LECTURE TAXATION

05 INCOME TAX
 QUIZ -1

Muhammad Sadam
Definition: Person
 an individual;
 a company or association of persons incorporated,
formed, organized or established in Pakistan or
elsewhere;
 the Federal Government, a foreign government, a
political subdivision of a foreign government, or
public international organization.

PERSON
 ASSOCIATION
OF PERSONS
Definition: Association of Persons
 “Association of persons” includes a firm, a Hindu
undivided family, any artificial juridical person
and anybody of persons formed under a foreign
law, but does not include a company;
 “Firm” means the relation between persons who
have agreed to share the profits of a business
carried on by all or any of them acting for all.
 COMPANY
“Company” means:

 a company as defined in the Companies Act, 2017

 a Small company as defined in section 2 of the Income Tax Ordinance,2001

 a body corporate formed by or under any law in force in Pakistan;

 a modaraba;

 a body incorporated by or under the law of a country outside Pakistan relating to

incorporation of companies;
 COMPANY
“Company” means:

 a foreign association, whether incorporated or not, which the Board has, by general or special order, declared

to be a company for the purposes of this Ordinance;

 a Provincial Government; or

 a Local Government in Pakistan; or

 a co-operative society, a finance society or any other society

 a non-profit organization

 a trust, an equity or a body of persons established or constituted by or under any law for the time being in

force
 PUBLIC COMPANY
“Public company” means —

(a) a company in which not less than 50% of the shares are held by the Federal Government or Provincial

Government;

(b) a company in which not less than 50% of the shares are held by a foreign Government, or a foreign

company owned by a foreign Government;

(c) a company whose shares were traded on a registered stock exchange in Pakistan at any time in the tax

year and which remained listed on that exchange at the end of that year; or

(d) a unit trust whose units are widely available to the public and any other trust as defined in the Trusts Act,
 PUBLIC COMPANY
“Public company” means —

 “Unit trust” means any trust under which beneficial interests are divided

into units such that the entitlements of the beneficiaries to income or

capital are determined by the number of units held.

 “PRIVATE COMPANY” means a company that is not a public company

 NON-PROFIT ORGANIZATION
“Non-profit organization” means any person other than an individual which is
(i) established for religious, educational, charitable, welfare purpose for general public or
development purposes, or for the promotion of an amateur sport;
(ii) formed and registered under any law as a non- profit organization;
(iii) approved by the Commissioner for specified period, on an application made by such person in
the prescribed form and manner, accompanied by the prescribed documents and, on requisition,
such other documents as may be required by the Commissioner;
and none of the assets of such person are available for private benefit to any other person.
Sec 2(11A) “charitable purpose” includes;
 relief of the poor, education, medical relief and

 the advancement of any other object of general public utility

 SMALL COMPANY
 "Small Company" means a company registered on or after the first day of July
2005, under the Companies Act, 2017 which,-
(i) has paid up capital plus undistributed reserves not exceeding fifty million rupees;
(ii) has employees not exceeding two hundred and fifty any time during the year;
(iii) has annual turnover not exceeding two hundred and fifty million rupees; and
(iv) is not formed by the splitting up or the reconstitution of a company already in
existence and;
(v) is not a small and medium enterprise;
 EXERCISE
 Briefly state, with reasons, whether or not you consider the below
mentioned companies to be a public company for tax purpose.
 (i) PPL is a company incorporated under the Companies Act, 2017 and is
not listed on any stock exchange in Pakistan. 59 per cent of the shares in
PPL are held by BBC Ltd, a company incorporated in United Kingdom.
United Kingdom holds 97% of the shares in BBC Ltd.
 (ii) XYZ Limited is a public company incorporated under the Companies
Act, 2017 whose shares were traded on the Pakistan Stock Exchange from
01 August 2021 until 29 June 2022 on which date the company was
delisted on the exchange.
 EXERCISE: SOLUTION
 (i) A public company for Pakistan tax purposes, inter alia includes a company in which not
less than 50% of the shares are held by a foreign government or a foreign company owned
by a foreign government. 59% of the shares in PPL are owned by BBC Ltd, which is a
foreign company but BBC Ltd is not wholly owned by the United Kingdom (foreign
government). Therefore, PPL is not a public company for Pakistan tax purpose.
 (ii) A company whose shares are traded on a registered stock exchange in Pakistan at any
time in the tax year and which remained listed on that exchange at the end of that year is a
public company for tax purpose.
 Although the shares of XYZ Limited were traded on the Pakistan stock exchange during
the tax year 2022, XYZ Ltd did not meet the test of being a public company for tax purpose
since its shares were not listed on the Lahore stock exchange on 30 June 2022. XYZ Ltd is
therefore not a public company for tax purpose.
Muhammad Sadam