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LESSON 2.4 BASIC FEATURES OF INCOME TAX
Background/ History Income Tax Act of 1922: At the time of independence, this Act prevalent in undivided India was adopted by the Government of Pakistan as its Income Tax Law. Income Tax Ordinance, 1979 First law on Income Tax was promulgated in Pakistan from 1st July, 1979. Income Tax Ordinance, 2001 To updates the tax laws and brings our law in accordance with international standards, this ordinance was promulgated on 13th September, 2001, which became effective from 1st July, 2002. IT rules 2002 These were promulgated by CBR on 1st July 2002 in exercise of powers granted under section 237 of the Ordinance. Rules are integral part of the main enactment / Law. I.T Ordinance 1979 stands repealed vide section 238 of the Ordinance. The Ordinance overrules all other laws for the time being in force (Sec 3). Federal Government empowered to allow exemptions to certain types of income or specific
persons during financial year but required to place the same before National Assembly at the end of that financial year Sec 53(3).
CBR can issue administrative instructions explanations/circulars under the powers vested through Sec 206 and 213. However, CBR’s instructions not binding on Tax Payers since these are administrative interpretation not judicial interpretation. Sec 206 and sec 213 of the ordinance are reproduced below:
Section 206: (1)To achieve consistency in the administration of this Ordinance and to provide guidance to
taxpayers and officers of the Central Board of Revenue, the Central Board of Revenue may issue Circulars setting out the Board’s interpretation of this Ordinance.
(2)A circular issued by the Central Board of Revenue shall be binding on all Income Tax Authorities and other persons employed in the execution of the Ordinance, under the control of the said Board other than Commissioners of Income Tax (Appeals).
(3)A Circular shall not be binding on a taxpayer.
Section 213: In the course of any proceedings under this Ordinance, the Commissioner or any taxation officer may be assisted, guided or instructed by any income tax authority to which he is subordinate or any other person authorized in this behalf by the Central Board of Revenue.
Case Law is an important source of interpretation. Decisions and interpretation of Supreme Court are binding on all courts in Pakistan, according to
Article 189 of constitution 1973. Decisions and interpretation of High courts are binding on subordinate courts/tribunals in the area
of their jurisdictions.
Basic Features of Income Tax Ordinance 2001 Scheme of the Ordinance is given below: There are thirteen chapters Chapters are divided into:
Parts & Divisions
There are 240 Sections
Schedules are integral part of the Ordinance.
Following aids / assistance are available that help in the interpretation of law / statue.
Internal Aids: These are available in the Act: Explanation to the section Marginal notes Punctuation marks Preamble Title of a chapter Non-Obstinate clause Proviso Context
External Aids: These are not available in the statute/ law but are available in the following instruments / sources. Dictionary Tax committee report Statement of objects appended to a finance bill Finance Minister’s budget speech CBR’s circulars Definitions in other statutes Departmental manuals