Q- Explian various types of depreciation allowances. whatare condiions for allowability of depriciation.

DEPRECIATION

Introduction: 

                     The term depreciation has not been defined in the income tax ordinance. therefore, it has to be understood in its usual commercial sense.

  Depreciation means  a gradual and permanent decrease in the value of an asset through wear and tear and obsolescence. In computing the taxable profits of a business  or profession, the income tax law permits the deduction of depreciation subject to certain conditions.

Assets allowable for depreciation;

                                                 According to section 22(1) of the income ordinance 2001," A person shall be allowed a deduction for depreciation of the person's depreciable assets[sec.22(15)]  used in the person's business  in the tax year"

It means only depreciable assets are allowed for depreciation.

Depreciable asset implies any tangible movable property, immovable property(other than unimproved land) or structural improvement to immovable property owned by the person that:
a- has a normal useful life exceeding one year,
b- is likely to lose value as a result of normal wear and tear or obsolescence< and
c- is used wholly or partly by the person in deriving income from business chargeable to tax.

Types of depreciation allowance.
There are four main types of depreciation allowance given in the income ordinance 2001.
1- Normal depreciation allowance
2- Initial depreciation allowance
3- First year allowance.
4- Accelerated Depreciation

1) Normal Depreciation Allowance: (22)
                                                         Normal depreciation is to be calculated at the prescribed rates for various types of assets on the written down value of the depreciable assets.

Depreciation rates specified for the purposes of section 22 shall be -

   

I.	Building (all types).	10%
II.	Furniture (including fittings) and machinery and plant (not otherwise specified), Motor vehicles (all types), ships, technical or professional books..	15%
III.	Computer hardware including printer, monitor and allied items, machinery and equipment used in manufacture of I.T. products aircrafts and aero engines.	30%
IV.	In case of mineral oil concerns the income of which is liable to be computed in accordance with the rules in Part-I of the Fifth Schedule. (a)        Below ground installations (b)        Offshore platform and production installations (c)        A ramp built to provide access to the persons with disabilities not exceeding Rs. 250000 each.                                                1oo%	100%   20%

2-Initial Allowance  (23)  

    (1) A person who places an eligible depreciable asset in service in Pakistan for the first time in a tax year shall be allowed a deduction (initial allowance‖) provided the asset is used by the person for the purposes of his business for the first time or the tax year in which commercial production is commenced,whichever is later.

(2) The amount of the initial allowance of a person shall be computed by
applying the rate specified in Part II of the Third Schedule against the cost of the
asset. Rate of initial allowance is 50 %.

(3) A deduction allowed under this section to a leasing company or an
investment bank or a modaraba or a scheduled bank or a development finance
institution in respect of assets owned by such institutions and leased to another person shall be deducted only against the leased rental income derived in respect of such assets.]
NOTE; It must be noted that initial allowance for depreciation is not provided in the following  cases
(a) any road transport vehicle not the vehicle is plying for hire;
(b) any furniture, including fittings;
(c) any plant or machinery that has been used previously in
   Pakistan

First Year Allowance.(23A)
The FYA has been provided in order to accelerate the industrial process in rural and under developed areas. Plant, machinery and equipment installed
by any industrial undertaking set up in specified rural and under developed
areas, and owned and managed by a company shall be allowed first year
allowance at the rate of 90% against the cost of the ―eligible depreciable assets‖ put to use after July 1, 2008.

Accelerated depreciation: 23B
 Accelerated depreciation to alternate energy projects.— (1) Any plant,
machinery and equipments installed for generation of alternate energy by an
industrial undertaking set up anywhere in Pakistan and owned and managed by
a company shall be allowed first year allowance in lieu of initial allowance under
section 23, at the rate 90% against the cost of the eligible depreciation assets put to use after first day of July, 2009.

Conditions applicable to depreciation.
1-Asset used partly for business.    sec.22(3))
Where a depreciable asset is used in a tax year partly in derivingincome from business and partly for another use, the deductionallowed for that year shall be restricted to the fair proportionalpart of the amount that would be allowed if the asset was wholly used toderive income from business chargeable to tax.

