Law: Income Tax Act, 1922

Section: 6

Law: Income Tax Ordinance, 1979

Section: 136

(a) Income Tax Ordinance (XXXI of 1979)----S. 136---Reference---High Court could reframe the question referred when it was of the opinion that under the given circumstances, the question referred to, it required modification. (b) Income-tax Act (XI of 1922)--- ----S. 6---Free reserve (deemed income of bonus shares) could not be adjusted (set off) against business loss (unabsorbed depreciation) of the assessee for the 'year in question ---Assessee, however, was entitled to its carrying forward and set off in the subsequent years. Commissioner of Income-tax (Central Zone), Karachi v. Messrs Karachi Electric Supply Corporation Ltd. 1985 PTD 389 ref. JUDGMENT MAMOON KAZI, J.---The assessee (respondent) is a private limited company. During the year under reference while framing the assessment, the Income-tax Officer set off the loss against the income of bonus shares. The assessee (respondent) being aggrieved by such order appealed before the Appellate Assistant Commissioner of Income-tax who allowed the appeal. The Income-tax Officer then filed an appeal before the learned Income-tax Appellate Tribunal but the appeal was dismissed on the ground that bonus shares being a deemed income do not fall under any of the heads enumerated under section 6 of the repealed Act of 1922 and the loss on account of unabsorbed depreciation cannot be set off against such income. The Income-tax Officer being aggrieved by such order applied to the learned Tribunal to refer the question to this Court for its opinion but the Tribunal declined to make a reference in view of its two decisions on the same question of law in the case of the same assessee. Not satisfied with the order of the Tribunal, the Commissioner of Income-tax has referred the following question for the opinion of this Court:-- "Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that free reserve (deemed income of Bonus shares) could not be adjusted (set off) against business loss (unabsorbed depreciation) of the assessee for the year in question:" 2. It has been pointed out that the question raised by the Income-tax Commissioner before the learned Tribunal…

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