Banking Business Chapter- 27
(1) Exemptions and tax concessions under the 2nd schedule shall not apply to banking company.
(1A) The accumulated loss under the head "Income from Business" (not being speculation business
losses) of an amalgamating banking company or banking companies shall be set off or carried
forward against the business profits and gains of the amalgamated company and vice versa, up
to a period of six tax years immediately succeeding the tax year in which the loss was first
computed in the case of amalgamated banking company or amalgamating banking company or
companies.
(2) If both the holding and subsidiary companies are banking companies then Group Relief
(section 59B) shall apply. Chartered Accountants firm on the panel of the State Bank of
Pakistan shall approve the accounts of group companies. Approval from State Bank of Pakistan
is required for surrender and claim of loss.
(3) Group taxation (section 59AA) shall apply for the 100% owned group of banking companies
with the approval of State Bank of Pakistan.(9) Transitional Provisions
- The provisions of “bad debts” (sec. 29) and “Provision regarding consumer loans” (sec. 29A)
shall apply. Amounts provided before or for tax year 2008 as irrecoverable or doubtful
advances, neither claimed not allowed as tax deductible in a tax year, shall be allowed only
when such advances are actually written off against such provision. - Amounts provided before or for tax year 2008 as irrecoverable or doubtful advances, which
were neither claimed not allowed as tax deductible in a tax year but were written off in
accounts, are written back in the tax year 2009 and thereafter in any tax year in accounts, shall
be excluded in computing the taxable income. - If a banking company give or acquire any asset at finance lease up to the tax year 2008 then
the provisions of this schedule shall not apply. The banking company shall recognize the
income and deduction in respect of asset leased on finance in accordance with the provisions
of Ordinance as if this schedule has not come in to force:
Provided that the un-absorbed depreciation in respect of such asset shall be allowed to be set-off
against the said lease rental income only.
(10) Provisions of Ordinance to apply: The provisions of the Ordinance not specifically dealt with in the
aforesaid rules shall apply as it is to the banking company.
(11) The federal government may, from time to time, by notification in official Gazette, amend the schedule
so as to add, modify or omit any entry therein.
Example: Finance manager of XYZ banking company has provided you the following information for the
computation of taxable income and tax liability of the company for the tax year 20 23.
Rs. In “000”
Profit before taxation as per P and L account 48,000
Accounting depreciation 9,000
Admissible depreciation by the taxation authority 10,500
Bad debts 750
Provision for bad debts 999
Total advances shown in balance sheet 66,600
Outstanding liability not paid over last 3 years ending on 20 20 1,500
Amount paid for outstanding liability in 20 22 which was become overdue
in 201 9 and was added back to the taxable income in 20 21 875
Un-adjusted loss on sale of shares of listed company is brought forward this year 150
Head Office expenditure charged to the branch (in accounts) 3,855
Total head office expenditure 12,850
Gross receipts of branch in Pakistan 320,000
Total world gross receipts 1,280,000