person in obtaining possession of the property, he may make an application to the Commissioner complaining of such resistance or obstruction.

(2) The Commissioner shall fix a day for investigating the matter and shall summon the party against whom the application is made to appear and answer the same.

203. Resistance or obstruction by defaulter

Where the Commissioner is satisfied that the resistance or obstruction was occasioned without any just cause by the defaulter or by some other person at his instigation, he shall direct that the applicant be put into possession of the property, and where the applicant is still resisted or obstructed in obtaining possession, the Commissioner may also, at the instance of the applicant, order the defaulter, or any person acting at his instigation, to be detained in the civil prison for a term which may extend to thirty days.

204. Resistance or obstruction by bona fide Claimant

Where the Commissioner is satisfied that the resistance or obstruction was occasioned by any person (other than the defaulter) claiming in good faith to be in possession of the property on his own account 1[or] some person other than the defaulter, the Commissioner shall make an order dismissing the application.

205. Dispossession by certificate holder or purchaser

(1) Where any person other than defaulter is dispossessed of immovable property by the holder of a certificate for the possession of such property or where on such property has been sold in execution of a Certificate, by the purchaser thereof, he may make an application to the Commissioner complaining of such dispossession.

(2) The Commissioner shall fix a day for investigating the matter and shall summon the party against whom the application is made to appear and answer the same.

206. Bona fide claimant to be restored to possession

Where the Commissioner is satisfied that the applicant was in possession of the property on his own account or on account of some person other than defaulter, he shall direct that the applicant be put into possession of the property.

207. Rules not applicable to transferee lite pendente

Nothing in rules 211 and 205 shall apply to resistance or obstruction in execution of a certificate for the possession of immovable property by a person to whom the defaulter has transferred the property after the institution of the proceedings in which the order was passed or to the dispossession of any such person.

208. Delivery of movable property, debts and shares

(1) Where the property sold is movable property of which actual seizure has been made, it shall be delivered to the purchaser.

(2) Where the property sold is movable property in the possession of some person other than the defaulter, the delivery thereof to the purchaser shall be made by giving notice to the person in possession prohibiting him from delivering possession of the property to any person except the purchaser. 1 Substituted for “of” by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 131

(3) Where the property sold is a debt not secured by a negotiable instrument or is a share in a corporation, the delivery thereof shall be made by a written order of the Commissioner prohibiting the creditor from receiving the debt or any, 1[interest] thereon, and the debtor from making payment thereof to any person except the purchaser, or prohibiting the person on in whose name the share may be standing from making any transfer of the share to any person except the 2[purchaser], or receiving payment of any dividend or interest thereon, and the manager, secretary, or other proper officer of the corporation from permitting any such transfer or making any such payment to any person except the purchaser.

209. Execution of documents and endorsement of negotiable instruments

Where any endorsement or execution of document is required to transfer a negotiable instrument or any share to a purchaser under these rules, such document shall be executed or endorsement shall be made by the Commissioner.

210. Forms

Any notice, warrant of attachment, warrant of arrest, sale proclamation, sale certificate or order to be issued under these rules, shall be issued in such form as the Board may from time to time direct, and any defect or deficiency in form unless it adversely effects the interest of the parties, shall not vitiate the proceedings taken or initiated. 1 Substituted for “rest” by SRO 392(I)/2009, dated May 19, 2009. 2 Substituted for “chaser” by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 132

1[CHAPTER - XVII NON-PROFIT ORGANIZATIONS

211. Procedure for the approval of a non-profit organization

(1) An institution, fund, trust, society or any other non-profit organization (hereinafter referred to in this Chapter as organization) established in Pakistan for religious, educational, charitable, welfare or development purposes or for the promotion of an amateur sport requiring approval of the Commissioner under clause (36) of section 2 of the Ordinance, shall make an application to the Commissioner in the following form, namely:- APPLICATION FOR APPROVAL FOR THE PURPOSES OF CLAUSE (36) OF SECTION 2 OF THE INCOME TAX ORDINANCE, 2001 To, The Commissioner of 2[“Inland Revenue”], ______________ Zone, ______________ (City). 1. With reference to clause (36) of section 2 of the Income Tax Ordinance, 2001 (XLIX of 2001), I the undersigned, hereby apply, on behalf of ________________________ (name of the organization) for its approval for the purposes of the said clause for the tax year ending on __________________. 2. Necessary particulars are set out below, and in the schedule to this application. 3. The following documents required under sub-rule (2) of rule 211 of the Income Tax Rules, 2002, are enclosed.

(i) ____________________________________________________

(ii) ____________________________________________________

(iii) ____________________________________________________

(iv) ____________________________________________________

(v) ____________________________________________________ Name (in block letters). _______________________ Designation _______________________________ Application must be signed either by the President or the Secretary of the organization or by a Trustee, of the trust. SCHEDULE PARTICULARS 1. Name of the organization (in block letters) _. 2. Full address of the organization (in block letters) 3. Date of registration of the organization . 1 Chapter XVII substituted by Notification No. SRO 541(I)/2003, dated June 13, 2003. 2 The words “Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 133

4. Its aims and objects. (a) ____________________________________________________

(b) ____________________________________________________

(c) ____________________________________________________

(d) ____________________________________________________ 5. Whether the organization has been registered under 1[the Companies Ordinance, 1984,] the Societies Registration Act, 1860 (XXI of 1860), or the Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961 (XLVI of 1961), or any other law in substitution thereof relating to the registration of welfare organization or established in pursuance of a Trust Deed. Please give/state the law and the number and date of registration ________________. 6. Whether constitution, memorandum and articles of association, trust deed, rules and regulations or bye-laws, as the case may be, conform(s) to the provisions of sub-rule

(1) of rule 213. If so, please give the number of Article/ Clause/ Rule etc., for each provision. 7. Whether the organization ensures for the benefit of the general public or a particular community or class of persons only (give full details). 8. The number of members /trustees of the organization on the date of application. 9. Accounting year of the organization commences on ______________________ and ends on ______________________. 10. The following books of accounts are being regularly maintained by the organization and are open for inspection without any hindrance to the general public.

(i) ____________________________________________________

(ii) ____________________________________________________

(iii) ____________________________________________________ Name (in block letters). _______________________ Designation _______________________________

(2) An application under sub-rule (1) shall be accompanied by -

(a) a duly attested copy of the constitution, memorandum and articles of association, rules and regulations or bye-laws, as the case may be, of the organization specifying the aims and objects for which it is established;

(b) a certified copy of the registered trust deed, in case of a Trust;

(c) a certified copy of certificate of registration in the case of an organization registered under 1[the Companies Ordinance, 1984,] the Societies Registration Act, 1860 (XXI of 1860), the Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961 (XLVI of 1961), or under any other law in substitution thereof relating to the registration of welfare organization as applicable; 1 Words etc. inserted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 134

(d) duly attested copies of the balance sheet and of revenue accounts of the organization as audited by a “qualified accountant” for the year immediately preceding the year in which the application is made;

(e) the names and addresses of the promoters, directors, trustees, president, secretary, treasurer, manager and other office bearers, as the case may be, of the organization, and indicating clearly their family relationships, if any, with each other;

(f) for the purposes of clause (d), “qualified accountant” means,-

(i) a retired audit, accounts, treasury or taxation officer of the Government not below BPS-17 or a bank manager, where the annual receipts of the organization do not exceed Rs.0.5 million; 1[ ] 2[(iii) in other cases, a Chartered Accountant as defined under the Chartered accountants Ordinance, 1960 (x of 1960) or a Cost and Management accountant as defined under the Cost and Management Accountants Act, 1966 (XIV of 1966) or a firm of Chartered Accountants as defined under the Chartered Accountants Ordinance, 1960 (X of 1960) or a firm of Cost and Management Accountants as defined under the Cost and Management Accountants Act, 1966 (XIV of 1966);]

(g) a detailed report with regard to the performance of the organization for achieving its aims and objects during the 3[preceding financial year] preceding the date on which application is made, duly evaluated and certified by an independent certification agency approved by an authority designated by the Government of Pakistan for this purpose or, till that authority is established, under arrangements made by the Federal Board of Revenue 4[ 5[ 6[“Commissioner”] ] 7[:] 8[Provided that till the approval of two such agencies, the applicant organization shall have an option to get its performance appraised by 9[10[“Chief Commissioner”], Regional Tax Office or Large Taxpayers Unit]: Provided further that 11[12[“Chief Commissioner”] or Officers of Regional Tax Office or Large Taxpayer Unit] shall apply the same parameters on applicant organizations for the purpose of aforesaid evaluation as are approved by the FBR to be applied by the certification agency.]

212. Decision on application

(1) On receipt of an application under rule 211, the Commissioner may make such inquiries or call for such further information as the Commissioner may deem necessary and after completion of formalities may approve the organization for the purpose of clause (36) of section 2 of the Ordinance.

(2) An approval granted under sub-rule (1) shall be - 1 Sub-clause (ii) as follows omitted by SRO 774(I)/2006, dated July 29, 2006. 2 Sub-clause (iii) as follows substituted by SRO 774(I)/2006, dated July 29, 2006. 3 Substituted for “three financial years” by SRO No. 608(I)/2005, dated June 13, 2005. 4 Inserted by SRO No. 608(I)/2005, dated June 13, 2005. 5 Inserted by SRO No. 608(I)/2005, dated June 13, 2005. 6 The words “or Commissioner of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 7 Substituted for full stop by Notification No. SRO 1015(I)/2003, dated November 05, 2003. 8 Provisos inserted by Notification No. SRO 1015(I)/2003, dated November 05, 2003. 9 Substituted for “CBR” by SRO 707(I)/2007, dated July 14, 2007. 10 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 11 Substituted for “CBR or its officer” by SRO 707(I)/2007, dated July 14, 2007. 12 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 135

(a) notified in the official Gazette; 1[ and]

(b) subject to such conditions as the Commissioner may specify in the approval; 2[ ] 3[ ]

213. Refusal to grant approval

(1) The approval shall not be granted if the constitution, memorandum and articles of association, trust deed, rules and regulations or bye-laws, as the case may be, specifying the aims and objects of the organization do(es) not provide-

(a) for the audit of the annual accounts of the organization every year by a qualified accountant as specified in clause (f) of sub-rule (2) of rule 211;

(b) where the organization is registered under 4[the Companies Ordinance, 1984,] the Societies Registration Act, 1860 (XXI of 1860), the Voluntary Social Welfare (Registration Control) Ordinance, 1961 (XLVI of 1961), or any other law in substitution thereof relating to the registration of welfare organization, for the quorum of a meeting of the members of the body in which the control of the affairs of the organization vests, being not less than four or one-third of the total number of the members of such body, whichever is greater;

(c) where the organization is a Trust as defined in the Trust Act, 1882 (II of 1882), for the quorum of a meeting of the members of the body in which the control of the affairs of the trust vests, being not less than three or one-third of the total number of the members of such a body, whichever is greater;

(d) for the transfer of its assets, in the event of its dissolution, after meeting all liabilities, if any, to another organization which is an approved non-profit organization, within three months of the dissolution under intimation to the Commissioner;

(e) for the utilization of its money, property or income or any part thereof solely for promoting its objects;

(f) for prohibiting any portion of its money, property or income being paid or transferred directly by way of dividend, bonus or profit to any of its members or the relative or relatives of a member or members;

(g) for the maintenance of accounts of the organization being kept in a scheduled bank or in a post office or national savings organization, National Bank of Pakistan or nationalized commercial banks;

(h) for prohibiting the making of any changes in the constitution, memorandum and articles of association, trust deed, rules and regulations or bye-laws, as the case may be, without the prior approval of the Commissioner: Provided this clause will have effect only in cases where the approval is granted; and 5[(i) for restricting the surpluses or monies validly set apart, excluding restricted funds, upto twenty-five percent of the total income of the year: 1 Substituted for “semi colon” by Notification No. SRO 667(I)/2006, dated June 27, 2006. 2 Word omitted for “and” by Notification No. SRO 667(I)/2006, dated June 27, 2006. 3 Clause “(c)” omitted by Notification No. SRO 667(I)/2006, dated June 27, 2006. 4 Words etc. inserted by SRO 392(I)/2009, dated May 19, 2009. 5 Sub-clause (i) as follows substituted by SRO 774(I)/2006, dated July 29, 2006. Income Tax Rules, 2002 136

Provided that such surpluses or monies set apart are invested in Government securities, 1[National Saving Schemes, issued by the Central Directorate of National Savings] NIT units, a collective investment scheme authorized or registered under the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003, mutual fund, a real estate investment trust approved and authorized under the Real Estate Investment Trust Rules, 2006, or scheduled banks: Explanation: For the purpose of this rule, “restricted funds” mean any fund received by the organization but could not be spent and treated as revenue during year due to any obligation placed by the donor.]

