Law: Income Tax Ordinance, 2001

Section: 4,4(4)(b),67,154,169

Income Tax Ordinance (XLIX of 2001)---Ss. 4(4)(b), 67, 154 & 169---Income Tax Rules, 2001, Rr. 13 & 231---Income derived from export of cotton yarn---Expenses (i.e. ocean freight, export development surcharge, surcharge, clearing/forwarding expenses and those in relation to bills of exchange), incurred by taxpayer in deriving such income---Taking into account such export related expenses in computing taxable income on local sales of yarn by taxpayer---Scope---Application of R. 231 of Income Tax Rules, 2001 in preference to R. 13 thereof would not be possible as both such Rules had entirely different and separate subjects matters---Rule 13(6)(e) Income Tax of Rules, 2001 pertaining specifically to Pakistan-source of income chargeable under head "income from business" would cover local sales of yarn, thus, expenses attributable thereto would be deductable in full against local sales to determine income in terms of normal tax regime---Export related expenses could not be taken into consideration in computing taxable income on local sales---Principles. 1999 PTD (Trib.) 3880; 2003 PTD (Trib.) 1053; Golden Graphics (Pvt.) Ltd. v. Director of Vigilance and others 1993 SCMR 1635; Ch. Pervaiz Elahi v. Province of Punjab and others PLD 1993 Lah. 595 and Bama Charan v. Additional Commissioner of Taxes and others AIR 1964 Calcutta 332 ref. JUDGMENT MUNIB AKHTAR, J.---This reference application has been filed by the Department impugning the order of the Tribunal dated 7-1-2011. The question of law said by the Department to arise out of the impugned order (with respect, slightly reformulated) is as follows:-- "Whether in the facts and circumstances of the case, the learned Tribunal has correctly concluded that Rule 231 of the Income Tax Rules, 2002 is applicable to the taxpayer's case?" The question arises in relation to the tax year 2007 under the Income Tax Ordinance, 2001 ("2001 Ordinance"). 2. The taxpayer is a public company that is engaged in the manufacture and sale of cotton yarn. It output is partly exported and in part sold locally. Insofar as the exports are concerned, a certain amount is deducted by way of tax under section 154 of the 2001 Ordinance, from…

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