Law: Income Tax Ordinance, 1979

Section: 2,2(3),FifthSched.,Part-I,R.2(3)

(a) Income Tax Ordinance (XXXI of 1979)----Fifth Sched., Part-I, R.2(3)---Computation of the profits and gains from the exploration and production of Petroleum---Adjustment and carry forward of losses of dry hole---Rejection on the ground that assessee had failed to comply with provisions of law and had not provided a mechanism about set off and carry forward of losses in its concession agreement with the Government of Pakistan---Assessee was not entitled to claim the carry forward and set off of loss in respect of dry hole---Validity---Concession agreement of the company/assessee was not altogether. silent about mechanism for adjustment and carry forward of lost expenditure on dry hole---Article of the agreement provided that all expenditure deemed to have been lost in terms of R.2 of Part-I of Fifth Schedule of the Ordinance shall be adjusted on "a fully consolidated basis in one of the two ways mentioned in R.2(3) of the Part-I of the Fifth Schedule of the Income Tax Ordinance, 1979---Assessing Officer failed to take into account the Witty gritty of the concession agreement in a proper manner---If for the sake of argument it was accepted that concession agreement was silent about such mechanism, even then the. Assessing Officer was not justified to, disallow the assessee's claim because in such situation the Revenue itself should decide whether the lost expenditure was to be allowed under Cl.(a) or Cl.(b) of R.2(3) of Part-I of the Fifth Schedule of the Income Tax Ordinance, 1979---First Appellate Authority. was fully justified to set aside the assessment for re-determination of expenditure for the purpose of adjustment and carry forward after verification---Order of First Appellate Authority was maintained with the directions that during re-assessment proceedings the Assessing Officer should allow the lost expenditure in either of the two ways prescribed in Cl.(a) and clause (b) of Sub-R.(3) of R.2 of Part-I of the Fifth Schedule to the Income Tax Ordinance, 1979. DHP Petroleum Asia Pacifiy Islamabad's case LT.A. No.341 (IB) of 2002 ref. (b) Income Tax Ordinance (XXXI of 1979)--- ----S. 23---Deduction---Exchange loss---Disallowance---Department contended…

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