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  INCOME TAX ORDINANCE, 1979ORDINANCE NO. XXXI OF 1979AN ORDINANCE to consolidate and amend the law relating to income-tax and super-tax WHEREAS it is expedient to consolidate and amend the law relating to income tax and super taxfor the purposes hereinafter appearing; AND WHEREAS the President is satisfied that circumstances exist which render it necessary totake immediate action; NOW, THEREFORE, in pursuance of the Proclamation of the fifth day of July, 1977 read with theLaws (Continuance in Force) Order, 1977 (CMLA Order No.1 of 1977), and in exercise of all powersenabling him in that behalf, the President is pleased to make and promulgate the following Ordinance:- CHAPTER IPRELIMINARY   1. Short title, extent and commencement . (1) This Ordinance may be called the Income Tax Ordinance,1979. (2) It extends to the whole of Pakistan. (3) It shall come into force on the first day of July, 1979.  2. Definitions .-In this Ordinance, unless the context otherwise requires,- (1) "Agricultural income" means-(a) any rent or revenue derived from land which is situated in Pakistan and is used for agricultural purposes;(b) any income derived from such land by-(i) agriculture; or (ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarilyemployed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or  1  (iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii);(c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator, or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any operation mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on: Provided that the building is on, or in the immediate vicinity of, the land, and is a buildingwhich the receiver of the rent or revenue or the cultivator, or the receiver of the rent-in-kind by reason of his connection with the land, requires as a dwelling-house, or as a store-house,or other out-building;(2) "Appellate  1 [Additional Commissioner]" means a person appointed to be an Appellate AdditionalCommissioner of Income Tax under section 4;(3) "Appellate Tribunal" means the Appellate Tribunal constituted under section 133;(4) "approved gratuity fund" means a gratuity fund which has been, and continues to be, approved by theCommissioner in accordance with the rules contained in Part III of the Sixth Schedule;(5) "approved superannuation fund" means a superannuation fund, or any part of a superannuation fund,which has been, and continues to be, approved by the Commissioner in accordance with the rulescontained in Part II of the Sixth Schedule;(6) "assessee" means a person by whom any tax or any other sum of money is payable under thisOrdinance, and includes-(a) every person in respect of whom any proceeding under this Ordinance has been taken for the assessment of his income or the income of any other person in respect of which he isassessable or of the amount of refund due to him or to such other person;(b) every person who is required to file a return of total income under section 55, section 72 or section 81; and(c) every person who is deemed to be an assessee, or an assessee in default, under any provision of this Ordinance;(7) "assessment" includes re-assessment and additional assessment and the cognate expressions shall beconstrued accordingly;(8) "assessment year" means the period of twelve months beginning on the first day of July nextfollowing the income year and includes any such period which is deemed, under any provision of thisOrdinance, to be the assessment year in respect of any income or any income year; 1  Subs. for “Asistant Commissioner” by F.A. 1993. 2  (9) "average rate of tax" means the rate arrived at by dividing the amount of tax calculated on the totalincome by such income; (10) "banking company" has the same meaning as in the Banking Companies Ordinance, 1962 (LVII of 1962), and includes any body corporate formed by, or under, any law for the time being in force whichtransacts the business of banking in Pakistan;(11) "business" includes any, trade, commerce or manufacture, or any adventure or concern in thenature of trade, commerce or manufacture;(12) "capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include-(i) any stock-in-trade (not being stocks and shares), consumable stores or raw materials heldfor the purposes of his business or profession;(ii) personal effects, that is to say, movable property (including wearing apparel, jewellery andfurniture) held for personal use by the assessee or any member of his family dependent onhim; and (iii) any land from which the income derived by the assessee is agricultural income;(13) "Central Board of Revenue" means the Central Board of Revenue constituted under the CentralBoard of Revenue Act, 1924 (IV) of (1924);(14) "charitable purpose" includes relief of the poor, education, medical relief and the advancement of any other object of general public utility;(15) "Commissioner" means a person appointed to be a Commissioner of Income Tax under section 4[and includes a Director of Tax Withholding and a Director of Intelligence and Investigation]; 1 [(16) "company" means-(a) company as defined in the Companies Act, 1913 (VII of 1913); or (b) a body corporate formed by or under any law for the time being in force; or  2 [(bb) a trust formed by or under any law for the time being in force; or](c) a body corporate incorporated by or under the law of a country outside Pakistan relating toincorporation of companies; or  3 [(cc) a modaraba as defined in the Modaraba Companies and Modarabas (Floatation andControl) Ordinance, 1980 (XXXI of 1980);(d) the Government of a Province; 1  Cl. (16) subs. by F. O. 1980. 