Companies

COMPANIES Section 94 – Principles of Taxation of Companies.  Comments: This sec. relates to the different aspects of computing income of companies and main points are highlighted here-under: a) The company’s liability to tax will be distinct from the liability of its shareholders. 

Comments: b) Sub-section

(2) mentions tax liability where the company is in receipt of dividend income from a resident company, it shall be taxable in accordance with section 5. (PTR)

Comments: c) Sub-section (3) provides that unless it has

been specifically declared exempt under the Ordinance, any dividend received from a non-resident company will be taxed under the head “income from Business” where the company is engaged in the business of shares or “income from Other Sources” where dividend is received from investment in shares. Such income will not fall under PTR.

Section 95 – Disposal of Business By individual to Wholly-Owned Company  Comment:  Any transaction relating to disposal of assets is subjected to ‘Capital Gain’. But in the above situation disposal of assets will not result in either gain or loss subject to fulfillment of provisos of the section.

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Section 96 – Disposal of Business By Association of Persons To WhollyOwned Company. No gain or loss shall arise if conditions of this section are satisfied.

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Section 97. – Disposal Of Assets between wholly-owned resident companies. No gain or loss shall arise provided conditions satisfied.

COMPUTATION OF TAXABLE INCOME OF COMPANIES First ascertain gross income under each head of income.  Exclude income to which section 5,6,7 or section 169(1)(b) apply. (Final tax)  Then deduct admissible deductions.  Add up net income from each head of income.  Losses are adjusted from total income. 

COMPUTATION OF TAXABLE INCOME OF COMPANIES 

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Amount of Zakat paid and contribution to workers welfare fund are also allowed to be deducted from income as deductible allowance. Now the total income arrived at will be taxable income and chargeable to tax. Apply rate of tax for companies given in Division II, part I of the first schedule. (Records are to be maintained by companies as required by Sec. 174, All companies are required to maintain books on accrual basis).