Law: Income Tax Ordinance, 2001

Section: 21(l),111(1)(b),122(1)&177

Income Tax Ordinance (XLIX of 2001)----Ss. 21(l), 111(1)(b), 122(1) & 177---Deductions not allowed---Cost of sale of plot / purchase---Taxpayer, a company deriving income from business of real estate, claimed cost of sale of plot, which was purchased on cash basis---Order was amended by making addition under S.21(i) of the Income Tax Ordinance, 2001---Taxpayer contended that Taxation Officer had grossly erred by invoking provisions of S.21(i) of the Income Tax Ordinance, 2001 as the same dealt with the expenses made in Profit & Loss account; and since issue pertained to cost of sale of plot, which was made on cash basis, addition in that regard could only be made by resorting to provisions of S.111(1)(b) of the Income Tax Ordinance, 2001---Validity---Section 21(l) of the Income Tax Ordinance, 2001 could only deal with the expenses debitable to Profit & Loss account whereas collective provisions of S.21 of the Income Tax Ordinance, 2001 transpired that the same dealt with the expenses debitable to profit and loss account and even if it was to cover trading account then it will deal with only the deductions like rent, wages, fuel, commission, interest, salary (relating to manufacturing cum trading account); and purchases, without any shadow of doubt, could not be termed as deductions---Provisions of S.21(l) of the Income Tax Ordinance, 2001 were only applicable to the expenses made in profit and loss account and that the same could not be invoked for the purpose of making addition on account of purchases---Since, addition had been made by resorting to irrelevant provisions of S.21(l) of the Income Tax Ordinance, 2001 on account of purchase of plot on cash basis, the same was ordered to be deleted. Messrs Farhan Food Industries's case I.T.A. No.468/KB of 2010 rel. ORDER NAZIR AHMAD (JUDICIAL MEMBER).---The above titled appeal pertaining to tax year 2008 has been filed at the instance of the taxpayer against the appellate order dated 14-12-2010 recorded by CIR(Appeals-II) Lahore, whereby confirmation of order passed under section 122(1) of the Income Tax Ordinance, 2001 (hereinafter called the 'Ordinance') has been agitated. 2. The facts in brief…

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