ISLAMABAD: The Large Taxpayers Unit (LTU) Karachi in its budget proposal 2014-15 suggested the Federal Board of Revenue (FBR) to do away with sub-section 1 of Section 113 of Income Tax Ordinance, 2001 to provide incentives to loss-making entities.
It is to be noted that Sub-section 1 of Section 113 of Income Tax Ordinance, 2001 empowered the commissioner to compute tax as per historical accounting pattern and provision of this ordinance, if the loss is reported by the entities. Resultantly, the business units, which are earning loss, are facing more difficulties in tax compliance.
In its budget proposal 2014-15, the LTU Karachi suggested removal of the sub-section to provide relief to loss-making entities. The sub-section shall apply to a resident company, an individual, having turnover of Rs50 million or above in the Tax Year 2009 or in any subsequent tax year.
Besides, an association of persons, having turnover Rs50 million or above in the Tax Year 2007 or in any subsequent tax year where for any reason whatsoever allowed under this ordinance including any other law for the time being in force – loss for the year, setting off of a loss of any earlier year, exemption from tax, application of credits or rebates or claiming of allowances or deductions. No tax is payable for a tax year, if it is less than one percent of the amount representing the person’s turnover from all sources for that year.
However, this sub-section shall not apply in the case of a company, which has declared gross loss before set off of depreciation and other inadmissible expenses under the Ordinance and the commissioner is empowered to compute tax as per historical accounting pattern and provision of this Ordinance. Sources said this proposal was aimed at providing relief to loss-making entities, adding that this recommendation was presently under consideration and if it was approved, loss-making entities would be able to regain momentum.
