12 Business Taxation DEFINITIONS UNDER INCOME TAX ORDINANCE NEED FOR: Every subject regarding any law always contains / consists of a few terms or phrases which are specifically meant only for the relevant subject. Similarly, Income Tax Law also assigns specific meanings to certain terms which are exclusively used for the purpose of its understanding and explanation. It is worth- mentioning that some of the terms retain their ordinary / dictionary meanings. whereas others give the definite meaning for the purpose of Income Tax Ordinance and over-rule the dictionary meanings, A comprehensive understanding of these terms is necessary to follow the subject ‘more easily. For this purpose, Income Tax Ordinance defines the following terms under different sections. ACCUMULATED PROFITS: [Section 2(1)} (Any amount transferred to reserve fund by an organization out ofits profits (ii) All the profits of the company kept in whatever shape, whether capitalized or not upto the date these are distributed. (iii) In case of liquidation of company or trust, its all profits upto the date of liquidation. Explanation: Many business organizations do not distribute their all profits among the shareholders. They keep a part of profits as rescrve to meet the unseen or unexpected expenditures and events of the future. The undistributed profit and reserve of business are known as accumulated profits in Income Tax Ordinance. It must he noted that the amount not distributed or kept as reserve may ultimately be distributed among the sharcholders or ‘owners if it remains unused in case non-happening of unexpected expenditure or event, AMALGAMATION: [Section 2(1A)] A merger of one or more companies or institutions shall be termed as amalgamation if the following conditions are satisfied: (i) The merger should be of banking companies, non-banking financial institutions, insurance companies, companies owning and managing industrial undertakings or companies engaged in providing services and not being trading companies.-2: Definitions Under the Income Tax Ordinance 13, (ii) ‘At least one of the companies being’ merged should cither be a public company or a company incorporated under any law other than the Companies Ordinance, 1984. Gif) As a result of the amalgamation the assets and. liabilities of the amalgamating company or companies become the assets and liabilities of ‘the amalgamated company. ‘The assets of amalgamating company should not become the assets of igamated company by purchase of such assets or by distribution of such assets to the igamated company after winding-up of amalgamating company. : Amalgamating company. isa company that is being merged with another company and amalgamated company is a company with which the amalgamating company / companies are being merged or which is formed as.a result-of the merger. LATE TRIBUNA [Section 2(2)] Appellate Tribunal means the Appellate Tribunal Inland Revenue established Section 130 of the Ordinance. sation: 1 In case of any dispute between the taxpayer and tax department, the taxpayer can an appeal to the Commissioner (Appeals). If the taxpayer or. tax department is. not isfied with the decision of the Commissioner (Appeals) then another appeal can be to “Appellate Tribunal”. The decision of the Tribunal on point of fact is final. in case of point of law, the matter may be referred to High Court. res: @) _ Itis the highest judicial authority in tax matters. fi) It consists of both judicial and accountant members. fii) Its members are appointed by the Federal Government. VED GRATUITY FUND: [Section 2()}- Gratuity means a lump sum payment by the employer to his employees in ition of past services and performance. Gratuity is a Voluntary contribution by. employer which has a sound commietcial purpose of enabling the employer to retain ‘employees and increasing their efficiency. According to Income Tax Ordinance 2001, the term gratuity fund means a fund: (Which is maintained by the continuous contribution of the employer: ii)_‘The amount of fund is paid to the employees on lump sum basis. ii) The amount of fund is paid to the employees at the time of retirement. (iv) _In case of death of an employee, the amouint of fund is paid to his family.”Approval (Under Part-III of Sixth Schedule): Approval of gratuity fund is demanded to avail certain benefits attached wit approval. In order to get gratuity fund approved: (i) The application is submitted to the Commissioner. Gi) 90% or more employees of the organization should be working in Pakistan. APPROVED PENSION FUND: [Section 23 Approved Pension Fund means Pension Fund approved’ by Securities Exchange Commission of Pakistan (SECP) under Voluntary Pension System Rules, 200: and managed by a Pension Fund Manager registered with the SECP under Volun Pension System Rules, 2005. APPROVED EMPLOYMENT PENSION OR ANNUITY SCHEME: [Section 2(3D) Approved Employment Pension or Annuity Scheme means any employm« related retirement scheme approved under this Ordinance, which makes periodic payment to a beneficiary i.e., pension or annuity such as approved superannuation public sector pension scheme and employees old-age benefit schieme. APPROVED SUPERANNUATION FUND: [Section 2(4) the benefit of retirement or invalidity (disability) to their employees. According to Income Tax Ordinance 2001, superannuation fund means a fund: (i) Which is maintained by the continuous contribution of the employer: i) The amount of fund is paid to the employees on annuity basis. (iii) The amount is paid to the employees at the time of retirement or in case disability (invalidity). (iv) Incase of death of an employee, the amount 6f fund is paid to his family. Approval (Under Part-II of Sixth Schedule): Approval of superannuation fund is demanded to avail certain benefits at with approval. In order to get superannuation fund approved: (The application is submitted to the Commissioner, Gi) 90% or more employees of the organization should be working in Pakistan, ASSESSMENT: [Section 2¢ Assessment means a complete scrutiny of the information provided by taxpayer in his retum of income. It includes re-assessment and emended assessment the cognate expressions shall be construed accordingly.