Law: Income Tax Ordinance, 2001

Section: 20,21(e),122(1),130,131,177

(a) Income Tax Ordinance (XLIX of 2001)--- ----S. 21(e)---Deductions not allowed---Contribution to approved gratuity fund---Add back---Taxpayer contended that in financial statements it was mentioned as provision of gratuity and the word "provision" was in fact "payable"; that gratuity fund was an approved fund and under S.21(e) of the Income Tax Ordinance, 2001 such provision could only be disallowed in case of unapproved fund; and that since gratuity was an approved fund, the add back could be upheld by the First Appellate Authority---Validity---Gratuity claimed by the taxpayer on account of contribution to approved gratuity fund had been disallowed, in financial statement it was mentioned as provision of gratuity, it was ascertained liability for gratuity which was an approved fund and under S.21(e) of the Income Tax Ordinance, 2001 such provision could only be disallowed in case of unapproved fund---Such figure was allowable in view of calculation for entitlements of gratuity of various employees---Issue was answered in favour of taxpayer and against the department. (b) Income Tax Ordinance (XLIX of 2001)--- ----S. 20---Deduction in computing income chargeable under the head "Income from Business"---Salary and wages---Add back---Taxpayer stated that he had duly maintained record of salaries and wages; made payment through cross cheques; that twelve month's complete details of salaries were provided to tax officer; that not a single instance of tax withholding provisions had been pin-pointed and huge add back was made; that such expenses had duly been incurred for the purposes of its business and if these were not to be incurred, it would not to be able to do its business which was purely services provision to clients as these expenses were incurred to earn its revenue; that there was no element of personal nature in any of the expenses particularly when the taxpayer company was a government concern and was twice audited by independent courses and no such deficiency had ever been pointed by any of the auditors; that not a single specific deficiency in any payment had been pointed out; and that tax had not been deducted where salaries were below…

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