(2) The Commissioner may refuse to approve the organization if the Commissioner is satisfied that the organization-

(a) has been or is being used for personal gain of any particular person or a group of persons;

(b) has been propagating the view of a particular political party or a religious sect;

(c) has been or is being managed in a manner calculated to personally benefit its members or their families; 2[ ]

(d) has not been or will not be able to achieve its declared aims and objects in view of its set up, administration or otherwise as evaluated and certified by an independent certification agency 3[or as evaluated by 4[“Chief Commissioner”], Regional Tax Office or Large Taxpayer Unit under clause (g) of sub-rule (2) of rule 211; or ] 5[(e) has made expenditure on salaries exceeding 50% of the total receipts excluding restricted donations or funds received during a tax year.]

(3) The Commissioner shall notify the applicant, in writing, the decision to refuse the approval.

(4) The notice referred to in sub-rule (3) shall include a statement of reasons for the refusal.

214. Validity of the approval

The approval granted under rule 212 will remain in force for the subsequent years unless withdrawn under rule 217.]

215. Finalization of applications

The Commissioner shall finalize applications under rules 7[211] within two months of their receipt. 8[ ]

217. Power to withdraw approval

(1) The Commissioner may, at any time, withdraw approval granted under rule 212, if he is 1 Words inserted by SRO 392(I)/2009, dated May 19, 2009. 2 Word “or” omitted by SRO 392(I)/2009 dated May 19, 2009. 3 Substituted for full stop and words inserted by SRO 392(I)/2009, dated July 19, 2009. 4 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 5 Clause “(e)” inserted by SRO 392(I)/2009, dated May 19, 2009. 6 Rule 214 substituted by SRO 667(I)/2006, dated June 27, 2006. 7 Substituted for “rules 211 and 214” by SRO 392(I)/2009, dated May 19, 2009. 8 Rule 216 omitted by SRO 667(I)/2006, dated June 27, 2006. 9 Rule 217 substituted by SRO 667(I)/2006, dated June 27, 2006. Income Tax Rules, 2002 137

satisfied that-

(a) the constitution, memorandum and articles of association, trust deed, rules and regulations or bye-laws, as the case may be, specifying the aims and objects of the organization do(es) not provide for prohibiting the making of any changes in the constitution, memorandum and articles of association, trust deed, rules, regulations and bye-laws without prior approval of the Commissioner;

(b) the organization has-

(i) been or is being used for personal gain of any particular person or a group of persons as specified in clause (a) of sub-rule (2) of rule 213;

(ii) been propagating the view of a particular political party or a religious sect as specified in clause (b) of sub-rule (2) of rule 213;

(iii) been or is being managed in a manner calculated to personally benefit its members or their families as specified in clause (c) of sub-rule (2) of rule 213; or

(iv) not been or will not be able to achieve its declared aims and objects in view of its set up, administration or otherwise as evaluated and certified by an independent certification agency as specified in clause (d) of sub-rule (2) of rule 213;

(v) failed to give valid reasons for setting apart, or not utilizing, or accumulating surpluses, excluding 1[restricted] funds, in excess of twenty five percent of the income for the year;

(vi) failed to file the return of income supported with following documents;

(a) the statement of audited balance sheet and statement of accounts as mentioned in clause (d) of sub-rule (2) of rule 211;

(b) statement showing names and addresses of the persons from whom donations, contributions, subscriptions etc exceeding Rs.5,000/- have been received during the tax year;

(c) statement showing the names and addresses of donees and beneficiaries etc to whom payments, services etc exceeding Rs.5,000/- have been made during the tax year; and

(d) statement showing the money set apart or kept un-utilized with reasons thereof;

(vii) failed to provide a detailed performance evaluation report in terms of clause (g) of sub-rule (2) of rule 211, after every three years2[:] 4[Provided that where such detailed performance evaluation report is not submitted on or before 30th of September following every three tax years, the Commissioner shall issue a show cause notice for withdrawal of approval to the concerned organization as required under sub-rule (2)] 3[(viii) failed to file statements of deduction of income tax under section 165 read with rule 44.]

(2) Approval shall not be withdrawn under sub-rule (1) unless the organization has had an opportunity to show cause against the action proposed to be taken. 1 Substituted for “unrestricted” by SRO 21(I)/2007, dated January 05, 2007. 2 Substituted for full stop and proviso inserted by SRO 392(I)/2009, dated May 19, 2009. 3 Clause “(vii)” inserted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 138

(3) Where the Commissioner decides to withdraw approval under sub-rule (1), he shall intimate the organization, in writing, of the decision including a statement of reasons for the decision.]

218. Appeal against a decision of Commissioner

1[(1)] An organization dissatisfied with -

(a) a decision to refuse an application made under rule 211 or 2[ ]; or

(b) a decision to withdraw an approval under rule 217, may lodge an appeal 3[within sixty days of the receipt of order from the Commissioner] in the following form with the 4[5[“Chief Commissioner”], Regional Tax Office or Large Taxpayer Unit] concerned, namely:- GROUNDS OF APPEAL

(i) ____________________________________________________

(ii) ____________________________________________________

(iii) ____________________________________________________

(iv) ____________________________________________________

(v) ____________________________________________________ We/I __________________________________________ the appellant(s) named in the above appeal do declare that what is stated therein is true to the best of our/my information and belief. Date _____________________________________ Name. ____________________________________ Address ___________________________________ PARTICULARS 1. Name of the organization (in block letters). 2. Full address of the organization (in block letters).

219. Organization granted approval before commencement of these rules

The approval granted prior to the commencement of these rules to an organization shall be deemed to have been withdrawn unless an application in the manner laid down in rule 214 is made on behalf of such organization for4[and upto calendar year 2003 by the 30th day of June 2004].

220. Relaxation of requirements or conditions

The Commissioner may relax or modify any of the requirements or conditions of this chapter, in any individual case, if he is satisfied that the requirements or conditions could not be fulfilled by the applicant for reasonable cause.

220A. Procedure for approval for purpose of “clause (c) of sub section (2) of section 100C of the Ordinance”

(1) An organization established in Pakistan requiring the approval of the 7[ 8[“Chief 1 Words etc. inserted by SRO 392(I)/2009, dated May 19, 2009. 2 Sub-rule (2) inserted by SRO 392(I)/2009, dated May 19, 2009. 3 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 4 SRO 1015(I)/2003, dated November 05, 2003, substitutes “calendar year 2002 within the time specified before June 2003” while these words etc. appeared in the rule 219 before substitution of Chapter XVIII by SRO 541(I)/2003, dated June 13, 2003. Moreover the proposed words “and upto calendar year 2003 by the 30th day of June 2014” appear to be an intended insertion instead of substitution and has been so dealt with here. 5 Words “of a non-profit organization” omitted by SRO 595(I)/2005, dated June 02, 2005. 6 The expression “sub-clause (3) of clause (58) of Part I of the Second Schedule” substituted by SRO 1218(I)/2015 dated 08.12.2015. 7 Substituted for “Federal Board of Revenue” by SRO 880(I)/2006, dated August 25, 2006. 8 The words “Regional Commissioner of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015.Substituted Income Tax Rules, 2002 140

Commissioner”] ] under 1[ clause (c) of sub section (2) of section 100C of the Ordinance], shall;

(a) make an application to the 2[ 3[“Chief Commissioner”] ] in Form-I annexed to this rule;

(b) the application shall be accompanied by-

(i) a duly attested copy of the constitution, memorandum and articles of association, rules and regulations or bye-laws, as the case may be, of the organization specifying the aims and objects for which organization is established;

(ii) a certified copy of the registered trust deed, in case of a Trust;

(iii) a certified copy of the certificate of registration in the case of an organization registered under 4[Companies Ordinance, 1984,] the Societies Registration Act, 1860 (XXI of 1860), or the Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961 (XLVI of 1961), or under any other law in substitution thereof relating to the registration of welfare organizations as applicable;

(iv) duly attested copies of balance sheets and of revenue accounts of organization as audited by a “qualified accountant” for the three years immediately preceding the tax year in which the application is made;

(v) the names and addresses of the promoters, directors, trustees, president, secretary, treasurer, manager and other office bearers, as the case may be, of the organization and indicating clearly their family relationships, if any, with each other; and

(vi) a detailed report with regard to the performance of the organization, for achieving its aims and objects during the three financial years immediately preceding the date of the application duly evaluated and certified by an independent certification agency approved 5[and appointed by the 6Federal Board of Revenue]. 7[Provided that the 8[9[“Chief Commissioner”], Regional Tax Office or Large Taxpayers Unit] shall also receive applications for performance appraisal and certification of applicant organizations till at least two such agencies have been appointed: Provided further that 10[11[“Chief Commissioner”], Regional Tax Office or Large Taxpayers Unit] shall apply the same parameters on applicant organizations for the purpose of aforesaid evaluation as are approved by the FBR to be applied by the certification agency.]

(2) (a) On receipt of an application for registration under this rule, the 12[1[“Chief 1 The expression “sub-clause (3) of clause (58) of Part I of the Second Schedule” substituted by SRO 1218(I)/2015 dated 08.12.2015 2 Substituted for “Board” by SRO 880(I)/2006, dated August 25, 2006. 3 The words “Regional Commissioner of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 4 Words etc. inserted by SRO 392(I)/2009, dated May 19, 2009. 5 Substituted for “by an authority designated by the Government of Pakistan for this purpose or till that authority is established, under arrangements made by the Federal Board of Revenue” by SRO 1015(I)/2003, dated November 05, 2003. The words “Central Board of Revenue” substituted by the Finance Act, 2007 7 Provisos inserted by Notification No. SRO 1015(I)/2003, dated November 05, 2003. 8 Substituted for “CBR” by SRO 707(I)/2007, dated July 14, 2007. 9 The words “Director-General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 10 Substituted for “CBR or its officer” by SRO 707(I)/2007, dated July 14, 2007. 11 The words “Director-General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 12 Substituted for “Federal Board of Revenue” by SRO 880(I)/2006, dated August 25, 2006. Income Tax Rules, 2002 141

Commissioner”] ], subject to the requirements and conditions specified in sub-rule

(3) and after such inquiry as it may deem necessary, grant approval to the organization if-

(i) the organization has been formed for the purpose of establishing hospitals or providing education or for community welfare or development;

(ii) it has operated and functioned anywhere in Pakistan, for a period of not less than three years and has complied with minimum acceptable standards of internal governance, accountability, transparency and efficiency prescribed by any law for the time being in force;

(iii) its area of operation is wholly within Pakistan; and

(iv) its books of accounts are maintained regularly and in accordance with the generally accepted accounting principles and satisfactory arrangements exist for their inspection by interested members of the public-.

(b) The approval shall be notified in the official Gazette. 2[(c) The approval granted under rule 220A (2) will remain in force for subsequent years unless withdrawn under sub-rule (7) of rule 220A.]

(d) For the purposes of this rule, “qualified accountant” has the same meaning as assigned to it in clause (f) of sub-rule (2) of rule 211.

