| Case ID |
1e55038a-2833-4dab-af14-222f85dfdf50 |
| Body |
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| Case Number |
R.A. No.708/LB of 2002 |
| Decision Date |
Jan 07, 2003 |
| Hearing Date |
|
| Decision |
The Income Tax Appellate Tribunal dismissed the application submitted by the appellant. The tribunal found that the assessee had not included the previous year's profit in its profit calculations for the purposes of Section 12(9A) of the Income Tax Ordinance, 1979. Consequently, the addition proposed by the Department was unjustified. The tribunal emphasized a strict interpretation of Section 12(9A), aligning with the intention to protect shareholders rather than solely focusing on revenue collection. The benefit of doubt was accorded to the assessee, and the tribunal upheld the findings of earlier judgments, reinforcing that capital expenditure cannot be adjusted in profit determinations as per the stipulated sections of the ordinance. Thus, the reference application filed by the Department was dismissed. |
| Summary |
In the landmark decision of R.A. No.708/LB of 2002, adjudicated on January 7, 2003, the Income Tax Appellate Tribunal (ITAT) deliberated on critical aspects of the Income Tax Ordinance, 1979. Represented by judges Khaweza Farooq Saeed and Imtiaz Anjum, the tribunal examined the appellant, Muhammad Asif's, claims against the respondent, Muhammad Sarwar Khawaja. The core issue revolved around Section 12(9A) of the Income Tax Ordinance, which pertains to income deemed to accrue or arise in Pakistan. The appellant challenged the Department's addition of previous years' profit in the profit calculations, asserting that such adjustments were unwarranted.
The tribunal meticulously analyzed the definitions of 'income' and 'profit,' highlighting that while income encompasses a broader financial concept, profit is a subset within it. However, a direct and comprehensive definition of profit remains elusive. Referencing precedents like Biria Brothers (Pvt.) Ltd v. CIT (1966) and Shiri, Vastava and Sons (P.) Ltd. v. CIT (1963), the tribunal underscored that capital expenditures cannot be arbitrarily added or deducted when determining an assessee's net income. The appellant's accounts, which declared an 'after tax profit,' did not incorporate previous years' profits, aligning with the legal stipulations of Section 12(9A).
Moreover, the tribunal emphasized a liberal interpretation of statutes to uphold justice, ensuring that the benefit of doubt favored the taxpayer. The application by the Department was ultimately dismissed, reinforcing the principle that statutory provisions must be applied strictly yet justly, safeguarding the interests of shareholders and maintaining the integrity of the Income Tax Ordinance. This decision not only clarified the application of Section 12(9A) but also set a precedent for future cases involving the interpretation of income and profit in tax assessments. |
| Court |
Income Tax Appellate Tribunal
|
| Entities Involved |
CIT,
Biria Brothers (Pvt.) Ltd,
Shiri, Vastava and Sons (P.) Ltd.
|
| Judges |
KHAWAJA FAROOQ SAEED,
IMTIAZ ANJUM
|
| Lawyers |
Muhammad Asif, D.R.,
Muhammad Sarwar Khawaja
|
| Petitioners |
Muhammad Asif
|
| Respondents |
Muhammad Sarwar Khawaja
|
| Citations |
2003 SLD 154,
2003 PTD 1659,
(2003) 87 TAX 421
|
| Other Citations |
Biria Brothers (Pvt.) Ltd v. CIT (1966) 13 Tax 76,
Shiri, Vastava and Sons (P.) Ltd. v. CIT (1963) 47 ITR 49
|
| Laws Involved |
Income Tax Ordinance, 1979
|
| Sections |
12(9A),
First Schedule Part IV,
Cis.(59),
Cis.(136)
|