Losses Chapter- 14
Carry forward of losses of export procession zone units [u/c 2 Part IV, second schedule] –
This clause has been omitted by Finance Act, 2021
In the case of losses referred to in section 57 in respect of an industrial undertaking set up in an area
declared by the Federal Government to be a "Zone" within the meaning of Export Processing Zones
Authority Ordinance, 1980, the period of 6 tax years specified in the said section shall not apply-Example: P and L account for the year 1 of Ali Enterprises (industrial undertaking in Export
Processing Zone) is given below:Rs.
Sales 300,000
Cost of sales 160,000
Gross profit 140,000
Administrative and selling expenses 160,000
Loss (20,000)
Note: Accounting depreciation 10,000
Tax depreciation 20,000
Solution:
Zia Enterprises
Computation of taxable income and tax liability: Year 1
Rs.
Accounting loss (20,000)
Add: accounting depreciation 10,000
Business loss (10,000)
Unabsorbed depreciation (20,000)
Both business loss assessed in the current year Rs. 10,000 and unabsorbed depreciation Rs. 20,000
shall be carried forward for unlimited time for an industrial undertaking in Export Processing Zone till
the tax year 2021. This clause has been omitted by Finance Act, 2022.- Set-off of business loss consequent to amalgamation [Section (57A)]
Both the amalgamating and amalgamated companies can set off and carry forward their losses
(excluding brought forward and capital loss) against each other for a period of 6 years if, the
amalgamated company continues the business of amalgamating company for 5 years from the date
of amalgamation and the scheme is approved by State Bank of Pakistan, Securities and Exchange
Commission of Pakistan or any court.
In case of amalgamation of banking company, non-banking company, non-banking finance company,
modaraba or insurance company, the accumulated loss (excluding speculation losses) of an
amalgamating company or companies shall be set off or carried forward against business income of
the amalgamated company or vice versa for 6 years provided the scheme is approved by State Bank
of Pakistan, Securities and Exchange Commission of Pakistan or any court.
The meaning of the “amalgamation “has been extended to include the companies engaged in
providing services other than trading companies.Example: A Ltd. (amalgamating company) and B Ltd. (amalgamated company) amalgamated in tax
year 20 16. Detail of losses of B Ltd. in tax year 20 23 is given below:
Rs.
Brought forward losses before tax year 201 7 10,000
Capital loss for tax year 20 17 2,000
Un- adjusted business loss for tax year 20 17 100,000
There was no loss in tax year 201 8 to 20 22. Following is the information relating amalgamated
company for tax year 20 23.