SOLVED ASSIGNMENT 2 CODE 456 BUSINESS TAXATION SPRING 2016
Aiou solved assignment 2 subject code 456 business taxation for the semester spring 2016. This is the second solved assignment 2 for the business taxation and especially offered to B.Com level students.
Course: Business Taxation Code: 456
Assignment No: 02
Level: B.Com Spring 2016
Q1:- To Implement the Income Tax Ordinance 2001, the Federal Govt. has established the institution of Federal Board of Revenue (FUR). Explain in detail the powers and functions of FUR with regard to the collection of Income Tax.
Ans:- The Federal Board of Revenue: Definition “Federal Board of Revenue” means the Federal 13oard of Revenue (MR) established under the Federal Board of Revenue Act, 2007. Before the promulgation of FBR Act, it was called CBR.
Who appointed the FBR?
The Federal Government has appointed the Federal Board of Revenue (FBR) by the authority of
Federal Board of Revenue Act, 2007.
Basic functions of the FBR: Tax collection is the basic function of the 1138. 1138 formulates policies and tab administrative measures to ensure this objective. It also performs quasi-judicial function of hearing of appeals.
Status of FBR:
MR shall be the highest executive authority in Pakistan.
Head of the FBR:
Chairman of 113R shall be the main authority in the 11312 who shall be appointed by Federal Government.
Members of the FBR:
FBR shall consist of at least seven members who shall be appointed by the Federal Government.
Powers and Functions of Federal Board of Revenue (FBR):-
Tax collection and administration of tax system is the basic function of the FBR. However, the FBR has also following powers and performs the following functions in the presence of its powers:-
1. Approval of research institutions: [26(2)] The F8R may approve any institution engaged in scientific research in Pakistan as “Scientific Research Institution” so that such institution may claims its scientific research expenditures as deduction against income from business.
2. Approval of employee training scheme: [27(c)] The FBR may approve to Pakistani employee training scheme against which deduction is allowed to business.
3. Approval of teasing Companies and Modaraba: [28(3)1 The FBR may approve any leasing company or modaraba, where lease rental payment made to such company is allowed as deduction against 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 F8R 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:  The FBR may demand any data regarded 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: 1206] 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 Inland Revenue Authorities: [208) The FBR may appoint as many Inland Revenue. Authorities as are necessary.
12. Criterion for selection of audit: (177(1)) The FBR may define criterion to guide the commissioner of Inland Revenue that how the OR 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 affair 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 CCIR or CCIRs concerned and, if they are not in agreement, it is determined by the FBR.
16. Authority of approval:  The FBR may authorize the CCIR or CCIRs 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 income Tax Ordinance, 2001.
19. Delegation of powers: [209(2)] The FBR may delegate all or any of its power and functions to any Inland Revenue Authority.
20. Unexplained income or assets: The FBR may make u/s 237 for the procedure of taxation of any unexplained income or asset of any person discovered by any Inland Revenue Authority.
21. Supervision or subordinate authorities: The FBR supervises the function duties and jurisdiction of its subordinate authorities.
Q2: The ERR can send a notice to any person for the payment of tax. However, that person will have to right to appeal the court for any unjustified tax demand from the ERR. Under the provision of Income Tax Ordinance 2001, hoe iv ill you guide such a person in making appeals related to the tax matters to the concerned appellate forums?
Ans. Procedure/condition for filling reference to the High Court
1. Who may file reference to the High Court? Taxpayer or the Commissioner of Inland Revenue; who is not satisfied with the decision of Appellate Tribunal, may file an application to the high court,
2. Point of Law: Application shall be filled only on the basis of point of Law arising out of order.
3. Prescribed Forum: The application shall be filled in the prescribed forum. (From specified under the rule-78 of the Income Tax Rules, 2002)
4. Verification of application: The Application shall be verified by the appellant.
5. Payment of Fee: Before reference to the High Court, the reference fee shall be paid by the applicant. Note: if appellant is income tax department, no reference fee shall be paid.