(3) Approval shall not be granted to an organization if the 3[ 3[“Chief Commissioner”] ] is satisfied that-

(a) any of the requirements or conditions specified in sub-rules (1) and (2) has not been fulfilled; or

(b) the organization has been or is being used or is likely to be used for personal gains of any particular person or a group of persons; or

(c) the organization has been or is likely to be used for propagating the views of a particular political party or a religious sect; or

(d) the organization has not been or will not be able to achieve its declared aims and objects in view of its set up, administration or otherwise as evaluated and certified by an independent certification agency; or

(e) the constitution, memorandum and articles of association, trust deed, rules and regulations or bye-laws, as the case may be, specifying the aims and objects of the organization do(es) not provide-

(i) for audit of the annual accounts of the organization, every year by a “qualified accountant”;

(ii) for the transfer of its assets, in the event of its dissolution, after meeting all liabilities, if any, to an organization approved under this rule or rule 212 within three months of the dissolution under intimation to the 4[ 5[“Chief Commissioner”] ]

(iii) for the regular maintenance of books of accounts in accordance with the generally accepted accounting principles and for their inspection by the 1 The words “Regional Commissioner of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 2 Clause “(c)” substituted by SRO 880(I)/2006, dated August 25, 2006. 3 The words “Regional Commissioner of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 4 Substituted for “Federal Board of Revenue” by SRO 880(I)/2006, dated August 25, 2006. 5 The words “Regional Commissioner of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 142

interested members of the public, without any hindrance, at all reasonable times;

(iv) for the utilization of its money, property or income or any part thereof solely for promoting the objects specified in sub-clause (i) of clause (a) of sub-rule (2);

(v) for the maintenance of accounts of the organization being kept in a scheduled bank or in a post office or national savings organization, National Bank of Pakistan or nationalized commercial banks;

(vi) for prohibiting the making of any changes in the constitution, memorandum and articles of association, trust deed, rules and regulations or bye-laws, as the case may be, without the prior approval of the 1[ 2[“Chief Commissioner”] ]; and 3[(vii) for restricting the surpluses or monies validly set apart, excluding restricted funds, up-to twenty-five percent of the total income of the year: Provided that such surpluses or monies validly set apart are invested in Government securities, 4[National Saving Schemes issued by the Central Directorate of National Savings,] NIT units, a collective investment scheme authorized or registered under the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003, mutual fund, a real estate investment trust approved and authorized under the Real Estate Investment Trust Rules, 2006, or scheduled banks: Explanation: For the purpose of this rule, “restricted funds” mean any fund received by the organization but could not be spent and treated as revenue during year due to any obligation placed by the donor.] 5[(4) The 6[“Chief Commissioner”] shall make a decision on the application of the organization within two months of its receipt.] 7[ ] 8[(7) Power to withdraw approval.- (1). The 9[“Chief Commissioner”] may, at any time, withdraw approval granted under rule 220A(2), if he is satisfied that- (a). the constitution, memorandum and articles of association, trust deed, rules and regulations or bye-laws, as the case may be, specifying the aims and objects of the organization do not provide for prohibiting the making of any changes in the constitution, memorandum and articles of association, trust deed, rules, regulations and bye-laws without prior approval of the 10[“Chief Commissioner”];

(b) the organization has- (i). been or is being used for personal gain of any particular person 1 Substituted for “Federal Board of Revenue” by SRO 880(I)/2006, dated August 25, 2006. 2 The words “Regional Commissioner of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 3 Sub-clause (vii) substituted by SRO 880(I)/2006, dated August 25, 2006. 4 Words etc. inserted by SRO 392(I)/2009, dated May 19, 2009. 5 Sub-rule (4) inserted by SRO 392(I)/2009, dated May 19, 2009. 6 The words “Regional Commissioner of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 7 Sub-rules 4, 5 and 6 omitted by SRO 880(I)/2006, dated August 25, 2006. 8 Sub-rule 7 substituted by SRO 880(I)/2206, dated August 25, 2006. 9 The words “Regional Commissioner” substituted by SRO 1218(I)/2015 dated 08.12.2015. 10 The words “Regional Commissioner” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 143

or a group of persons; (ii). been propagating the view of a particular political party or a religious sect; (iii). been or is being managed in a manner calculated to personally benefit its members or their families; or (iv). has not been, or will not be, able to achieve its declared aims and objects in view of its set up, administration or otherwise as evaluated and certified by an independent certification agency; (v). failed to give valid reasons for setting apart, or not utilizing, or accumulating surpluses, excluding 1[restricted] funds, in excess of twenty five percent of the income for the year; (vi). failed to file the return of income supported with the following documents namely:- (a). the statement of audited balance sheet and statement of accounts; (b). statement showing names and addresses of the persons from whom donations, contributions, subscriptions etc exceeding five thousand rupees have been received during the tax year; (c). statement showing the names and addresses of donees and beneficiaries etc to whom payments, services etc exceeding five thousand have been made during the tax year; and (d). statement showing the money set apart or kept un- utilized with reasons thereof; and (e). a detailed performance evaluation report in terms of sub- clause (vi) of clause (b) of sub-rule (1) of rule 220A, after every three years; 2[Provided that where such detailed performance evaluation report is not submitted on or before the 30th of September following every three Tax Years, 3[“Chief Commissioner”] shall issue a show cause notice for withdrawal of approval to the concerned organization as required under para (2) of the sub- rule;] 4[vii) failed to file statements of deduction of income tax under section 165 of the Income Tax Ordinance, 2001 read with rule 44.] (2). approval shall not be withdrawn under 5[para (1) of sub-rule (7)] unless the organization has had an opportunity to show cause against the action proposed to be taken; and. (3). where the 6[“Chief Commissioner”] decides to withdraw an approval under 1[para 1 Substituted for “unrestricted” by SRO 21(I)/2007, dated January 05, 2007. 2 Proviso inserted by SRO 392(I)/2009 dated May 19, 2009. 3 The words “Regional Commissioner of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 4 Clause (vii) inserted by SRO 392(I)/2009, dated May 19, 2009. 5 Substituted for “sub-rule (1)” by SRO 392(I)/2009, dated May 19, 2009. 6 The words “Regional Commissioner” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 144

(1) of sub-rule (7)] he shall intimate the organization, in writing, of the decision including a statement of reasons for the decision.] 2[ ] (9). The 3[ 4[“Chief Commissioner”] ] may relax or modify any of the requirement(s) or condition(s) of this rule in any individual case, if it is satisfied that the requirement(s) or condition(s) could not be fulfilled by the applicant for reasonable cause. 5[ ] Form-1 [See rule 220A (1)(a)] Application for Approval under 6[“clause (c) of sub section (2) of section 100C of”] the Income Tax Ordinance, 2001 To, 7[The 8[“Chief Commissioner of Inland Revenue”] ] With reference to 9[“clause (c) of sub section (2) of section 100C of”] the Income Tax Ordinance, 2001 (XLIX of 2001), I, the undersigned, hereby apply, on behalf of _________________ ________________________________ (name of the organization) for its approval for the purposes of the said clause for the tax year ending on ______________________. 2. Necessary particulars are set out below, and in the schedule to this application. 3. The following documents required under clause (b) of sub-rule 1 of Rule 220A are enclosed.

(i) (ii)

(iii) (iv)

(v) Name (in block letters) _______________________ Designation ________________________________ Application must be signed either by the President or the Secretary of the organization or 1 Substituted for “sub-rule (1)” by SRO 392(I)/2009, dated May 19, 2009. 2 Sub-rule 8 omitted by SRO 880(I)/2006, dated August 25, 2006. 3 Substituted for “Board” by SRO 880(I)/2006, dated August 25, 2006. 4 The words “Regional Commissioner of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 5 Sub-rule (10) omitted by SRO1218(I)/2015 dated 08.12.2015. The omitted sub-rule read as under: “(10) The approval granted prior to the commencement of these rules to an organization shall be deemed to have been withdrawn unless an application in the manner laid down in sub-rule (4) is made on behalf of such organization for calendar year 2003 by the 30th June, 2004.” 6 The expression “clause (58) of Second Schedule to” omitted by SRO 1218(I)/2015 dated 08.12.2015. 7 Substituted for “The Secretary, Federal Board of Revenue, Islamabad” by SRO 880(I)/2006, dated August 25, 2006. 8 The words “Regional Commissioner of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 9 The words “clause (58) of the Second Schedule to” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 145

by a Trustee of the Trust. SCHEDULE Particulars 1. Name of the Organization (in block letters) . 2. Full address of the organization (in block letters) . 3. Date of registration of the organization . 4. Its aims and objects

(a) ____________________________________________________

(b) ____________________________________________________

(c) ____________________________________________________ 5. Where the organization has been registered under 1[the Companies Ordinance, 1984,] the Societies Registration Act, 1860 (XXI of 1860), or the Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961 (XLVI of 1961), or any other law or established in pursuance of a Trust Deed. Please give/ state the law, the number and date of Registration ___________________. 6. Whether the constitution, memorandum and articles of association, trust deed, rules and regulations or bye-laws, conforms to the provisions of sub-rules (2) and

(3) of rule 220A. If so, please give the number of article/ clause/ rule for each provision. 7. Whether the organization ensures for the benefit of the general public or a particular community or class of persons only (give full details). 8. The number of members/ trustees of the organization on the date of application. 9. Accounting year of the organization commences on ___________________ and ends on ___________________. 10. The following books of accounts are being regularly maintained by the institution and are open for inspection without any hindrance to the general public.

(i) (ii)

(iii) Name (in block letters) _______________________ Designation ________________________________ [ ] 1 Words etc. inserted by SRO 392(I)/2009, dated May 19, 2009. 2 Form II omitted by SRO 880(I)/2006, dated August 25, 2006. Income Tax Rules, 2002 146

220B. Approval and appointment of certification agencies

(1) Whereas rule 211 to 220A, both inclusive, provide for performance evaluation of non-profit organizations with regard to their aims and objectives during the last three years by approved independent certification agencies, the procedure given in the following sub- rules shall apply in respect of approval and appointment of such certification agencies.

(2) The Chairman, Federal Board of Revenue, shall, in his discretion, constitute a Committee for approval and appointment of certification agencies, hereinafter referred to as the Committee, comprising of not less than three members. The Chairman, Federal Board of Revenue shall also designate a member of the Committee to serve as its Chairman. All nominations to the Committee shall be ex-officio. One third of the membership or two members of the Committee, whichever is larger, shall constitute the quorum for meetings of the Committee.

(3) An application for approval and appointment as a certification agency shall be placed before the Committee.

(4) The Committee shall consider the application on its own merit and decide through a majority vote. The Chairman of the Committee shall caste a vote only in case of a tie.

(5) In its deliberations on the application, the Committee shall consider, inter alia, the following criteria, for approval and appointment of certification agency, namely:-

(a) demonstrated and established eminence, credibility and stature of the governing body of such organization that brings respect and credibility to the organization and its work;

(b) understanding of the organization, essentially the senior management and program staff, of the parameters of evaluation as approved by the Federal Board of Revenue;

(c) human resource, quantity as well as quality, available with the organization to conduct professional, objective and transparent evaluations of non-profit organizations;

(d) financial resources available with the organization for meeting the costs incurred on such evaluations;

(e) organizational understanding and experience of working with the non-profit organizations;

(f) experience of evaluating non-profit organizations or social programs;

(g) systems put in place by the organization to conduct evaluation and award of certification; and

(h) monitoring mechanisms to ensure transparency and objectivity.

(6) The Committee may call for any document, report and statement from the organization concerned to assess the capacity of the organization to undertake professional, objective and transparent evaluation as per the criteria specified in sub-rule (5). The Committee may also interview the managerial and program staff of the organization to assess their level of experience, understanding and professionalism.

(7) In no case, however, the committee shall decide to authorize an organization which-

(a) is not registered in Pakistan under any of the relevant laws;

(b) does not specifically prohibit distribution of profit, if any, to its members or staff; 1 Rule 220B inserted by Notification No. SRO 745(I)/2004, dated August 30, 2004. Income Tax Rules, 2002 147

(c) is controlled in part or wholly by the Federal Government, Provincial Government or a local Government; and

(d) in its other programmes create a conflict of interest in evaluating non-profit organization. Explanation: A grant-making organization would have a conflict of interest if it undertakes evaluation and certification of its grant-recipient or potential-recipient organizations. Similarly, a capacity building organization, evaluating non-profit organizations whose capacity it has built or may build in future, would be in a conflict of interest situation.

(8) An application received by the Committee may be decided upon within a period of three months from the date of the receipt of such application.

(9) An applicant adversely affected by any decision of the Committee may file an appeal before the Member (1[“Inland Revenue”]), Federal Board of Revenue, within thirty days of the service of the decision upon the application.

(10) The approval and appointment of an organization as a certification agency shall be notified in the official Gazette.

(11) Any approval and appointment granted under this rule shall be for a period of three years and thereafter the Committee shall re-assess the capacity and evaluate the performance of such organization to function as a certification agency. The Committee shall complete such re-evaluation and its decision within three months, during which the certification agency shall continue to function as a legitimate certification agency.

(12) In case of any change in the status of an approved and appointed certification agency that may adversely affect its functioning as such an agency or in case of any violation of the standards of professionalism, transparency, integrity or objectivity coming to the knowledge of the Committee, the Committee may, after due inquiry and after providing proper opportunity of being heard to the agency, withdraw such approval and appointment at any time.] 1 The words “Direct Taxes” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 148

CHAPTER - XVIII TAX CLEARANCE CERTIFICATE

221. Tax clearance certificate

(1) A person leaving Pakistan permanently may apply to the Commissioner for a tax clearance certificate referred to in sub-section (3) of section 145 where -

(a) the person has satisfied all income tax liabilities; or

(b) the person has made arrangements to the satisfaction of Commissioner for payment of income tax liabilities.

