Law: Income Tax Ordinance, 1979

Section: 23(1)(x)

(a) Income Tax Ordinance, 1979 (XXXI of 1979)----Section: 23(1)(x) - Deductions - Standard accounting principles - Written off debt - Determination regarding irrecoverability of a loan and whether deduction for bad debts was to be allowed to a particular taxpayer individually on the basis of the treatment that has been given by the taxpayer/financial institution in it books of accounts - Reference to High Court - FACTS The first issue of law relates to provision for bad debts which have been decided by us in PR No.184 of 2002 [(2022) 126 TAX 575 (H.C. Lah.)] in the following terms:- “5. Thus, the Supreme Court of Pakistan has conclusively put construction on the precise scope and sweep of section 23(i)(x) of the Ordinance, 1979 and held on the basis of the standard accounting principles that a debt becomes irrecoverable when it is written off and so the entitlement regarding deduction for bad debts was to the extent of irrecoverable loans determined as such under the regulatory framework governing financial institution. It would thus be a matter to be determined on a case to case basis whether the deduction for bad debts was allowable to a particular taxpayer/financial institution or not. This issue was required to be determined under the repealed Ordinance, 1979 by the Deputy Commissioner concerned. We, therefore, deem it proper to remit this case for the necessary determination regarding irrecoverability of a loan to the competent officer concerned under the present dispensation. This will be done by the competent officer in the light of the of the Supreme Court of Pakistan set out above and to determine whether deduction for bad debts was to be allowed to a particular taxpayer individually on the basis of the treatment that has been given by the taxpayer/financial institution in its books of account.” DECISION (A.) Issue relation to the Provision for bad debts has been decided in PTR No. 184 of 2002 - The question of Law is decided in same terms - The question of law is decided in the same terms and the reference application to this extent is disposed of. (b) Income Tax Ordinance, 1979 (XXXI of 1979)---Paragraph D of Part V of the First Schedule -…

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