Law: Companies Ordinance, 1984

Section: 234

(a) Income Tax Ordinance (XLIX of 2001)---Ss. 24(11), 21(c), 20, 12, 122(5A), 127(6) & 120---Companies Ordinance (XL VII of 1984), S.234 (3)---International Accounting Standard No.19, Paragraphs 133 & 137---Intangibles---Voluntary Separation Scheme---Expenses incurred on such scheme were treated as intangible asset---Taxpayer contended that such expenses fell within the definition of salary as contained in S.12 of the Income Tax Ordinance, 2001 and by no means may be treated as an intangible asset as contained in S.24(11) of the Income Tax Ordinance, 2001; that such expenditure had been incurred exclusively for the purpose of business and was allowable deduction from income under S.20 of the Income Tax Ordinance, 2001 in a single go; that the benefit of such expenditure was not available to the taxpayer company over a period of more than one year; that the salary expense could only be disallowed under S.21(c) or (m) of the Income Tax Ordinance, 2001 as not deductible; that treatment of such expenditure as intangible was based on mere presumption and that the Accounting Standards and tax laws were in complete agreement with each on the treatment of such expenditure---Department contended that such expenditure fell within the definition of intangible for the reason that the benefit of such expenditure shall extend to the company over a period of more than one year; and that the taxpayer itself stated that the benefits of Voluntary Separation Scheme shall accrue to it in the years to come, then there remained no ambiguity with regard to the fact that the benefit of Voluntary Separation Scheme expenditure shall extend to the taxpayer for a period of more than one year---Validity---Expenses under Voluntary Separation Scheme was included in the amounts, received by employee on termination of employment whether voluntary or under an agreement including any compensation under golden hand shake scheme, payments fell within the definition of the term salary, as contained in S.12(2)(e)(iii) of the Income Tax Ordinance, 2001 and such salary expense was an allowable deduction and could be disallowed only if it was hit by mischief of S.21 of the Income Tax Ordinance,…

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