Law: Income Tax Ordinance, 1979

Section: 13(1),clause78 of Second Schedule

(a) Income Tax Ordinance (XXXI of 1979)--- ----Second Sched., cl. (78)---Exemption---Real income accrued to assessee has to be brought to tax and not the hypothetical accrual of income---Foreign Exchange rate gain or foreign currency account being in nature of capital transaction could not be subject to tax. CIT v. Shoorji Vallabhdas & Company Limited (1962), 46 ITR 144 fol. CIT v. Smith Kline & French of Pakistan Limited 1991 SCMR 2374 = 1991 PTD 999; CIT, Bengal v. Shew Wallace & Co. AIR 1932 PC 138; Inspector of Taxes v. FW Woolworth PLC 1992 PTD 1259 and CIT v. Pfizer Limited 1993 PTD 927 ref. (b) Income Tax Ordinance (XXXI of 1979)--- ----Second Sched., cl. (78)---Exemption---Interest earned on foreign currency account ---Addition---Validity---Assessee being not a foreign national and he himself having opted the status of a resident while filing the return, his income of interest on foreign currency account was not exempted. ORDER NASIM SIKANDAR (JUDICIAL MEMBER). ---The assessee in these further appeals for the years 1980-90 to 1990-91 is an individual and a Director of a private limited company. In the three years involved incomes were respectively disclosed at Rs.1,33,341, Rs.97,183 and Rs.50,590 Instead the assessments were framed at total income at Rs.2,36,139, Rs.1,68,366 and Rs.2,55,1t17. From the wealth statement filed with the returns the assessing officer found that exchange rate gain on foreign currency account indicated therein was not disclosed in the Income Tax Returns. After serving the assessee with a show-cause notice the gain respectively at Rs.1,02,708, Rs.78,183 and Rs.1,09,472 was added towards income in the three years. In the year 1990-91 an amount of Rs.89,045 was also added towards income which was found to have accrued to the assessee as interest on foreign currency account. The claim of the assessee that it was exempted under clause 78 of the Second Schedule to the Income Tax Ordinance was not accepted. The treatment of foreign exchange gain was discussed in detail in the year 1990-91 in the following words:--- "Regarding exchange rate gain of Rs. 1,09,472 he contended that treatment has been given in accordance with…

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