Intangibles

Taxpayer contended that S.24(3) of the Income Tax Ordinance, 2001 used the term "normal useful life in whole years" ; and in the present world technological advances were so fast that even such a program became outdated within one year

Revenue contended that intangible asset was rightly amortization to ten years

Validity

Technological advances were very fast

Amortization of computer software in five years was unjust

First Appellate Authority had restricted same it to three years which was reasonable

Order of First Appellate Authority was confirmed by the Appellate Tribunal.

Additions were vacated by the First Appellate Authority on the ground that estimation of life of intangible asset was to be determined by the taxpayer

Taxpayer contended that S.24(3) of the Income Tax Ordinance, 2001 provided the terms "normal useful life in whole years" that was three years in taxpayer's case; that application of ten years came into play where a normal life of an intangible was more than ten years or where the same was not ascertainable; and that in those conditions, it would be restricted to ten years as per S.24(5) of the Income Tax Ordinance, 2001

Validity

Application of 10 years came into play where a normal life of an intangible was more than ten years or where the same was not ascertainable

Life of computer software in the case of taxpayer was only three years which could not be stretched to 10 years

In the present world technological advances were so fast that even before three years such a programme became outdated

Addition made being not maintainable, order of First Appellate Authority was confirmed by the Appellate Tribunal.

Section 24(11) of the Income Tax Ordinance, 2001 enumerated certain types of incorporeal property/intellectual property, which was followed by the expression "and any expenditure that provides the advantage or benefit for a period of more than one year" - Forums below focused on the second aspect of the definition i.e. "and any expenditure" and concluded that expense of Voluntary Separation Scheme was intangible

Conclusion was misplaced for the reason that the expression "and any expenditure" was to be read in conjunction or in the light of the first part of the definition of intangible

Legislature after having given a'delineation of certain intellectual properties used the expression "and any expenditure "

Said expression was to be interpreted or coloured in the light of enumeration of the incorporeal properties which precede; in other words, the expenditure incurred for the purchase of any of the kind of the property mentioned in the first part and had a useful life of more than one year was to be treated as intangible and the expression "and any expenditure" was not an independent part of the definition and could not be segregated from the enumeration mentioned in S.24(11) of the Income Tax Ordinance, 2001

Expenditure incurred by taxpayer in running his business may have the benefit or an advantage over a period of more than one year but it could not be said to be an intangible if it did not qualify the quality or character of an intellectual property.