INCOME TAX

DEFINITIONS

1.ACCUMULATED PROFITS sec.2(1)

In relation to distribution or payment of dividend, it includes

1- Any reserve made up wholly or partly of any allowance, deduction or exemption admissible under this ordinance.

2- All profits of the company up to the date these are distributed.

3- In case of liquidation of a company or trust, all profits up to the date of its liquidation.

Explanation 

 A business house can separate a portion of profits previously earned for future use. Such reserves may be used for a specific purpose otherwise will be distributed among the owners. Any presentation of a reserve on the face of the balance sheet of a business will be considered accumulated profit under the income tax ordinance 2001.
                                                              APPELLATE TRIBUNAL  SEC.2(2)
Appellate tribunal means the appellate tribunal established by the federal govt. u/s 130 of the income tax ordinance 2001. The tribunal has been established to exercise its functions under the ordinance.It consists upon  a chairperson and such number of judicial and accountant members as considered necessary. Members are appointed by the federal govt. This is the highest judicial authority in the matters of tax. The basic function of the tribunal is to hear the appeals against the decisions of the commissioner(appeals) The decision of the tribunal on point of fact is final. However, in case of point of law, the matter may be referred to the high court.

 3.APPROVED GRATUITY FUND  Sec. 2(3) 

Meaning:

            Approved gratuity fund means a gratuity fund which has been and  continues to be approved by the commissioner of income tax under part III of sixth schedule of income tax ordinance.

Purpose: Organizations maintain gratuity funds for the benefit of their employees. In such funds, amounts are contributed from year to year and are paid to employees at the time of their retirement. In case of death of an employee during service, the amount is paid to his family. If gratuity fund is paid to an employee during his life time, it will be considered his salary. 

Approval: The commissioner may accord approval to any gratuity fund that complies with the requirements.

Benefit For Employer: The employer gets a lot of benefits if the fund is approved because this contribution is considered as a business expenditure that results a decrease in tax

4. APPROVED SUPERANNUATION FUND  Sec 2(4)

Meaning:

            Approved superannuation fund means a fund which has been and continues to be approved by the commissioner of income tax under part III of sixth schedule of the income tax ordinance.

 Features of Approved Superannuation Fund: 

1.MAINTENANCE: This fund is maintained by private as well as govt. organizations for the benefit of their employees.

2. CONTRIBUTION:  The amount in this fund is continuously contributed by the employer.

3. PAYMENT:   Amount is paid to the employees as annuities or pension after retirement or tothier families in case of death during service.

4. APPROVAL: Under income tax ordinance 2001, commissioner of income tax approves such fund in accordance with sixth schedule. 

5. BENEFIT TO EMPLOYEE:  ASF is maintained for the old age benefit of the employees. If it is approved the commissioner of income tax , the employee can get tax exemption.

6. BENEFIT TO EMPLOYER:  The commissioner of income tax approves such in which the amount contributed by the employer is treated as allowable  business expense and results in decrease in tax reduction.

                                        5. BUSINESS          sec. 2(9)

   

 "Business includes any trade , commerce, manufacture, profession, vocation or concern in the nature of trade, commerce,manufacture, profession or vocation but does not include employment"              
                                            EXPLANATION