Taxation System Chapter- 04
in banking business in Pakistan, will be considered banking companies and will be subjected to higher rate
of tax, till the time the rate of tax of public and banking companies come at par.
The body corporate simplicitor and body corporate formed by or under a law are two different categories.
However, the expression "banking business" remains the same in both the enactments meaning by that
only those bodies corporate will be covered which are engaged in the banking business. The "banking
business" is not an ordinary dictionary expression. It has specific, technical meaning under the relevant law
i.e. the Banking Companies Ordinance of 1962, which reads as under:
"Banking Company" means any company which transacts the business of banking in Pakistan.
Banking means accepting, for the purpose of lending or investment, of deposits of money from the public,
repayable on demand or otherwise, and withdraw-able by cheque, draft, or otherwise.
Any company which is engaged in the manufacture of goods or carries on any trade and which accepts
deposits of money from the public merely for the purpose of financing its business as such manufacturer or
trader shall not be deemed to transact the business of banking within the meaning of this clause.
“BENEFICIAL OWNER” [U/s 2(7A) means a natural person who –
(a) ultimately owns or controls a Company or association of persons, whether directly or indirectly, through
at least 25% shares or voting rights; or
(b) exercise ultimate effective control, through direct or indirect means, over the company or association of
persons including control over the finances or decisions or other affairs of the company or association of
persons;”;
"BOARD" [U/s 2(8)] means the Central Board of Revenue established under the Central Board of
Revenue Act, 1924 and on the commencement of Federal Board of Revenue Act, 2007, the Federal Board
of Revenue established u/s 3 thereof;
"Bonus shares" [U/s 2(9)] includes bonus units in a unit trust;
Explanation: This is an inclusive definition which retains the generally accepted meaning of the word
"bonus shares" but includes in its ambit "bonus units' in a unit trust. The purpose is to treat profit distribution
by NIT and other unit trusts at par with stock dividend issued by companies. Bonus shares are not more a
part of income.
"Business" [U/s 2(10)] includes any trade, commerce, manufacture, profession, vocation or adventure or
concern in the nature of trade, commerce, manufacture, profession or vocation, but does not include
employment;
Explanation: The Legislature has merged profession or vocation in the definition of '"business." This
definition is not exhaustive. It includes some specific categories but specifically excludes "employment"
meaning by that professionals like doctors, lawyers, accountants, engineers etc. while deriving income from
employment will not be charged to tax under the head "Income from Business" although they derive
emoluments from rendering of professional services.
This verifies the principle laid down in 2000 PTD (Trib.) 457 that professional receipts (hospital share)
derived by a doctor in addition to emoluments as employee are not salary.
“Business bank account” [U/s 2(10A)] means a bank account utilized by the taxpayer for business
transaction declared to the Commissioner through original or modified registration form prescribed under
section 181;
"Capital asset" [U/s 2(11)] Capital asset means property of any kind held by a person, whether or not
connected with a business, but does not include the following:
(a) Any stock-in-trade, consumable stores or raw materials held for the purpose of business;
(b) Any depreciable and intangible property; or