Law: Income Tax Ordinance, 1979

Section: 2(42),65,80C,80CC,107AA,156

ORDER The Department has preferred appeal captioned above, being aggrieved and dissatisfied from the impugned order dated 03.09.2002, passed by the learned CIT(A) directing the assessing officer to modify the impugned order and allow credit of tax under Section 107AA against the normal tax payable by assessee/appellant. 2. The above order indicates that the assessee company a manufactured of pharmaceutical products in the year under appeal, furnished the return of income under normal law, and also did not opt for assessment under presumptive tax regime. The assessee in this year supplied raw material to another company to get certain goods manufactured. In addition assessee also imported goods which were offered to tax under Section 80C of the Income Tax Ordinance, 1979. 3. Actual controversy started due to investment of Rs.23,763,270/- in the purchase of plant & machinery against which assessee claimed tax credit under Section 107AA of the Ordinance, amounting to Rs.2,376,327/- which was allowed by the assessing officer while finalizing the assessment under Section 62 of the Ordinance. The assessment was challenged on other issues, during the pendency of first appeal before the learned CIT(A) certain mistakes in the assessment order were noted, hence the assessee vide his letter dated May 22, 2002 invoked provision of Section 156 of the Ordinance and requested the DCIT to rectify the order. During the course of rectification proceedings the DCIT raised another issue, which stood as under: "as to why tax credit under Section 107AA should not be prorated against normal tax as well as tax under Section 80C". 3. The assessee, on confrontation on this issue vide order sheet entry, vehemently opposed the version of the assessing officer and urged that since tax paid under Section 80C/80CC is final tax liability, the said credit under Section 107AA could only be adjusted against tax payable under normal law as word "payable" has been used with reference to tax credit. The assessing officer contrary to arguments of learned A.R. observed that Section 107AA permits 10% allowance against "tax payable" by the assessee on an investment in the purchase of plant and…

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