MS AR 2018 (1)

NOTES TO THE
FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2018
36.1 Relationship between income tax expense and accounting profit:
Rupees 2018 2017
Profit before taxation 1,603,727,936 1,222,297,788
Tax on accounting profit at the applicable tax rate of 30% (2017: 31%) 481,118,381 378,912,314
Tax effect of amounts that are admissible for tax purposes (164,549,419) (96,731,360)
Tax effect of amounts that are inadmissible for tax purposes 85,802,361 45,870,369
Tax effect of tax credits / losses / minimum taxes (217,409,933) (207,507,925)
Income subject to final and minimum taxation 561,460 (41,145,793)
Income subject to super tax 40,293,278 27,765,051
Effect of prior year 7,824,143 29,700,156
Tax effect of timing differences 79,872,734 94,675,061
313,513,004 231,537,873
Average effective rate of tax charged to statement of profit or loss % 20% 19%
36.2 The tax provision is calculated by considering the tax applicable on local, exports and trading income in view of
provisions of various sections of Income Tax Ordinance, 2001, after taking to account any adjustments of brought
forward tax losses, minimum taxes and tax credits (if any) available under the Income Tax Ordinance, 2001.
36.3 The income tax assessments of the Company have been finalized up to and including the assessment year
2008, except for tax year 2004. Tax returns of subsequent years are deemed to be assessed under provisions
of the Income Tax Ordinance, 2001, unless selected for audit by the taxation authorities (refer note. 28). The
Commissioner of income tax may at any time during the period of five years from end of financial year in which
return was filed, may select the deemed assessment order for audit. As at the year end, the Company has filed
tax returns up to tax year 2017.
36.4 The provision for current year tax represent tax on taxable income at the rate of 30%. According to management,
the tax provision made in the financial statements is sufficient. A comparison of last three years of income tax
provision with tax assessed is presented below:
Rupees 2017 2016 2015
Provision for taxation as per accounts 107,162,656 – –
Provision for taxation as per tax assessment 114,986,799 29,700,156 13,912,642
36.5 During the year through Finance Act, 2018 section 5A of the Income Tax Ordinance, 2001 has been further
amended. Through the revised provision a tax equal to 5 percent of accounting profit for the year will be levied
on every public company, other than a scheduled bank and modaraba, if distribution of cash dividend of at least
20 percent of the accounting profit after tax for the year is not made. The Board of Directors in their meeting held
on September 19, 2018 has distributed sufficient cash dividend for the year ended June 30, 2018 (refer note. 50)
which complies with the above stated requirements. Accordingly, no provision for tax on undistributed profits has
been recognised in these financial statements.
122 MUGHAL IRON & STEEL INDUSTRIES LIMITED