Law: Income Tax Ordinance, 1979

Section: 2(26),25(c),62,136,136(1)

Law: Income Tax Act, 1922

Section: 10(2A)(iii)

Law: Income Tax Ordinance, 2001

Section: 34(5)

Income Tax Ordinance (XXXI of 1979)---Ss.25(c), 2(26) & 136 - Tax liability - Amounts subsequently recovered in respect of deductions, etc. trading liability not paid within three years of the expiration of income year - Computation of "income year", "assessment year" and "date of default of liability" under S. 25(c) of the Income Tax Ordinance, 1979 - Scope- Question before High Court was whether unpaid trading liability from tax years 1983-84 could be deemed to be income of the taxpayer in assessment year 1986-87 after applying S. 25(c) of the Income Tax Ordinance, 1979 - Held, that per definition of term "income year" in S. 2(26) of the Income Tax Ordinance, 1979, "income year" meant the next financial year meaning therefore that for income for the year 1982-83 assessment year would be 1983-84 - Application of S.25(c) to the present case would mean that third income year ended on 30.6.1986 which was income for the year 1986-87 and for assessment year 88 - Default in discharge of unpaid trading activity in the present case therefore would take place after 01.07.1986 and in assessment year 1987-88 - Reference was answered accordingly. 1996 PTD (Trib.) 100 and CEBEE Industries (Pvt.) Ltd. Lahore v. Income Tax Appellate Tribunal and others 2006 PTD 348 ref. THIS JUDGMENT DELIVERED BY: IRFAN SAADAT KHAN, JUSTICE:---.--- This Income Tax Reference (ITR) was forwarded by the Income Tax Appellate Tribunal (Pakistan), Karachi (ITAT), by raising two questions of law:- i. " Whether under section 25(c) of the Income Tax Ordinance, 1979 "liabilities" allowed in the assessment year 1983-84 could be deemed to be the income of the applicant company of the assessment year 1986-87, being the third year of the expiration of assessment year 1983-84? ii. Whether the learned Appellate Tribunal misdirected itself in law by restoring the order of the Income Tax Officer whereby "liabilities" allowed in the assessment year 1983-84 were deemed to be the income of the applicant company of the assessment year 1986-87?" 2. At the very outset, the learned counsel appearing for the applicant does not press the Question No. 1 and stated that he will argue this matter only to the extent…

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