Law: Income Tax Ordinance, 1979

Section: 31

Income-tax Ordinance (XXXI of 1979)---S.31--Claim of relief/deductions by assessee--Any expenditure laid out or expended wholly and exclusively for the purpose of earning income from other sources was liable to be deducted from such income--Expenses incurred by assessee in earning income from interest, was therefore, allowable. (1975) 101 I T R 1531; I.T.A.. No. 2440/KB of 1986-87 and I.TAs. Nos 3961 to 3966/KB of 1987-88 ref. I T A No. 2291/KB of 1986-87 distinguished. ORDER This appeal has been filed by the Department against the order of the learned A.A.C., "E" Range, Karachi, dated 19-7-1986. 2. The brief facts of the case are that the assessee/Respondent which is a Co-operative Society, filed its return for the assessment year 1984-85 wherein the amount of Rs.9,966 was shown as income from interest. The Respondent /assessee claimed exemption of the total amount. However, the ITO by his assessment order dated 24-11-1985 assessed the entire income. Being aggrieved-by aforesaid order the assessee/Respondent filed an appeal before the learned A. A C who set aside the order of the ITO and directed him to proceed do novo and to allow proportionate expenses to the appellant. The Income-Tax Department felt aggrieved by the aforesaid order and preferred this appeal. 3. I have heard the arguments of Mr. Yusuf Sharih, the learned D.R, appearing on behalf of the Department and Mr. Ramzan Dossa, C.A. the learned A.R. of the Respondent/assessee. I have also perused the material on record and the case law cited before me. 4. Mr. Yusuf Sharih, the learned DR. vehemently attacked the order of the learned A.A.C. and submitted that the Respondent which is a Cooperative Society was not primarily engaged in earning interest by making deposits in bank and its main function and business was the welfare of its members and, therefore, the Respondent would not be allowed to take benefit of the expenses or the monies which were expended or laid out by it on earning of income which was outside the primary function and duties of the Respondent/assessee. He further submitted that the Respondent, as a matter of fact, was not required to make any expenditure for the purpose of earning…

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