Law: Income Tax Ordinance, 2001

Section: 20,133

Law: Income Tax Ordinance, 1979

Section: FourthSched,5,5(a)

Income Tax Ordinance (XLIX of 2001)---Ss. 20 & 133---Income Tax Ordinance (XXXI of 1979), Fourth Schedule, R. 5(a)---Zakat and Ushr Ordinance (XVIII of 1980), S. 25---Deduction---Insurance Company---Khas Deposit Certificates---Asset---Payment of Zakat, at source onKhas Deposit Certificates by Insurance Company---Allowable deduction under R. 5(a), Fourth Schedule, Income Tax Ordinance, 1979. Commissioner of Income-tax v. Azlak Enterprises 2003 PTD 1309 fol. 1989 PTD (Trib.) 1263; 1989 PTD (Trib.) 1263 and 1991 PTD (Trib.) 804 ref. JUDGMENT MUHAMMAD MUJEEBULLAH SIDDIQUI, J.---After rejection of application under section 133(1) of the Income Tax Ordinance, 2001, by the ITAT, the Commissioner of Income Tax Companies-III, Karachi has submitted this reference application under section 133(4) of Income Tax Ordinance, 2001, invoking advisory jurisdiction of this Court on the following question of law:-- "(1) Whether on the facts and circumstances of the case the claim of Zakat deduction at source is admissible deduction under rule 5(a) of the Fourth Schedule to the Income Tax Ordinance, 1979?" Briefly stated the relevant facts are that respondent/assessee is a company carrying on business of general insurance. During the assessment year 1996-97, the assessee disclosed income from interest and profit earned from Khas Deposit Certificates. The assessee claimed deduction on account of Zakat paid at Rs.13,601. The Assessing Officer, disallowed the claim for the reason that the Zakat is not admissible expense under Rule 5(a) of the IVth Schedule to the Income Tax Ordinance, 1979. It was contended before the Assessing Officer that similar disallowance was made in the assessment year 1993-94 which was deleted in appeal. The Assessing Officer observed that he has gone through the appeal order, dated 12-7-1993 passed by the learned Commissioner of Income Tax (Appeals) placing reliance on the decision of ITAT in the case reported as 1989 PTD (Trib.) 1263. The Assessing Officer further observed that the Zakat deducted at source is not an admissible deduction for working out total income under the Income Tax Ordinance, 1979. However, Zakat paid could be deducted in computing…

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