| Case ID |
0f86e29f-c973-4814-b5c2-1abb06079636 |
| Body |
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| Case Number |
Income Tax Reference Case No. 1 of 1971 |
| Decision Date |
Mar 31, 1980 |
| Hearing Date |
Aug 22, 1979 |
| Decision |
The court held that the surplus derived by the Pakistan Industrial Credit and Investment Corporation (PICIC) from the sale of shares and securities was not taxable under the Income Tax Act. The decision emphasized that whether or not a transaction is in the line of the assessee's trade depends on the character and circumstances of the transaction. The court concluded that the PICIC was primarily an investment company and not a trading entity, as it purchased shares with the intent of investment rather than trading. Therefore, the profits made from sales of shares were not revenue receipts and were not subject to income tax. The burden of proof rested on the revenue to demonstrate that the gains were taxable, which they failed to do. |
| Summary |
The Sindh High Court addressed the taxation of profits derived from the sale of shares by the Pakistan Industrial Credit and Investment Corporation (PICIC) under the Income Tax Act of 1922. The court examined whether the surplus from these transactions constituted a revenue receipt, which would be taxable. The court ruled that the nature of transactions—whether they are investments or trades—depends on the character of the activities undertaken by the PICIC. It highlighted the importance of intent behind the purchases, emphasizing that if shares were bought primarily for investment rather than speculative trading, the resulting profits are not taxable. The decision reaffirmed the principle that the revenue must prove that the profit arose from a taxable source. This case is significant for investment companies and clarifies the standards for determining the taxability of profits arising from share sales. Keywords: income tax, investment company, taxable profit, share trading, revenue receipt, taxation law. |
| Court |
Sindh High Court
|
| Entities Involved |
Pakistan Industrial Credit and Investment Corporation,
Commissioner of Income Tax (EAST), Karachi
|
| Judges |
FAKHRUDDIN G. EBRAHIM,
B. G. NIKAZI
|
| Lawyers |
Ali Athar,
Mansoor Ahmed Khan
|
| Petitioners |
PAKISTAN INDUSTRIAL CREDIT AND INVESTMENT CORPORATION LTD
|
| Respondents |
COMMISSIONER OF Income Tax (EAST), KARACHI
|
| Citations |
1980 SLD 111 = (1980) 42 TAX 122
|
| Other Citations |
Sardar Indra Singh & Sons v. Commissioner of Income Tax (1951) 24 ITR 416,
Commissioner of Inland Revenue v. Scottish Automobile & General Insurance Co. LTD. (1929) 16 Tax Cas. 381,
Dunn Trust LTD. v. Williams (1950) 31 Tax Cas. 477,
California Copper Syndicate v. Harris (1904) 5 Tax Cas. 159
|
| Laws Involved |
Income Tax Act, 1922
|
| Sections |
2,
2(4),
4(3)(vii),
10
|