STATUTORY DEFINITIONS

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Taxation Management FIN 623

MODULE 3

LESSON 3.5

STATUTORY DEFINITIONS

Legal concepts and technical words are to be understood in the legal and technical perspective.

· Dictionary meanings can also be referred in the absence of statutory definition.

· In addition to words defined in Section 2, certain words are also defined in other sections.

Type of Definitions

Exclusive or Exhaustive Definition:

· It excludes ordinary dictionary meanings of the word. Exclusive definitions start with the expression

`mean' or `means'.

Examples of exclusive definitions are given below:

Sec. 2(2) Appellate Tribunal means the Appellate Tribunal established under section 130.

2(5A) "assessment year" means assessment year as defined in the repealed Ordinance;2(6)

"association of persons" means an association of persons as defined in section

80;2(13)"Commissioner" means a person appointed as a Commissioner of Income Tax under section

208, and includes a taxation officer vested with all or any of the powers, and functions of the

Commissioner;

2(15) "debt" means any amount owing, including accounts payable and the amounts owing under

promissory notes, bills of exchange, debentures, securities, bonds or other financial instruments;

2(23) "fee for technical services" means any consideration, whether periodical or lump sum, for the

rendering of any managerial, technical or consultancy services including the services of technical or

other personnel, but does not include:

(a) Consideration for services rendered in relation to a construction, assembly or like project

undertaken by the recipient; or

(b)

Consideration which would be income of the recipient chargeable under the head "Salary";

2(36) "non-profit organization" means any person, other than an individual, which is:

(a) established for religious, educational, charitable, welfare or development purposes, or for the

promotion of an amateur sport;

(b) formed and registered under any law as a non-profit organization;

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

confers, or may confer, a private benefit to any other person;

Inclusive Definition:

Examples of inclusive definitions are given below:

It includes dictionary meanings as well as meanings conveyed by definition.

Sec. 2(9)--Business includes any trade, commerce, manufacture, profession, vocation or adventure or

concern in the nature of trade, commerce, manufacture, profession, vocation, but doesn't include

employment.

(11A) "charitable purpose" includes relief of the poor, education, medical relief and the advancement

of any other object of general public utility;

2(22) "employment includes:

· a directorship or any other office involved in the management of a company;

· a position entitling the holder to a fixed or ascertainable remuneration; or

· the holding or acting in any public office;

2(19) "dividend" includes:

(a)

any distribution by a company of accumulated profits to its shareholders, whether capitalized or not, if

such distribution entails the release by the company to its shareholders of all or any part of the assets

including money of the company;

Taxation Management FIN 623

(b) any distribution by a company, to its shareholders of debentures, debenture-stock or deposit certificate in

any form, whether with or without profit, to the extent to which the company possesses accumulated

profits whether capitalized or not;

(c)

any distribution made to the shareholders of a company on its liquidation, to the extent to which the

distribution is attributable to the accumulated profits of the company immediately before its liquidation,

whether capitalized or not;

(d) any distribution by a company to its shareholders on the reduction of its capital, to the extent to which

the company possesses accumulated profits, whether such accumulated profits have been capitalized or

not; or

(e)

any payment by a private company or trust of any sum (whether as representing a part of the assets of

the company or trust, or otherwise) by way of advance or loan to a shareholder or any payment by any

such company or trust on behalf, or for the individual benefit, of any such shareholder, to the extent to

which the company or trust, in either case, possesses accumulated profits;

But does not include:

(i)

a distribution made in accordance with sub-clause (c) or (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 the company; and

(iii) any dividend paid by a company which is set off by the company against the whole or any part of any

sum previously paid by it and treated as a dividend within the meaning of sub-clause (c) to the extent to

which it is so set off;

2(58) "share" in relation to a company, includes a modaraba certificate and the interest of a beneficiary

in a trust (including units in a trust);

2(59) "shareholder" in relation to a company, includes a modaraba certificate holder, a unit holder of a

unit trust and a beneficiary of a trust;

Exclusive as well as Inclusive Definition:

Such definitions contain both elements as enumerated above.