2-Determination of written down value.           
The written down value of a depreciable asset of a person at thebeginning of the tax year shall be –—
(a) where the asset was acquired in the tax year, the cost of theasset to the person as reduced by any initial allowance inrespect of the asset under section 23; or

(b) in any other case, the cost of the asset to the person asreduced by the total depreciation deductions (including any
  initial allowance under section 23) allowed to the person in respect of the asset in previous tax years.

3-Determination of writtendown value in case asset used partly for business.
Where a depreciable asset is used during a tax year partly for business and partly for another use, the written down value of the asset shall be computed on the basis that the assethas been solely used to derive income from business chargeable to tax.

4-Depreciation allowance not to exceed original cost.
The total deductions allowed to a person during the period ofownership of a depreciable asset under this section and section 23 shall notexceed the cost of the asset.

5-Disposal of asset used for business
Where, in any tax year, a person disposes of a depreciable asset, no
depreciation deduction shall be allowed under this section for that year.

6- Profit or loss on disposl of asset.
1-if the consideration received exceeds the written down value ofthe asset at the time of disposal, the excess shall be chargeable to tax in that year under the head ―Income fromBusiness or

2-if the consideration received is less than the written downvalue of the asset at the time of disposal, the difference shall be allowed as a deduction in computing the person‘s income chargeable under the head ―Income from Business for tha year.

7-Disposal of asset partly used for business.(Maqsood ahmed , career academy hfd 03333424200)
Where a depreciable asset is not used for the whole of the tax year in deriving incomefrom business chargeable to tax, the written down value of the asset is computed by deducting the total depreciation allowed on asset till its disposal out of the sale proceeds received against the asset.
.
8-Depreciation allowance in case of asset owned by leasing company, bank etc.
The depreciation deductions allowed to a leasing company or aninvestment bank or a modaraba or a scheduled bank or a development finance institution in respect of assets owned by such institution and leased to another person shall be deductible only against the lease rental income derived in respect of such assets.

9-Dpreciable allowance in case of immovable property.
         The cost of immovable property or a structural improvement of immovable property shall not  include the cost of land.

10- Cost of depreciable asset exporteed or transfered out of pakistan.
 Where a depreciable asset that has been used by a person inPakistan is exported or transferred out of Pakistan, the person shall be treated ashaving disposed of the asset at the time of the export or transfer for aconsideration received equal to the cost of the asset.

INCOME TAX NUMERICAL FORMAT

NAME OF TAXPAYER

       NATIONAL TAX NUMBER

   TAX YEAR........................

   TAX YEAR ENDED..........

RESIDENTIAL STATUS

                    COMPUTATION OF TAX PAYABLE

INCOME FROM SALARY ..............................(section 12)

INCOME FROM PROPERTY...........................(=====15)

INCOME FROM BUSINESS...........................(=====18)

CAPITAL GAINS.............................................(=====37)

INCOME FROM OTHER SOURCES..............(=====39)

TOTAL INCOME

LESS DEDUCTIBLE ALLOWANCES:

1.Zakat paid 

2.payment to worker welfare fund

3.contribution to workers participation fund

ACTUALLY TAXABLE INCOME TAXABLE INCOME
Add share from AOP included for rate purpose only
Add any other income for rate purpose

TAXABLE INCOME FOR RATE PURPOSE

(here rate will be applied according to taxable income and marginal relief treatment will be applied , then tax payable will be calculated)

TAX ON TAXABLE INCOME......................................................................................XXXXXXXXXXXXXX

LESS CONCESSION FOR SENIOR CITIZENS

LESS CONCESSION FOR TEACHERS & RESEARCHERS

LESS FOREIGN TAX CREDIT
                     FORMULA FOR CREDIT....
                                           PAK INCOME TAX        X              FOREIGN INCOME
                                            TAXABLE INCOME INCLUDING FOREIGN INCOME

LESS TAX CREDIT FOR AVERAGE RELIEF
              1-CHARITEABLE DONATIONS
              2-INVESTMENT  SHARES
              3-CONTRIBUTION TO APP. PENSION FUND    
              4- PROFIT O DEBT ON HOSING PAYMENTS

FORMULA FOR AVERAGE RELIEF....
                                                    GROSS TAX         X AMOUNT ADMISSIBLE
                                                              TAXABLE INCOME

