Law: Income Tax Ordinance, 1979

Section: 12,12(18),66A

(a) Income Tax Ordinance (XXXI of 1979)----S. 12(18) [as inserted by Finance Act (VI of 1987)] & 66-A---CBR Circular No. 6 of 1987, dated 5-7-1987---Deemed income---Revision--­Jurisdiction---Scope---Company ---Share advance money indicated in the books of accounts/balance-sheet of the company could by no imagination be treated as loan---Principles. Irrespective of the factual position as to the extent of the authorized capitals of the assessee/companies the Revenue had no business to pick up faults with the intention and motive of a company to increase its capital and the reasons therefore. A joint stock company is at liberty to increase and subject to certain conditions prescribed by law, to decrease its paid-up capital. As for the increase in the authorized capital is concerned, for a' private limited company, there is hardly any difficulty and in fact it is almost a declaration made to the Registrar of Companies subject to payment of certain fees. It is correct that an Assessing Officer can always probe, look into arid judge the exact nature of a receipt or an entry in the books of accounts. Entries made-by an assessee in books of accounts are not determinative of the question whether the amount was paid as capital asset or a stock in trade. However, it is equally correct that letter of law in taxing statute has to be interpreted in the sense it had been used and expressed. The provisions of section 12(18) of the Income Tax Ordinance, 1979 [as inserted by Finance Act, 1987] at the relevant time did not attract unless two conditions were answered. First that there was a "loan" received by an assessee and secondly that it was so claimed. Where any of the two requirements were not answered, the provisions were not attracted. Subsequent amendment in the year 1998 rather supports the case of the assessee/appellants that at the relevant time an advance, irrespective of its nature, could not be deemed as income of the assessee. Share deposit money can--never be or amount to a "loan" which is necessarily a sum to be returned after a certain or uncertain period with or without interest. In the present case at the relevant time the express mention of the word…

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