Law: Income Tax Ordinance, 2001

Section: 29A, 22(2),22, 29A, 64C, 103, 122(5A)

MICROFINANCE BANK — PROVISION FOR DOUBTFUL/BAD DEBTS — SECTION 29A — APPLICABILITY ONLY TO NBFCs — MICROFINANCE BANK NOT COVERED — DISALLOWANCE WITHOUT JURISDICTION Microfinance Institutions Ordinance, 2001 — Prudential Regulations of State Bank of Pakistan Head Notes The Appellate Tribunal Inland Revenue held that section 29A of the Income Tax Ordinance, 2001, is confined in its application to nonbanking finance companies (NBFCs) and House Building Finance Corporation and cannot be extended to microfinance banks regulated by the State Bank of Pakistan under the Microfinance Institutions Ordinance, 2001. The Tribunal observed that taxing statutes are to be interpreted strictly and no category of taxpayer can be brought within the ambit of a charging or restrictive provision unless expressly included therein. Since NRSP Microfinance Bank Ltd. was operating as a banking institution under SBP’s prudential framework, the Assessing Officer lacked jurisdiction to invoke section 29A for disallowance of provision for doubtful/bad debts. The Tribunal further held that prudentially mandated provisioning by a banking institution could not be disregarded merely on the ground that it represented an accounting provision or notional expense. Consequently, the addition of Rs.1,357,418,217/- on account of doubtful/bad debts was annulled. On the issue of tax credit under section 64C, the Tribunal held that technical limitations or inaccuracies in the IRIS portal cannot override substantive statutory entitlements where the taxpayer has furnished documentary evidence and acted bona fide in reconciling the actual tax liability. The matter was…