NET TAX= GROSS TAX - REBATE FOR AVERAGE RELIEF

LESS CREDIT FOR SHARE FROM AOP
                                FORMULA           =  NET TAX          X    ACTUAL TAXABLE INCOME
                                                                   TAXABLE INCOME FOR RATE PURPOSE

=TAX LIABILITY UNDER NORMAL TAX REGIME

= TAX PAYABLE WITH RETURN
footnote for :separate block of incomes
END

INCOME TAX AUTHORITIES--- FEDERAL BOARD OF REVENUE

Income Tax Authorities

The Federal Board of Revenue

INTRODUCTION:
The Federal Board of Revenue (more commonly known by its initials as FBR) is the semi-autonomous, supreme federal agency of Pakistan that is responsible for auditing, enforcing and collecting revenue for the government of Pakistan.. FBR is estimated to be the largest federal bureaucracy in Pakistan. As the agency conducts audit of taxpayers regularly, it's regarded as the guardian of national treasury in Pakistan. FBR primarily operates through its main collection arms, its field formations, the Regional Tax Offices (RTOs) and Large Taxpayer Units (LTUs) across the country. FBR has two major wings: the Inland Revenue Wing which brings in over 90% of FBR's total collection and Customs Wing.              
 Mr. Tariq Bajwa is the current chairman of the FBR and under his capacity as Chairman FBR, he is authorized Office of the Secretary, Revenue Division, Government of Pakistan

Definition
Up till 30th June  2006 the  Board meant Central Board Of Revenue as established under the central board of revenue act, 1924. On the commencement of Federal Board of Revenue Act 2007, Board means the Federal Board of Revenue.

Who appointed the FBR?
The Federal Government has appointed the Federal Board of Revenue (FBR) by the authority of the Federal Board of Revenue Act, 2007.

Basic function of the FBR:
Tax collection shall be the basic function of the FBR.

Status of the FBR:
FBR shall be the highest executive authority in Pakistan.

Head of the FBR:
Chairman of the FBR shall be the main authority in the FBR who shall be appointed by the Federal Government. He is responsible for
a- Formulation and administration  of fiscal policies.
b- Levy and collection federal taxes.
c- Judicial function of hearing of appeals.
     His responsibility also involve  interaction with the officers of the president, the prime minister, all economic ministries as well as trade and industry.

Members of the FBR:
The FBR currently comprises chairman and eleven members appointed by the federal govt. as follow;

a- Three line members which include
Member (Direct Taxes),
Member (Sales & Federal Excise) and
Member (Customs)

b-Four functional members are
Member Fiscal(Research & Statistics),
Member(Human resource management),
Member (Audit) and 
Member (Administration)

c-Support members include
Member( Legal),
Member(Tax policy & Reforms),
 Member(Information management system) and
 Member(Facilitation & Tax Education)

Appointment of Authorities By FBR.
The following tax authorities are appointed by the federal board of revenue.

1. 1. Chief commissioners inland revenue,
2. commissioner inland revenue,
3. commissioner inland revenue appeals,
4. deputy commissioner inland revenue,
5. assistant commissioner inland revenue,
6. inland revenue officers,
7. inland revenue audit officers,
8. superintendents inland revenue,
9. inspectors inland revenue,and
10. such other ministerial officers and staff as may be necessary.

Besides this, the Board may appoint firms of chartered accountants and cost and management accountants to conduct the audit of any person. The scope of audit is determined by the Board on case to case basis.

