(a) Income Tax Act (XI of 1922)---

----First Schedule, R.6(1) & S.10---Amount claimed by an insurance company on account of provision for taxation or taxation reserve was an admissible expenditure under S.10.

Commissioner of Income-tax Central Karachi v. Messrs Mercantile Fire and Central Insurance Co. Ltd. 1989 P T D 142; The Commissioner of Income-tax v. International General Insurance Company Limited I.T.R. Nos.96 and 97 of 1983 and Commissioner Income-tax Zone `A' v. Messrs Sootiashun Union I.T.R. No.101 of 1982 ref.

(b) Income Tax Ordinance (XXXI of 1979)-

----S. 136(1) & (2)---Income Tax Act (XI of 1922), S.66(1)---Reference application filed beyond the period of 60 days having been dismissed under S.66(1) of the Act of 1922 as barred by time, could not be treated as one under S.136(1) of the Ordinance (XXXI of 1979)---Such an application, therefore, would not lie under S.136(1) of the Ordinance of 1979.

Commissioner of Income-tax v. Messrs Asbestos Cement Industries Ltd. 1988 P T D 277 fol.

Shaikh Haider for Applicant. Fazale Ghani Khan and Makhdoom Ali Khan for Respondent.

Date of hearing: 24th April, 1991.

JUDGMENT

MUHAMMAD HUSSAIN ADIL KHATRI, J: -- The respondent company is carrying on General Insurance business. In assessment year 1976 77 it claimed provision for taxation reserve amounting to Rs.12,00,000 which was rejected by the Income Tax Officer. The assessee preferred appeal before the Appellate Assistant Commissioner of income-tax which was allowed. The Department preferred appeal before the Appellate Tribunal. The Appellate Tribunal confirmed the order passed by the Appellate Assistant Commissioner of Income-tax by order, dated 18-7-1981, The Commissioner of Income-tax being dissatisfied with the order of the Tribunal made an application under section 136(1) of the Income Tax Ordinance 1979 after expiry of 60 days of the receipt of the judgment, requiring the Appellate Tribunal to refer the question of law that arose out of its judgment for the decision of this Court. The Tribunal came to the conclusion that the application ought to have been filed under section 66(1) of the Income Tax Act, 1922 within a period of 60 days, instead of filing application under section 136(1) of the Income Tax Ordinance, 1979. The said application was therefore, dismissed by the Tribunal.

The Commissioner of Income-tax has filed present reference application under section 136(2) of the Income Tax Ordinance, 1979 seeking decision of this Court on the following questions:--

(1) Whether on the facts and in the circumstances of the case the learned Income Tax Tribunal was justified in deleting the addition of Rs.12,00,000 on account of Provision made for taxation?

(2) Whether the Tribunal is right to apply section 66(1) of the Repealed Act instead of section 136(1) of the Income Tax Ordinance of 1979 in the instant case?

So far as the first question is concerned, it was considered in the case of Commissioner of Income Tax Central, Karachi v. Messrs Mercantile Fire and Central Insurance Co. Ltd. 1989 P T D 142 and referring to rule 6(1) it was observed as follows:--

"This rule provides that the Income-tax Officer has to assess on the basis of the balance disclosed by the annual accounts required to be prepared under the Insurance Act. Section 10 has been applied only for the purpose of excluding expenditure other than which may under section 10 `be allowed for computing the profits and gains of the business'. This applicability is for limited purpose and the provisions of section 10(2-A) cannot be applied under this garb. In this regard reference can be made to C.I.T. v. Alpha Insurance Co. Ltd., Karachi P L D 1981 SC 293 where after an exhaustive discussion it was observed as follows:--

`Rules contained in the First Schedule to the Income Tax Act , completely, exhaustively and to the exclusion of every other provision not expressly incorporated, govern the computation of profits and gains of insurance business'."

The same question was considered in several other cases including the following unreported cases:--

(1) The Commissioner of Income-tax v. International General Insurance Company Limited I.T.R. Nos.96 and 97 of 1983,

(2) Commissioner Income Tax Zone `A' v. Messrs Sootiashun Union I.T.R. No.101 of 1982.

The above unreported cases were decided by the Division Bench of t, this Court of which one of us namely (Mr. Justice M. Hussain Adil Khatri) was [ also a member. In all the above cases the question was answered in affirmative.

So far as the second question is concerned, it is also covered by the judgment passed in Commissioner of Income-tax v. Messrs Asbestos Cement Industries Ltd. 1988 F T D 277.

We, therefore, dismiss this application.

M.BA./C-238/KApplication dismissed.