Law: Income Tax Ordinance, 1979

Section: 23,23(1)(x),23(1)(xviii),23(1)(xxi)

(a) Income Tax Ordinance (XXXI of 1979)----S.23(1)(x)---Deductions---Disallowance of provisions for bad debts on the ground that `provision' made in final accounts for an expense did not qualify as valid business expendiure and it was required to be added back to income when finalizing income tax assessment and in case of debt gone bad, only that part of the debt may be written off and charged to the profit and loss account that could be shown by the assessee to have actually gone bad---Assessee-Bank contended that Banking Company fell in a distinct class governed by `prudential regulations' and subject to stringent rules prescribed by State Bank of Pakistan reporting format for documentation required to be periodically filed by a Bank before the State Bank, made it incumbent on the assessee-Bank to cite only `a provision for bad and doubtful debts in the case of debt that was held by the Bank to have `gone bad'---Assessee had no option but to cite the bad debt as a provision in the final accounts---Validity---Assessing Officer had not "determined" whether or not the claimed bad debt had indeed become bad as was required to do under S.23(1)(x) of the Income Tax Ordinance, 1979---Matter was remanded to Assessing Officer to do the same strictly in accordance with law---Assessing Officer will not disallow the bad debt claim simply because it had been cited as a `provision for bad debt'---Add-back could only be made if, after calling for necessary explanation/clarification as the Assessing Officer might require, the assessee was duly confronted and the Assessing Officer then `determines' that a certain amount was not a `bad debt'---If Assessing Officer were to allow the provision for bad debts as a profit and loss account expense without question, as a matter of course, then the statutory requirement for its "determining" whether the debt had indeed become bad would be rendered redundant which of course could not be the case as no provision in a statute could be seen as having become redundant---Matter pertaining to bad debt as a charge to the profit and loss account was remanded to the Assessing Officer for its re-appraisal strictly in accordance with express…

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