Examples of above type of definitions are given below:

Sec 2(7) `banking company means a banking company as defined in the banking companies ordinance,

1962 and includes any body corporate which transacts the business of banking in Pakistan.

2(41) "permanent establishment" in relation to a person, means a fixed place of business through

which the business of the person is wholly or partly carried on, and includes:

a place of management, branch, office, factory or workshop, premises for soliciting orders, warehouse,

permanent sales exhibition or sales outlet, other than a liaison office except where the office engages in

the negotiation of contracts (other than contracts of purchase);

a mine, oil or gas well, quarry or any other place of extraction of natural resources;

a building site, a construction, assembly or installation project or supervisory activities connected with

such site or project but only where such site, project and its connected supervisory activities continue

for a period or periods aggregating more than ninety days within any twelve-months period;

the furnishing of services, including consultancy services, by any person through employees or other

personnel engaged by the person for such purpose

a person acting in Pakistan on behalf of the person (hereinafter referred to as the "agent"), other than

an agent of independent status acting in the ordinary course of business as such, if the agent

has and habitually exercises an authority to conclude contracts on behalf of the other person;

has no such authority, but habitually maintains a stock-in-trade or other merchandise from which the

agent regularly delivers goods or merchandise on behalf of the other person; or

any substantial equipment installed, or other asset or property capable of activity giving rise to income.

Tax Year:

Sec. 2(68) read with Sec. 74---Tax year means a period of 12 months ending on June 30th which is also

called Normal Tax Year.

Special Tax Year:

In case a person has a different accounting period from normal tax year or adopted such a period after

seeking approval from commissioner under section 74(3) it is called special tax year.

Explanation--a tax year can be a period of less than 12 months under special circumstances for example

discontinuance of business u/s 117.

Taxation Management FIN 623

Section 117 is reproduce below:

117. Notice of discontinued business

(1) Any person discontinuing a business shall give the Commissioner a notice in writing to that effect

within fifteen days of the discontinuance.

(2) The person discontinuing a business shall, under the provisions of this Ordinance or on being

required by the Commissioner by notice, in writing, furnish a return of income for the period

commencing on the first day of the tax year in which the discontinuance occurred and ending on the

date of discontinuance and this period shall be treated as a separate tax year for the purposes of this

Ordinance.

(3) Where no notice has been given under sub-section (1) but the Commissioner has reasonable grounds

to believe that a business has discontinued or is likely to discontinue, the Commissioner may serve a

notice on the person who has discontinued the business or is likely to discontinue the business to

furnish to the Commissioner within the time specified in the notice a return of income for the period

specified in the notice.

(4) A return furnished under this section shall be treated for all purposes of this Ordinance as a return of

income, including the application of Section 120.

Person--Sec. 2(42) read with section 80. Person includes:

· An individual

· A company or association of persons incorporated or formed in Pakistan or elsewhere; and

· The federal Government, a foreign

· government, a political sub division of

· foreign government, or public

· international organization

For the purpose of the above:

· "An association of persons"--includes a firm, a Hindu Undivided Family, any artificial juridical person and

anybody of persons formed under a foreign law, but doesn't include a company.

"Company" means---

o A company as defined in companies ordinance, 1984

o A small company as defined in sec. 2(59A)

o A body corporate formed by or under any law in force in Pakistan;

o A modarba

o A body incorporated by or under the law of a country outside Pakistan, relating to incorporation of

companies;

o A trust, a cooperative society or a finance society

o A foreign association whether incorporated or not, which the central board of revenue has, by general

or special order, declared to be a company for the purpose of this ordinance;

o A provincial govt.;

o A local authority in Pakistan

c) Firm means the relation between persons who have agreed to share the profits of a business carried on

by all or anyone of them acting for all;

d) Trust means an obligation annexed to the ownership of a property and arising out of the confidence

reposed in and accepted by the owner, or declared and accepted by the owner for the benefit of another,

or of another and the owner, and includes a "unit trust"; and

e) "Unit trust" means any trust under which beneficial interest are divided into units such that the

entitlements of the beneficiaries to income or capital are determined by the number of units held.

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