Powers and Functions of the Federal Board of Revenue (FBR):
The FBR has following powers and performs the following functions in the presence of its powers:
1)         Approval of research institutions: [26(2)]
            The FBR may approve any institution engaged in scientific research in Pakistan    as “Scientific Research Institution” so that such institution may claim its scientific     research expenditures as deduction against income from business.
2)         Approval of employee training scheme: [27(c)]
The FBR may approve a Pakistani employee training scheme against which deduction is allowed to business.
3)         Approval of Leasing Companies and Modaraba: [28(3)]
The FBR may approve any leasing company or Modaraba, where lease rental payment made to such company is allowed as deduction against income from business to that person who makes such payment.
4)         Approval of charitable institutions: [61]
            The FBR may approve any institution as a charitable institution for the        purposes of the Income Tax Ordinance, 2001, especially, for donation      purposes.
5)         Method of accounting: [32(3)]
            The FBR may specify that any class of persons shall record its "Income from        Business" on a cash or accrual basis.
6)         Apportionment of deductions: [67(2)]
            The FBR may make rules u/s 237 for the purposes of apportioning             deductions where the expenditure relates to the derivation of more than one      head of income.
7)         Permission for tax year: [74]
            The FBR may permit person or class of persons to use special tax year instead of normal tax year.
8)         Power to demand particular data: [180]
The FBR may demand any data regarding exempted income of any industrial and commercial organization (By delivering data collection and compilation responsibility to any government or private department)
9)         Authority of circulars: [206]
            The FBR may issue circulars to achieve consistency in the administration of the   Ordinance and to provide guidance to taxpayers and officers of the FBR.
10)       Empowerment of general administration:
            The FBR shall exercise the general administration of the Income Tax         Ordinance, 2001.
11)       Appointment of income tax authorities: [208]
            The FBR may appoint as many income tax authorities as are necessary.
12)       Criterion for selection of audit: [177(1)]
The FBR may define criterion to guide the Commissioner of Income Tax that how the CIT select a particular person to conduct audit of its income tax affairs during a particular tax year.
13)       Appointment of the auditor: [177(8)]
            The FBR may appoint a firm of Chartered Accountants, to conduct an audit of the             income tax affairs of any person.
14)       Determination of the scope of audit: [179(8)]
            The scope of any audit conducted by firm of Chartered Accountants or Cost and   Management Accounts shall be determined by the FBR on a case to case basis.
15)       Determination of jurisdiction: [209(6)]
Where a question arises as to whether a Commissioner has jurisdiction over a person or not, the question shall be decided by the RCIT or RCITs concerned and, if they are not in agreement, it is determined by the FBR.
16)       Authority of approval: [212]
            The FBR may authorize the RCIT or the CIT to grant approval on behalf of the       FBR.
17)       Registration of income tax practitioners: [223(10)]
            The FBR may make rules u/s 237 for the registration of income tax            practitioners.
18)       Power to make rules: [237(1)]
            The FBR may, by notification in the Official Gazette, make rules for            carrying out the purposes of the Income Tax Ordinance, 2001.
19)       Delegation of powers: [209(2)]
The FBR may delegate all or any of its powers and functions to any income tax authority.
20)       Unexplained income or assets:
The FBR may make rules u/s 237 for the procedure of taxation of any unexplained income or asset of any person discovered by any income tax authority.
21)       Supervision of subordinate authorities:
            The FBR supervises the functions, duties and jurisdiction of its subordinate           authorities.
22)        Approval of securities:
               Approve a security for the purpose of taxation as "profit on debt"

The FBR  has the powers to select persons or class of persons for audit of income tax affairs through computer ballot which may be random or parametric on the discretion of the board.

DEFINE PERQUISITES

DEFINE PERQUISITE,WHAT VARIOUS PERQUISITES /BENEFITS/ FACILITIES ARE PROVIDED BY AN EMPLOYER TO AN EMPLOYEE IN RELATION TO SALARY.

 INTRODUCTION:
                            Perquisite is defined as any casual emolument or benefit attached to an office or position in addition to salary.    or                
   An employee benefit is any benefit provided or paid by the employer for the benefit of the employee or the employee’s family. Benefits are generally included in the employee’s SALARY for tax purposes, except those benefits that qualify for an exclusion.

Valuation of Perquisites(section 13 ITO 2001)
SECTION 13(1) SAYS
                                "For the purpose of computing the income of an employee for the tax year chargeable to tax under the head 'Salary" the value of perquisites provided by an employer to an employee in that year that is included in the employee's salary under section 12 shall be determined in accordance with this section"   
              As a general rule, the taxable value of perquisites in the hands of the employees is its cost to the employer. However, specific rules for valuation of certain perquisites as per ITO2001 are briefly given below:

• Accommodation
• Conveyance
• Services of Sweeper, Gardner, Watchman or Personal Assistant
• Supply of Gas, Electric Power or Water (Utilities)
• Interest Free or Concessional Loan Facility
• Medical charges, Hospital charges or medical allowance. 

