Law: Income Tax Ordinance, 1979

Section: 2(32),50(2A),65,80B

THIS ORDER PASSED BY: MUNIB AKHTAR, JUSTICE:---.--- These two appeals, relating to the same assessee, arise out of the Income Tax Ordinance, 1979 ("1979 Ordinance"). The appellant succeeded before the learned Appellate Tribunal, but that decision was reversed by the learned High Court by the impugned judgment, on tax references filed by the Department. Leave was granted vide order dated 01.07.2010 to consider whether, in the facts and circumstances of the case, there was any "definite information" within the meaning of s. 65 of the 1979 Ordinance to warrant proceedings in terms thereof. We may note that the impugned judgment is reported as Commissioner of Income Tax v. Dewan Khalid Textile Mills Ltd. 2010 PTD 1397. 2. Briefly stated the facts are that the appellant filed its return for the relevant assessment year but thereafter (before the assessment was framed) filed a revised return. The reason for the revised return was that the appellant claimed that in respect of certain amounts accruing to it, it was liable to be taxed in terms of s. 80B of the 1979 Ordinance. That section applied, as provided in its subsection (1), to "an individual, unregistered firm, association of persons, Hindu undivided family or artificial juridical person referred to in clause (32) of S. 2". The section went on to provide that the amounts referred to in subsection (2) were to be treated as a separate block of income, on the whole of which tax was payable at the special rates set out in the First Schedule. One category given in subsection (2) (in clause (b) thereof) was "interest or profit on which the tax is deductible under sub-section (2-A) of section 50". The appellant claimed that during the relevant income year amounts falling in this category had accrued to it and were therefore liable to tax in terms of s. 80B. In the assessment framed by order dated 28.12.1995 the Income Tax Officer accepted this contention, and the said amounts were taxed accordingly. However, subsequently, by notice dated 10.06.1998 issued under s. 65, the ITO sought to reopen the assessment on the ground that the appellant was not so entitled. A revised assessment order, adverse to the appellant, was…

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