(2) An application referred to in sub-rule (1) shall be in the following form, namely:- APPLICATION FOR A CERTIFICATE UNDER SECTION 145 OF THE INCOME TAX ORDINANCE, 2001 Not for tourists who have earned no income from Pakistan source and have come on tourist visa and stay is not more than 90 days in a tax year. To, The Commissioner, ______________ Zone, ______________ (City). Sir, I request that an Tax Clearance Certificate under section 145 of the Income Tax Ordinance, 2001, be granted to me. I give below necessary particulars:- 1. Name of applicant (in block letters) ______________________________________ 2. Domicile _____________________________________________________________ 3. Present address ____________________________________________________ 4. Address in Home Country _____________________________________________ 5. Nature of business, professions or vocation in Pakistan (if visit to Pakistan was made only as a tourist and no income was earned during the period of stay in Pakistan, it should be so stated). 6. Place(s) at which the business, profession or vocation is or was carried on _______ _______________________________. 7. Name and address of employers of the ________________________________ _________________________ Applicant (in case the applicant is representing a firm or a company, the name and address of the company or firm should be stated here. 8. Name of the Commissioner, if any, where last assessment of the applicant was made _________________. 9. Date of arrival in Pakistan ____________________________________________ 10. Probable date of departure ____________________________________________ 11. Destination __________________________________________________________ Income Tax Rules, 2002 149

CHAPTER - XIX MISCELLANEOUS

12. Mode of travel (by air/sea/land) _________________________________________

13. Place ________________________ Date ________________________

Date ____________________ 20___ Yours faithfully, Signature

(3) An application referred to in clause (b) of sub-rule (1) shall be accompanied by a certificate of guarantee of the applicant’s employer or business associate in the following form, namely:-

GUARANTEE CERTIFICATE TO BE FURNISHED BY EMPLOYER OR BUSINESS ASSOCIATE OF THE APPLICANT

(1) Certified that (Name in block letters) is our employee/ representative /associate.

(2) (i) Certified that _______________ (give name) is leaving Pakistan and tax demand of Rs.______________ is outstanding him. The assessment is pending resulting in tax liability.

(ii) A cheque for the amount of tax due along with the computation of income is enclosed.

(iii) We undertake to pay the tax liability, if any, when determined.

Seal of the business

Strike out whichever is in applicable.

222. Form of tax clearance certificate under section 145

For the purposes of sub-section (3) of section 145, a tax clearance certificate shall be in the following form, namely:-

Nature of business, This is to certify that _________________________ Vocation Pakistan has no liability has made satisfactory arrangement Date of arrival in Ordinance, 2001 or the Income Tax Ordinance,

Income Tax Rules, 2002 150

CHAPTER - XIX MISCELLANEOUS

Signature/ left hand thumb of Application/ or person Signature/ left hand thumb of Application/ or person receiving the Certificate on behalf of the applicant. receiving the Certificate on behalf of the applicant.

223. Form of tax exemption certificate

On receipt of an application under rule 221, the Commissioner shall issue an exemption certificate under section 145 in the following form, namely:-

profession or vocation in Pakistan Date of departure Applicant/ or person receiving the certificate on return to Pakistan Applicant/ or person receiving the certificate on behalf of the applicant.

(i) they have not spent more than 90 days at a time in Pakistan; and

(ii) they have not spent more than 90 days in any financial year in Pakistan.

2[ ]

1 Rule 223 substituted by SRO 392(I)/2009, dated May 19, 2009. 2 Omitted “(iii) passengers travelling by a pilgrim ship which sails direct from a Port in Pakistan to Jeddah.”

Income Tax Rules, 2002 151

CHAPTER - XIX MISCELLANEOUS

224. Conditions for approval of leasing companies for claim of depreciation deduction

The following conditions shall be fulfilled by a leasing company or a modaraba to claim deduction for depreciation on lease of depreciable assets under this rule, namely:-

(i) The leasing company is engaged principally in the business of leasing of assets and has been issued a licence by the Securities and Exchange Commission of Pakistan to operate under the terms and conditions specified therein; and

(ii) the leasing company or a modaraba doing leasing business undertakes that where a motor vehicle is given on lease, the purchase value thereof shall be restricted to the amount specified in the Third Schedule to the Ordinance, for the purposes of claiming depreciation or the expenditure on such lease.]

225. Recognized Associations of Accountants for the purpose of section 223

The following bodies are recognized by the Board as associations of accountants for the purpose of section 223, namely:-

(a) The Institute of Chartered Accountants in England and Wales;

(b) The Institute of Chartered Accountants in Scotland;

(c) The Institute of Chartered Accountants in Ireland;

(d) The Society of Incorporated Accountants and Auditors, London; and

(e) The Association of 2[Chartered] Certified Accountants, United Kingdom.

226. Appointment of valuers

(1) A person desiring to be appointed as a valuer for the purposes of section 222 shall make an application to the Commissioner in duplicate setting out the fact or facts by virtue of which the person claims to be qualified for such appointment.

(2) For the purpose of sub-rule (1) a person qualified for appointment as a valuer means a person who:-

(a) holds a degree or equivalent qualification in civil engineering or mechanical engineering or mechanical and electrical engineering from any University incorporated under any law for the time being or accredited or affiliated by any association of universities or college in force in Pakistan and Azad Kashmir or a like degree or qualification conferred by any foreign university incorporated by law of that country and recognized by a Pakistani University;

(b) holds an internationally recognized qualification in architecture equivalent to or comparable with the Associate- ship of Royal Institute of British Architects;

(c) having successfully completed a diploma course in architecture or civil engineering or mechanical engineering or mechanical and electrical engineering or automobile engineering from a recognized institution has worked with a qualified architect or engineer or in a Government or quasi-Government department for a period of three years; 1 Rule 224 substituted by SRO 392(I)/2009, dated May 19, 2009. 2 Word inserted by SRO 590(I)/2004 dated July 07, 2004. Income Tax Rules, 2002 152

(d) has held the insurance surveyor certificate issued by the department of Insurance for a period of five years;

(e) has retired after putting in satisfactory service in the 1[“Inland Revenue”] Department or the Customs Department or judiciary or in a revenue collecting agency of the Government for period of not less than ten years in a post or posts in a grade not less than Grade 17; or

(f) for the purpose of valuation of such assets as require specialized knowledge not available to persons qualified under clauses (a), (b), (c), (d) and (e) of this sub- rule, any person, who is in the opinion of the Commissioner is fit to be appointed as a valuer.

(3) Notwithstanding anything contained in sub-rule (2), no person shall qualify for appointment as a valuer if the person-

(a) has been dismissed or removed from Government service;

(b) is an un-discharged insolvent;

(c) has been convicted of any offence under any law or has been found guilty of misconduct in his professional capacity which, in the opinion of the Commissioner, renders him unfit to 2[be] registered as a valuer; or

(d) has been representing taxpayers before income tax authorities.

(4) On receipt of an application under sub-rule (1), the Commissioner may make such inquiries or call for such further information or evidence as may be deemed necessary.

(5) If the Commissioner is satisfied that a person should be appointed as a valuer for the purposes of section 222, the Commissioner shall notify the person in writing of the decision.

(6) Where the Commissioner decides to refuse an application under this rule, the Commissioner shall give the applicant notice, in writing, of the decision including a statement of reasons for the decision.

(7) The appointment of a value may be terminated by the Commissioner at his discretion at any time without assigning any reason and without any compensation.

227. Scale of remuneration, fees and allowances for a valuer

(1) A valuer appointed under section 222 shall not be paid any retention fee but would be entitled to remuneration at the following scale:- Rs. Where the value of assets does not exceed Rs.1,000,000/- 5,000/- Where the value of assets exceeds Rs.1,000,000/- but does not exceed Rs.5,000,000/- 10,000/- Where the value of assets exceeds Rs.5,000,000/- but does not exceed Rs.10,000,000/- 20,000/- Where the value of assets exceeds Rs.10,000,000/- 30,000/- 1 The words “Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 2 Substituted for “e” by SRO 392(I)/2009, dated May 19, 2009. 3 Rule 227 substituted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 153

(2) In addition to remuneration at the scale prescribed under sub-rule (1), a valuer shall be entitled to the following fee and allowance:-

(a) a fee of Rs.500/- per day in the event of attendance before the Appellate Tribunal in connection with the valuation made in any case; and

(b) traveling expenses to which a Government servant in BPS-17 is entitled.]

228. Valuation of assets

1[(1) The valuation of immovable property for the purposes of section 111 shall be taken to be-

(a) in the case of open plot, the value determined by the development authority or government agency on the basis of the auction price in respect of similar plots in the area where the plot in question is situated or in case where such value is not determined, the value fixed by the District Officer Revenue or provincial authority authorized in this behalf for the purposes of stamp duty;

(b) in the case of agricultural land, the value equal to the average sale price of the sales recorded in the revenue record of the estate in which the land is situated for the relevant period or time; or

(c) in the case of constructed immovable property, value shall be determined at the fair market value as defined in section 68 or the value fixed by the District Officer (Revenue) whichever is higher.]

(2) For the purposes of section 111 and subject to sub-rule (2), the value of motor cars and jeeps shall be determined in the following manner, namely:-

(a) the value of the new imported car or jeep shall be the C.I.F. value of such car or the jeep, as the case may be, plus the amount of all charges, customs-duty, sales tax, levies, octroi fees and other duties and taxes leviable thereon and the costs incurred till its registration;

(b) the value of a new car or jeep purchased from the manufacturer or assembler or dealer in Pakistan, shall be the price paid by the purchaser, including the amount of all charges, customs-duty, sales tax and other taxes, levies, octroi, fees and all other duties and taxes leviable thereon and the costs incurred till its registration;

(c) the value of used car or jeep imported into Pakistan shall be the import price adopted by the customs authorities for the purposes of levy of customs-duty plus freight, insurance and all other charges, sales tax, levies octroi, fees and other duties and taxes leviable thereon and the costs incurred till its registration;

(d) the value of a car or jeep specified in clause (a), (b) and (c) at the time of its acquisition shall be the value computed in the manner specified in the clause (a),

(b) or (c), as the case may be, as reduced by a sum equal to ten percent of the said clause for each successive year, upto a maximum of five years; or

(e) the value of a used car or jeep purchased by an assessee locally shall be taken to be the original cost of the car or the jeep determined in the manner specified in clause (a), (b) or (c), as the case may be, as reduced by an amount equal to ten percent for every year following the year in which it was imported or purchased from a manufacturer.

(3) In no case shall the value be determined at an amount less than fifty percent of the value determined in accordance with clause (a), (b) or (c) or the purchase price whichever is more. 1 Sub-rule (1) substituted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 154

(4) For the purposes of section 61, the value of any property donated to a non-profit organization shall be determined in the following manner, namely:-

(a) the value of articles or goods imported into Pakistan shall be the value determined for the purposes of levy of customs duty and the amount of such duty and sales tax, levies, fees, octroi and other duties, taxes or charges leviable thereon and paid by the donor;

(b) the value of articles and goods manufactured in Pakistan shall be the price as recorded in the purchase vouchers and the taxes, levies and charges leviable thereon and paid by the donor;

(c) the value of articles and goods which have been previously used in Pakistan and in respect of which depreciation has been allowed, the written down value, on the relevant date as determined by the Commissioner;

(d) the value of a motor vehicle shall be the value as determined in accordance with rule; and

(e) the value of articles or goods other than those specified above, shall be the fair market value as determined by the Commissioner.

229. Filing of returns, statements and documents and issuance of orders, notices through computers

(1) Notwithstanding anything contained in these rules taxpayer or any person responsible for furnishing the prescribed statements or returns may furnish such statement or return, on computer media and in such language, program arrangement and data formats and representations which are compatible with those of the 1[“Inland Revenue”] Department and any other technical specification as the 2[Federal Board of Revenue] may prescribe; accompanied by a certificate in the following form and duly signed by the person authorized to sign such statement or return or the department may issue notice orders, or communication or production of documents in appeals or courts taken through computers or scanning images duly certified, namely:- CERTIFICATE I, ____________________________ S/o. _________________________ do hereby certify that the data and information contained in the enclosed disk, diskette, tape or cartridge or scanning image or electric communication is complete, correct and true to the best of my knowledge and belief. I, further certify that the return of income contained in the aforementioned media have been duly verified and affirmed to be true by the respective assessee. Name. (in block letters) _______________________ Designation ________________________________ Date _____________________________________

(2) Notwithstanding anything contained in these rules, any order required to be made or notice to be issued or assessment or computation made, or document required to be prepared or issued under the Ordinance may be generated through the computer system and no such order, notice, assessment, computer document shall require the signature of the concerned officer whose name and designation is specified on the aforementioned documents. 1 The words “Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 2 Substituted for “RCIT or Committees” by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 155

230. Charges for various forms

The following forms shall be provided after 30th June, 2002 on payment as mentioned against each:- Form Charge

(i) Form of return of total income. Rupees Five each. Form of Wealth statement under section 116 of the

(ii) Rupees Five each. Income Tax Ordinance. [ ] [231. Computation of export profits attributable to export sales.-

(1) Where a taxpayer exports any goods manufactured in Pakistan, the taxpayer’s profits attributable to export sales of such goods shall be computed in the following manner,

(a) where a taxpayer maintains separate accounts of the business of export of goods manufactured in Pakistan, the profits of the export business shall be taken to be such amount as may be determined by the Commissioner in accordance with the provisions of Ordinance on the basis of such accounts; or

(b) in other cases, the profits of such business shall be taken to be an amount which bears to the total profits of the business of the taxpayer from the sale of goods, the same proportion as the export sales of goods manufactured in Pakistan bear to the total sales of goods.