• Provident Fund
• Entertainment
• Transfer of property or service
• Obligation of employee waived by employer.
• Obligation of employee paid by employer.
• Any Other Benefit or Amenity, Service, Right or Privilege

1. Accommodation 

   (a) House Rent Allowance:

         If an employer provides any accommodation allowance or house rent allowance, the whole amount will be fully taxable under the head income from salary.

     (b) Accommodation Facility:

     If the employer provides an accommodation, the following amount will be added in total income of the employee as value of perquisite:

1- The amount that would have been paid by the employer in case such accommodation was not provided; or 

2- 45% of the minimum of time scale of the basic salary;   whichever of (1) or (2) is higher.

Note= In areas other than big cities the house rent allowance admissible to govt. employees is 30% of minimum time scale of the basic salary.

  Conveyance:

(a) Conveyance Allowance;

   If the employer provides conveyance allowance to the employee, the whole allowance will be fully taxable under the head income from salary. 

 (b) Conveyance provide by the employer for personal use of the employee.

If the employer has provided a conveyance to employee purely for personal use, 10% of the cost paid for purchasing the motor vehicle will be included in the taxable income of the employee every year.

(c) Conveyance provided by employer partly for personal and partly for official use.

When the motor vehicle is provided by the employer both for official and personal use, 5% of the cost paid by the employer for purchasing the motor vehicle will be included in the total income of the employee.

 NOTE= If the vehicle is acquired on lease, no leasing value will be considered for this purpose. The percentage  of 5% or 10% will be applied on fair market value of the vehicle.

Medical charges, Hospital charges or Medical allowance: 

(1) In case an employee receives free medical treatment or hospitalization or both by the employer or receives reimbursement of the medical expenses under the terms of employment whole such amount.

(2) In case where the above mentioned facilities are not provided for in the terms of employment, any medical allowance given by the employer will be exempt up to 10% of basic salary of employee.

Provident Fund

Entertainment 

 Services of a sweeper, a gardener, a watchman or a personal assistant

The value of benefit to the employee or any member of his household resulting from the provision of services of a sweeper, a gardener, a watchman or a personal attendant by the employer, shall be the actual cost to the employer. The actual cost in such a case shall be the total amount of salary paid or payable by the employer for such services as reduced by any amount paid by the employee for such services.

Supply of Gas, Electric Energy or Water(utilities)
If an employer provides utilities to an employee in a tax year, the amount chargeable to the tax under the head salary for that year shall include the fair market value of the utilities provided, as reduced by any payment made by the employee for the utilities.

Interest free or Concessional Loan Facility

The value of the benefit to the assessee resulting from the provision of interest-free or concessional loan for any purpose by the employer will be as follow:
        If a loan is made, on or after the 1 day of July, 2002, by an employer to  an employee and either no profit on loan is payable by the employee or the rate of profit on loan is less than the benchmark rate, the amount chargeable to tax to the employee under the head  Salary  for a tax year shall
include an amount equal to—
(a) the profit on loan computed at the benchmark rate, where no
   profit on loan is payable by the employee, or
(b) the difference between the amount of profit on loan paid by the
   employee in that tax year and the amount of profit on loan
  computed at the benchmark rate,as the case may be.
Bench mark rate for tax year 2012 is 14%. 

Obligation of employee waived by employer.
If an obligation of an employee to pay or repay an amount owing by the employee to the employer is waived by the employer, the amount chargeable to tax to the employee under the head  Salary  for that
year shall include the amount so waived.

Obligation of employee paid by employer. 

If an obligation of an employee to pay or repay an amount[owing by the employee to another person is paid by the employer, the amount chargeable to tax to the employee under the head  Salary  for that
year shall include the amount so paid.

Transfer of property or service

If property is transferred or services are provided by an employer to an employee, the amount chargeable to tax to the employee under the head ―Salary for that year shall include the fair market value of the
property or services determined at the time the property is transferred or the services are provided, as reduced by any payment made by the employee for the property or services.

Any Other Benefit or Amenity, Service, Right.
 If an employer has provided an employee with a perquisite which is not covered by sub-sections (3) through (12), the amount chargeable to tax to the employee under the head  Salary  for that year shall include the fair market value of the perquisite, as reduced by any payment made by the employee for the perquisite.
                                        end
  

DEFINE CONTRACT ALSO EXPLAIN ITS ESSENTIALS

CONTRACT

Question: Define contract, what are the essentials of a contract?

