Law: Income Tax Ordinance, 1979

Section: 107,48

Law: Income Tax Rules, 1982

Section: 48

(a) Income-tax Ordinance (XXXI of 1979)---Ss. 107 & 48--Income-tax Rules, 1982, R.48--Words "tax payable by it"-¬Connotation--Exemption from tax of newly established industrial undertaking-¬Tax credit for replacement, balancing and modernisation of machinery or plant-¬Tax credit permissible under S.107 has not been tagged with any particular or specified undertaking but it has been allowed against the tax payable--Tax payable by industrial undertaking refers to assessee used in the opening words of the subsection (1) of S.107 and does not refer to the industrial undertaking-¬Words "tax payable by it" refer to the assessee and not to the industrial undertaking--Tax credit thus is to be deducted from the tax payable by the assessee irrespective of the consideration whether the income generated from such industrial undertaking suffers incidence of tax or not--Rule 48 of Income-tax Rules, 1982 has to be read alongwith and in conjunction with S.107 of the Ordinance--Purpose of R.48, Income-Tax Rules, 1982 is to device the procedure for the grant of tax credit claimed for the replacement; balancing, modernisation or extension of machinery under S.107--Tax credit is not allowed under R.48 but it is allowed under S.107--Tax credit being neither deduction nor allowance, in the absence of any specific provision in the Ordinance, no nexus is required to be established between the tax credit and the income suffering the incidence of tax and the analogy that an allowance or deduction permissible under the Income-tax Ordinance, 1979 is not admissible on an income which enjoys exemption from the sufferance of tax--Assessee, therefore, can claim tax credit under S.107 notwithstanding the fact whether or not the profits of any industrial undertaking are taxable. Section 48 of the Income-tax Ordinance, 1979 shows that the exemption from the tax payable under this Ordinance has been allowed to the profits and gains derived by an assessee from an industrial undertaking to which section 48 applies. The exemption available under section 48 is to the profits and gains derived by an assesses from an industrial undertaking and thus the exemption is attached with the industrial…

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