LAHORE: The industrial units converting their lands into housing societies are liable to tax as they fall under the definition of ‘adventure in nature of trade’, said sources from the income tax department.
It may be noted that a number of limited companies, especially those engaged in textile business, have been found winding up their businesses due to continuous losses and applying for liquidation before the competent authority.
However, many of the managements of these industrial units had decided to sale out their lands through real estate developers after developing and plotting acres of lands to private buyers and submitted ‘nil’ income tax returns to the field formations of Federal Board of Revenue in central Punjab.
Also, said the sources, those industrial units were had also claiming exemptions against the amounts obtained through sale of land. They said they were dubbing their proceeds as capital gain in the hands of the companies which was not liable to be taxed under the provisions of the income tax ordinance.
But the department confronted these exemption claims against sale of industrial lands while treating the proceeds as normal business income. Sources further added that the taxpayers had claimed in their relevant record that they had sold the land on ‘as is where is’ basis but a thorough investigation by the department revealed that they had modified and developed the land before its disposal and got housing society maps approved from the concerned authorities. All those involved in adventure of constructing roads, plotting the land into commerce and residential plots and sale them out to the buyers while claiming exemption.
Even some of the shareholders of the company were also found becoming part and parcel of the housing society and the management had also approached the power distribution companies for sanction of electricity load on behalf of the housing society. They said the land was also not sold on ‘as is where is’ basis and in one go rather effort were made by the managements of such industrial units to first develop their lands and then sold them out to the prospective
Copyright Business Recorder, 2023