Law: Income Tax Ordinance, 2001

Section: 21e,21(c),152(1),221,21(k),22,122(5A),60 A,75(3A)

Law: Workers Welfare Fund Ordinance, 1971

Section: 4

Law: Income Tax Rules, 2002

Section: 117

(a) Income Tax Ordinance (XLIX of 2001)----S.21(e)---Income Tax Rules, 2002, R.117---Deductions not allowed--Gratuity fund---Amount paid to fund and claimed as deduction to be classifiable as 'initial contribution' to fund was disallowed on the grounds that it required a special approval from Commissioner Inland Revenue under provisions of R.117 of the Income Tax Rules, 2002 which was not obtained and that a further amount representing 'transitional liability' computed by actuary was separately disallowed---Taxpayer contended that amount paid was within the limits prescribed i.e. such amount was not in excess of participating employees, aggregate salaries for last months of relevant financial year in respect of which benefit of 'staff gratuity' had vested and a similar issue was raised by the Commissioner Inland Revenue at the time of issuance of 'exemption certificate' to the fund established by taxpayer and after examining the record, concerned Authority had agreed that such amount was not in excess of the prescribed limit and no statutory approval under R.117 of the Income Tax Rules, 2002 was required---Validity---Authority to enforce the limits prescribed in R.117(2) of the Income Tax Rules, 2002 rested with the Commissioner Inland Revenue which did satisfy himself on this account---Such position, prima facie, verifiable from the documents furnished before the Appellate Tribunal and had been conceded to by the Departmental Representative---Taxation Officer had formed a view that was in conflict with another departmental official and that too senior in hierarchy to him---Contents of reply submitted by the taxpayer showed that the amount was not in excess of limit prescribed in R.117(2) of the Income Tax Rules, 2002 and subsequent issuance of exemption certificate substantiated that after due verification, such contention of taxpayer was found to be correct---Disallowance had been made on an assumption that was unfounded and was not supported by facts and circumstances---Disallowance had been made on the basis of an imaginary position, which did not exist---Section 21(e) of the Income Tax Ordinance, 2001 conferred a right upon the taxpayers to claim as…

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