Section 108A of Income Tax Ordinance, 2001 has explained that when a transaction is not arm’s length a commission can obtain report from Chartered Accountant (CA) or Cost and Management Accountant (CMA).
The Federal Board of Revenue (FBR) issued the Income Tax Ordinance, 2001 updated up to June 30, 2021. The Ordinance incorporated amendments brought through Finance Act, 2021.
Following is the text of Section 108 of the Income Tax Ordinance, 2001:
108A. Report from independent chartered accountant or cost and management accountant.- (1) Where the Commissioner is of the opinion that a transaction has not been declared at arm’s length, the Commissioner may obtain report from an independent chartered accountant or cost and management accountant to determine the fair market value of asset, product, expenditure or service at the time of transaction.
(2) The scope, terms and conditions of the report shall be as may be prescribed.
(3) Where the Commissioner is satisfied with the report of the independent chartered accountant or cost and management accountant, the fair market value of asset, product, expenditure or service determined in the report shall be treated as definite information for the purpose of sub-section (8) of section 122.
(4) Where the Commissioner is not stratified with the report of the independent chartered accountant or cost and management accountant, the Commissioner may record reasons for being not satisfied with the report and seek report from another independent chartered accountant or cost and management accountant, to determine the fair market value of asset, product, expenditure or service at the time of transaction.
(5) The Commissioner shall seek report under sub-section (1) or sub-section (3), as the case may be, with prior approval of the Board.
