Law: Income Tax Act, 1922

Section: FirstSched.,R.6

Law: Constitution of Pakistan, 1973

Section: 185(3)

(a) Income-tax Act (XI of 1922)----First Sched., R. 6---Constitution of Pakistan (1973), Art. 185(3)---Leave to appeal was granted to consider the question, inter alia, as to whether reserve for taxation was not expenditure and therefore, R.6 of the First Sched. of the Income-tax Act, .1922 was not applicable to the matter. Per Zaffar Hussain Mirza Naimuddin and Sajjad Ali Shah, JJ. agreeing--- (b) Income-tax Act (XI of 1922)--- ----First Sched., R.6 & S.10(7)---Insurance Act (X of 1938), Ss. 11, 15 18, 21 &, 102---Jurisdiction of Income Tax Officer---Taxation reserve being not expenditure, Income Tax Officer had no jurisdiction to examine or exclude same from the profit and loss account and the Profit and Loss Appropriation Account approved by the Controller of Insurance under the Insurance Act, 1938---Finality was attached to the accounts submitted by the assessee insurance company under the Insurance Act, 1938 to the Controller of Insurance, and the limited jurisdiction vesting in the Income Tax Officer was only to exclude expenditure from the balance profit in such accounts which was not permissible under S.10 of Income Tax Act, 1922---Income Tax Officer was not competent to upset the integrity of the accounts submitted by the assessee under the Insurance Act, 1938 by applying the ordinary rules for computation of profits and gains and for assessment of tax thereon in the light of provisions of Income Tax Act, 1922 in respect of the income in regard to the head 'business'---If the item in question did not in substance and essence constitute expenditure, it would be out of power of income Tax Officer to apply the provisions of First Schedule, R.6, Income Tax Act, 1922 to exclude and addback the same to the balance of profits in order to bring it within tax net.- --[Jurisdiction]. Under section 11 of the Insurance Act, 1938 every insurance company has to prepare at the expiration of each calendar year a balance-sheet, a profit and loss account, and a revenue account to prescribed form to be authenticated. Under section 15 the audited accounts and statements referred to, have to be furnished to the Controller as returns. Section 18 of the said Act require…

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