Law: Income Tax Act, 1922

Section: 10,10(2)(iii),66

(a) Income Tax Act (XI of 1922)---S. 10(2)(iii)---Constitution of Pakistan (1973), Art. 185(3)---Leave to appeal was granted in a case wherein the assessee's claim under S.10(2)(iii) for deduction of the interest paid on borrowed capital was disallowed. (b) Income-tax--- ----Res judicata, principles of---Principles of res judicata do not apply to the cases on assessments under the income-tax law in the same manner as they are applied in civil proceeding---Restrictions on applicability on principles of res judicata enumerated. Principles of res judicata cannot be applied to the cases on assessments under the Income Tax Act in the same manner as they are applied in civil proceedings. Applicability of principles of res judicata has been restricted as follows:- A previous decision of an Income Tax Authority will not be a bar in the following cases: (i) where the earlier decision is clearly open to some objection; (ii) if it is a decision which is not reached after proper enquiry; (iii) if it is a decision as could not reasonably have been reached on the material before the authority; (iv) it is a decision which suffers from such a defect which falls within the purview of the grounds mentioned in section 100, C.P.C. and liable to correction thereunder in second appeal, if it were a decision of civil Court; and (v) if fresh evidence having a material bearing on the point decided in the previous decision is available. C.I.T. v. Waheeduzzaman P L D 1965 SC 171 fol. (c) Income Tax Act (XI of 1922)--- ----S. 10(2)(iii)---When an assessee is entitled to claim allowance under S.10(2)(iii) of interest as capital borrowed. The assessee would be entitled to claim allowance under section 10(2)(iii) Income Tax Act, 1922 provided it satisfies that (i) he has borrowed capital, (ii) such borrowed capital was for the purposes of business, profession or vocation and (iii) that interest has been paid on such borrowed capital. The borrowing of capital should be genuine and not merely a sham or, illusory. (d) Income Tax Act (XI of 1922)--- ----S. 10(2)(iii)---Assessee claiming allowance under S.10(2)(iii) of amount paid as interest ---Assessee is entitled to the allowance if the…

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