| Citation(s) |
|---|
| 1998 SLG 165 1998 SLD 165 1998 PTCL 12 1998 PTD 1103 (1998) 77 TAX 35 |
Appellate Tribunal Inland Revenue
I. T. A. No. 150/KB of 1996-97, decision dated: 13-08-1997.dates of hearing: 29th July and 1st August, 1997
MUHAMMAD MUJIBULLAH SIDDIQUI, CHAIRMAN AND NAZEER AHMAD SALEEMI, ACCOUNTANT MEMBER
Sirajul Haq Memon. Iqbal Naeem Pasha, E.U. Khawaja, Muhammad Farid, Muhammad Jawaid Khurram, Shabbar Zaidi, F.C.A., arshad Siraj. Tai-yab G. Adeeb, F.C.A., Saqib Masood, C.A., Noor Muhammad. C.A., Muhammad Salecm, C.A., S.M. Sohail, A.C.A., Amin Malik, A.
I. T. A. No. 150/KB of 1996-97, decision dated: 13-08-1997.dates of hearing: 29th July and 1st August, 1997
MUHAMMAD MUJIBULLAH SIDDIQUI, CHAIRMAN AND NAZEER AHMAD SALEEMI, ACCOUNTANT MEMBER
Sirajul Haq Memon. Iqbal Naeem Pasha, E.U. Khawaja, Muhammad Farid, Muhammad Jawaid Khurram, Shabbar Zaidi, F.C.A., arshad Siraj. Tai-yab G. Adeeb, F.C.A., Saqib Masood, C.A., Noor Muhammad. C.A., Muhammad Salecm, C.A., S.M. Sohail, A.C.A., Amin Malik, A.
Law: Income Tax Ordinance, 1979
Section: FourthSched.,R.5,65,R.6A,10,25,26(a)&12, 24(1),111,80D,80D(2),8(8)(a),23
Law: Income Tax Act, 1922
Section: 10(2A)&10(7),10(4)(a)
Law: Insurance Act, (IV of 1938)
Section: 27A,11
(a) Income-tax--- ----Unearned income---Concept---Insurance company---Concept of unearned income is not available in the insurance law or income-tax law as prevailing in Pakistan. Property and Liability Insurance by John H. Magee and Oskar N. Serbein, 4th Edn., 1967, p.806; Advanced Accounts by N.C. Shukla and T.S. Grewal; Treatise of Advanced Accounting by J. R. Batliboi, 29th Edn., 1987, p.887 and Advanced Accounting by R.L. Gupta and M. Radhaswamy, 1988 Edn. (b) Income-tax--- ----Earned income---Net income---Insurance company---As soon as the premium is received the income is earned---Net income is earned on expiry of the insurance policy and after payment of claim on the risk covered, if any---Premium received though becomes income is the insurance company but before expiry of policy same is not converted in net income---Principles. Under the laws prevailing in Pakistan as soon as the premium is received the income is earned. However, the net income is earned on expiry of the insurance policy and after payment of claim on the risk covered, if any. Thus, though the premium received becomes income of the insurance company but before expiry of policy it is not converted into net income. Since it is a continuous process, therefore, it is not possible to work out the exact net income on any particular date and, therefore, it is peculiarity of insurance business that the premium is received in advance but the risk can arise on any day during the year which is covered with the insurance policy and, therefore, a reserve for un expired risk is to be maintained. Advanced Accounting by R.L. Gupta and M. Radhaswamy, 1988 Edn., p.560 ref. (c) Income-tax--- ----Insurance company---Reserve for un expired risk---Proportion to be allowed out of the net premium---Principles---Insurance Act (IV of 1938), S.27-A---C.B.R. Circular No.2 of 1981. Reserve for un expired risk is to be treated as liability to the year the provision is made and it is shown on debit side of the revenue account and in the next year the balance in the provision is transferred to credit side of next year's revenue account. Thus, in the revenue account balance of the previous year appears or the credit…
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