Income Tax Manual, Part I, Income Tax Ordinance, 2001, Amended upto 30th June, 2021, Chapter III, Tax On Taxable Income
Part VIII, Lossses
56. Set off of losses.— (1) Subject to sections 58 and 59, where a person sustains a loss for any tax year under any head of income specified in section 11, the person shall be entitled to have the amount of the loss set off against the person’s income, if any, chargeable to tax under any other head of income [except income under the head salary] for the year.
[56A. Set off of losses of companies operating hotels.— Subject to
sections 56 and 57, where a [public company as defined in the Companies Act, 2017 and] registered in Pakistan [,Gilgit-Baltistan] or Azad Jammu and Kashmir (AJ&K), operating hotels in Pakistan [,Gilgit-Baltistan] or AJ&K, sustains a loss in Pakistan [,Gilgit-Baltistan] or AJ&K for any tax year under the head “income from business” shall be entitled to have the amount of the loss set off against the company’s income in Pakistan [,Gilgit-Baltistan] or AJ&K, as the case may be, from the tax year 2007 [onward].
57. Carry forward of business losses.—
(1) Where a person sustains a loss for a tax year under the head “Income from Business” (other than a loss to which [sub-section (4) or] section 58 applies) and the loss cannot be wholly set off under section 56, so much of the loss that has not been set off shall be carried forward to the following tax year and set off against the person’s income chargeable under the head “Income from Business” for that year.
(2) If a loss sustained by a person for a tax year under the head “Income from Business” is not wholly set off under sub-section (1), then the amount of the loss not set off shall be carried forward to the following tax year and applied as specified in sub-section (1) in that year, and so on, but no loss can be carried forward to more than six tax years immediately succeeding the tax year for which the loss was first computed.
[(2B) Where a loss, referred to in sub-section (2), relating to a tax year commencing on or after the first day of July, 2020 is sustained by a resident company engaged in the hotel business in Pakistan, the said loss shall be carried forward for a period of eight years.]
Sources:
Income Tax Manual, Part I, Income Tax Ordinance, 2001, Amended upto 30th June, 2021, Chapter III, Tax On Taxable Income, Part VIII, Losses, Clause 56A.
https://download1.fbr.gov.pk/Docs/20217141672549772IncomeTaxOrdinanceAmendedupto30.06.2021.pdf