Law: Income Tax Ordinance, 1979

Section: 22,ThirdSched,R.1(3A),22,23,24,25,62

(a) Income Tax Ordinance (XXXI of 1979)----Third Sched, R.1(3A), Ss. 22, 23, 24, 25 & 62---Income Tax Ordinance (XLIX of 2001), Ss. 124 & 221---C.B.R. Circular No.23 of 1988 dated 8-11-1988---Computation of depreciation allowance---Un-absorbed depreciation of tax holiday---First Appellate Authority annulled the assessment and directed that un-absorbed depreciation of tax holiday period be adjusted against the income/profits and gains of post holiday period---Revenue contended that in case of exemption to industrial undertaking under various clauses to the Second Schedule to the Income Tax Ordinance, 1979, the profits and gains were chargeable to tax but exempted from taxation as concession and for the incentive and for betterment of economic activity of the country thus there arose no question to keep in abeyance the depreciation till the post holiday period---Taxpayer contended that profit and gains of the units were not chargeable to tax in the tax holiday period at all; that the return showing nil income was filed, no proper assessment had been made in each of the year of exemption, rather nil income was assessed; that depreciation was held in abeyance till the expiry of tax holiday period, and had been claimed in the post tax holiday period as unabsorbed depreciation, which was as per rules and in accordance with law, because at that time no such R. 3(A) was on the statute book; that unabsorbed depreciation was to be carried forward accordingly and be adjusted against the taxable profits and gains of the post tax holiday period; and that order passed under S.124 of the Income Tax Ordinance, 2001 was illegal and also hit by limitation---Validity---Work carried out by the Taxation Officer was not correct, it was only normal depreciation which was to be accounted for---Prior to insertion of R.1(3A) of Third Schedule to the Income Tax Ordinance, 2001, normal depreciation was deducible from the original cost of the assets in post tax holiday period---After the amendment in rule it was the written down value which was to be carried forward to the post tax holiday period and normal depreciation was deemed to have been allowed in the exempt period---Only…

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