Law: Income Tax Ordinance, 1979

Section: 23(1)(x)

INCOME TAX ORDINANCE, 1979 (XXXI OF 1979)---Section: 23(1)(x) - Deductions - Banking institution - Interest credited to suspense account - Provision for bad debts - ITAT held that interest Credited to suspense account will form income of assesse and that Credited of provision of bad debts are synonymous to written off and thus allowed - Failing of ITAT to appreciate that even in case of written off bad debts, the condition of irrecoverability of the same as determined by the assessing officer is a per requisite for any allowance u/s 23(1)(x) of the Income Tax Ordinance - Contention of the applicant - Reference to High Court - FACTS The following common questions of law arise in this reference application as well as connected reference application PTR No.406 of 2003: i. Whether under the facts and in the circumstances of the case the learned ITAT was justified to hold that interest credited to suspense account will form income of the assesse and consequently charged to tax or not. ii. Whether on the facts and circumstances of the case the learned ITAT was justified to allow the provision for bad debts in contravention to the provision of section 23(1)(x) of the Income Tax Ordinance, 1979, wrongly assuming that creation of provision of bad debts are synonymous and failing to appreciate that even in case of written off bad debts, the condition of irrecoverability of the same as determined by the assessing officer is a pre requisite for any allowance u/s 23(1)(x) of the Income Tax Ordinance. DECISION (A.) Question No. i has been answered by a D.B of Lahore High Court in PTR No. 407 of 2003 - So far as question No. i is concerned, this has been answered by a Division Bench of this Court in PTR No.407 of 2003 where relying upon a letter dated 23.11.2005 issued by the then Central Board of Revenue the applicant-department decided to withdraw the cases with regard to above question. On that basis, the Division Bench declined to answer the said question. We respectfully follow the holding of the Division Bench and accordingly the reference applications are dismissed with regard to question No. i. (B.) Question No. ii relates to provision for bad debts which has already…

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