Law: Income Tax Ordinance, 1979

Section: 23(xviii)

Income Tax Ordinance (XXXI of 1979)----S. 23(xviii)---Drugs (Licensing, Registration and Advertising) Rules, 1976. R.33--- Assessing Officer disallowed expenditure incurred in excess of five per cent. of turn-over on sales promotion under R. 33 of Drugs (Licensing, Registration and Advertising) Rules, 1976---Penalty provided under the said rule, held, could not be extended to the provisions of Income Tax Ordinance as no such penalty had been provided in the Ordinance. C.I.T. v. Alpha Insurance Company PLD 1981 SC 293; 1981 PTD (Trib.) 71 and Messrs General Tyre and Rubber Company v. Commissioner of Income-tax, Central Karachi 1986 PTD 52 ref. JUDGMENT MAMOON KAZI, J.--In the assessment year 1978-79 the applicants claimed Rs.3,360,134 as sales promotion expenses but the assessing officer disallowed Rs.6,11,629 on the ground that under Rule 33 of the Drugs (Licensing, Registration and Advertising) Rules, 1976 any expenditure in excess of five per cent. of the turn over could not be permitted. On appeal, the Commissioner of Income Tax allowed the entire expenses claimed by the applicants and ordered deletion of addbacks during the relevant years. The Department filed appeal before the learned Income Tax Appellate Tribunal, which reversed the order of the Commissioner, Income Tax and upheld the order passed by the assessing officer. The reasons which prevailed with the learned Tribunal have been given by it thus: "From perusal of the rule it appears that the Central Licensing Board was vested with the power of cancelling or suspending a licence if it found a licensee violating the provisions of the Ordinance or the Rules. Mr. Alain, however, contended that in view of the PLD 1981 SC 293 (CIT v. Alpha Insurance Company), since the respondent spent the money wholly and exclusively for business purposes therefore it was rightly allowed by learned Commissioner of Income Tax (Appeals). With due respect to him, in our judgment, Alpha Insurance Company case (supra) revolves round its own peculiar facts. The Insurance Act and the Rules framed thereunder lay down the procedure for maintenance of the account books of the insurance companies as well as the assessment of their…

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