Transactions between Associates Section 108
Transactions between Associates Section 108: Finance Act, 2024 — Explanation regarding Important Amendments made in the Income Tax Ordinance, 2001
Important amendments made in Income Tax Ordinance, 2001 (“the Ordinance”) through Finance Act, 2024 are explained in the subsequent paragraphs.
Transactions between Associates Section 108
Section 108 pertains to transactions between associates and sub-section (1) of it empowers the Commissioner to distribute, apportion or allocate income, deductions or tax credits between persons who are associates as is necessary to reflect the income that the associates would have realized in an arm’s length transaction. A new sub-section (6) has been added in section 108 as per which, notwithstanding the provisions of sub-section (1), for the tax year 2024 and onwards, where a taxpayer has claimed any amount as deduction for the tax year or for any of the two preceding tax years, on account of royalty paid or payable to an associate directly or indirectly, in respect of use of any brand name, logo, patent, invention, design or model, secret formula or process, copyright, trademark, scientific or technical knowledge, franchise, license, intellectual property or other like property or right or contractual right, the taxpayer upon notice by the Commissioner shall furnish explanation or evidence in respect of promotion, advertisement and publicity expenses incurred that no benefit If has been conferred from such expenses on the associate to which such royalty was paid or payable. Where the taxpayer fails to furnish explanation or evidence that no benefit has been conferred on the associate, twenty five percent of the total expenditure for the tax year in respect of sales promotion, advertisement and publicity shall be disallowed to the taxpayer and allocated to the said associate.
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