Law: Income Tax Ordinance, 2001

Section: 67,99,109(1)(a),122(1),122(5),177,Fourth Sched.,Rr.6A,5(b)

(a) Income Tax Ordinance (XLIX of 2001)--- ----Ss.109(1)(a), 99, 67, 177, 122(1), 122(5) & Fourth Sched., Rr.6A & 5(b)---Recharacterization of income and deductions---Insurance business---Exemption of capital gains from sale of shares---Capital gain---Scope---Appreciation of investment---Scope---Taxpayer provided services of general insurance in the spheres of fire, marine, motor as well as miscellaneous---Taxpayer's claim of exemption of capital gain under R.6A of the Fourth Schedule to the Income Tax Ordinance, 2001 was rejected on the ground that it was not a capital gain and was in fact "appreciation of investment" which was taxable under R.5(b) being actually an appreciation in value of shares as the taxpayer sold and simultaneously re-purchased the same shares of blue chip companies within 72 hours in a highly controlled manner with the help of an associate through a series of same day twin and simultaneous transactions on the ground that present case was a case of tax avoidance under S.109 of the Income Tax Ordinance, 2001 and was not a capital gain rather it was mere sum taken credit for the accounts for "appreciation of investments" and was liable to be recharacterized under S.109(1)(a) of the Income Tax Ordinance, 2001 read with R.5(a) and R.5(b) of the Fourth Schedule to the Income Tax Ordinance, 2001---Assessing Officer, further made addition under S.67 of the Income Tax Ordinance, 2001 being apportionment of expenses between Presumptive Tax Regime (PTR) and Normal Tax Regime (NTR)---First Appellate Authority confirmed the action of Assessing Officer in respect of capital gain re-characterized under S.109 of the Income Tax Ordinance, 2001 as revaluation gain and added the same under R.5(b) of the Fourth Schedule to the Income Tax Ordinance, 2001; and deleted the addition made under S.67 of the Income Tax Ordinance, 2001---Taxpayer contended that since it was engaged in business of General Insurance and S.99 read with R.5 of the Fourth Schedule of the Income Tax Ordinance, 2001 was applicable being special law; that capital gain on sale of shares was exempt under R.6A of the Fourth Schedule to the Income Tax Ordinance, 2001, that such capital gains…

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