 has issued a judgment on the calculation of taxes on insurance companies under section 99 read with the Fourth Schedule .){kind=link}
Lahore High Court Explains How to Tax Insurance Companies. The Lahore High Court (LHC) has made a ruling regarding the calculation of taxes on insurance companies under section 99, in conjunction with the Fourth Schedule of the Income Tax Ordinance 2001.
In its recent judgment, the Lahore High Court has stated that the income of an insurance company will be calculated according to the provisions outlined in section 99, along with the Fourth Schedule of the Income Tax Ordinance 2001.
The Lahore High Court (LHC) has issued a detailed judgment concerning the taxation of insurance companies.
This judgment has clarified any confusion among insurance companies regarding the calculation of taxes for these entities.
LHC explains how to compute income of insurance firms
According to the LHC’s judgment, the controversy surrounds the interpretation of Section 99 of the Ordinance, 2001, which states: “(99); Special provisions relating to the insurance business. — The profits and gains of any insurance business shall be computed in accordance with the rules in the Fourth Schedule.”
The insurance companies argued that while Rule 5 of the Fourth Schedule provides for the computation of profits and gains, it does not pertain to the determination or calculation of tax liability, which they consider to be a separate concept.
On the contrary, the Department argues that the taxpayers’ income in these cases should be aggregated, and tax liability should be determined accordingly.
Lhr High Court Explains Tax Insurance Companies
The Lahore High Court (LHC) has cited a judgment from the Supreme Court of Pakistan, which distinguished between the computation of profits and gains and the computation of tax payable, stating that these are two separate concepts.
The LHC noted that while the Fourth Schedule deals with the computation of profits and gains, it does not address the computation of tax payable according to the opinion of the Supreme Court of Pakistan. If this were the case, tax liability would need to be calculated based on the general provisions of the First Schedule.
Read Also: ISSB Result 2024 Check Online
The Lahore High Court (LHC) emphasized that the First Schedule applies different tax rates, particularly concerning dividend income. Therefore, if the First Schedule is to be applied, the Department cannot argue that insurance businesses should not benefit from the tax rate provided by the First Schedule. This benefit should extend to similarly placed companies and taxpayers.
The LHC further noted that even though the current Section 99 does not explicitly mention “and the tax payable thereon,” this omission does not alter the situation. At the relevant time covered by these tax references, there were no provisions regarding the tax payable on insurance business in the Fourth Schedule.