Interest on securities

2018 PTD 1089 ISLAMABAD Judicial Precedent

Ss. 17(1), 23(1)(x), 24(i) & 32Income Tax Ordinance (XLIX of 2001), Ss. 18(2), 32, 33, 34 & 100-APublic Debt Act (??? of 1944), S. 28Interest on securitiesCharging of taxPrinciple

Dispute was with regard to charging of tax from Banking companies on securities offered by Federal Government under Public Debt Act, 1944

Validity

Income tax was chargeable to tax under Income Tax Ordinance, 2001 during tax year when income derived from interest on government securities was recorded in accounts as receivable or earned and not when it was actually received in installments or upon maturity, as the case was; it would have been otherwise if Banks were regularly employing method of accounting on cash basis because thereunder a person was not required to declare or record income unless actually received

Question of law formulated for consideration of High Court involved factual controversy

Banks advanced loans to their employees on concessional rates of interest

Respective assessing officers made additions on basis of difference between concessional rates of interest charged to an employee and prevalent market rate having regard to S.24(1) of Income Tax Ordinance, 1979

Such addition was detected by Income Tax Appellate Tribunal on sole ground and after making determination on factual side, that no actual expenditure was incurred so as to attract S.24(1) of Income Tax Ordinance, 1979

Actual expenditure in relation of concessional loans advanced to directors and employees was required to be established by department

Nothing was on record to show that conclusion drawn by Income Tax Appellate Tribunal was based on misreading ort non-reading

High Court declined to interfere in reasoning recorded by Income Tax Appellate Tribunal as same did not suffer from any legal infirmity

Reference was disposed of accordingly.

2017 PTD 1266 KARACHI-HIGH-COURT-SINDH Judicial Precedent

Ss. 17(2)(a), cls. (79-A), (79-B) & 133ReferenceInterest on securitiesJudgment of High CourtEffectDispute was with regard to exemption claimed on WAPDA BondsValidity

Question proposed by taxpayer company was decided earlier by Division Bench of High Court, in favour of taxpayer and against the authorities

Though controversy in judgment passed by Division Bench of High Court was in respect of Second issue of WAPDA Bonds, whereas the claim raised by taxpayer was in respect of Third issue of WAPDA Bonds

Ratio of case decided earlier by Division Bench of High Court was fully applicable to the facts, therefore, proposed question was answered in negative, in favour of taxpayer and against the authorities

Reference was allowed in circumstances.