Losses Chapter- 14
Computation of tax liability:Higher of:
Tax on Rs. 400,000 @ 29 % 1 16, 000
OR
Tax on total turnover Rs. 7,000,000 @ 1. 25 % 87,500
As the tax payable under Normal Tax Regime is higher than the minimum
tax payable u/s 113, hence the same is payable by the company 1 16, 000
Note - 1 : This question has been solved on the assumption that all other conditions required for
taxation under group taxation have been met by the group.
Note -2: In the absence of information it has been assumed that the tax under Alternative Corporate
tax u/s 113C of the Income tax Ordinance, 2001 @ 17% on accounting profit is less than the
corporate tax.- Group relief (Section 59B)
(1) Any company, being a subsidiary or a Holding Company, may surrender its assessed loss as
computed in sub-section (1A) (excluding capital loss) for the tax year (other than brought
forward losses and capital losses), in favour of its Holding Company or its subsidiary or
between another subsidiary of the HC:
Provided that where one of the company in the group is a public company listed on a registered
stock exchange in Pakistan, the Holding Company shall directly hold 55% or more of the share
capital of the Subsidiary Company. Where none of the companies in the group is a listed
company, the holding company shall hold directly 75% or more of the share capital of the
Subsidiary Company.
(1A) The loss to be surrendered as above shall be allowed as per following formula:-
(A / 100) x B
where—
A is the percentage share capital held by the holding company of its subsidiary company; and
B is the assessed loss of the subsidiary company.
(2) The loss surrendered by the Subsidiary Company may be claimed by the Holding Company or
a Subsidiary Company for set off against its income under the head "income from Business" in
the tax year and the following two tax years subject to the following conditions, namely:
(a) there is continued ownership for 5 years, of share capital of the Subsidiary Company to
the extent of 55% in the case of a listed company, or 75% or more, in the case of other
companies;
(b) a company within the group engaged in the business of trading shall not be entitled to
avail group relief;
(c) Holding Company, being a private limited company with 75% of ownership of share
capital gets itself listed within 3 years from the year in which loss is claimed;
(d) the group companies are locally incorporated companies under the Companies Act,
2017 ;
(e) the loss surrendered and loss claimed under this section shall have approval of the Board
of Directors of the respective companies;
(f) the Subsidiary Company continues the same business during the said period of 3 years;
(g) all the companies in the group shall comply with such corporate governance requirements
and group designation rules or regulations as may be specified by the Securities and
Exchange Commission of Pakistan from time to time, and are designated as companies
entitled to avail group relief; and
(h) any other condition as may be prescribed.
(3) The Subsidiary Company shall not be allowed to surrender its assessed losses for set off
against income of Holding Company for more than 3 tax years.