ISLAMABAD (July 20 2004): The Central Board of Revenue (CBR) has clarified that the profit earned on Certificates of Investment (CsOI) issued by investment banks is exempted from tax, as are foreign currency accounts. The CBR on Monday issued the explanatory circular to elaborate important provisions of Income Tax Ordinance 2001 incorporated in Finance Act, 2004.
Income tax circular 17 of 2004 has elaborated all amendments made in the Ordinance 2001 as announced by Finance Minister Shaukat Aziz in his budget speech.
According to circular, the investment banks are allowed to raise foreign currency fund from abroad through issuance of Certificates of Investment (CsOI). State Bank's circular 36 of April 2, 1992 has explained the procedure in this regard. A confusion arose as to whether the CsOI issued by investment banks are covered under Foreign Currency Account Scheme of SBP and profit earned thereon entitled to exemption from tax as was available to foreign currency accounts or not.
As per clarification issued by SBP investment banks are authorised to issue CsOI and, thus, covered by Foreign Currency Account Scheme approved by SBP. Accordingly, clause (78) and clause (80) of Part I of the Second Schedule of the Income Tax Ordinance 2001 have been amended to include CsOI for the purposes of exemption. The amendment shall be applicable from the date on which the clauses (78) & (80) were introduced in the said schedule.
In another clarification, the government has introduced the concept of 'group relief' whereby loss surrendered by a subsidiary company can be claimed and allowed against income of the holding company, acquiring 75 percent share capital of the subsidiary company.
The circular has explained that the commissioner cannot delegate the powers of amendment of assessment to an officer lower than the rank of Additional Commissioner of Income Tax (ACIT).
It specifies that the rate of additional tax for delayed-payment of tax demand has been reduced from 18 percent to 12 percent, while rate of compensation for delayed refund payment has also been reduced from 15 percent to 6 percent from July 1, 2004.