Law: Income Tax Ordinance, 2001

Section: 10,1(c),34(3),67,71,111(1)(c),122(1),122 (5),122(9),129(1),153(1)(b),177,210

Law: Companies Act, (VII of 1913)

Section: 87-C

Law: Income Tax Rules, 2002

Section: 13(3)(b)

INCOME TAX ORDINANCE, 2001 (XLIX OF 2001) Section: 34(3) - Accrual basis accounting - Unrealized exchange loss - Disallowance by Deptt. treating it as notional in nature - Confirmation of action of DCIR by CIR(A) with direction to DCIR to allow claim of exchange loss in next year when currency liability is actually paid - AR contended that foreign currency is translated into Pak Rupees by using applicable rate of exchange prevailing as at December 31, 2009 issued by Stale Bank of Pakistan, therefore, conditions specified in sub-section (3) of section 34 of Ordinance to claim liability as allowable expense is fulfilled - lie further contended that liability incurred in foreign currency is not to be accounted for under Ordinance till it is paid in subsequent year - He further argued that action of DCIR to disallow exchange loss on basis that it is notional in nature is against very basis of computation of income prescribed by ordinance - Validity - (A.) It is observed that section 34(3), envisages certain parameters to be observed by the taxpayers who are maintaining their accounts on accrual basis. (B.) Here the taxpayer/appellant, has himself admitted that there is a certain amount of unrealized exchange loss. Although the DCIR, confronted the taxpayer at disallowance of exchange loss at Rs. 16,510,240/- but following the submission of breakup by the taxpayer and admission on his part that an amount of Rs.5,947,631/- is unrealized exchange loss. Apparently, this does not conform to the provisions of section 34(3) of the Ordinance, 2001, which allow to record the liability for the persons maintaining the accounts on the accrual basis when all the events that determine the liability have occurred. Here, the exchange loss recorded pertains to unrealized exchange loss. As such, we find no legal infirmity in order of the learned CIR(A) and the same is hereby maintained. INCOME TAX ORDINANCE, 2001 (XLIX OF 2001) Section: 67 - Income Tax Rules, Rule: 13(3)(b) - Apportionment of deductions - Allocation of expenses against insurance commission by DCIR - Addition - Upholding by DCIR in appeal - Challenge to - Before ATIR, AR contended that provisions of section 67 read…