(2) For the purpose of sub-rule,-

(a) the expression “export sales’’ means the f.o.b. price of the goods exported;

(b) the expression “total sales’’ means,-

(i) the aggregate of export sales as determined under clause (a);

(ii) the ex-factory price of goods sold in Pakistan, where the goods exported out of Pakistan were manufactured by the exporter; or

(iii) the ex-godown price of goods sold in Pakistan, in other cases.]

231A. Procedure for issuance of advance ruling under section 206A

(1) A non-resident person desiring an advance ruling under section 206A of the Ordinance, 2001 (XLIX of 2001) shall make an application to the Federal Board of Revenue in the following form set out in the Schedule below.

(2) The application under sub-section (1) shall be considered by a Committee consisting of the following members, namely:-

(a) Chairman, Federal Board of Revenue Chairman

(b) Member 4[“(Inland Revenue)”], FBR Member

(c) 1[Senior Joint Secretary], Law, Justice . Member 1 Rule 231 omitted by SRO 392(I)/2009, dated May 19, 2009. 2 Rule 231 inserted by SRO 58(I)/2010, dated February 02, 2010. 3 Rule 231A and 231B inserted by SRO 130(I)/2004, dated February 27, 2004. 4 The words and brackets “(Direct Taxes)” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 156

and Human Rights Division.

(3) The Committee may obtain comments of the Commissioner 2[ ] concerned and, if it considers necessary, advice of a legal expert on the application and decide the issue, as it may deem appropriate, in a joint sitting or through circulation amongst its members.

(4) Advance ruling for the purposes of this rule means determination by the Committee in relation to the transaction which has been undertaken or is proposed to be undertaken by a non-resident person the question of law specified in the application.

(5) The advance ruling shall be binding on the Commissioner only in respect of the specific transaction on which such advance ruling is issued. The advance ruling shall continue to remain in force unless there is a change in facts or in the law on the basis of which the advance ruling was pronounced.

(6) The copy of the advance ruling pronounced by the Federal Board of Revenue shall be provided to the applicant and to the Commissioner 3[ ] having jurisdiction over the case.

(7) Notwithstanding anything contained in this rule, the advance ruling shall cease to be binding on the Commissioner, if it is subsequently found to have been obtained by fraud or misrepresentation of facts about the nature of the transaction on which advance ruling was issued.

(8) An application filed under this rule shall be disposed of not later than ninety days of its receipt.

231B. Withdrawal of application

The applicant may withdraw the application made under rule 231A at any time before the advance ruling in issued. SCHEDULE [See sub-rule (1)] Application for advance ruling under section 206A of the Income Tax Ordinance, 2001 To The Chairman, Federal Board of Revenue, Islamabad Dear Sir, The undersigned being duly authorized hereby apply on behalf of _________________ (name of the non-resident) for advance ruling under section 206A of the Income Tax Ordinance, 2001 (XLIX of 2001). 2. Necessary details of the transaction are set out below and in the Annexure to this application. 3. The following documents as required under rule 231A of Income Tax Rules, 2002 are enclosed:-

(a) _______________________________________________

(b) _______________________________________________

(c) _______________________________________________ 1 Substituted for “Solicitor General” by SRO 54(I)/2009, dated January 22, 2009. Earlier it was substituted for “Additional Secretary” by SRO 756(I)/2008, dated July 15, 2008. 2 The words “of Income Tax” omitted by SRO 1218(I)/2015 dated 08.12.2015. 3 The words “of Income Tax” omitted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 157

(d) _______________________________________________

(e) _______________________________________________ Yours faithfully, Name (in block letters) _______________________ Designation ________________________________ Annexure [See paragraph 2 of the Schedule]

(1) Name of the non-resident person (in block letters) ________________________________

(2) Permanent address and telephone and fax numbers of the non-resident person (in block letters) __________________________________________________________________ 1[ ] 2[ ]

(5) Country of origin ___________________________________________________________

(6) National Tax Number _______________________________________________________

(7) The following is the statement of the relevant facts of the transaction having bearing on the question(s) on which the resolution is required (Please annex extra sheet, if required):

(8) Statement containing the applicant’s interpretation of law or facts, as the case may be, in respect of the question(s) on which advance ruling is required (Please annex extra sheet, if required) is as follows:-

(9) The undersigned, solemnly declare that :-

(a) full and true particulars of the transaction relevant for the purposes of advance ruling applied for have been disclosed and no material aspect affecting the determination of the application of the Income Tax Ordinance, 2001, in this behalf has been withheld; and

(b) that the above issue(s) is/ are not pending before any Income Tax Authority, Appellate Tribunal or Court for adjudication. Yours faithfully, Name (in block letters) _______________________ Designation ________________________________ Address in Pakistan __________________________ Telephone No. ______________________________ Fax No. ___________________________________ ] 1 Serial (3) omitted by SRO 1218(I)/2015 dated 08.12.2015. The omitted serial read as under: “(3) Address in Pakistan __________________________” 2 Serial (4) omitted by SRO 1218(I)/2015 dated 08.12.2015. The omitted serial read as under: “(4) Telephone Number ___________ Fax Number ______________” Income Tax Rules, 2002 158

[231C. Income tax 2[alternative] dispute resolution.-

(1) This rule shall apply to all cases of disputes brought or specified for resolution under section 134A.

(2) In this rule, unless there is anything repugnant in the subject or context,-

(a) “applicant” means a person or a class or persons who has brought a dispute for resolution under section 134A;

(b) “Board” means the Federal Board of Revenue.

(c) “Committee” means a Committee constituted under sub-section (2) of section 134A; and

(d) “dispute” means any matter of income tax pertaining to liability of income tax, admissibility of refund, waiver or fixation of penalty or fine, relaxation of any period or procedural and technical condition as specified in sub-section (1) of section 134A.

(3) Any person or class of persons interested for resolution of any dispute under section 134A shall submit a written application for alternative dispute resolution to the Board in the form as set out in the Schedule below.

(4) The Board, after examination of the contents of an application by a taxpayer and facts stated therein and on satisfaction that the application may be referred to a Committee for the resolution of the hardship or dispute, shall constitute a Committee consisting of the following members, namely:-

(a) the 3[“Chief Commissioner”], Large Taxpayers Unit or Commissioner, Medium Taxpayers Unit or any other Commissioner or officer of the 4[“Inland Revenue Department”] nominated by the Board;

(b) a Fellow of Chartered Accountants, registered with the Institute of Chartered Accountants of Pakistan or an Associate of Cost and Management Accountant, an advocate of High Court or Income Tax Practitioner 5[ ]; and

(c) a reputable taxpayer.

(5) The Board may appoint one of the members of the Committee to be its Chairman.

(6) An application filed under this rule may be disposed of by the Committee within thirty days of its constitution: Provided that the time so specified may, if requested by the Chairman of the Committee for reasons to be recorded in the request, be extended by the Board to such extent and subject to such conditions and limitations as it may deem proper.

(7) The Chairman of the Committee shall be responsible for deciding the procedure to be followed by the Committee which may inter-alia, include the following, namely:- [(a) to decide about the place of sitting of the Committee, in consultation with the 7[“Chief Commissioner”] Regional Tax Office, or as the case may be, the 1[“Chief 1 Rule 231C inserted by Notification No. SRO 748(I)/2004, dated August 30, 2004. 2 Substituted for “alternate” by SRO 1032(I)/2006, dated October 03, 2006. 3 The words “Director-General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 4 The words “Income Tax Department” substituted by SRO 1218(I)/2015 dated 08.12.2015. 5 Words “having at least twenty-five reported cases in a reputed journal to his credit” omitted by SRO 679(I)/2005, dated July 04, 2005. 6 Clause “(a)” substituted by SRO 814(I)/2008, dated July 31, 2008. 7 The words “Director-General” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 159

Commissioner”] Large Taxpayer Unit;]

(b) to specify date and time for conducting proceedings by the Committee;

(c) to supervise the proceedings of the Committee;

(d) to issue notices by courier or registered post or electronic mail to the applicant;

(e) to requisition and produce relevant records or witnesses from the Commissioner or other concerned quarters;

(f) to ensure attendance of the applicant for hearing either in person or through an advocate, representative or a tax consultant;

(g) to consolidate recommendations of the Committee and submission of a conclusive report to the Board; and

(h) for any other matter covered under these rules.

(8) The Committee may conduct inquiry, seek expert opinion, direct any 2[“officer of Inland Revenue”] or any other person to conduct an audit and make recommendations to the Committee in respect of dispute or hardship.

(9) The Committee may determine the issue and may thereafter seek further information or data or expert opinion or make or cause to be made such inquiries or audit as it may deem fit, to formulate its recommendations in respect of any matter specified in sub- section (1) of section 134A.

(10) The applicant may withdraw the application made under sub-rule (3) of these rules at any time before the Committee submits its recommendations to the Board. [ ***]

(12) The Chairman of the Committee shall send a copy of the recommendations of the Committee to the Board, applicant and the concerned Commissioner, simultaneously.

(13) The Board on its own motion or on the request of the applicant, may refer back the recommendations of the Committee for rectification of any mistake apparent from record or for reconsideration of the facts or law, as the case may be, not considered earlier by the Committee.

(14) The Committee after rectification of the mistake or reconsideration of the facts or law as aforesaid shall furnish to the Board its fresh or amended recommendation within such period as specified by the Board.

(15) The Board, after examining the recommendations of the Committee shall finally decide the dispute or hardship and make such orders as it may deem fit for the resolution of the dispute or hardship 4[,within ninety days of receipt of such recommendations,] under intimation to the applicant, Chairman of the Committee and the concerned Commissioner: Provided that the resolution reached by the taxpayer and the Board shall not bind them for tax year not covered by the agreement. Any such resolution shall not be used as precedent, except as provided in the agreement.

(16) The copy of order passed by the Board shall be provided to the applicant and to the Commissioner having jurisdiction over the case for modification of all decisions, orders 1 The words “Director-General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 2 The words “officer of income tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 3 Sub-rule (11) omitted by SRO 213(I)/2005, dated March 03, 2005. 4 Inserted by SRO 771(I)/2008, dated July 21, 2008. Income Tax Rules, 2002 160

and judgments passed in respect of the said dispute or hardship, within such period as may be specified by the Board in the order.

(17) On receipt of the Board’s order as aforesaid, the Concerned Commissioner shall implement the order in such manner and within such period as may be specified by the Board in the order.

(18) Notwithstanding anything contained in this rule an order passed by the Board shall cease to exist if it is subsequently found to have been obtained by fraud or misrepresentation of facts about the nature of dispute or hardship on which the said order was passed and all decisions, orders and judgments modified under the said order shall deemed to be re modified. THE SCHEDULE [See sub-rule (3)] Application for 1[alternative] dispute resolution under section 134A of the Income Tax Ordinance, 2001 To The Chairman, Federal Board of Revenue, Islamabad Dear Sir, The undersigned being duly authorized hereby apply _________________ (name and address of the applicant) for dispute to hardship resolution under section 134A of the Income Tax Ordinance, 2001(XLIX of 2001). 2. Necessary details of the dispute or hardship are set out below and in the annexure to this application. 3. A request is made to constitute a Committee as provided under sub-rule (4) of rule 231C of Income Tax Rules, 2002. 4. The following documents as are necessary for the resolution of the dispute or hardship are enclosed.

(a) _______________________________________________

(b) _______________________________________________

(c) _______________________________________________ Yours faithfully, Name (in block letters) _______________________ NTN ______________________________________ Address ___________________________________ 1 Substituted for “alternate” by SRO 1032(I)/2006, dated October 03, 2006. Income Tax Rules, 2002 161

Annexure [See paragraph 2 of the Schedule]

(1) Name of the applicant (in block letters) ________________________________________

(2) National tax number _______________________________________________________

(3) Address of the applicant ___________________________________________________

(4) Telephone Number __________________ Fax Number __________________ 1[(4A) Tax year to which the dispute or hardship relates __________________]

(5) The Commissioner with whom a dispute has arisen _________________

(6) The following is the statement of the relevant facts and law with respect to dispute or hardship having bearing on the question(s) on which the resolution is required (Please annex extra sheet, if required):-

(7) Statement containing the applicant’s interpretation of law or facts, as the case may be in respect of question(s) on which resolution is required (Please annex extra sheet, if required) is as follows:-

(8) The extent or the amount of tax which the applicant agrees to pay, if any.

