| Case ID |
0adf7024-8eeb-4346-a52f-4518f0fa0f84 |
| Body |
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| Case Number |
Civil Appeal No. K-43 of 1971 |
| Decision Date |
Feb 04, 1981 |
| Hearing Date |
Feb 03, 1981 |
| Decision |
The Supreme Court of Pakistan ruled on the appeal of Beach Luxury Hotel Ltd, which challenged the determination of the cost of a building for the purpose of depreciation under the Income Tax Act, 1922. The court found that the cost of the building incurred by the assessee was Rs. 25,00,000, and that the depreciation allowance should be based on this amount rather than the actual payments made during the assessment year. The court emphasized the mercantile system of accounting and clarified that the cost to the assessee should not be reduced by any contributions from other parties. The court's decision reinforced the principle that the cost of an asset for depreciation purposes is determined by the amount the assessee is liable for, regardless of the actual cash payments made during the year. The appeal was allowed, and the matter was remanded to the lower authorities for recalculation of depreciation based on the accepted cost of Rs. 25,00,000. |
| Summary |
In the case of Beach Luxury Hotel Ltd vs Commissioner of Income Tax, the Supreme Court of Pakistan addressed the complexities of determining the cost of a building for depreciation purposes under the Income Tax Act, 1922. The petitioner, Beach Luxury Hotel Ltd, had acquired an evacuee property at a public auction and claimed depreciation based on the total cost of the building, which was set at Rs. 25,00,000. The Income Tax Officer initially accepted this amount but later questioned the actual cost incurred, leading to an appeal. The court upheld the mercantile system of accounting, stating that the cost to the assessee should reflect the total liability incurred, irrespective of actual cash payments made. This case highlights the importance of accurately assessing depreciation allowances and the principles governing accounting practices in taxation. The ruling is significant for taxpayers and advocates in understanding the application of cost accounting in tax assessments, reinforcing the need for clarity in asset valuation and depreciation calculations. |
| Court |
Supreme Court of Pakistan
|
| Entities Involved |
|
| Judges |
ANWARUL HAQ, C.J.,
SHOJI-UR-REHMAN,
FAKHRUDDIN G. EBRAHIM, JJ.
|
| Lawyers |
Ali Akhtar, Advocate Supreme Court,
Yusuf Rafi, Advocate-on-Record,
Mansoor Ahmad Khan, Advocate Supreme Court,
M. Shabbir Ghaury, Advocate-on-Record
|
| Petitioners |
BEACH LUXURY HOTEL LTD
|
| Respondents |
COMMISSIONER OF INCOME TAX, CENTRAL, KARACHI
|
| Citations |
1981 SLD 113,
(1981) 44 TAX 40
|
| Other Citations |
Commissioner of Income Tax and Smt. Singari Bai (1945) 13 ITR 225,
Corporation of Birmingham v. Barnes 19 Tax Cas. 195,
C.I.T. v. Poona Electric Supply Co. Ltd (1946) 14 ITR 622,
Cape Brandy Syndicate v. Inland Revenue Commissioner (1921) l KB 64,
Muhammad Saddiq and 2 others v Chief settlement & Rehabilitation Commissioner and 3 others PLD 1965 SC 123,
Haji Ghulam Hussain v. Hamid Hassan Khan and another PLD 1969 Lah. 147,
Calcutta Coal Co. Ltd. v. Commissioner of income tax (1959) 37 ITR 1,
Commissioner of Income Tax, Gujrat v. Leather Products Pvt. Ltd. (1975) 101 ITR 61,
North Central Wagon Co, Ltd. v. Fifield (1953) All ER 1009
|
| Laws Involved |
Income Tax Act, 1922
|
| Sections |
10,
10(3A),
10(2)(iv),
10(5),
13
|