PIPFA Business Laws and Taxation Syllabus

What is the rule 'Risk prima facie passes with property' (Sec 26)?

Unless otherwise agreed, goods remain at the seller's risk until property passes to the buyer; thereafter the goods are at the buyer's risk whether delivery has been made or not. Risk and ownership move together by default.

Who is an 'unpaid seller' under the Sale of Goods Act 1930?

A seller is unpaid when the whole price has not been paid or tendered, or when a bill of exchange/negotiable instrument received as conditional payment has been dishonoured. The term includes an agent of the seller in the same position.

What rights does an unpaid seller have against the goods?

A right of lien (retaining possession until paid), a right of stoppage in transit (when the buyer becomes insolvent), and a right of resale. These exist even where property has passed to the buyer.

When can an unpaid seller exercise the right of stoppage in transit?

When the buyer has become insolvent, and the goods are in the course of transit (delivered to a carrier but not yet received by the buyer). The seller may resume possession and retain them until payment.

What are the unpaid seller's rights against the buyer personally?

Suit for the price, suit for damages for non-acceptance, suit for interest, and suit for damages for repudiation/anticipatory breach. These are remedies in personam against the buyer.

Define a promissory note under the Negotiable Instruments Act 1881.

An instrument in writing (not a bank/currency note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.

Define a bill of exchange and name its parties.

A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum only to or to the order of a certain person or bearer. Parties: drawer (maker), drawee/acceptor (who pays), and payee (who receives).

Define a cheque and how it differs from a bill of exchange.

A cheque is a bill of exchange drawn on a specified banker and payable on demand. Differences: a cheque is always drawn on a banker, always payable on demand, needs no acceptance, and can be crossed; a bill may be drawn on anyone and may be time-payable.

Distinguish between a promissory note and a bill of exchange.

A promissory note contains a promise to pay and has two parties (maker and payee); a bill contains an order to pay and has three parties (drawer, drawee, payee). A note needs no acceptance; the maker is primarily liable. A bill requires acceptance by the drawee.

What is 'crossing' of a cheque and its main types?

Crossing is drawing two parallel transverse lines on a cheque, directing that payment be made only through a bank account (not over the counter). Types: general crossing (two lines, with/without '& Co.') and special crossing (banker's name added), restricting payment to that banker.

Define negotiation under the Negotiable Instruments Act.

Negotiation is the transfer of a negotiable instrument from one person to another so as to constitute the transferee the holder of the instrument. A bearer instrument is negotiated by delivery; an order instrument by endorsement plus delivery.

Define endorsement and name its main kinds.

Endorsement is the signing of an instrument (usually on the back) by the holder to negotiate it. Kinds: blank (signature only), full/special (names the endorsee), restrictive (restricts further negotiation), partial (invalid), conditional, and sans recourse (without liability).

Who is a 'holder in due course' and what is the difference from a 'holder'?

A holder is anyone entitled in their own name to possession and to recover the amount. A holder in due course obtained the instrument for consideration, before maturity, and in good faith without notice of any defect in title. A holder in due course gets a better title than the transferor.

Define a partnership under the Partnership Act 1932.

Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. The persons are individually 'partners' and collectively a 'firm'.

What are the essential elements of a partnership?

An agreement between two or more persons, to carry on a business, with the object of sharing profits, and the business carried on by all or any of them acting for all (mutual agency). Mutual agency is the true test of partnership.

State the maximum number of partners allowed in a firm under Pakistani law.

The Partnership Act 1932 does not itself fix a number, but under the (now Companies Act 2017 framework) the limit is generally 20 partners for an ordinary business; banking partnerships are limited to 10. Exceeding the limit makes the association illegal.

Distinguish between a partnership and a company.

A company is a separate legal person with perpetual succession, limited liability, transferable shares, and registration is compulsory; a partnership has no separate legal entity, unlimited liability, restricted transfer of interest, registration is optional, and dissolves on a partner's death/insolvency.

What is the effect of non-registration of a firm under the Partnership Act 1932?

An unregistered firm cannot sue third parties or its own partners to enforce contractual rights, and partners cannot sue the firm. However, third parties can sue the firm, and the right to sue for dissolution or accounts of a dissolved firm and set-off up to a limit is preserved.

List the main modes of dissolution of a firm.

Dissolution by agreement, compulsory dissolution (illegality/all-but-one insolvent), dissolution on the happening of contingencies (expiry of term, completion of venture, death/insolvency of a partner), dissolution by notice (partnership at will), and dissolution by the court.

What types of companies can be incorporated under the Companies Act 2017?

Companies limited by shares, companies limited by guarantee (with or without share capital), and unlimited companies. By membership: single-member, private, and public companies. Also includes listed/unlisted and foreign companies.

Distinguish between a private company and a public company under the Companies Act 2017.

A private company restricts share transfer, limits members to 50 (excluding employees), and prohibits public subscription; minimum 1 member (single-member) or 2. A public company has minimum 3 members, no upper limit, freely transferable shares, and may invite public subscription.

What are the main incorporation documents and the role of SECP under the Companies Act 2017?

Key documents are the Memorandum of Association (defines objects/scope) and Articles of Association (internal rules). These are filed with the Securities and Exchange Commission of Pakistan (SECP), the regulator that registers companies and issues the certificate of incorporation.

