1991 PLP 869 (PTD)

MAMOON KAZI, J.

The assessee (respondent) is a private limited company. During the year under reference while framing the assessment, the Income-tax Officer set off the loss against the income of bonus shares. The assessee (respondent) being aggrieved by such order appealed before the Appellate Assistant Commissioner of Income-tax who allowed the appeal. The Income-tax Officer then filed an appeal before the learned Income-tax Appellate Tribunal but the appeal was dismissed on the ground that bonus shares being a deemed income do not fall under any of the heads enumerated under section 6 of the repealed Act of 1922 and the loss on account of unabsorbed depreciation cannot be set off against such income. The Income-tax Officer being aggrieved by such order applied to the learned Tribunal to refer the question to this Court for its opinion but the Tribunal declined to make a reference in view of its two decisions on the same question of law in the case of the same assessee. Not satisfied with the order of the Tribunal, the Commissioner of Income-tax has referred the following question for the opinion of this Court:-- "Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that free reserve (deemed income of Bonus shares) could not be adjusted (set off) against business loss (unabsorbed depreciation) of the assessee for the year in question:"

2. It has been pointed out that the question raised by the Income-tax Commissioner before the learned Tribunal was differently worded as the same was as under: "Whether on the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in holding that free reserve could not be adjusted against business loss of the assessee for the year in question:" However, Mr. Shaikh Haider has pointed out that the question now referred to this Court in the present reference is not altogether alien to the facts and circumstances of the case. After going through the orders of the learned Appellate Assistant Commissioner and the learned Income-tax Appellate Tribunal, dated 16-4-1980 and 4-4-1982 respectively, we find that Mr. Shaikh Haider is right. Even otherwise this Court in enumerable cases has refrained the question when it was of the opinion that under the given circumstances, the question referred to it required modification.

3. So far as the question referred to us is concerned, it has been pointed out that in the case of Commissioner of Income-tax (Central Zone), Karachi v. Messrs Karachi Electric Supply Corporation Ltd. 1985 P T D 389 the same question has been decided by a Division Bench of this Court. The following conclusions were drawn by the learned Division Bench which appear at para. 24 of the judgment at pages 395 and 396 of the report:-- "

24. After giving our thoughtful consideration to the entire matter, we are of the view that losses amounting to Rs.52,04,540 could not be adjusted against the fiction income and the respondent/assessee is entitled to its carrying forward and set off in the subsequent years. The net result, therefore, is that the respondent/assessee has in the total effect suffered the loss of saving 60% of his future tax. We are afraid that the same is against the spirit as, well as clear words of section 10(2)(vi) proviso of the Act."

4. Since an identical question has been referred to us for our opinion, we decide the question in the light of the said judgment and for the same reasons as stated in the said judgment. M.B.A./C-216/K Answer accordingly.