Tax liability in state of bankruptcy

Tax liability in state of bankruptcy

Section 138B of the Income Tax Ordinance, 2001 tells about the tax liability in the state of bankruptcy.

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 138B of Income Tax Ordinance, 2001:

138B. Estate in bankruptcy.—(1) If a taxpayer is declared bankrupt, the tax liability under this Ordinance shall pass on to the estate in bankruptcy.

(2) If tax liability is incurred by an estate in bankruptcy, the tax shall be deemed to be a current expenditure in the operations of the estate in bankruptcy and shall be paid before the claims preferred by other creditors are settled.

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