Law: Income Tax Act, 1922

Section: 10,10(2)(iii)

Law: Income Tax Ordinance, 1979

Section: 136(1)

(a) Income Tax Act (XI of 1922)---S.10(2)(iii)---Allowance, claim of---Entitlement---Necessary conditions ---Scope---Assessee was entitled to claim allowance under S.10(2)(iii) of Income-tax Act, 1922, provided he could satisfy that he had borrowed capital; that such borrowed capital was for the purpose of business, profession or vocation and that interest had been paid on such borrowed capital---Borrowing of capital should be genuine and not a sham or illusory. CIT v. Pakistan Industrial Engineering Agencies Ltd. (1992 PTD 954) ref. (b) Income Tax Act (XI of 1922)--- ----S.10(2)(iii)---Borrowing of capital---Availability of surplus funds with assessee---Effect---Borrowing of capital was discretion of the assessee--­Mere availability of surplus funds with the assessee did not in any manner debar him from taking loans. CIT v. Pakistan Industrial Engineering Agencies Ltd. (1992 PTD 954) ref. (c) Income Tax Ordinance (XXXI of 1979)-- ----S.136(1)---Allowable allowance---Duty of Assessing Officer ---Scope-­Assessing Officer disallowed an expense as an admissible deduction but the same was allowed by the Income-tax Appellate Tribunal ---Validity--­if an allowance is allowable, the Assessing Officer must allow the same in its entirety---To disallow part of the claim, is contradictory in terms-­Claim can be partly disallowed only after recording sufficient reasons and bringing material on record that part of the interest/expense was incurred for the purpose other than business---Assessing Officer did not record any such finding at the time of disallowing the expense--­Reference was disposed of accordingly. CIT v. Pakistan Industrial Engineering Agencies Ltd. 1992 PTD 954 fol. JUDGMENT NASEEM SIKANDAR, J.---In this further appeal under section 136(1) (since amended) of the Income Tax Ordinance, 1979 following questions of law are stated to have arisen out of an order of the Income-tax Appellate Tribunal dated 6-10-1997:-- "(i) Whether under the facts and circumstances of the case, the learned Income-tax Appellate Tribunal can direct to allow an expense as an admissible deduction when it has no connection with the business of the assessee? (ii) Whether under the facts…

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