Law: Income Tax Ordinance, 2001

Section: 114,120,122(5-A)

Income Tax Ordinance (XLIX of 2001)--- ----Ss. 114, 120 & 122(5-A)---Amendment of assessment---Revenue expenditure---Determination---Scope---Assessee/company, filed Income Tax return declaring loss---Assessment made by Assessing Officer was found erroneous and prejudicial to the interest of revenue, on the ground that the mark-up claimed on borrowed capital for expansion of the plant, was capital expenditure, and could not be reduced from taxable income---Such assessment order was annulled by Appellate Authority below, and department had filed appeal before Appellate Tribunal---Contention of Departmental representative was, that as assessee company had itself declared the mark-up on the loan borrowed for expenditure in the capital account, as per audited accounts, company was not entitled to claim its direct deduction while computing the income as revenue expense---Contention was repelled, as in the audited accounts, the entries were recorded on the basis of "International Account Standards (IAS)", whereas in the income tax return, the entries were recorded in accordance with income tax law and procedure---Under International Account Standards, mark-up payable to the bank, could be capital expenditure, but under the Income Tax Law, that could be claimed as a revenue expenditure. 1989 PTD 500 rel. ORDER MUHAMMAD ASIF (ACCOUNTANT MEMBER).---This single appeal filed at the instance of revenue/department, against the findings recorded by the learned CIR(Appeals)., Faisalabad on 23-6-2010 vide Order No. 3744 pertaining to Tax Year 2007. The single ground as set forth in the memo. of appeal before us in respect of Tax Year 2007 is as under:-- "That the learned CIR[A] was not justified to annul the order passed under section 122(5A) of the Income Tax Ordinance, 2001." The appellant, a limited company, derives income from manufacturing and sale of sugar. Briefly stated the relevant facts of the case are that return for Tax Year 2007 was filed declaring loss of (Rs.5,86,52,540). The deemed order passed under section 120 of Income Tax Ordinance, 2001 was found erroneous and prejudicial to the interest of revenue. On the ground that the mark up claimed on borrowed…

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