Reviving Sicked Industrial Sectors through granting Tax Incentives

On last Friday the Federal Board of Revenue (FBR) revised the incentives allowed for renewal of poorly governed and managed industrial sectors.

An SRO has been issued Circular No. 13 of 2022 by the FBR on 07-04-2022, to put weight and emphasize the amendments made in the Income Tax Ordinance 2001, which was put up via Income Tax (Amendment) Ordinance 2022.

The FBR added that, to kickstart renewing of the ill-fated industrial sectors, a new section 59C has been inducted in the Income Tax Ordinance 2001, which becomes Income Tax Amendment Ordinance 2022. Through the description of this ordinance, the acquiring company would be allowed to adjust their concurrent year losses and put ahead examined business losses while excluding the capital loss of the acquired company incurring the rouged industrial sector through acquisition of its majority share capital.         

The acquiring company would be able to adjust their said losses until the tax year 2026 and for a time period of up to three years.      

In case of failure to renew the ill-fated industrial sector till 2026, it will include the acquiring company to reroute the adjustment of losses in the previous three years and present income to be taxed which was sidelined due to loses adjustments of the acquiring company in the tax year 2027.

Referring to the subjective conditions in sub-section (2) of the section 59C of the Income Tax Amendment Ordinance 2022, the acquiring company is entitled to adjust above mentioned sort of loses in the context of share capital acquired.      

If there is any leftover of loss remained intact by the acquired company till the end of tax year 2026 then it will not available to the acquired company for furtherly setting off the losses in the tax year 2027 against their own income, although in accordance with the section 57 of the ordinance the acquired company can carry forward its losses.  

Only the acquired company can benefit from this section, other than this amalgamation or merger companies can not be benefitted from this section.

In this section, for ill-fated industrial sectors, their losses for adjustments are available in this scheme. 

Maximizing the production is the antidote for renewing the ill-fated industrial sector and that capacity should be adopted before getting the company sicked.