Law: Income Tax Ordinance, 1979

Section: FirstSched

Income Tax Ordinance (XXXI of 1979)---First Sched. Part III---Provision/liability for tax falls within the purview of the expression "for meeting working capital requirements" and was to be excluded from the total income for levy of surcharge. 1988 PTD 66 fol. JUDGMENT MAMOON KAZI, J.---The learned Income Tax Tribunal while deciding the Second Appeal of the parties held that the provision/liability for tax falls within the purview of the expression "for meeting working capital requirements" as used in Part III of the First Schedule and hence it is to be excluded from the total income for levy of surcharge. The department was not satisfied with the same and, therefore, following question has been referred to this Court for determination:-- "Whether in the facts and circumstances of the case, the Appellate Tribunal was justified in holding that provision/liability for tax falls within the purview of the expression 'for meeting working capital requirements' as used in Part III of the First Schedule and hence it is to be excluded from the total income for levy of surcharge." 2. We find that the question referred to in the present case has already been answered in the case of Commissioner of Income Tax v. Pakistan Tobacco Company Ltd. etc. 1988 PTD 66, in this case a Division Bench of this Court held as under:--- "From the above inferred definitions of the words, "working capital", "current liability" and "current assets", it is evident that Macmillan Dictionary of Accounting by R.H. Parker has excluded provisions for taxation and proposed dividend from the ambit of current liabilities. The other books have not referred to the above aspect. It may be observed that the exclusion of the above two items may be justified in a case of a new set-up, in which working capital would not require any provision for the taxation and for the proposed dividends as till the time the factory goes into production for a business operate profitably the question of payment of any income-tax or dividend would not arise. The other reason may be that the learned author had in mind only the items which are either in liquid form or are readily liquidable and can be used for earning profit in…

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