Law: Income Tax Ordinance, 1979

Section: 24,FourthSched.,R.5(a),24(a),35,54,85,26 (a),SecondSched,65

Law: Insurance Act, (IV of 1938)

Section: SecondSched.,

(a) Income-tax Ordinance (XXXI 1979)----Fourth Sched., R. 5(a) & S. 24(a)--Insurance Act (IV of 1938), Second Sched., Form B--Insurance Company--Taxes on income ha, a to be considered as expenses to earn income and not as some statutory requirement of law--Taxes on income falling in 'the category of expenses, Income-tax Officer can invoke provision R. 5(a) of the Fourth Schedule. Tax on income is treated as expense incurred for the purpose of earning income. They are, therefore, debited to Profit and Loss Account and not reflected in the Profit and Loss Appropriation, which shows application of income for different purposes. Though taxes on income are business expenses they are not allowed as admissible deduction because of provisions of section 10(4) of the repealed Income-tax Act and section 26(a) of the Ordinance, 1979. The debit entry in the Profit and Loss Account of an insurance company (viz. Form `B') in respect of taxes on income is, therefore, not an abnormality required by law in the cases of insurance companies only. Taxes on income are shown as debit entry in the Profit and Loss Account of every company which earns income from any source. The I.-T.O., has therefore, to consider taxes on income as expenses to earn income and not as some statutory requirement of law. As taxes on income fall in the category of expenses the I.-T.O. can invoke provisions of Rule 5(a) of he Fourth Schedule. (b) Income-tax Ordinance (XXXI of 1979)-- ---Fourth Sched., R. 5(a) [as amended by Finance Ordinance, (XXV of 1980)]-­Insurance company--Income-tax Officer can disallow taxes actually paid as, well as the provision for taxation for 1980-81 and onwards. (c) Income-tax Act (XI of 1922)-- ---First Sched., R. 6(1) & S. 10(2)--Insurance company--Inadmissibility of taxes on income is not restricted to provisions of S. 10(2) or any other subsection-­Provisions of S.10 in its entirety can be invoked by the Income-tax Officer. (d) Income-tax Ordinance (XXXI of 1979)-- ---Ss. 53, 54 & 85--Types of taxes on income and creation of provision in respect of every type of tax due Under the Ordinance. Taxes on income are paid in the following four manners:-- (a) Tax is…

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