Law: Income Tax Ordinance, 1979

Section: Third Schedule,8(7),1(3A),8(7)(b)(ii)

Income Tax Ordinance (XXXI of 1979)--- ----Third Sched. Rr.1(3A) [as inserted by Finance Act (VII of 1992) w.e.f. 1-7-1992) & 8(7)(b)(ii)---Central Board of Revenue Circular No.23/88---Depreciation admissible in tax holiday period---Reduction of depreciation from actual cost of assets for working out written down value---Scope---Rule 1(3A) of Third Sched. of Income Tax Ordinance, 1979 as inserted by Finance Act, 1992 had no retrospective effect---Depreciation admissible but not allowed on account of tax holiday could not be reduced from actual cost of assets for determining written down value---If depreciation could be reduced from actual cost of assets without allowing same in tax holiday period, then there would have been no necessity of enacting a deeming provision through R.1(3A) of Third Sched. of Income Tax Ordinance, 1979---Wear and tear caused to plant, machinery or building would not be relevant for purpose of depreciation, which was not allowable on basis of actual amount of wear and tear, but on basis of fixed formula contained in Third Sched. of Income Tax Ordinance, 1979---When assessee suffered more loss than prescribed rate of depreciation, then same would not be allowed in excess of such rate---When value of assets actually increased, then depreciation would not be refused, but would be allowed in accordance with prescribed rate---When asset was used for business for first time in assessment year enjoying tax holiday, then actual cost and written down value both would be same on expiry of tax holiday period---With effect from 1-7-1992 on account of deeming provision inserted through R.1(3A) of Third Sched of Income Tax Ordinance, 1979, admissible depreciation would be reduced from actual cost through fiction of law. JUDGMENT MUHAMMAD MUJEEBULLAH SIDDIQUI, J.---The above appeal was admitted to regular hearing to consider the following questions of law:--- "(1) Whether on the facts and in the circumstances of this case the learned Income Tax Appellate Tribunal was justified in holding that after completion of period of lax holiday the depreciation for assessment year from which the post tax holiday period commences, is to be allowed at the…

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