(9) The undersigned, solemnly declare that,-

(a) full and true particulars of the dispute or hardship for the purposes of resolution have been disclosed and no material aspect affecting the determination of the application filed under the Income Tax Ordinance, 2001, in this behalf has been withheld;

(b) that the above issue(s) is/are pending before (name of the appellate forum, ITAT or court)/ not pending before any forum, ITAT, High Court or Supreme Court of Pakistan for adjudication2[.] 3[ ] Yours faithfully, Name (in block letters) _______________________ Designation ________________________________ Date ______________________________________ ] 1 Clause “(4A)” inserted by Notification No. SRO 679(I)/2005, dated July 04, 2005. 2 Full stop substituted for “; and” by SRO 679(I)/2005, dated July 04, 2005. 3 Clause “(c)” omitted by SRO 679(I)/2005, dated July 04, 2005. Income Tax Rules, 2002 162

231D. Procedure for group taxation under section 59AA

(1) For the purposes of this rule, a 100% owned company shall be a subsidiary company where another company, herein-referred to as “holding company”, owns all equity shares of such company except those held by nominees to meet the statutory requirements of the Companies Ordinance, 1984 (XLVII of 1984).

(2) A holding company and each of its subsidiary companies of 100% owned group which fulfill the conditions specified in section 59AA shall make separate application containing declaration of irrevocable option for group taxation as one fiscal unit to the concerned Commissioner in the form as set out in the Schedule below within the first quarter of the tax year for which group taxation is opted for.

(3) The application shall be signed, in the case of a holding company, by the Chief Executive Officer of the holding company and in the case of a subsidiary company the Chief Executive Officer of the subsidiary company, identifying the Commissioner having jurisdiction over the holding company or as the case may be, subsidiary company, National Tax Number and Corporate Registration Number.

(4) The holding company as well as each subsidiary company shall furnish a certificate issued by the Securities and Exchange Commission of Pakistan verifying that the company has been complying with the Code of Corporate Governance as notified from time to time by the SECP.

(5) The return for the tax year following the option for group taxation shall be prepared as one fiscal unit under the name of the holding company and the tax liability shall be discharged or the refund shall be claimed respectively as if the business of the subsidiary companies were the business of the holding company. However, for that purpose, no effect shall be taken for losses including unabsorbed depreciation of subsidiary companies for the tax year prior to the exercise of option for group taxation. Along with the group return, copies of audited accounts of every company in the group shall be attached.

(6) On option for group taxation under sub-section (2) of section 59AA, the subsidiary companies shall furnish their returns of income in their respective tax jurisdiction along with a copy of application for group taxation for record and future adjustments and intimating non-taxability of the returned income. The subsidiary companies shall also intimate to the Commissioner having jurisdiction over the holding company regarding their option for group taxation.

(7) Taxation matters relating to the period prior to the adoption of one fiscal unit shall continue to be dealt with by the Commissioner having jurisdiction over the subsidiary company.

(8) In case, there is divestment of a subsidiary company and the provisions of group taxation become inapplicable, no effect shall be taken for group taxation during the year of disposal.

(9) All the provisions of the Ordinance, including withholding provisions as applicable on a holding company shall mutatis mutandis apply to a subsidiary company during the period when the group is taxed as one fiscal unit. Each company shall file independent withholding statements as required under the provisions of the Ordinance.

(10) The relief under group taxation shall be limited only to those companies which are locally incorporated under the Companies Ordinance, 1984 (XLVII of 1984).

(11) All companies opting for group taxation under section 59AA shall have the similar accounting period for computation of income.

(12) The transaction by any company within the group and with its associated companies shall be carried out and recorded on arm‟s length basis. 1 Rule 231D inserted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 163

SCHEDULE (See sub-rule (2) of rule 231D) APPLICATION/ DECLARATION FOR GROUP TAXATION UNDER SECTION 59AA OF THE INCOME TAX ORDINANCE, 2001 To, The Commissioner, ________________________ Dear Sir, I _________________________________ S/O _____________________ being Chief Executive of M/s.______________________________________________ (Name/ NTN and address of the holding company or as the case may be subsidiary company) duly authorized in this regard hereby apply on behalf of the aforesaid company for group taxation under section 59AA of the Income Tax Ordinance, 2001, in respect of the following companies of the group:- Whether Commissioner having Address holding or jurisdiction over Name of the (Head Office/ Incorporation subsidiary holding/ subsidiary S.No. company postal) NTN No. No. company company

(1) (2) (3) (4) (5) (6) (7) 2. The following documents are attached:- (i) Copies of incorporation certificates of the above mentioned companies seeking group taxation;

(ii) Copy of the certificate issued by the SECP (as set out in Annexure to this Schedule) confirming that the company had complied with corporate governance requirements, as notified by the SECP, and are not defaulters of any rules or regulations. 3. It is declared that,- (i) the company asks for irrevocable option for group taxation as one fiscal unit;

(ii) the companies in the group are locally incorporated under the Companies Ordinance, 1984; and

(iii) the company complies with corporate governance requirements as notified by the Securities and Exchange Commission of Pakistan from time to time. 4. Further I certify that to the best of my knowledge and belief the information given in the application is correct and complete in accordance with the provisions of section 59AA of the Income Tax Ordinance, 2001. Yours faithfully, Name (in block letters) _______________________ CNIC _____________________________________ Designation ________________________________ Income Tax Rules, 2002 164

ANNEXURE (See paragraph 2(ii) of the Schedule) CERTIFICATE FROM THE SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN It is certified that M/s.__________________, incorporated at No. dated _________________________ is a holding company having 100% share of the following subsidiary companies, namely:-

(a) _______________________________________________

(b) _______________________________________________

(c) _______________________________________________

(d) _______________________________________________ And the holding company and its subsidiary companies (mentioned above) have not violated any corporate governance requirements notified by the SECP from time to time, and the said companies are entitled to avail group taxation under section 59AA of the Income Tax Ordinance. The SECP shall also inform the 1[“Commissioner of Inland Revenue”] concerned, if any code of corporate governance is violated by the holding company or its subsidiary companies mentioned above availing the benefit of group taxation under section 59AA of the Income Tax Ordinance, 2001 Name of the issuing authority __________________ Seal/Stamp ________________________________ Date: _____________________________________

232. Repeal & Savings

(1) The following rules as in force before the commencement of these rules are hereby repealed, namely Income Tax Rules, 1982. “(2A) Notwithstanding anything contained in sub-rule (1), rules 190 to 198, 201. 20ID, 201F, 202(C), 202D, 202E, 202F of Income Tax Rules, 1982 shall stand repealed on the first day of July, 2003; and

(2B) Any proceedings including proceedings under part IX (Chapters A, B, C, D, E & F) initiated, or any action taken or initiated, or approval sought, under Income Tax Rules, 1982 prior to 01.07.2002; such proceedings, action, or approval sought shall be completed under the Income Tax Rules, 1982 and to that extent Income Tax Rules, 2002 would not apply.“ 1 The words “Commissioner of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 165

PART-I OF THE FIRST SCHEDULE Government of Pakistan 1[“DEPARTMENT OF INLAND REVENUE”] Office of the _____________________ APPLICATION FOR FOREIGN TAX CREDIT The application for a foreign tax credit required to be furnished under the rules shall be in the following form, namely:- Application for relief in respect of tax paid in another country.- An application for relief by way of credit against Pakistan tax for tax paid by a person resident in an tax year in Pakistan shall be made in the following form, namely:- APPLICATION FOR UNILATERAL RELIEF UNDER SECTION 103 OF THE INCOME TAX ORDINANCE, 2001 To The Commissioner I, _____________________ of _____________________ hereby declare that I have paid taxes on income by deduction or otherwise in the territory of ______________ amounting to ______________ in respect of income from sources therein for the tax year ending __________________ amounting to ______________ and that Pakistan tax amounting to Rs._______________ is also payable, on the said income. 2. I further declare that I was resident in Pakistan for the period on the basis of which the doubly taxed income stated above is assessable in Pakistan. 3. I now apply for relief by way of tax credit amounting to Rs.________________ under section 103 of the Income Tax Ordinance, 2001. My net income from all source to which the ordinance applies during the tax year ending on __________________ 20___ amounted to Rs.________________ only, as shown in my return of income attached herewith/ already submitted. Name _____________________________________ Address ___________________________________ Dated ________, 20 National Tax Number 1 The words “DEPARTMENT OF INCOME TAX” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 166

PART-II OF THE FIRST SCHEDULE Government of Pakistan 1[“DEPARTMENT OF INLAND REVENUE”] Office of the _____________________ Notice Letter under section 122 of The Income Tax Ordinance, 2001 (See rule 2[68]) NTN/3[CNIC] ____________________________ Name: ____________________________ Address: ____________________________ Tax year: ____________________________ Dated: __________________ Dear Sirs, Whereas I consider necessary that the assessment order treated as issued under section 120 or issued under section 121 or amended assessment u/s.122(3) needs alteration or and to make addition to income by amended or further amended assessment of amended assessment under section 122 for imposition of the correct amount of tax for the tax year ____________, as in my opinion, Income Tax Return/ Statement and documents relating to the income and tax filed under the relevant provisions of this Ordinance. 2. In view of situation above, amended assessment or further assessment is necessary u/s.122 and for that the tax year, examination of books of account/ record is necessary. I, therefore require you to produce or cause to be produced at my office on the date and time mentioned below. the following accounts/documents on which you have relied your return of income, so that correct income may be determined and proper tax be imposed. 3. Please note that in case you or your authorized representative duly authorized to represent you in the assessment proceedings fails to attend the office/ produce the documents/ accounts mentioned above, assessment may be framed ex-parte which may also entail further legal punitive actions in accordance with law. Name ____________________________________ Code No. __________________________________ of the Commissioner 1 The words “DEPARTMENT OF INCOME TAX” substituted by SRO 1218(I)/2015 dated 08.12.2015. 2 Substituted for figure “62” by Notification No. 310(I)/2007, dated April 05, 2007. 3 The word “TRN” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 167

Part-III of the First Schedule Government of Pakistan 1[“DEPARTMENT OF INLAND REVENUE”] Office of the _____________________ Notice under section 2[138(1)] of The Income Tax Ordinance, 2001 National Tax Number ____ ____________________ Commissioner __________ ____________________ Date __________________ ____________________ To M/s. __________________________ ______________________________ Dear Sir, Whereas it is established that the sum of Rs._____________ which is due from you on account of tax as per details given in the schedule below, is in arrear, you are, hereby, required to pay these arrears of tax by __________________ and produce necessary evidence to that effect before me at my office on __________________ failing which proceedings may be initiated under these rules to recover the said amount by one or more of the following modes, namely:-

(a) attachment and sale of moveable or immovable property;

(b) appointment of receiver for the management of your moveable or immovable property;

(c) your arrest and detention in person for a period not exceeding six months. I, in exercise of the powers vested in me [ ] under section 138 of the Income Tax Ordinance, hereby further direct that you shall not sell, mortgage, charge, issue or otherwise deal with any property belonging to except with my permission to that effect in writing. Commissioner Range _______________ Zone _______________ SCHEDULE Number in Demand and Assessment Collection Income Additional Sr. No year(s) Register Tax Penalty Tax Surcharge Total 1 2 3 4 5 6 7 8 1 The words “DEPARTMENT OF INCOME TAX” substituted by SRO 1218(I)/2015 dated 08.12.2015. 2 Substituted for “138(2)” by SRO 392(I)/2009, dated May 19, 2009. 3 Words “under the Income Tax Rules framed” omitted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 168

Part-IV of the First Schedule Government of Pakistan 1[“DEPARTMENT OF INLAND REVENUE”] Office of the _____________________ Notice u/s.140 read with rule 69 of Income Tax Rules, 2002 Recovery of Tax M/s. Mr. ____________________ Dear Sir, Whereas the undersigned is empowered to issue this notice and has reasons to believe that in respect of Mr. _________________________________ a tax defaulter/ taxpayer for Rs.______________;

(i) You are owing to this taxpayer money, amount, debt or may at a future date/ month owe to him.

(ii) You hold money on behalf of the taxpayer/ defaulter.

(iii) You are holding money on some other person’s behalf for payment to the above named taxpayer defaulter.

(iv) You hold authority of some other person to pay money to him or defaulter. 2. And whereas, an amount of Rs._____________ is tax due outstanding against the person, and whereas the taxpayer has not paid the same amount in time, therefore, under the provisions of section 148, you are required to remit or send the money to the undersigned through pay order/ D. Draft or through banking transfer or cheque for payment to the government, treasury under income tax head of account. Please take notice that:

(i) Any tax paid in lieu of and on behalf defaulter in pursuance of this notice shall be treated as having been paid under the authority of taxpayer concerned - section 140(6).

(ii) In case of failure to comply, the said amount shall be recovered from you, and all the provisions relating to tax recovery u/s.160, 161, 162 and 163 shall apply for effecting recovery of such amount from you.

