Preliminary Chapter- 04
Explanation: PE of a non-resident is taxable on attributable profits in Pakistan u/s 105 or in terms of
applicable provisions of a double taxation treaty, if available. A Branch and head office is not independent
or separate entities as are a holding or a subsidiary company.
Example: Iqbal Industries (Pvt.) Ltd. had paid up capital of Rs.100,000 divided into 10,000 shares of Rs.10
each and accumulated profit of Rs.50,000 at the time of liquidation. The official liquidator realized
Rs.380,000 out of which Rs.230,000 was paid to the creditors. Remaining was paid to shareholders. Mr.
Amir had 500 shares at the time of liquidation.
Required: Calculate (a) the amount received by Amir and (b) how much out of this amount is to be treated
as dividend income.
Solution:
Total amount received by Amir (150,000 x 500 / 10,000) 7,500
Amount treated as dividend to the extent of accumulated profit
(50,000 x 500 / 10,000) 2,500
Example: Under what circumstances advance or loan to a shareholder by a private company would be
treated as 'dividend' with reference to the Income tax Ordinance, 2001.
Solution: Loan or advance to the extent of accumulated profits paid to a shareholder by a private company
as defined in the Companies Ordinance, 1984 or by a trust shall be treated as dividend.
However, if the company is involved in the business of money lending then loan or advance in the ordinary
course of business shall not be treated as dividend.
"Eligible Person" [U/s 2(19A)] for the purpose of Voluntary Pension System Rules, 2005, means an
individual Pakistani who holds a valid National Tax Number or Computerised National Identity Card or
National Identity Card for Overseas Pakistanis issued by the National Database and Registration Authority:
Provided that the total tax credit available for the contribution made to approved employment pension or
annuity scheme and approved pension fund under Voluntary Pension System Rules, 2005, should not
exceed the limit prescribed or specified in section 63.
Explanation: For the purpose of voluntary pension scheme, the condition of computerized National Identity
Cards or National Identity Card for Overseas Pakistanis is provided in case of non-availability of National
Tax Number.
"Definitions in Electronic Transactions Ordinance" [U/s 2(19B)] the expressions "addressee",
"automated", "electronic", "electronic signature", "information", "information system", "originator"
and "transaction", shall have the same meanings as are assigned to them in the Electronic Transactions
Ordinance, 2002;
"Electronic record" [U/s 2(19C)] includes the contents of communications, transactions and procedures
under this Ordinance, including attachments, annexes, enclosures, accounts, returns, statements,
certificates, applications, forms, receipts, acknowledgements, notices, orders, judgments, approvals,
notifications, circulars, rulings, documents and any other information associated with such communications,
transactions and procedures, created, sent, forwarded, replied to, transmitted, distributed, broadcast,
stored, held, copied, downloaded, displayed, viewed, read, or printed, by one or several electronic
resources and any other information in electronic form;
"Electronic resource" [U/s 2(19D)] includes telecommunication systems, transmission devices, electronic
video or audio equipment, encoding or decoding equipment, input, output or connecting devices, data
processing or storage systems, computer systems, servers, networks and related computer programs,
applications and software including databases, data warehouses and web portals as may be prescribed by
the Board from time to time, for the purpose of creating electronic record;
"Telecommunication system" [U/s 2(19E)] includes a system for the conveyance, through the agency of
electric, magnetic, electro-magnetic, electro-chemical or electro-mechanicals energy, of speech, music and
other sounds, visual images and signals serving for the impartation of any matter otherwise than in the form