Lecture by Mr. Mohammad Iqbal Ghori FCMA

1. PROVISIONS GOVERNING
PERSONS

2. PROVISIONS GOVERNING
PERSONS
CENTRAL CONCEPTS

3. Provisions Governing Persons
Person.
(1) The following shall be treated as persons for
the purposes of this Ordinance, namely: —
(a) An individual;
(b) a company or association of persons
incorporated, formed, organized or established
in Pakistan or elsewhere;
(c) the Federal Government, a foreign
government, a political sub-division of a foreign
government, or public international organisation.

4. Provisions Governing Persons
Person.
(2) For the purposes of this Ordinance —
(a) ―association of persons‖ includes a firm, a Hindu undivided family, any
artificial juridical person and any body of persons formed under a foreign law,
but does not include a company;
(b) company means
(i) a company as defined in the Companies Ordinance, 1984 (XLVII of 1984);
(ii) a body corporate formed by or under any law in force in Pakistan;
(iii) a modaraba;
(iv) a body incorporated by or under the law of a country outside Pakistan
relating to incorporation of companies;
(v) a trust, a co-operative society or a finance society [or any other society
established or constituted by or under any law for the time being in force;]
(vi) 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;
(vii) a Provincial Government;
(viii) a [Local Government] in Pakistan; [or]
(ix) a Small Company as defined in section 2;]

5. Provisions Governing Persons
Person.
(c) 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;
(d) ―trust‖ means an obligation annexed to the
ownership of 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
interests are divided into units such that the
entitlements of the beneficiaries to income or capital
are determined by the number of units held.

6. Provisions Governing Persons
Resident and Non-Resident Persons.
(1) A person shall be a resident person for a tax
year if the person is —
(a) a resident individual, resident company or
resident association of persons for the year; or
(b) the Federal Government.
(2) A person shall be a non-resident person for a
tax year if the person is not a resident person for
that year

7. Provisions Governing Persons
Resident individual. —
An individual shall be a resident individual for a
tax year if the individual —
(a) is present in Pakistan for a period of, or
periods amounting in aggregate to, one hundred
and [eighty-three] days or more in the tax year;
(b) is an employee or official of the Federal
Government or a Provincial Government posted
abroad in the tax year.

8. Provisions Governing Persons
INDIVIDUALS

9. Provisions Governing Persons
Taxation of Individuals:
Principle of taxation of individuals.— Subject to this
Ordinance, the taxable income of each individual shall be
determined separately.
Deceased individuals.— (1) The legal representative of a
deceased individual shall be liable for –
(a) any tax that the individual would have become liable for if
the individual had not died; and
(b) any tax payable in respect of the income of the deceased‘s
estate.
(2) The liability of a legal representative under this section
shall be limited to the extent to which the deceased‘s estate is
capable of meeting the liability.

10. Provisions Governing Persons
Deceased individuals.
(3) For the purpose of this Ordinance, —
(a) any proceeding taken under this Ordinance against the deceased
before his or her death shall be treated as taken against the legal
representative and may be continued against the legal representative from
the stage at which the proceeding stood on the date of the deceased‘s
death; and
(b) any proceeding which could have been taken under this Ordinance
against the deceased if the deceased had survived may be taken against
the legal representative of the deceased.
(4) In this section, legal representative means a person who in law
represents the estate of a deceased person, and includes any person who
intermeddles with the estate of the deceased and where a party sues or is
sued in representative character the person on whom the estate devolves
on the death of the party so suing or sued.

11. Provisions Governing Persons
An individual as a member of an association of persons.
If, for a tax year, an individual has taxable income and derives an amount
or amounts exempt from tax under sub-section (1) of section 92, the
amount of tax payable on the taxable income of the individual shall be
computed in accordance with the following formula, namely: —
(A/B) x C
where —
A is the amount of tax that would be assessed to the individual for the year
if the amount or amounts exempt from tax under sub-section (1) of section
92 were chargeable to tax;
B is the taxable income of the individual for the year if the amount or
amounts exempt from tax under sub-section (1) of section 92 were
chargeable to tax; and
C is the individual‘s actual taxable income for the year

12. Provisions Governing Persons
Share profits of company to be added to taxable income .
(1) Notwithstanding the provisions of sub-section (1) of section 92, the
share of profits derived by a company from an association of persons shall
be added to the taxable income of the company.
(2) The company shall be allowed a tax credit in accordance with the
following formula, namely: —
[(A/B) x C]
Where —
A is the amount of share of profits received by the company from the
association;
B is the taxable income of the association; and
C is the amount of tax assessed on the association.
(3) The tax credit allowed under this section shall be applied in accordance
with sub-section (3) of section 4.]

13. Provisions Governing Persons
Income of a minor child.
(1) Any income of a minor child for a tax year
chargeable under the head "Income from
Business" shall be chargeable to tax as the
income of the parent of the child with the
highest taxable income for that year.
(2) Sub-section (1) shall not apply to the
income of a minor child from a business
acquired by the child through an
inheritance.

14. Provisions Governing Persons
ASSOCIATIONS OF PERSONS.

15. Provisions Governing Persons
ASSOCIATIONS OF PERSONS.
Association of persons includes a firm, a
Hindu undivided family, any artificial
juridical person and any body of persons
formed under a foreign law, but does not
include a company

16. Provisions Governing Persons
Principles of Taxation of AOP
An association of persons shall be liable to
tax separately from the members of the
association and 2[where the association of
persons has paid tax the] amount received
by a member of the association in the
capacity as member out of the income of
the association shall be exempt from tax.

17. Provisions Governing Persons
COMPANIES.

18. Provisions Governing Persons
Company means
(i) a company as defined in the Companies Ordinance, 1984 (XLVII of
1984);
(ii) a body corporate formed by or under any law in force in Pakistan;
(iii) a modaraba;
(iv) a body incorporated by or under the law of a country outside Pakistan
relating to incorporation of companies;
(v) a trust, a co-operative society or a finance society [or any other society
established or constituted by or under any law for the time being in
force;]
(vi) 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;
(vii) a Provincial Government;
(viii) a [Local Government] in Pakistan; [or]
(ix) a Small Company as defined in section 2

19. Provisions Governing Persons
Principles of taxation of companies.A company shall be liable to tax separately from its
shareholders. The incomes of a company shall be
charged to tax in the light of the following principles:
1.
2.
Taxable income (other than dividend income) shall be
computed and treated as per normal procedure. Income
tax under NTR shall be charged to tax @35% of taxable
income of the company.
The dividend income received from a company shall be
treated separate block of income and chargeable to tax
@10% of the gross amount of dividend

20. Provisions Governing Persons
Disposal of business by individual to wholly-owned
company:
A company shall be liable to tax separately from its
shareholders. The incomes of a company shall be
charged to tax in the light of the following principles:
1.
2.
Taxable income (other than dividend income) shall be
computed and treated as per normal procedure. Income
tax under NTR shall be charged to tax @35% of taxable
income of the company.
The dividend income received from a company shall be
treated separate block of income and chargeable to tax
@10% of the gross amount of dividend

21. Provisions Governing Persons
Disposal of business by individual to wholly-owned
company:
A company shall be liable to tax separately from its
shareholders. The incomes of a company shall be
charged to tax in the light of the following principles:
1.
2.
Taxable income (other than dividend income) shall be
computed and treated as per normal procedure. Income
tax under NTR shall be charged to tax @35% of taxable
income of the company.
The dividend income received from a company shall be
treated separate block of income and chargeable to tax
@10% of the gross amount of dividend