Law: Income Tax Ordinance, 2001

Section: 21(k),37,75,97,120,133

INCOME TAX ORDINANCE, 2001 (XLIX OF 2001)---Sections: 21(k), 37, 75, 97, 120 & 133 - Deductions not allowed - Capital gains - Disposal and acquisition of assets - Disposal of asset between wholly-owned companies - Merger of subsidiary company into respondent company pursuant to Court’s order - Amendment of assessment by putting in additions on account of capital gains u/s 37 thereby disallowing the expense on R & M of the vehicles - Appeal before the CIR(A) disposed of in manner that addition made u/s 21(k) was confirmed whereas addition of lease rentals & vehicle expenses was deleted - Appellate Tribunal deleted the addition made on account of capital gain tax u/s 37, holding that the addition covers the parameters of section 97 - Reference to High Court - FACTS Brief facts of the case are that respondent-taxpayer, filed income tax return which was found to be erroneous insofar as prejudicial to the interest of revenue. Consequently, the assessment was amended by putting in additions on account of capital gains under section 37 of the Ordinance of 2001 thereby disallowing the expense on R&M of the vehicles. Commissioner (Appeals), disposed of the appeal confirming additions, while in second appeal before learned Appellate Tribunal addition made by the Additional Commissioner Inland Revenue under section 37 of the Ordinance of 2001, which was confirmed by the Commissioner (Appeals), was deleted being illegal and void ab-initio. The Department in reference raised the questions whether learned Appellate Tribunal Inland Revenue was justified in deleting the addition and whether it was justified in holding that addition covers the parameters of section 97 of the Ordinance deleting the addition without making any comparison with them. ARGUMENTS Learned Legal Advisor for applicant-department submits that learned Appellate Tribunal was not justified in deleting the addition made on account of capital gains under section 37 of the Ordinance of 2001. DECISION Where the amalgamating company, which is a hundred percent subsidiary, merges with the holding company (amalgamated company), no question of any profit or gain would arise- Where the amalgamating…

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