Law: Income Tax Ordinance, 1979

Section: 80,Second Schedule,176,80B(2)(b),30

Law: Constitution of Pakistan, 1973

Section: 185(3)

(a) Income Tax Ordinance (XXXIX of 1979)-- Second Schedule, Item 176 & S.80 B(2)(b) Constitution of Pakistan (1973), Art. 185(3) Leave to appeal was granted by the Supreme Court to consider as to whether the High Court had not correctly construed the scope of Item 176, Second Schedule and S.80 B(2)(b) of the Income Tax Ordinance, 1979 in accordance with the law laid down by. Supreme Court in Messrs Packages Ltd. v. Commissioner of Income Tax 1993 SCMR 1224. Messrs Packages Ltd. v. The Commissioner of Income Tax 1993 SCMR 1224 ref. (b) Income Tax Ordinance (XXXIX of 1979) -- Ss. 30, 80 B & Second Schedule Item 176 Income from other sources Electric Power Generation Project Exemption Interest earned by the assessee from the Share Capital deposited in the Banks whether fell within the scope of "income from other sources" under S.30, Income Tax Ordinance, 1979 Principles. Item 176 of Second Schedule of the Income Tax Ordinance 1979 provides in clear terms that "profits and gains derived by an assessee from Electric Power Generation Project, set up in Pakistan on or after 1st of July, 1998 shall be exempted from total income tax.", Essentially, profits and, gains from the Electric Power Generation Project is distinct and different from the interest being obtained by the Company on the deposit of share capital in the Banks, during the financial years for which the return of income under the relevant provision of Ordinance is filed and the exemption is claimed from the payment of income tax under Item 176 of Second Schedule of the Ordinance. Electric Generating Plants of companies had started functioning in 1994 95 but they instead of claiming exemption on the profits/gains from Power Generation, claimed it from the deposit of the share capital lying in the Banks. It is to be seen that as soon as a Company goes in production it cannot claim exemption of income tax on the interest of share capital deposited in Banks because on commencement of the production, profits and gains are to be earned out of the income of Electric Generation independently. The share capital deposits in the Banks by the assessees provide a separate income to them after post production…

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