Law: Income Tax Ordinance, 1979

Section:

(a) Income-tax----Allowable expenses---Gratuities payable to employees---Admissibility as expense against income of relevant years---Such amount is a proper charge on the income of the assessee and as such is admissible as an expense. Commissioner of Income-tax v. Oriental Dyes & Chemical Co. Ltd. 1992 SCMR 763 ref. (b) Income-tax--- ----Allowable expenses---Expense vouched by Director---Deletion of such expense in computing taxable income of assessee---Pre-conditions---Expenses whether vouched by a Director or otherwise must satisfy two statutory requirements, firstly that the same was actually incurred and secondly that the expense was incurred wholly and exclusively for the purpose of business of the assessee---Petty expenses having been certified by the Directors must be deemed to have been actually incurred for the business of the assessee--­Verification of a Director would not dispense with the statutory requirements for allowing of an expense ---Disallowances of small amounts were made by the Assessing Officer under the heads of general repairs, general charges, entertainment, medical expense, car expense and travelling etc. as the expenses were not fully vouched---Validity---Both the verifiability as well as the admissibility of an expense was to be seen in the light of relevant provisions of Income Tax Ordinance, 1979, irrespective of the amount of the expense claimed---Verification of Director per se could not be accepted as a proof of actual incurring of expense---Where the assessee failed to comply with the requirements of law, the expenses so incurred were liable to be deleted in computing the taxable income of the assessee in circumstances. JUDGMENT NASIM SIKANDAR, J.--The Lahore Bench of the Income-tax Appellate Tribunal at the instance of the assessee a private limited company deriving income from publication of newspapers has referred the following questions of law said to have arisen out of a consolidated order recorded on 31-7-1988 by the Tribunal for the assessment years 1977-78 to 1986-87:--- "(1) Whether in the facts and circumstances of the case the gratuity calculated by the assessee from year to year and provided for in its books of…

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