Law: Income Tax Ordinance, 1979

Section: 12,12(18),13,62,63

(a) Income Tax Ordinance (XXXI of 1979) S.12(18) Income deemed to accrue or arise in Pakistan Company -Director Lean Amount paid by the directors from their personal bank account on .behalf of company/assessee in order to clear its tax liability, to third parties from whom new buses had to be purchased and cash loan received from sister companies by recording transfer entries was shown as loan received from directors in the books of account of the company) assessee Such amount was added in the total income under S.12(18) of the Income Tax Ordinance, 1979 on the ground that the payments should have been routed through the company's bank account rather making direct payment by the director to the third parties Validity Specific purpose of S.12(18) of the Income Tax Ordinance, 1979 was to check -fictitious loan and to preclude back dated introduction of credit in the books of account Where genuine loans shown to have been received from identifiable persons either cash or through the banking channel should not be treated as deemed income of the assessee merely on the ground that the amount of loan had not been received through crossed cheque Where nature and sources of money was not satisfactorily explained, addition to the income of the assessee could still be made under S.13 of the Income Tax Ordinance, 1979, notwithstanding the claim that any loan was received through crossed cheque etc. -Withdrawal of amount by the director of the company from his personal bank account and clearance of company's tax liability had never been disputed by the Department, likewise, payment made on behalf of company/assessee by another director by way of crossed cheque to the manufacturer of buses which were intended to be purchased by the company/assessee, was never subject of objection by the Assessing Officer Addition made under S.12(18) of the Income Tax Ordinance, 1979 was not legally made and Assessing Officer had not lawfully exercised his powers Action of Assessing Officer treating the sum as assessee's deemed income under S:12(18) of the Income Tax Ordinance, 1979 did suffer from legal infirmity Order of First Appellate Authority was vacated and addition made by the…

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