Law: Income Tax Ordinance, 1979

Section: 80C&80CC(l),50(5A)

(a) Income Tax Ordinance (XXXI of 1979)-----S.80CC(1)---C.B.R. Circular No. 12 of 1991, dated 30-6-1991---C. B. R. Circular o.14 of 1993, dated 18-9-1993---Export sales---Local sales--¬Expenses exclusively related to export sales ---Treatment---Assessee prorated all profit and loss account expenses in the ratio of sales covered under normal law and -sales, covered under presumptive tax regime---Assessing Officer disallowed expenses under the head "ocean freight" and "shipping and others" exclusively related to export covered under S.80CC, Income Tax Ordinance, 1979---First Appellate Authority directed to prorate all the profit & loss expenses in terms of method provided in C.B.R. Circular No.12 of 1991, dated 30-6-1991 in the ratio of sales covered under presumptive tax regime and sales covered under the normal law---Validity---Reliance on C.B.R. Circular No. 12 of 1991 was misplaced as it was issued for explaining the provisions contained in S.80C of the Income Tax Ordinance, 1979 which was inserted in the Ordinance by Finance Act, 1991 while S.80CC was inserted by Finance Act, 1992 and C.B.R. Circular No. 14 of 1993, dated 18-9-1993 was issued in this behalf---Normal assessment and presumptive tax regime were basically different and were poles apart in their concepts, implications, procedure and consequences---Expenses exclusively relatable to export were not to be allowed against the income assessed under normal law for the simple reason that income covered under presumptive tax regime and income assessed under normal law were to be treated as separate block of income and any expenses relatable/attributable to income from one source was not to be allowed against income from other sources---Formula of peroration is a law of prudence and has been evolved by taking pragmatic view of the facts but the basic idea underlying is that only such expenses are to be allowed which are worked out to be attributable to income covered under normal law---Direction to prorate expenses which could directly be allocated to export and to allow such expenses against the income assessed under normal law was vacated and the treatment given by the Assessing officer was…

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