Tax credit for new industries: ''simplified'' procedure recommended

Senate has recommended a simplified tax credit procedure for newly established industrial undertakings through proposed amendments in sections 65D and 65E of the Income Tax Ordinance 2001.
In its recommendations, Senate has suggested totally revamped procedure under Ordinance 2001 for giving tax credit to new industrial undertakings and companies with 100 percent equity investment in the purchase and installation of plant and machinery for the purpose of balancing modernisation, replacement, or for expansion of the plant and machinery already installed.
In this regard, Senate has revised the entire proposed sections pertaining to tax credit to undertakings under Ordinance 2001 to further simplify the language of the income tax law. According to Senate recommendation to the National Assembly, after section 65C, the following new sections shall be added, namely: "65D. Tax credit for newly established industrial undertakings:
(1) Where a taxpayer being a company formed for establishing and operating a new industrial undertaking for manufacturing in Pakistan sets up a new industrial undertaking, it shall be ''given a tax credit equal to hundred percent of the tax payable on the taxable income arising from such industrial undertaking for a period of five years beginning from the date of setting up or commencement of commercial production, whichever is later.
(2) Tax credit under this section shall be admissible where (a) The company is incorporated and industrial undertaking is set up between the first day of July, 2011 and 30th day of June, 2016.
(b) Industrial undertaking is managed by a company formed for operating the said industrial undertaking and registered under the Companies Ordinance, 1984 (XLVII of 1984) and having its registered office in Pakistan.
(c) The industrial undertaking is not established by the splitting up or reconstruction or reconstitution of an undertaking already in existence or by transfer of machinery or plant from an industrial undertaking established in Pakistan at any time before 1st July 2011.
(d) The industrial undertaking is set up with hundred percent equity owned by the company.
(3) The amount of credit admissible under this section shall be deducted from the tax payable by the taxpayer in respect of the tax year in which the plant or machinery referred in sub-section (1) is purchased and installed.
(4) Where any credit is allowed under this section and subsequently it is discovered, on the basis of documents or otherwise, by the Commissioner Inland Revenue that any of the conditions specified in'' this section, was not fulfilled, the credit originally allowed shall be deemed to have been wrongly allowed and the Commissioner Inland Revenue may, notwithstanding anything contained in this Ordinance, re-compute the tax payable by the taxpayer for the relevant year and the provisions of this Ordinance shall, so far as may be, apply accordingly" 65E Tax credit for industrial undertakings established before the first day of July 2011:-
(1) ''Where a taxpayer being a company invests any amount, with hundred percent equity investment in the purchase and installation of plant and machinery for the purposes of balancing modernisation, replacement, or for expansion of the plant and machinery already installed in an industrial undertaking setup in Pakistan before the first day of July 2011, a tax credit shall be allowed against the tax payable in the manner provided hereinafter, in the same proportion, which exists between the total investment and such equity investment made by the industrial undertaking.
(2)The provisions of sub-section (1) shall apply if the plant and machinery is purchased and installed at any time between the first day of July 2011, and the 30th day of June 2016.
(3)The amount of credit admissible under this section shall be deducted from the tax payable by the taxpayer in respect of the tax year in which the plant or machinery referred in sub-section (1) is purchased and installed and for the subsequent four years.
(4)Where no tax is payable by the taxpayer in respect of the tax year in which such plant or machinery is installed, or where the tax payable is less than the amount of tax credit, the amount of such credit or so much of it as is in excess thereof, shall be carried forward and deducted from the tax payable by the taxpayer in respect of the following tax year.
Provided that no such amount shall be carried forward for more than four tax years. Provided further that deduction made under sub-section (1) and under this sub-section shall, not exceed in aggregate the limit of the tax credit specified in sub-section (1).
(5) Where any credit is allowed under this section and subsequently it is discovered, on the basis of documents or otherwise, by the Commissioner Inland Revenue that any of the conditions specified in this section was not fulfilled, the credit originally allowed shall be deemed to have been wrongly allowed and the Commissioner Inland Revenue may notwithstanding anything contained in this Ordinance, re-compute the tax payable by the taxpayer for the relevant year and the provisions of this Ordinance shall apply accordingly, Senate recommendation added.