Law: Income Tax Act, 1922

Section: 10(2)(xvi)

Law: Constitution of Pakistan, 1973

Section: 185.3

(a) Income-tax Act (XI of 1922)--- ,,..S.10(2) (xvi),.Constitution of Pakistan (1973), Art 185.3,Leave to appeal was granted to consider the question as to whether assessee could legitimately claim deduction Under S.10 (2) (xvi). (b) Income tax Act (XI of 1922)-- ----S.10(2)(xvi)----Assessee company, a subsidiary of an American company was incorporated as a private limited company in Pakistan and claimed deduction of amount on account of technical assistance fee which could not be remitted to the parent company on accrual and the amount was increased to some extent due to the devaluation of Pakistani currency---Held, larger amount which was paid could still be treated as permissible allowance despite the extra cost incurred in discharging its liability. Radio Picture Limited v. Commissioners of Inland Revenue 22 Tax Cases p.106) fol. JUDGMENT NASIM HASAN SHAH, J.---This appeal, by leave of this Court is directed against the judgment/order of the High Court of Sindh, dated 30-1-1989 in Income Tax Reference No.25 of 1979. The facts, which form the background of this case, are stated precisely in the order of this Court granting leave to appeal, namely, that respondent company, which is a subsidiary of General Tyres and Rubber Company, Inc. Arken Ohio, U.S.A. was incorporated as a private limited company in Pakistan and for the assessment year 1973-74 claimed deduction of Rs.50,50,055 on account of technical assistance fee which could not be remitted to the parent company on accrual and the amount was increased to some extent due to the devaluation of Pakistani currency. The Income Tax Officer disallowed the claim of deduction as he took the view that it cannot be treated as revenue expenditure as the liability accrued due to the failure of the assessee to remit the amount in the earlier assessment year. The respondent's appeal to the Appellate Assistant Commissioner was dismissed and same was the result before the Income Tax Tribunal. It is in these circumstances that the following question was referred to the High Court: "Whether on the facts and in the circumstances of the case, the sum of Rs.50,50,055 paid by the assessee-Company on account of Technical…

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