Answer:
            Introduction: Contract law is based on the principle expressed in the Latin phrase pacta sunt servanda, which is usually translated "agreements must be kept" . The security and stability of business world depend upon the law of contract. Indeed the basis of trade and commerce today is the enforceability  of promises, very often contracts are made at one time and the performance is to follow latter, there should be legally enforceable obligation to perform the agreement.
 
Definition:
                Literally: The word contract comes from a Latin word"Contractus" which means consent, agreement or to enter into an agreement with a particular person.
Traditionally: Salmond says , "A contract is an agreement creating and defining obligations between the parties"

Sir John Smith says,"A voluntary, deliberate and legally binding agreement between competent parties."

Example: Asif says to Hamid,"Will you purchase my car for Rs.500000?.it is an offer, Hamid says yes, the offer is accepted and a contract is formed.

Contract law in Pakistan
                                          The law relating to contracts in Pakistan is contained in Contract Act 1872. It extends to whole Pakistan and came in to force on the first day of September 1872. It provides rules relating to commercial transactions. It determines the circumstances in which promises made by the parties shall be legally binding on them.

According to Contract Act1872:
                                        Section 2(h) defines contract as,"An agreement enforceable by law is a contract"
A contract consists of two elements, 1- Agreement    2- Enforceability.
 
Agreement: Section 2(e) defines the term agreement as," every promise and set of promises forming the consideration for each other is an agreement."

Now what is promise?
Section 2(b) says,"when the person to whom the proposal is made, signifies his assent thereto,the proposal is said to be accepted, a proposal, when accepted becomes a promise"

Enforceability:
Enforceability is the second requirement of the contract. An agreement is enforceable if it is recognized by the courts of law. In order to be enforceable by law, the agreement must create legal obligation between the parties.
ESSENTIALS OF A VALID CONTRACT
" To be enforceable by law, an agreement must possess the essential elements of a valid contract as contained in sections 10, 29 and 56. According to section 10, "all agreements are contracts if they are made by the free consent of the parties, competent to contract, for a lawful consideration, with a lawful object, are not expressly declared by the Act to be void, and where necessary, satisfy the requirements of any law as to writing or attention or registration".            
                            The essential elements of a valid contract are as follows.

1-Agreement:

There must be at least two parties, one making an offer and the other accepting it. Acceptance must be unconditional and in the same mode as prescribed and communicated by the offeror. There must be “consensus ad idem”.(same thing in the same sense) To constitute a valid contract

Example: A offer B to sell his car for Rs.500000. B agrees to buy it. This is an offer by A and acceptance by B

2-Legal relationship:

Parties must intend to create legal relationship. It arises when parties know that if one of them does not fulfill his part of promise, he shall be liable for the failure of the contract. (Balfour vs Balfour)

Example: Asif offers to sell his phone to Alvi for Rs. 1000. Alvi agrees to buy. It is a contract as it creates legal relationship.

3-Lawfull object: (sec.23 ) The object of the contract must be lawful.

Under section 23, “Every agreement of which the object or consideration is unlawful is void”

The object must not be:

1. Illegal or unlawful,

2. Immoral,

3. Opposed to public policy.

Object must not be forbidden by law or is of such a nature that if permitted it will defeat the provisions of law, imputes injury to the person or property of another.

example: Hamid agrees to pay Asif Rs.20000 if he kills Ali. The agreement is illegal as the object is unlawful.

4-Free consent (13)

Two or more parties are said to be consent when they are agreed upon the same thing in the same sense. This emphasizes the need of consensus ad idem. Free consent is absent if contract is induced by coercion, misrepresentation, fraud, undue influence etc.

Example: A compels B to enter into a contract on gun point. It is not a valid contract because consent is not free.

5-Capacity of parties: (sec. 11)

Every person is competent to contract if he is of the age of majority, is of sound mind and is not disqualified from contracting by law to which he is subject.

Example: M, a minor agrees to sell his house to B. It is not a valid contract because he is not competent to make a contract.

6-Lawful consideration:

Consideration is something in return. It is the doing of or abstinence from an act. It is the price paid by one party for the promise of the other. It means that contract is only valid if both the parties get something and give something.

