The Federal Board of Revenue (FBR) is reviewing a budget proposal for Finance Bill (2015) to prohibit expenditure incurred by pharmaceutical companies in the form of gifts, foreign travel and other giveaways to doctors for promoting healthy and lawful competition.
Sources told Business Recorder here on Tuesday that the budget proposal of the Large Taxpayer Unit (LTU) Karachi is under review for next fiscal year. According to the budget proposal of the LTU Karachi, amendment has been proposed in Section 20 of the Income Tax Ordinance 2001 through Finance Act 2015. Under the proposed amendment, it is declared that any deduction claimed on account of any expenditure incurred by a person for any purpose which is an offence under any law for the time being in force in which the expenditure has been incurred, or which is prohibited by the law, or goes against the public morality shall not he deemed to have been incurred for the purpose of business, and no deduction shall be allowed in respect of such expenditure.
As per LTU Karachi, existing law said, "section 20". Deductions in computing income chargeable under the head "Income from Business".- (1) Subject to this Ordinance, in computing the income of a person chargeable to tax under the head "Income from Business" for a tax year, a deduction shall be allowed for any expenditure incurred by the person in the year wholly and exclusively for the purposes of business.
(1A) Subject to this Ordinance, where animals which have been used for the purposes of the business or profession otherwise than as stock-in-trade and have died or become permanently useless for such purposes, the difference between the actual cost to the taxpayer of the animals and the amount, if any realized in respect of the carcasses or animals.
(2) Subject to this Ordinance, where the expenditure referred to in sub-section (1) is incurred in acquiring a depreciable asset or an intangible with a useful life of more than one year or is pre-commencement expenditure, the person must depreciate or amortise the expenditure in accordance with sections 22, 23, 24 and 25.
(3) Subject to this Ordinance, where any expenditure is incurred by an amalgamated company on legal and financial advisory services and other administrative cost relating to planning and implementation of amalgamation, a deduction shall be allowed for such expenditure.]
Proposed amendment: 20. Deductions in Computing income chargeable under the head "Income from Business".- (1) Subject to this Ordinance, in computing the income of a person chargeable to tax under the head "Income from Business" for a tax year, a deduction shall be allowed for any expenditure incurred by the person in the year wholly and exclusively for the purposes of business.
Explanation:- For removal of doubt it is declared that any deduction claimed on account of any expenditure incurred by a person for any purpose which is an offence under any law for the time being in force in Pakistan, or in the country in which the expenditure has been incurred, or which is prohibited by the law, or goes against the public morality shall not he deemed to have been incurred for the purpose of business, and no deduction shall be allowed in respect f such expenditure.
(1A) Subject to this Ordinance, where animals which have been used for the purposes of the business or profession otherwise than as stock-in-trade and have died or become permanently useless for such purposes, the difference between the actual cost to the taxpayer of the animals and the amount, if any, realized in respect of the carcasses or animals.
(2) Subject to this Ordinance, where the expenditure referred to in subsection (1) is incurred in acquiring a depreciable asset or an intangible with a useful life of more than one year or is pre-commencement expenditure, the person must depreciate or amortise the expenditure in accordance with sections 22, 23, 24 and 25.
(3) Subject to this Ordinance, where any expenditure is incurred by an amalgamated company on legal and financial advisory services and other administrative cost relating to planning and implementation of amalgamation, a deduction shall be allowed for such expenditure.]
The rationale behind the proposal of LTU Karachi is to prohibit expenditure incurred by pharmaceutical companies by way of gifts, foreign travel and other giveaways to doctors against professional ethics or public morality and promote healthy and lawful competition, they added.