ISLAMABAD: The Federal Board of Revenue (FBR) on Friday explained tax incentives granted for revival of sick industrial units.
The FBR issued Circular No. 13 of 2022 dated April 07, 2022 to explain amendments to Income Tax Ordinance, 2001 brought through Income Tax Ordinance (Amendment) Ordinance, 2022.
The FBR said that in order to initiate revival of sick industrial units, a new section 59C has been inserted in the Income Tax Ordinance, 2001 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 flick industrial unit’) by way of acquisition of its majority share capital.
READ MORE: FBR explains tax amnesty on equity investment
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.
READ MORE: Input tax adjustment restricted for oil, ghee, steel makers
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.
READ MORE: FBR detects fraudulent declaration of goods in ST returns
Revival of sick industrial unit require attaining maximum production capacity that was obtained before such company went sick.
Such revival will be certified by the Engineering Development Board and the acquired company is required to file said certificate along with return of income for tax year 2026.