(iii) In case of default, additional tax u/s.205 shall also be charged and prosecution proceedings shall also be launched. 3. Since law provides for such mode of recovery, and payment shall be taken as made by the taxpayer to the government. N.B. This notice requires the payment to the extent shown in the notice out of any amount due or due to be paid as mentioned at 1(i to iv). Given under my hand and seal Commissioner 1 The words “DEPARTMENT OF INCOME TAX” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 169

PART-V OF THE FIRST SCHEDULE Government of Pakistan 1[“DEPARTMENT OF INLAND REVENUE”] Office of the _____________________ Notice u/s.145 of Income Tax Ordinance, 2001 and rule 70 in respect of a person who is likely to leave Pakistan permanently The Director of Immigration, Airport/Seaport. Incharge Immigration Department, Airports/Seaport. (See section 145 of the Income Tax Ordinance, 2001) on collection of tax from person leaving Pakistan. Sir, Whereas section 145 of the Income Tax Ordinance, 2001 empowers the undersigned to issue this certificate of outstanding tax demand and there are reasons to believe that Mr.___________________ NTN _______________ has to pay tax/ government dues of Rs._______________, or based on the return of income filed and the amended assessment made for which notice has been issued, a tax demand is likely to be raised, for which he has not made satisfactory arrangement for tax payment, and is likely to leave Pakistan permanently, therefore, you are required under section 145 not to allow Mr. _______________ Mrs. ____________________ to leave the country, till he has discharged tax liability by way of making payment of tax by prescribed challan in the NBP/SBP and produces a copy of challan bearing date of payment of the amount after issuance of this certificate, or, produces from the undersigned withdrawal of the certificate/ notice, or makes payment of tax through pay order/ demand draft or bank cheque in favour of income tax department. The certificate issued under my signature and seal is not to be disputed and would be valid till it is modified or withdrawn by the undersigned. Commissioner N.B. This certificate shall be withdrawn in case in the matter of pending amended assessment, proper arrangements are made for the payment of tax. This certificate shall be withdrawn immediately. PART-VI OF THE FIRST SCHEDULE Government of Pakistan 2[“DEPARTMENT OF INLAND REVENUE”] Office of the _____________________ (See Rule 71) Prescribed application for refund of tax.- An application for refund of tax under section 170 shall be made in the following form, namely:- 1 The words “DEPARTMENT OF INCOME TAX” substituted by SRO 1218(I)/2015 dated 08.12.2015. 2 The words “DEPARTMENT OF INCOME TAX” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 170

The Commissioner, ______________ Zone, ______________ (City). Dear Sir, I _________________________________________________ of _________________________________ hereby declare:-

(a) that my total income computed in accordance with the provisions of Income Tax Ordinance, 2001 (XLIV of 2001), during the year ending on being the income year for the assessment for the year ending on the _______________ amounted to Rs._______________.

(b) that the total tax chargeable in respect of such total income is Rs._______________.

(c) that the total amount of tax paid is Rs.. 1[(d) that I have already filed evidence of payment of tax along with my return of income for the year or I enclose herewith evidence of tax already paid during the tax year for taking credit.] I, therefore, request that a refund of Rs. may be allowed to me. Yours faithfully_________________________ Signature ____________________________ NTN_________________________________ Address_______________________________ I hereby declare that I am resident/ non-resident and that what is in this application is correct. Date ____________________ Signature ______________________ PART-VII OF THE FIRST SCHEDULE Government of Pakistan 2[“DEPARTMENT OF INLAND REVENUE”] Office of the _____________________ Application for Certificate of Exemption from deduction of tax or deduction at a lower rate under section 3[159].-

(1) An application for a certificate under the section 4[159] shall be made in the following form, APPLICATION FOR CERTIFICATE UNDER SECTION 159 OF THE INCOME TAX ORDINANCE, 2001 The Commissioner I _____________________________________________ of ______________________________ 1 Para “d” inserted in Part VI by SRO 392(I)/2009, dated May 19, 2009. 2 The words “DEPARTMENT OF INCOME TAX” substituted by SRO 1218(I)/2015 dated 08.12.2015. 3 Figure inserted by SRO 392(I)/2009, dated May 19, 2009. 4 Substituted for “152” by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 171

hereby declare that I am entitled to nil/ reduce rate withholding tax certificate, on the following basis, in accordance with the provisions of the Income Tax Ordinance, 2001 for the tax year ____________.

(i) was less than the minimum liable to tax; (i)* amounted to Rs.________________ on which tax is chargeable at the rate of

(ii) is under the Agreement for Avoidance of Double Taxation signed by the Government of Pakistan with the Government of ________________ the country of my residence, not liable to Pakistan tax/ chargeable to Pakistan at the rate of _____________.

(iii) was held exempt under clause _________ of the Second Schedule or is exempt under clause _________ of the Second Schedule.

(iv) that income is not likely to be chargeable to tax in view of tax credits or unabsorbed losses, or

(v) or, in any case, since advance tax rules 147 has been duly paid already, or

(vi) the goods imported are for manufacturing purposes at own factory/ mills/ unit.

(vii) for any other reasons (to be specified). I, therefore, request that certificate may be issued to the person responsible for paying profit on securities/dividends/royalties/other amounts particulars of which are given in the Schedule annexed thereto, or to a person responsible for collecting tax at source, authorizing him not to deduct tax at the rate of ________________ at the time of payment of such amount or to exempt from withholding tax at source. Name _____________________________________ Nationality _________________________________ Address ___________________________________ National Tax Number (if any) I, hereby declare that I am resident/ non-resident in Pakistan and that what is stated in the application is correct. Name _____________________________________ Address ___________________________________ Dated _____________________________________

(2) An application under sub-rule (1) in respect of income derived from sources within Pakistan (other than pensions paid by or on behalf of the Government of Pakistan) in accordance with the provisions of an agreement having effect under section 107 by a person resident in the territory with the Government of which the agreement is made shall be accompanied by further information in the following form, namely:- Income Tax Rules, 2002 172

1[PART-VII(A) OF THE FIRST SCHEDULE Application for Certificate of Exemption under section 159 of the Income Tax Ordinance, 2001 [See Rule 40(3)] To, The 2[“Commissioner of Inland Revenue”] _________________ I, __________________________________________________ Principal Officer/Member of AOP/Individual Proprietor of M/s. _______________________________________________________ hereby declare that I am entitled to import goods without collection of tax at source on the following basis, in accordance with the provisions of clause (v) of paragraph 1 of Notification No. S.R.O. 947(I)/2008, dated 05- 09-2008 for the tax year ___________:

(i) The goods imported consist of plant, machinery, fixtures, fittings or its allied equipments for the purposes of setting up an industrial undertaking (including hotel) owned by me.

(ii) Goods imported consist of plant, machinery, fixtures, fittings or its allied equipments are for the purpose of installation/utilization in an existing industrial undertaking (including hotel) owned by me. I, therefore, request that certificate may be issued to the Collector of Customs _____________________ not to collect tax at source on the value of imports. Necessary details in this regard are given as under:-

(a) Copy of Memorandum and Articles of the Association in case of Company/AOP owning industrial undertaking/ Registration No.___________________

(b) NTN ___________________

(c) Location address of the industrial undertaking ___________________

(d) Nature of the business of industrial undertaking ___________________

(e) Copy of the balance sheet of the industrial undertaking for the latest tax year ______

(f) Description of goods imported ___________________

(g) L.C. No. ___________________

(h) Value of goods ___________________

(i) Port of clearance ___________________ I, hereby declare that whatever is stated in the application is correct to the best of my knowledge and belief. Name _____________________________________ Address ___________________________________ Dated _____________________________________ ] PART-VIII OF THE FIRST SCHEDULE 1 Part VII(a) inserted by SRO 1139(I)/2008, dated October 31, 2008. 2 The words “Commissioner of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 173

CHAPTER - XIX MISCELLANEOUS

Government of Pakistan 1[“DEPARTMENT OF INLAND REVENUE”] Office of the _____________________

Reduce rate/exemption certificate:

Form for certificate of exemption from deduction or deduction of tax at a lower rate.-

(1) On an application made under rule 40, the 2[“Commissioner of Inland Revenue”] may, subject to the conditions laid down in sub-rule (2), give a certificate authorizing the person making the application to receive income specified in Part V of Chapter X without deduction of tax or after deduction of tax at a rate specified therein, in the following form, namely:-

Counterfoil of certificate under proviso to Certificate under Section 159 of the Income certificate. Initials of the Commissioner 2. The income in this case is exempt under ________________ 20___.

Remarks _____________________________ 3. This authorization will remain in force ____________________________________ until the date it is cancelled by me. Description of securities payments _________

(2) The certificate referred to in sub-rule (1) shall be issued only if the 4[“Commissioner of Inland Revenue”] is satisfied that the person concerned-

(i) has furnished such return of returns of income as became due, if any, on or before the date on which the application under rule - is made; and

(ii) is not in default or deemed to be in default in respect of any tax (including advance tax

The words “DEPARTMENT OF INCOME TAX” substituted by SRO 1218(I)/2015 dated 08.12.2015. 2 The words “Commissioner of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 3 The words “Commissioner of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. The words “Commissioner of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015.

Income Tax Rules, 2002 174

under section 147 or tax payable under section 137). 1PART-VIII(A) OF THE FIRST SCHEDULE Government of Pakistan 2[“DEPARTMENT OF INLAND REVENUE”] Office of the _____________________ EXEMPTION CERTIFICATE UNDER SECTION 159 OF THE INCOME TAX ORDINANCE, 2001 [See Rule 40(4)] On an application made under Rule 40, the 3[“Commissioner of Inland Revenue”] may, subject to conditions laid down in sub-rule (3) of the said rule, give a certificate authorizing the Collector of Customs not to collect tax on the import of goods from the person making the application in the following form specified herein namely:- To, The Collector of Customs _____________________________ M/S.__________________________ have applied for issuance of exemption certificate under section 159 of the Income Tax Ordinance, 2001. The relevant particulars are given hereunder:- 1. Certificate No.__________________ Date of Issue __________________ 2. Validity period From: __________________ To __________________ 3. N.T.N. __________________ 4. Location address of the industrial undertaking: __________________ 5. Description of goods imported: __________________ 6. L.C. No. __________________ 7. Value of goods: __________________ I hereby authorize you to exempt the import of goods from collection of tax under section 148 of the Income Tax Ordinance, 2001 as specified in clause (v) of paragraph 1 of Notification No. S.R.O. 947 (I)/2008, dated 05-09-2008 for setting up of an industrial undertaking or for installation in an existing industrial undertaking. This authorization will remain in force until the date specified above or cancelled by me earlier. Any Remarks ________________________________________ 4[“Commissioner of Inland Revenue”] Enforcement Division ____________ RTO/LTU________] 1 Part VIII(a) inserted by SRO 1139(I)/2008, dated October 31, 2008. 2 The words “DEPARTMENT OF INCOME TAX” substituted by SRO 1218(I)/2015 dated 08.12.2015. 3 The words “Commissioner of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 4 The words “Commissioner of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 175

1[PART-IX OF THE FIRST SCHEDULE FORM OF E-ENROLMENT ”] 1 Part IX substituted by SRO 1076(I)/2015 dated 02.11.2015. The substituted Part-IX is as under: Income Tax Rules, 2002 176

Income Tax Rules, 2002 177

PART-X OF THE FIRST SCHEDULE APPLICATION FOR REGISTRATION OF INCOME TAX PRACTITIONER To [2[“Chief Commissioner”] of Regional Tax Office], _______________ Region, ______________ (City), _______________ (Jurisdiction) Dear Sir, With reference to section 223 of the Income Tax Ordinance, 2002, I, the undersigned, hereby apply for registration as an Income Tax Practitioner within the meaning of the said section. Necessary particulars are as below:-

(1) Name (in block letters) __________________________________________________________________________________

(2) Father’s name (in block letters) _______________________________________________________________________

(3) Residential address: ____________________________________________________________________________________

(a) _______________________________________________________________________

(b) _______________________________________________________________________

(4) Date of birth ______________________________________________________________

(5) Academic/professional qualifications on the basis of which registration has been sought

(6) Present occupation _________________________________________________________

(7) Particulars of Chartered Accountant/ Cost and Management Accountant/ Income Tax Practitioner with whom apprenticeship was completed and the period and dates of apprenticeship. I hereby declare on solemn affirmation that whatever information has been given above is correct to the best of my knowledge. It is further affirmed that-

(a) I have not been dismissed or removed from service;

(b) I am not an un-discharged insolvent;

(c) I have not been disqualified to represent an income tax assesses by a 3[“Commissioner of Inland Revenue”] or any authority empowered to take disciplinary action against lawyers or registered accountants;

(d) A period of two years elapsed since I resigned from service after having been employed in the 4[“Inland Revenue Department”] for two years or more;

(e) I have not been convicted of any offence connected with any income tax proceeding under the Income Tax Ordinance, 2001, or the repealed Income Tax Ordinance, 1979 5[ ]; and

