| Case ID |
37362a74-ce27-4f34-832e-2d267740e625 |
| Body |
View case body. Login to View |
| Case Number |
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| Decision Date |
Sep 28, 1987 |
| Hearing Date |
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| Decision |
The court determined that the surplus taken to the capital gains account was merely a fictional entry and did not constitute a real gain. The Income-tax Officer's treatment of this surplus as a reserve was deemed unsustainable as there were no actual profits to justify such a classification. The judgment emphasized that tax should be levied on real incomes, and mere book entries do not generate real gains or losses. The court agreed with the Income-tax Appellate Tribunal that the fictional surplus could not be recognized as a reserve or free reserve, thus upholding the Tribunal's findings. |
| Summary |
This case revolves around the interpretation of the Income Tax Act, particularly concerning the treatment of surplus entries in financial records. The Sindh High Court ruled on the nature of a surplus amount credited to a capital gains account, determining that it was a fictional entry without any real gain. The court emphasized the importance of recognizing actual profits for taxation purposes, rejecting the notion that mere accounting entries could constitute taxable income. The judgment sheds light on the principles governing reserves and the necessity for tangible gains to validate their existence. This ruling is significant for taxpayers and legal practitioners, as it clarifies the boundaries of taxable income and reinforces the requirement for real economic transactions to underpin financial reporting. The decision aligns with established judicial precedents that prioritize reality over fiction in financial assessments. |
| Court |
Sindh High Court
|
| Entities Involved |
Not available
|
| Judges |
AJMAL MIAN,
HAIDER ALI PIRZADA
|
| Lawyers |
Nasarullah Awan,
Ali Athar
|
| Petitioners |
COMMISSIONER OF Income Tax (CENTRAL ZONE), KARACHI
|
| Respondents |
Messrs BEACH LUXURY HOTEL LIMITED
|
| Citations |
1988 SLD 59,
1988 PTD 512,
(1988) 57 TAX 150
|
| Other Citations |
1983 PTD 178 (H.C. Kar)
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| Laws Involved |
Income Tax Act, 1922
|
| Sections |
4(1) Explanation 5
|