Law: Income Tax Act (XI of 1922)

Section:

Income-tax Act (XI of 1922)----   ----S., 10(2)(vii) proviso (b) read with Income-tax Rules, 1922, r. 33-Non-resident company-Depre ciation-Admissible proportionately on `basis' of income calculated.   JUDGMENT   FARUQUI, J.-The Income-tax Appellate Tribunal, Karachi, has under section 66 (1) of the Income-tax Act, referred the following question for the opinion of this Court :-   "Whether in the case of the applicant company, which is assessed in Pakistan under the second method provided in rule 33, the provisions of section 10, subsection (2), clause (vi) proviso (b) should apply in calculating depreciation allowance on the company's world business, in each successive year, for the purpose of determining the profits or loss attributable to the business in Pakistan?"   2. The facts are these. The United Netherland Navigation Co., hereinafter referred to as the assessee, is a non-resident shipping company with its registered place of business in Holland. Its assessment in this country is made through Messrs Volkart Bros. who are their local agents. As the company did not maintain any separate accounts for its business in Pakistan, assessment of profits and loss in all the assessment years in question, viz., 1950-51 to 1954-55 were made under rule 33 of the Income-tax Rules on the basis of freight earnings in Pakistan. The Income-tax Officer determined net losses including unabsorbed depreciation in the assessment for the years 1947-48 to 1951-52 but he did not determine the trading losses and unabsorbed depreciation during those years separately. Therefore, in setting off the previous losses from the years 1947-48 to 1951-52 from the profits of the subsequent assessment years 1952-53 to 1954-55 he did not follow the provision contained in section 24 (2) proviso (b) of the Income-tax Act. The assessee being dissatisfied with the method followed by the Income-tax Officer took the matter in appeal before the Appellate Assistant Commissioner who upheld the contention of the appellant in so far as the question of setting off the trading losses was concerned. He held that the trading losses of the business carried forward…