Define 'tax' and distinguish a direct tax from an indirect tax.

A tax is a compulsory contribution levied by the government without direct quid pro quo. A direct tax (e.g. income tax) is borne by the person on whom it is imposed and cannot be shifted. An indirect tax (e.g. sales tax) can be shifted to another person (the consumer).

State Adam Smith's four canons of taxation.

Canon of Equality (ability to pay), Canon of Certainty (amount/time/manner certain), Canon of Convenience (levied at a convenient time and manner for the taxpayer), and Canon of Economy (low cost of collection).

Name the additional canons of taxation beyond Adam Smith's four.

Canon of Productivity, Canon of Elasticity (flexibility), Canon of Simplicity, Canon of Diversity, and Canon of Expediency (administrative feasibility).

Distinguish between a tax, a fee, and a cess.

A tax is a compulsory levy with no direct return. A fee is a charge for a specific service rendered by the government (quid pro quo present). A cess is a tax levied for a specific purpose, usually as a surcharge on an existing tax.

Distinguish between progressive, proportional, and regressive taxation.

Progressive: tax rate rises as income rises (e.g. income tax slabs). Proportional: same rate at all income levels. Regressive: rate falls as income rises, so the burden is heavier on lower incomes (indirect taxes are often regressive in effect).

Which authorities administer income tax and sales tax in Pakistan, and under which laws?

The Federal Board of Revenue (FBR) administers federal taxes. Income tax is governed by the Income Tax Ordinance 2001; sales tax (goods) by the Sales Tax Act 1990. Sales tax on services is provincial (e.g. PRA, SRB, KPRA, BRA).

How is the residential status of an individual determined under the Income Tax Ordinance 2001?

An individual is resident if present in Pakistan for 183 days or more in a tax year, or is an employee/official of the Federal/Provincial Government posted abroad. Otherwise the individual is a non-resident.

Why is residential status important for taxation, and how does it affect scope of income?

A resident person is taxed on world income (Pakistan-source plus foreign-source income). A non-resident is taxed only on Pakistan-source income. Residential status determines the scope of total income chargeable to tax.

What is a 'tax year' under the Income Tax Ordinance 2001?

The normal tax year is the 12-month period ending on 30th June, denoted by the calendar year in which it ends. A special tax year is one approved by the FBR ending on a different date; a transitional tax year covers the change-over period.

List the five heads of income under the Income Tax Ordinance 2001.

Salary; Income from Property; Income from Business; Capital Gains; and Income from Other Sources.

How is Total Income computed under the Income Tax Ordinance 2001?

Total income is the sum of income under all five heads (salary, property, business, capital gains, other sources), computed for the tax year. Taxable income = Total income minus deductible allowances (e.g. Zakat, charitable donations as allowed).

What is the difference between Total Income and Taxable Income?

Total income is the aggregate of income under all heads. Taxable income is total income less deductible allowances (such as Zakat paid and approved donations). Tax is computed on taxable income at applicable rates.

What constitutes 'salary' income under the Income Tax Ordinance 2001?

Salary includes any amount received by an employee from employment — pay, wages, leave pay, fees, commissions, bonuses, gratuity, perquisites, allowances, and any profits in lieu of or in addition to salary. It is taxed on a receipt basis.

How is income from property computed under the Income Tax Ordinance 2001?

Income from property is the rent received or receivable from letting out land/buildings (the higher of actual rent or fair market rent), including the gross amount of rent chargeable to tax for the tax year, subject to permissible deductions/treatment as specified in the law.

Distinguish 'perquisite' from 'allowance' in salary taxation.

An allowance is a fixed monetary amount paid to an employee (e.g. house rent allowance, conveyance allowance). A perquisite is a non-cash benefit or facility provided by the employer (e.g. company car, free accommodation), valued and added to salary income.

What is the scope of sales tax under the Sales Tax Act 1990?

Sales tax is charged on taxable supplies made by a registered person in the course of business, and on goods imported into Pakistan. It is a value-added, indirect tax levied at each stage of the supply chain, ultimately borne by the final consumer.

Define a 'taxable supply' and 'taxable activity' under the Sales Tax Act 1990.

A taxable supply is a supply of taxable goods made by a person carrying on a taxable activity (other than exempt supplies). Taxable activity means any economic activity carried on regularly or continuously, including supply of goods, whether or not for profit.

Who is required to register for sales tax under the Sales Tax Act 1990?

Persons making taxable supplies in the course of business — manufacturers, importers, wholesalers, dealers, distributors, retailers (above threshold), and exporters intending to claim refunds — must register with the FBR. Registration enables charging output tax and claiming input tax.

Define input tax and output tax under the Sales Tax Act 1990.

Output tax is the sales tax charged by a registered person on taxable supplies made (sales). Input tax is the sales tax paid by the registered person on purchases/imports of taxable goods used in making taxable supplies.

How is the net sales tax payable computed, and what is input tax adjustment?

Net sales tax payable = Output tax minus admissible Input tax for the tax period. If input tax exceeds output tax, the excess is carried forward or refunded (e.g. for exporters). This adjustment mechanism makes sales tax a value-added tax.