Example: A agrees to sell his car for Rs. 50000 to B. For A the consideration is Rs.500000 and for B consideration is car.

The consideration or object of an agreement is unlawful if….

1-It is forbidden by law,

2-If permitted; it would defeat the provisions of any law,

3-Involes injury to any other person or property,

4-It is fraudulent, or

5-It is opposed to public policy.

7-Agreement is not expressly declared to be void:

A void agreement is not enforceable. It has no legal existence neither it gives rise to any rights or obligations. In order to make a valid contract must not be one of those that are expressly declared to be void.

Examples of void agreements are:

                 a- Agreement in restraint of marriage.

b- Agreement in restraint of legal proceedings.

c- Agreement in restraint of trade.

d- Agreement to do impossible acts.

e- Agreement by way of wager.

8-Possibility of performance:

A contract must be possible to perform otherwise it will not be a valid contract.

Section 56 says that “An agreement to do an act impossible in itself is void”.

Example: An agreement to put the life into a dead body is void as it is not possible.

9-Certainty of terms:

The contract must not be uncertain, vague or indefinite. Where the agreement is vague and its meaning can not be understood, it shall be unenforceable.

According to section 29, Agreement, the meaning of which is not certain or capable of being made certain, is void.

Example: A agrees B to sell one ton of oil without informing the kind of oil. The agreement is void because of its uncertainty.

10-Legal formalities:

Legal formalities should also be fulfilled regarding

1. Writing
2. Registration
3. Attestation etc.

Example: Sale and purchase of land requires registration.

CONCLUSION:

If any of the essential elements is missing the contract is voidable, void, illegal or unenforceable in the eyes of law.

BUSINESS COMMUNICATION---process

CAREER ACADEMY HAFIZ ABAD

 
Communication process

Communication (from Latin "communis", meaning to share) is the activity of conveying information through the exchange of thoughts, messages, or information, as by speech, visuals, signals, writing, or behavior.

Communication is considered effective when it achieves the desired reaction or response from the receiver. Simply stated
 

“Communication is a two way process of exchanging ideas and information”

Communication includes six components: context, sender-encoder, message, medium, receiver-decoder and feedback. Figure illustrates how these factors interact in the communication process, affected by various contextual conditions and decisions.

A brief discussion of various factors is given below.

Context.

Every message begins with context. Context is a broad field that includes country, culture, organization and external and internal stimuli.

Every country, culture and organization has its own conventions for processing and communicating information. This aspect of the context is the playing field on which you must plan, design and communicate your message successfully.

Another aspect of context is the external stimulus that prompts you to send a message. The source of this prompt may be a letter, memo, note, mail, fax, phone, or a meeting.

Next internal stimuli have a complex influence how you translate ideas into a message. Your attitude, opinions, emotions, likes and dislikes, education, and confidence in your communication skills, all influence the way you communicate your ideas. Especially important is your ability to analyze your receiver’s culture, viewpoint, needs, skills, status, mental ability, experience and expectations.

Sender –Encoder

When you send your message through any medium, you are the sender or encoder. You try to choose symbols usually words that express your message so that the receiver will understand it and react with the response you desire. After considering context, you decide which symbols best convey your message and which message channel will be the most effective among the oral or written media.

Message

The message is the core idea you wish to communicate. It consists of both verbal and nonverbal symbols. Your first task is to decide exactly what your message is and what content to include. You must consider the context and your message—how the receiver will interpret it and how it may affect your relationship.

Medium.

Your message channel depends on all the contextual factors and the nature of message itself.Your choices include e mail, the printed word or sound. The choice of medium is influenced by the relationship between the sender and the receiver. Urgency of message is a primary factor in choosing the medium. You may also consider factors such as importance, number of receivers, costs, and amount of information.

The written channel is often preferred when the message is long, technical or formal in nature. The oral message is effective when the message is urgent or personal or when immediate feedback is important.

1.Inside organization. For internal communication, written media may be memo, reports, bulletins, posters, notes etc. oral communication my take the form of staff meeting reports, presentations, telephone chats, face to face discussions etc .Another oral channel “grapevine” through which news and rumours travel quickly and accurately.

2.Outside organization. External written communication media may be letters, proposals, telegrams, faxes, telexes, postcards, catalogs, news releases etc. you may communicate orally in face to face discussions, by telephone, by presentations, by panel situations or through television.

