Law: Income Tax Act, 1922

Section: FirstSched,2,3,.5

[Income Tax Act, 1922 (XI of 1922)].......First Schedule-Rules 2, 3, .5,- Life insurance business--Depreciation-Allowance of depreciation after surplus is determined with reference to gross external earnings as reduced by management expenses, envisaged in rule3 (b) of the First Schedule Whether mandatory-Held yes-Whether assessee entitled to deduction of amount of depreciation Claimed over and above the maximum management expenses -Held yes-Word "surplus", meaning of . Case referred to :- Pandyan Insurance Co. Ltd. v. Commissioner of Income Tax (1965) P TD 475) = (1965) 11 Taxation 371. ORDER [The Judgment of the Court was delivered by I. MAHMUD, .l.]-This is a reference by the Income Tax Appellate Tribunal at the instance of the Commissioner of Income Tax (Central), Karachi, in which the following question of law has been referred to the High Court for opinion under Section 66(1) of the Income Tax Act, 1922 :- "Whether on the facts and in view of the provisions of rule 2(a) and the definition of Management expenses in rule 5(iii) of the First Schedule, the Income Tax Appellate Tribunal was justified in allowing depreciation over and above the maximum Management expenses, which had already been allowed " 2. The respondent, Messrs United Insurance Co. Ltd., which carries on business of life insurance, submitted a return of income for the assessment year 1962-63, in which it claimed depreciation on assets written of? in the accounts amounting to Rs. 4,606. The Income Tax Officer computed the profits under rule 2(a) of the Rules in the First Schedule to the Income Tax Act, in the absence of an actuarial valuation under rule 2(b). He disallowed depreciation and added back this amount, which, he stated, would be considered separately, which however, he failed to do. The insurance company appealed to the Appellate Assistant Commissioner of Income Tax, who allowed the appeal and held that the depreciation on assets written off in the accounts should be allowed under rule 3(b). The Department filed an appeal to the Income Tax Appellate Tribunal (hereinafter referred to as the Tribunal). The Tribunal agreed with the view of the Commissioner and dismissed the appeal…

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