(f) I have not been convicted of any offence under the Pakistan Penal Code. Yours faithfully 1 Substituted for “The Regional Commissioner of Income Tax” by SRO 392(I)/2009, dated May 19, 2009. 2 The words “Director General” substituted by SRO 1218(I)/2015 dated 08.12.2015. 3 The words “Commissioner of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015 4 The words “Income Tax Department” substituted by SRO 1218(I)/2015 dated 08.12.2015. 5 The expression “and Income Tax Act, 1922” omitted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 178

Name of the Appellant ________________________ Office Address ______________________________ Income Tax Rules, 2002 179

PART-XI OF THE FIRST SCHEDULE Government of Pakistan 1[“Department of Inland Revenue”] office of the _____________________ Notice under sub-section 4 of section 114 of the Income Tax Ordinance, 2001 NTN//2[“CNIC”] ____________________________________ Name: ____________________________________________ Address: _________________________________________ 3[“Tax”] year: ________________________________________ Dated: ____________________________________________ Dear Sir, 1. You have not furnished a return of income for the tax year _________ required to be filed under clause ______ of sub-section (1) of section 114 of the Income Tax Ordinance, 2001. You are, hereby, required to furnish 4[“with thirty days from the date of service of notice”] on or before _______________________ a Return of Income for the said tax year, in the prescribed form and verified in the prescribed manner. A copy of the Return of Income is enclosed. 2. Please note that failure to comply with any of the terms of this notice may result in 5[“provisional”] assessment under sub-section (1) of section 6[“122C”] of the said Ordinance, and may also render you liable to a penalty under sub-section (1) of section 182, or, prosecution under section 191 of the said Ordinance or both. Commissioner/ 7[“Officer of Inland Revenue”] [PART-XII OF THE FIRST SCHEDULE 9[Prescribed Form for Notice of Demand 10[for] payment of tax due].- Notice of demand required to be served upon the taxpayers under section 137(2) shall be in the following form, namely:- Government Of Pakistan 11[“Department of Inland Revenue”] office of the _____________________ NOTICE OF DEMAND UNDER SECTION 137(2) OF THE INCOME TAX ORDINANCE, 2001 N.T.No. 1[“CNIC”] 1 The words “Department of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 2 The word “TRN” substituted by SRO 1218(I)/2015 dated 08.12.2015. 3 The word “Assessment” substituted by SRO 1218(I)/2015 dated 08.12.2015. 4 Inserted by SRO 1218(I)/2015 dated 08.12.2015. 5 The words “an ex-parte” substituted by SRO 1218(I)/2015 dated 08.12.2015. 6 The figure “121” substituted by SRO 1218(I)/2015 dated 08.12.2015. 7 The word “Taxation Officer” substituted by SRO 1218(I)/2015 dated 08.12.2015. 8 Part XII substituted by SRO 189(I)/2006, dated February 28, 2006. 9 Underlining omitted by SRO 392(I)/2009, datedMay 19, 2009. 10 Substituted for “in” by SRO 392(I)/2009, dated May 19, 2009. 11 The words “Department of Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 180

Tax Year ______________ Year ending ____________ To _________________________________ _________________________________ Dear Sir/Madam As a result of order passed u/s.____________ in your case for the tax year _____________ whereby your total income has been determined at Rs.______________________ and an amount of Rs._______________ (Rupees ___________________________________________________) has been determined to be payable/refundable as specified below.-

(a) Income Tax Rs

(b) 2[“Default Surcharge”] Rs

(c) WWF Rs

(d) Penalty u/s Rs

(e) Others Rs Total Rs

(2) You are required to make the payment of the above amount on or before _______________ but not later than 3[ 4[“thirty”] ] days from the date of service of this notice in the National Bank of Pakistan/ State Bank of Pakistan/Treasury Office/Sub-Treasury Office.

(3) If you intend to appeal against the order, you may file an appeal under section 127 to the Commissioner of 5[“Inland Revenue”] (Appeals), Zone _______________ within thirty days of the receipt of this notice.

(4) Please note that by timely payment of your tax liability you can avoid:

(a) mandatory levy of 6[“default surcharge”] under section 205 7[ ];

(b) penalty under section 8[“182(1)”]; and

(c) proceedings under 138(2). 9[“(d) Recovery of tax under section 140.”]

(5) Copy of the order on which demand/refund is based is enclosed. Date ________________ Seal [Commissioner/10[“officer of Inland Revenue”]] Personal Code ___________] 1 Inserted by SRO 1218(I)/2015 dated 08.12.2015. 2 The words “Additional Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 3 Substituted for “30” by SRO 755(I)/2008, dated July 15, 2008. Earlier it was substituted for “15” by SRO 612(I)/2006, dated June 08, 2006. 4 The words “fifteen” substituted by SRO 1218(I)/2015 dated 08.12.2015. 5 The words “Income Tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 6 The words “additional tax” substituted by SRO 1218(I)/2015 dated 08.12.2015. 7 The words “@ 12% per annum” omitted by SRO 1218(I)/2015 dated 08.12.2015. 8 The figure “183” substituted by SRO 1218(I)/2015 dated 08.12.2015. 9 Added by SRO 1218(I)/2015 dated 08.12.2015 10 The words “Taxation Officer” substituted by SRO 1218(I)/2015 dated 08.12.2015. Income Tax Rules, 2002 181

PART-XIII OF THE FIRST SCHEDULE Government Of Pakistan 1[“DEPARTMENT OF INLAND REVENUE”] office of the _____________________ Form of authorization (See Rule 72 Section 175) In pursuance of and as empowered under section 175 and to carry out the purpose and objects of the Section, M/s._____________________ and M/s.____________________ 2[“officer of Inland Revenue”] and/or M/s.____________________ __________________________________ valuer(s) is/ are authorized with regard to the tax related matters of M/s. _______________________________ to enter any premises and to have full and free access to any place, accounts, documents or computer, and to impound or to take extracts or copy of such material and/or examine and prepare notes, details of inventory and its valuation, or computer disc of information or floppies from hard disc or inventory of any article found at the place. The officer(s) authorized shall handover a copy of inventory of goods and material to the persons available on premises and/or put/affix on the conspicuous place in case of refusal of such person to receive or accept. In the later situation, may also send such copy through registered post/courier service as early as possible. The 3[“officer of Inland Revenue”] may keep in mind the enquiry/investigation, audit relating to tax issues only. Commissioner 4[PART-XIV OF THE FIRST SCHEDULE APPLICATION FOR GROUP RELIEF UNDER SECTION 59B OF THE INCOME TAX ORDINANCE, 2001 Prescribed application for group relief.- An application by the taxpayer for group relief under section 59B of the Income Tax Ordinance, 2001, shall be in the following form, namely:- To, The Commissioner, _____________________________ Dear Sir, . The undersigned being duly authorized hereby apply on behalf of M/s.____________________________ (Name, NTN and address of the company) for group relief under section 59B of the Income Tax Ordinance, 2001, in respect of the following companies of the group. Whether Commissioner Name of holding/ having jurisdiction the Address (Head Incorporation subsidiary over holding/ S.No. company Office / postal) NTN No. No. company subsidiary company

(1) (2) (3) (4) (5) (6) (7) 2. The following documents are attached:- (i) Copies of locally incorporation certificates of the above mentioned companies under the Companies Ordinance, 1984; and 1 The words “DEPARTMENT OF INCOME TAX” substituted by SRO 1218(I)/2015 dated 08.12.2015. 2 The words “Taxation Officer” substituted by SRO 1218(I)/2015 dated 08.12.2015. 3 The words “Taxation Officer” substituted by SRO 1218(I)/2015 dated 08.12.2015. 4 Part XIV inserted by SRO 392(I)/2009, dated May 19, 2009. Income Tax Rules, 2002 182

(ii) Copy of the certificate issued by the SECP (as set out in Annexure to this Part) confirming that the companies had complied with the corporate governance requirements, as Notified by the SECP, and are not defaulters of any rules or regulations. 3. It is declared that in accordance with the provisions of section 59B of the Income Tax Ordinance, 2001,-

(i) there is continued ownership for five years of share capital of the subsidiary company to the extent of,-

(a) fifty five percent in the case of a listed company; or

(b) seventy-five percent or more, in the case of other companies;

(ii) a company within the group has not engaged in the business of trading;

(iii) holding company, being a private limited company with seventy-five percent of ownership of share capital gets itself listed within three years from the year in which set off for loss is claimed;

(iv) the Board of Directors of the respective companies have approved the loss surrendered and loss claimed under section 59B of the Income Tax Ordinance, 2001;

(v) the Board of Directors of the loss claiming company has approved transfer of cash to the loss surrendering company equal to the amount of tax payable on the profit set off against the acquired loss; and

(vi) after the approval of cash transfer by the Board of Directors, the cash has been actually transferred before the filing of returns of the loss claiming company and the loss surrendering company. Yours faithfully Name (in block letters) _______________________ CNIC No. __________________________________ Designation. _______________________________ ANNEXURE (See paragraph 2(ii) of this part) CERTIFICATE FROM THE SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN It is certified that M/s ______, incorporated at No. dated is a holding company having 55% share of the following subsidiary companies,

(a) ________________________________________

(b) ________________________________________

(c) ________________________________________

(d) ________________________________________ It is certified that M/s , M/s and M/s __________ are the subsidiary companies of the holding company M/s_______________________________ holding 75% share of the aforementioned subsidiary companies. Income Tax Rules, 2002 183

And the holding company and its subsidiary companies (mentioned above) have not violated any corporate governance requirements notified by the SECP from time to time, and the above said companies are entitled to avail group relief under section 59B of the Income Tax Ordinance, 2001. This certificate shall be valid till no violation from the date of issuance of this certificate onwards is committed by the concerned companies. The SECP is obliged to intimate the Commissioner of Income Tax concerned, if any, code of corporate governance is violated by any of companies availing benefit of group relief under section 59B of the Income Tax Ordinance, 2001. Name of the issuing authority __________________ Seal/Stamp ________________________________ Income Tax Rules, 2002 184

PART-I OF THE SECOND SCHEDULE PART-II OF THE SECOND SCHEDULE 1[“ 1 Inserted by the S.R.O. 841(I)/2015 dated 26.08.2015

”]

1Part II G [“Company Income Tax Return 2015 1 Inserted by the S.R.O. 877(I)/2015 dated 01.09.2015

”]

1[“Individual Income Tax Return 2015 1 1 Inserted by the S.R.O. 877(I)/2015 dated 01.09.2015

1[“AOP Income Tax Return 2015 1 1 Inserted by the S.R.O. 877(I)/2015 dated 01.09.2015

”]

PART-IV OF THE SECOND SCHEDULE 1[“Statement of Assets / Liabilities for Tax Year 2015 ”] 1 1 Inserted by the S.R.O. 877(I)/2015 dated 01.09.2015

PART-X OF THE SECOND SCHEDULE 1[“Monthly Statement of collection or deduction of income tax under section 165(2) [See rule 44(2)] 1 Inserted by the S.R.O. 941(I)/2015 dated 18.09.2015

”]

442. Certificate of collection or deduction of tax

(1) As required under sub-section (1) of section 164, any person responsible for-

(a) Collecting tax under Division II of Part V of Chapter X of the Ordinance;

(b) Deducting tax from a payment under Division III of Part V of Chapter X of the Ordinance, except in the case of salary;

(c) Collecting or deducting tax under Chapter XII of the Ordinance; or

(d) Deducting tax under the Sixth Schedule to the Ordinance, 1 Sub-rules “(3) and (4)” inserted by SRO 1139(I)/2008, dated October 31, 2008. 2 Part II comprising of rules 41 to 45 substituted by SRO 641(I)/2005, dated June 27, 2005. 3 Rule “41” omitted by SRO 1062(I)/2007, dated October 27, 2007. 4 Part II comprising of rules 41 to 45 substituted by SRO 641(I)/2005, dated June 27, 2005. 5 Words “other than from salary” omitted by SRO 1062(I)/2007, dated October 27, 2007. Income Tax Rules, 2002 70

CERTIFICATES, STATEMENTS AND PROCEDURE FOR PAYMENT OF CHAPTER - IX ADVANCE TAX shall issue a certificate to the person from whom tax has been collected or deducted, in the form as set out in Part VII of the Second Schedule to these rules, within fifteen days after the end of the financial year or discontinuation of business etc.

(2) Where the person from whom tax has been collected or deducted requests for the issuance of the certificate before the end of the financial year, the certificate under sub- rule (1) shall be issued for the period in that year within seven days of the request made.

(3) Where the certificate issued under sub-rule (1) or sub-rule (2) has been lost, stolen or destroyed the recipient of the certificate may request, in writing, to the issuer of the certificate to issue a duplicate thereof.

(4) Where a request has been made under sub-rule (3), the issuer of the certificate shall comply with the request and the certificate so issued shall be clearly marked “duplicate”.

(5) The certificate issued under sub-rules (1), (2) or sub-rule (3) shall be in duplicate and serially numbered. DIVISION III PAYMENT OF TAX COLLECTED OR DEDUCTED