Receiver-decoder.

The message receiver is your reader or listener or decoder. As figure illustrates, the receiver as well as the sender are influenced by the context and by the internal and external stimuli. Both receive message through the eyes and ears but are also influenced by nonverbal factors like touch, taste and smell. All factors of the message are filtered through the receiver’s view and experiences in the world.

Therefore, miscommunication can occur when personal biases and individual values cause the receiver to misinterpret the sender’s intended message.

Feedback.

Feedback is your receiver’s response and the final link in the communication chain. Feedback is the key element in the communication process because it enables you to evaluate the effectiveness of your message. Feedback can be oral or written. Sometime silence is used as feedback but it is not effective.

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Conclusion.

The components described above represent what happens in communication. Although this linear description seems relatively simple, problems can occur at any point on the continuum. Communication is effective when each step is successful. Ended.

BUSINESS LAW void agreements

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Q. Discuss briefly expressly declared void agreements under the Contract Act 1872.

Introduction:

Void agreements are those agreements which do not create legal relations between the parties. Breach of a void agreement does not provide legal remedy to injured party because it is void from beginning.

Section 2(g) says that “an agreement not enforceable by law is void.”

An agreement must not be one of those that are express declared to be void by the law. (sec.10)

The void agreements are as follows:

1. Agreements under mistake of fact:

Under section 20 “where both the parties to an agreement, are under a mistake as to matter of fact essential to the agreement, the agreement is void”

Example: A agrees to buy a certain horse. It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact. The agreement is void.

2. Unlawful object and consideration:

Section 24 states, “if any part of a single consideration for one or more objects, or any part of several considerations for a single object is unlawful, the agreement is void”

In simple words any agreement that involves unlawful consideration or object is void.

Example: A agrees to kill Z on behalf of B for one kg heroine.

3. Agreement without consideration:

An agreement without consideration is void with some exceptions under section 25. “Agreement without consideration is void unless it is in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law.”

Example: A agrees to give his car to B without consideration. The agreement is void.

4. Agreement in restraint of marriage:

Section 26 says, every agreement in restraint of the marriage of any person, other than a minor is void.”

An agreement to marry some person has no legal remedies and no person can be bound for this purpose because this is a social agreement. Parents of a minor person can stop him

Example: Asif agrees with B that she will not marry U. It is a void agreement.

5. Agreement in restraint of trade:

An agreement that interferes with a person’^s right to engage him in a lawful business, trade, occupation or profession is called an agreement in restraint of trade. “ Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent is void” (sec.27)

Example: APL company agrees with Seeking Cargo to close its operations in Karachi for an amount of Rs. 10000. It is a void agreement because it is in restraint of trade.

Exception to the rule “All agreements in restraint of trade are void”

1. Sale of goodwill. When a seller of goodwill agrees with the buyer to refrain from carrying on a similar business within specified local limits, shall be valid provided the limits are reasonable.
2. Exception under Partnership Act.

1. A partner shall not carry on any business other than that of the firm while he is a partner.
2. A retiring partner may make an agreement with his partners that he will not carry on similar business to that of the firm within a specified period or specified local limits.
3. Any partner may, upon the sale of the goodwill of the firm, make an agreement with the buyer that such partner will not carry on any business similar to that of the firm within specified period or specified local limits.
4. Partners may, upon or in anticipation of the dissolution of the firm, make an agreement that some or all of them will not carry on a business similar to that of the firm within specified period or specified local limits.

3. Service Contracts: Agreements of service often contain negative covenants

preventing the employee working elsewhere during the period covered by the . agreement

4. Business Combinations:

Agreements among businessmen to reduce cost and enhance profit by regulating prices, output, advertising and other factors, are valid. But combinations which are against the public interest are void.

6. Agreement in restraint of legal proceedings:

Sec.28 says,” Every agreement by which any party is restricted absolutely from enforcing his right under a contract, by the usual legal proceedings in the ordinary Tribunals, or which limits the time within which he may enforce his rights, is void to that extent.

Example: A and B are parties to a contract. Both agree that in case of breach of contract, they would not go to court. This is a void agreement.

Exceptions.

1.Tthe parties may agree that in case of dispute