2  Sub-cl.(bb) ins.by F. O. 1983. 3  Sub-cl. (cc) ins. by F. A. 1992. 3   (e) a foreign association, whether incorporated or not which the Central Board of Revenue may, be general or special order, declare to be company for the purposes of this Ordinance for such assessment year or years (whether commencing before, on or after the first day of July, 1979) as may be specified in the said order;](17) "co-operative society" means a co-operative society registered under the Co-operative Societies Act,1912 (XI of 1912) or under any other law for the time being in force in Pakistan for the registration of co-operative societies; 1 [(17A) "Deputy Commissioner" means a person appointed to be a Deputy Commissioner of Income Taxunder section 4 and includes an Income Tax Officer, a Special Officer][ , a Deputy Director of TaxWithholding, an Assistant Director of Tax Withholding, a Deputy Director of Intelligence andInvestigation, an Assistant Director of Intelligence and Investigation] and a Tax Recovery Officer;(18) "director" and "manager", in relation to a company, have the meaning assigned to them in theCompanies Act, 1913 (VII of 1913); 2 [(19) "Director-General of Intelligence and Investigation means a person appointed to be a Director-General of Intelligence and Investigation under section 4; ] 3 [(19A) "Director-General of Training and Research" means a person appointed to be a Director-Generalof Intelligence and Investigation under section 4, and includes a person appointed to be Director of Training and Research, an Additional Director of Training and Research, a Deputy Director of Trainingand Research, an Assistant Director of Training and Research or any other officer, howsoever designated,appointed by the Central Board of Revenue for the purposes of any or all functions performed by Director-General of Training and Research and any other function that may be assigned to him;] (20) "dividend" includes-(a) any distribution by a company of accumulated profits to its shareholders 4 [or modarabacertificate holders], whether capitalised or not, if such distribution entails the release by thecompany to its share holders of all or any part of the assets of the company;(b) any distribution by a company, to its shareholders 1 [or modaraba certificate holders], of debentures, debenture stock or deposit certificates in any form, whether with or withoutinterest, and any distribution to its 5 [ ]shareholders of shares by way of bonus 6 [or bonusshares], to the extent to which the company possesses accumulated profits whether capitalised or not;(c) any distribution made to the shareholders 1 [or modaraba certificate holders] of a companyon its liquidation, to the extent to which the distribution is attributable to the accumulated profits of the company immediately before its liquidation, whether capitalised or not; 1  Cl.(17A) ins. by F. A. 1993. 2  Cl.(19) subs. by F. A. 1995. 3  Cl.(19A) ins. ibid. 4  Words ins. by F. A. 19.92. 5  Word “preference” omitted by F.O. 2001. 6  Words ins. by F.O. 2001. 4  (d) any distribution by a company to its shareholders 1 [or modaraba certificate holders] on thereduction of its capital, to the extent to which the company possesses accumulated profits,whether such accumulated profits have been capitalised or not; and(e) any payment by a private company of any sum (whether as representing a part of the assetsof the company or otherwise) by way of advance or loan to a shareholder or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, tothe extent to which the company, in either case, possesses accumulated profits; but does notinclude-(i) distribution made in accordance with sub-clause (c) or sub-clause (d) in respect of any share for full cash consideration, or redemption of debentures or debenture-stock, where the holder of the share or debenture is not entitled in the event of liquidation to participate in the surplus assets;(ii) any advance or loan made to a shareholder by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of thecompany;(iii) any dividend paid by a company which is set off by the company against the wholeor any part of any sum previously paid by it and treated as a dividend within themeaning of sub-clause (e), to the extent to which it is so set off.  Explanation .- The expression "accumulated profits",-(a) wherever it occurs in this clause, includes any reserve made up wholly or partly of anyallowance, deduction or exemption admissible under this Ordinance or the repealed Act, but does not include capital gains arising before the first day of April, 1946 or after thethirty-first day of March, 1949 and before the eighth day of June, 1963;(b) as used in sub-clauses (a), (b), (d) and (e), includes all profits of the company up to the dateof such distribution or such payment, as the case may be; and(c) as used in sub-clause (c), includes all profits of the company up to the date of itsliquidation.(21) "domestic company" means a Pakistani company and includes any company which, in respect of itsincome liable to tax under this Ordinance had made the prescribed arrangements for the declaration and payment, within Pakistan, of the dividends (including dividends on preference shares) payable out of suchincome and for the deduction of tax from such dividends; 1 [(21A)"finance society" includes a co-operative society which accepts money on deposit or otherwise for the purpose of advancing loans or making investments in the ordinary course of business;] 1  Cl.(21A) ins. by F. A. 1991. 5
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