COMMISSIONER OF INCOME-TAX VS MESSRS UNITED INSURANCE CO. OF PAKISTAN, KARACHI
1991 P T D 571
[Karachi High Court]
Before Salahuddin Mirza and Muhammad Hussain Adil Khatri, JJ
COMMISSIONER OF INCOME-TAX
versus
Messrs UNITED INSURANCE CO. OF PAKISTAN, KARACHI
Income Tax Reference No. 31 of 1983, heard on 04/03/1991.
Income-tax Act (XI of 1922)---
----S. 10(7) read with Sched.---Assessee, an Insurance Company carrying on life, fire and general insurance business claimed certain amount as bonus payable to its employees---Amount so claimed had not been paid in full at the time the books of accounts were closed---Assessing Officer deducted the unpaid amount on the assumption that said amount represented the provisions that were not allowable under the Act, 1922 and made-the addition to assessee's account---Held, Income-tax Appellate Tribunal was justified in deleting the addition so made by the Assessing Officer as the amount in question was payable to the employees of the assessee and "provisions for taxation" and "provision for unpaid risk etc." in the accounts of the insurance business would apply equally to the "provision for bonus".
Commissioner of Income-tax v. Messrs Adamjee Insurance Co. I.T.R. No.88 of 1983 and C.I.T. v. New Jubilee Insurance Corporation Limited I.T.C. No.272 of 1974 fol.
Shaikh Haider for Applicant.
Mazhar Jaffari for Respondent.
Date of hearing: 4th March, 1991.
JUDGMENT
MUHAMMAD HUSSAIN ADIL KHATRI, J.---The respondent is an Insurance Company carrying on life, fire and general insurance business. During the assessment year 1975-76, the respondent claimed an amount of Rs.1,63,000 as bonus payable to its employees. This amount was not paid in full at the time the books of account were closed. The Assessing Officer deducted the aforesaid amount on the assumption that the unpaid amount represented the provisions that were not allowable under repealed Income Tax Act. In the 1st Appeal, the relief was given to the respondent to the extent of amount actually paid. In Second Appeal the Tribunal observed that the ratio of decisions in the cases decided by the Tribunal regarding "Provisions for taxation" and "Provisions for unpaid risk etc." in the accounts of the Insurance Business would apply equally to the "Provision for bonus".
On the application of the Commissioner of Income-tax, the Tribunal has referred the following question to this Court.
"Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in deleting the addition of bonus amounting to Rs.1,63,000 payable to the employees?"
Mr. Shaikh Haider, the learned counsel for the respondent, has referred us to an unreported Division Bench Judgment of this Court in I.T.R. No.88 of 1983 (The Commissioner of Income-tax v. M/s. Adamjee Insurance Co.), which covers the point in issue. The relevant question referred in the said case was as under:--
"Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in knocking off the add back. of Rs.3,50,000 being provision for Bonus?"
The said question alongwith two other questions, was replied as under:--
.........although there are no specific decisions of this Court on the point but on the basis of ratio laid down in the above-referred cases and in another unreported decision of this Court in the case of C.I.T. v. New Jubilee Insurance Corporation Limited (I.T.C. No.272 of 1974) decided on 30-8-1972, we answer all the above questions referred to us in the affirmative:'
We respectfully following the said view answer the question in affirmative.
M.B.A./C-197/K Question answered in the affirmative.