Law: Income Tax Ordinance, 1979

Section: 27(2)(a)(ii)

(a) Income-tax---Venture in the nature of trade ---Assessee, a company---Unless a concrete shape is given to the subsidiary objects of Memorandum of Association of the company, a company cannot be regarded as having ventured in business other than the main business---To have intention of doing a business and being in a business are different matters---Mere mention of an activity in the Memorandum of Association of the company, at best, raised a reputable presumption which can be dispelled by showing that the company actually did not carry out that business. 1980 PTD 322 and 1990 PTD (Trib.) 671 ref. (b) Income Tax Ordinance (XXXI of 1979)--- ----S. 27(2)(a)(ii)---Capital gain---Exemption---Adventure in the nature of trade ---Assessee, a company deriving income from a restaurant---Assessee had purchased property for setting up of a Five Star Hotel---Balance-sheets of the assessee showed the payment 8 "work in progress" under the head fixed assets---Record showed that detailed feasibility studies were prepared for the purpose of obtaining loan from Bank and assessee had applied for a loan from the Bank for setting up of such hotel---Assessees request for loan was refused by the Bank after detailed negotiations---Available evidence thus clearly showed that property in question had been purchased by assessee for setting up of a hotel---Gain on sale of such property being not a profit in the ordinary course of business, assessees claim for exemption under S.27(2)(a)(ii) on such gain was justified in circumstances. 1980 PTD 322 and 1990 PTD (Trib.) 671 ref. (c) Income-tax--- ----Addition---Assessee had entered into an agreement with a contractor for demolition of building and levelling of the plot of land and it was agreed upon that in lieu of any consideration for the job of demolition and levelling the plot contractor will take away the scrap material---Agreement in question was prepared by a prestigious law firm and witnessed by two responsible persons--¬No evidence to the contrary was brought on record by the Assessing Officer ¬Estimate of income of assessee on account of "income from sale of scrapped building material" by the Assessing Officer, without any…

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