Law: Income Tax Ordinance, 1979

Section: 12(9A),proviso(ii)&SecondSched.,PartIV,C ls.59,66A

(a) Income Tax Ordinance (XXXI of 1979)]......S. 12(9 A), proviso (ii) Income deemed to accrue or arise in Pakistan Departmental contention that in view of proviso (ii) to subsection (9A) of S.12 of the Income Tax Ordinance, 1979, any dividend distribution for assessment year 1999 2000 made after 30 6 1999 i.e. close of the stipulated income year, would not be relevant to assessment year 1999 2000 as assessment year 1999 2000 closed on 30 6 1999 and all company operations having a bearing on the determination of this income also came to an end on this date was clearly not tenable. (b) Income Tax Ordinance (XXXI of 1979) --- S. 12(9 A), proviso (ii) & Second Sched., Part IV, Cls. 59, 66 A -Finance Act (IV of 1999) Income deemed to accrue or arise in Pakistan Exemption from specific provisions Assessment year 1999 2000 Dividend, declaration of Dividend declared as on 21 8 1998 and 23 8 1999 were found to be not relevant to assessment year 1999 2000 as the dividend declarations had been allegedly made outside the time frame relevant to income year 1998 99 as evident from the dates of dividend declaration made by the company Consequently, dividend distributions was found to be much less than 40% of the after tax profits declared by the company rendering the company subject to the mischief of S.12(9A) of the Income Tax Ordinance, 1979 and the deemed income was determined by the Inspecting Additional Commissioner Validity Both the dividends were placed within the time frame relevant to income year 1998 99 i.e. assessment year 1999 2000 Departmental contention that such dividend did not relate to assessment year 1999 2000 was misconceived Distribution of dividend could not be related to the current years profit only Dividend was always distributed out of the accumulated, brought forward profits i.e. the retained earnings of the company No provisions of law existed that could compel a company to distribute dividend out of the current years profits only Company may announce a dividend even when loss had been declared currently Section 12(9A) of the Income Tax Ordinance, 1979 came on the statute in July, 1999 while such dividend had already been announced in August,…

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