106. Tax credit for investment in share-capital of industrial companies:-

(1)   Where an assessee, being a company, invests, at any time before the first day of July, 1991, any amount in the purchase of shares issued by any other Pakistani company which fulfils the condition specified in sub-section (7), credit for the amount so invested shall be allowed to the assessee against the tax payable by it in the manner and to the extent hereinafter provided.

(2)   The credit under sub-section (1) shall be allowed at the following rates, namely:-

Where the industrial undertaking set up by the company is located in-

		Rates
(a) Baluchistan, Tribal areas, Northern Areas or Azad Kashmir		Thirty percent of amount Invested.
(aa) the district of Mansehra, Kohistan, Dera Ismail Khan, Bannu or Karak in the North West Frontier Province, the District of Dera Ghazi Khan or Rajanpur in the Punjab or the district of Jacobabad or Shikarpur in Sind.		Twenty percent of the amount invested.
(b) Other places excluding the Karachi and Hyderabad Talukas and Tehsils of Faisalabad and Lahore and such adjoining areas of Lahore Tehsil as may be notified in this behalf by the Federal Government.		Fifteen percent of the amount invested.

(3)   The amount of the credit admissible under this section shall be deducted from the tax payable by the assessee in respect of the income year in which the investment was made.

(4)   Where no tax is payable by an assessee in respect of the assessment year relevant to the income year in which such investment was made, or where the amount of the tax payable is less than the amount of the credit, the amount of the credit, or so much of it as is in excess thereof, as the case may be, shall be carried forward and deducted from the tax payable by the company in the following assessment year and so on, so, however, that the deductions made under sub-section (3) and this subsection shall not exceed in the aggregate the limits specified in sub-section (2).

(5)   Nothing contained in sub-section (1) shall apply in respect of any shares acquired by an assessee by purchase or transfer from a previous holder thereof or in respect of any shares sold or transferred or otherwise disposed of by an assessee within five years from the date of their purchase.

(5A) Notwithstanding anything contained in this section, a banking company or a financial institution shall not be entitled to tax credit under this section.

(6)   Where any credit is allowed under this section and it is subsequently discovered by the Deputy Commissioner that-

(a)    any shares, investment in which has resulted in the said credit, are sold, transferred or otherwise disposed of within five years of the date of their purchase; or

(b)    the approved industrial undertaking referred to in sub-section (7)-

(i)     was not set up within the period specified in the order of approval; or

(ii)    was set up in an area other than that specified in the order of approval and in consequence of that the assessee was not entitled to any credit; or

(iii)   was set up in an area other than that specified in the order of approval and in consequence of that the assessee was entitled to an amount of credit which is less than the amount actually allowed; or

(iv)   has not started commercial production within the period specified in the order of approval,

the assessee shall, notwithstanding anything contained in this Ordinance, be liable to pay, in addition to any tax otherwise payable by it in respect of the income year in which such infringement was discovered, additional tax equal to,-

(i)     in the case referred to in sub-section (iii) of clause (b), the difference in the amount actually allowed and the amount of credit allowable; and

(ii)    in other cases, the full amount of credit actually allowed, and

where no such tax is otherwise payable by the assessee in respect of the said income year, the said additional tax shall be deemed to be the tax payable by it in respect of the said income year.

(7)   The following are the conditions referred to in sub-section (1), namely:-

(a)    that the company is a public company; and

(b)    that the company is formed for the purpose of, and is actually engaged in, carrying on in Pakistan an approved industrial undertaking owned by it.

Explanation. - As used in this sub-section,-

(a)    "approved industrial undertaking" means an industrial undertaking which is set up in Pakistan after the fourteenth day of August, 1947 and is approved by the Central Board of Revenue for the purposes of this section; and

(b)    "Industrial undertaking" means-

(i)     any undertaking which fulfils the conditions specified in clauses (a), (d) and (e) of sub-section (2) of section 48; and

(ii)    any other industrial undertaking, which is approved by the Central Board of Revenue for the purposes of this section,

and includes any expansion of an industrial undertaking to which this section applies, were such expansion constitutes-

(a)    an identifiable industrial unit for the production of any goods or class of goods; or

(b)    a similar unit for the carrying on of an identifiable industrial process.

(7A) Notwithstanding anything contained in this section, the Central Board of Revenue may, in the case of any company applying for approval of an industrial undertaking owned by it, grant approval under this section before the said undertaking is set up or has commenced commercial production or may grant approval from such date, whether preceding or following the date on which the approval is granted, as it may specify in this behalf.

(8)   The provisions of sections 96, 97, 99, 100, 103 and 104 shall, so far as may be, apply to tax credit under this section as they apply to refunds.

(9)   The Central Board of Revenue may make rules regulating the procedure for the grant of approval under this section and any other matter connected with, or incidental to, the operation of this section.