Law:

Section:

Income Tax Ordinance, 1979 (XXXI of 1979)-- ----S. 14--Second schedule--Income or classes of income or persons or classes of person specified in second schedule shall be exempted from tax--Industrial undertaking in manufacturing claimed--Exemption from charge to tax--Period of tax holiday--Validity-Where any income which is exempt from tax under any provision of second schedule, such income, as may be specified in said schedule and subject to such conditions as may be specified therein, shall be included in total income, so however that tax shall not be payable in respect of such income--Industrial undertakings (which fulfil conditions enumerated therein) set up during various time periods were exempted from paying tax upon their profit and gains--It is undisputed that industrial undertakings were entitled to such exemption, rather only issue was whether they were entitled to carry forward losses they incurred during tax holiday period and have it set-off against income earned in assessment years beyond tax holiday period. [P. 111] A Income Tax Ordinance, 1979 (XXXI of 1979)-- ----Ss. 34 & 35--Set off losses to income--Unabsorbed depreciation--Losses incurred during tax holiday--Adjustment--No exception has been created vis-à-vis tax holidays, whereby such periods have been excluded for purposes of carrying forward and setting off losses--It does not preclude losses incurred during tax holidays from being carried forward and set-off subsequently as per Section 35, nevertheless if interpretation adopted by department was also possible, or there existed an ambiguity, in such a situation an interpretation favourable to tax payer would be preferred as settled by Supreme Court--Industrial undertakings were entitled to carrying forward and setting off losses they incurred during tax holiday period in accordance with provisions of Section 35 of Ordinance--Industrial undertaking is not entitled to carry forward to post-tax holiday period, unabsorbed depreciation allowances that arose during tax holiday period--Appeals were allowed. Income Tax Ordinance, 1979 (XXXI of 1979)-- ----S. 38(6) & Third Schedule--Carrying forward of unabsorbed depreciation…

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