6. Prescribed Fee: The reference Fee shall be Rs.100.
7. Attachment of Payment Challan: Payment Challan of fee shall be attached with application form, if appellant is taxpayer.
8. Copy of Appellant Order: Certified copy of the order of the Appellant Tribunal from which the question of Law arises shall be attached with application.
9. Copy of first Appellant Order: The copy of the order of Commissioner (Appeals) shall be attached with application.
10. Statement of the Case: Statement of the case, stating question of law and facts determined by the Tribunal signed by the appellant shall be attached with application.
11. Time of Appeal: A reference shall be filled within 90 days of the communication of the order of the Appellant Tribunal.
12. Required of Triplication: The application shall be filed in triplicate.
Q 3:- The ERR has powers to recover the tax from the person n ho does not siduntarils pays his/her tax liability. Under Mc Income Tax Ordinance 2001, what are the different method for the recovery of tax from such a person?
Ans:- Recovery of Tax out of Property and In arrest of Taxpayer:-
Who may recover tax?
The Commissioner of Inland Revenue (CIR) may recover any tax due by a taxpayer (defaulter taxpayer).
2. Powers of Commissioner regarding recovery: The Commissioner shall have the same powers as a Civil Court has under the code of Civil procedure 1908, regarding recovery of any amount due under a decree.
3. Issuance of notice: The Commissioner may serve a notice to defaulter taxpayer for payment of tax due.
4. Requirements of notice by the Commissioner:
i. Prescribed form: Notice shall be issued in the prescribed form.
ii. Specification of Amount: Amount due by taxpayer shall be dearly specified in the notice.
iii. Specification of time: The notice shall specify the time of payment of tax due by the taxpayer.
Recovery of tax by District Officer [Revenue]:
1. Who authorizes the District Officer (revenue)? The Commissioner may authorize the District Officer (Revenue) for recovery of tax, by forwarding a certificate specifying the amount of any tax due from the taxpayer.
2. To whom District Officer (Revenue) case is forward: It is forward to the District Officer (Revenue) of the District in which:
i. The taxpayer resides; or
Carries on business; or
Any property belonging to the taxpayer is situated.
3. Manner of Recovery: On receipt of certificate form the Commissioner, the District Officer (Revenue) shall proceed to recover any tax due from the taxpayer as if it were an arrear of land revenue. Recovery from Liquidators:
1. Who may recover tax from liquidator? l he Commissioner may recover tax from liquidator.
2. Responsibility of liquidator: Any person appointed as a liquidator of a company shall issue a notice within 14 days of his appointment as liquidator to the Commissioner.
3. Non-compliance with the notice of Commissioner by liquidator: If a liquidator does not comply with the requirements of notice of the Commissioner, he shall be personally liable to the amount specified in the notice.
Recovery of Tax from person leaving Pakistan Permanently: If the Commissioner has reasonable grounds to believe that a person may leave Pakistan permanently without payment of tax; he may issue a certificate to the Commissioner of Immigration and request him not to allow the person to leave Pakistan until:
i. The person has made payment of tax; or
ii. ii. Has acquired clearance from the Commissioner of Inland Revenue (CIR).
Collection of Tax in case of Private companies and Association of persons
1. In case of Private Company: Where any tax payable by a private company (including a private company that has been wound up or gone into liquidation) in respect of any tax year cannot be recovered from the company, it may be recovered from the following persons:
2. In case of Association of persons: Where any tax payable by a member of AOP in respect of the members share in the income of an AOP in respect of any tax year cannot be recovered from the member, the association shall be liable for the tax due by the member.
Recovery of Tax due by the Non-Resident Member of an Association of persons (AOP):
The tax payable by a non-resident member of an AOP in respect of member’s share in profit of the association can be recovered out of assets of the association or from a resident member of association.