The Federal Board of Revenue (FBR) has imposed a major condition on the sick industrial units to attain maximum production capacity to avail conditional tax concessions under the amnesty scheme.
According to an explanatory circular issued by the FBR on the industrial package (amnesty scheme), the sick industrial units need to attain maximum production, comparable to production capacity before the company went sick. Such revival will be certified by the Engineering Development Board (EDB) and the acquired company is required to file said certificate along with return of income for tax year 2026, FBR stated.
The FBR has explained important amendments introduced in the Income Tax Ordinance, 2001, via the Income Tax (Amendment) Ordinance, 2022.
In order to initiate revival of sick industrial units, a new section 59C has been inserted in the Income Tax Ordinance under which an acquiring company is allowed to adjust loss for the latest tax year and brought forward assessed business losses, excluding capital loss, of acquired company sick industrial unit) by way of acquisition of its majority share capital.
The acquiring company can adjust said losses for a period of three tax years up to tax year 2026. Failure to revive sick industrial unit by tax year 2026 shall entail acquiring company to reverse the adjustment of loses in the preceding three tax years and offer income for tax which was set-off due to adjustment of loses of the acquiring company in Tax Year 2027.
The acquiring company is entitled to adjust above said losses in proportion to share capital acquired subject to the conditions referred in sub-section (2) of the section 59C of the Ordinance. Any leftover loss of acquired company by the end of tax year 2026 will not be available to the acquiring company for further set-off of losses in Tax Year 2027 against its own income, however, the acquired company can carry forward its losses in accordance with section 57 of the Ordinance. The benefit under this section shall not be available to any scheme of amalgamation or merger.
The definition of a sick industrial unit, whose losses are available for adjustment under this scheme, has been provided in this section, FBR added.
The Federal Board of Revenue (FBR) has imposed a major condition on the sick industrial units to attain maximum production capacity to avail conditional tax concessions under the amnesty scheme.