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

----S. 136(1) & (2)---Income Tax Act (XI of 1922), S.66(1)---Reference application 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--- \Such an application thus would not lie under S. 136(1) of the Ordinance of 1979.

Commissioner of Income-tax v. Asbestos Cement Industries Limited 1988 P T D 227 fol.

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

----S. 10(2)(xi)---Income Tax Ordinance (XXXI of 1979), S.136(2)---Reference to High Court---Loss of current assets in former East Pakistan---Income Tax Appellate Tribunal had given a finding that amount claimed by assessee was a bad debt ---Assessee being entitled to the allowance on bad debt, High Court declined interference with the finding of fact by Tribunal.

Commissioner of Income-tax v. Grindlays Bank Ltd. 1991 P T D 569 and National Bank of Pakistan 1976 P T D 237 fol.

Waheed Farooqui for Applicant. Iqbal Naeem Pasha for Respondent.

Date of hearing. 16th May, 1991.

JUDGMENT

MUHAMMAD HUSSAIN ADIL KHATRI, J: -- The Assessee -respondent which is a Banking Company engaged in providing specialised credit to agriculturists, had claimed a loss of Rs37,17,25,000 (Rupees thirty- seven crore, seventeen lacs, twenty five thousands) as loss of current assets in former East Pakistan. At the assessment stage, this claim was disallowed on two counts. Firstly, on the ground that the loss having occurred in 1971, did not pertain to the assessment year 1977-78 and secondly, the liabilities were on account of borrowing from State Bank and other sources. On the appeal filed by the Assessee, the Appellate Assistant Commissioner of Income-tax held that the disallowance was not justified. The department filed an appeal before the Income-tax Appellate Tribunal which was dismissed for the reason that the loss on current assets in respect of former East Pakistan was allowable as it was in respect of bad debts which could not be claimed under section 10(2)(xi) in assessment year 1972-73 as it was then premature and was rightly claimed in assessment year 1977-78, as at that stage, there was no foreseeable possibility of recovery of loans advanced in former East Pakistan. It was also held that the question of settlement of assets and liabilities between Government of Bangla Desh and the State Bank of Pakistan was irrelevant in consideration of claims under the aforesaid provisions of the Income Tax Act, 1922.

The department, therefore, filed an application under section 136(1) of the Income Tax Ordinance, 1979, which was held to be barred by limitation for the reason that the application ought to have been fled under section 66(1) of the Income Tax Act, 1922, within 60 days from the date of the order. The Commissioner of Income Tax, Central Zone `C', Karachi, has filed this application under section 136(2) of the Income Tax Ordinance, 1979, seeking decision of this Court on the following two questions:--

"(a) Whether on the facts and the circumstances of the case the Tribunal was justified in holding the application of the applicant as barred by time;

(b) Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in adjudicating the at Rs37,17,25,000 claim of the assessee on account of alleged bad debts were admissible within the meaning of section 10(2)(xi) of the Income Tax Act, 1922, in spite of the fact that such debt or loans have neither been written off as irrecoverable in the account of the assessee nor any provisions for Lad debts was created in the books of account including relevant entries made in the individual accounts of the debtors."

We have heard Mr. Waheed Farooqui, learned Advocate for the applicant and Mr. Iqbal Naeem Pasha learned Advocate for the respondent. The learned Advocate for the applicant did not press the first issue. It may be observed that the first issue is covered by a judgment of the Division Bench of this Court reported in Commissioner of Income-tax v. Asbestos Cement Industries Limited 1988 P T D 227.

So far as the second question is concerned, it pertains to the controversy whether the said amount is a bad debt. If it is so, the respondent is entitled to claim allowance. The Tribunal has given a finding that the amount claimed by the respondent was bad debt. This is a finding of fact and has not been challenged by the applicant. On this finding, therefore, the respondent would be entitled to claim allowance of the bad debt. In Commissioner of Income-tax v. Grindlays Bank Ltd. (I.T.R. No37 of 1982) 1991 P T D 569, the Division Bench of this Court of which the author of the judgment was also a member, a similar question Was decided holding that the assessee was entitled to the allowance on entire bad debt.

Reference may also be made to an another Division Bench judgment of this Court in Re: National Bank of Pakistan 1976 P T D 237.

We are, therefore, of the opinion that no exception can be taken to the decision given by the Appellate Tribunal. This application is, therefore, dismissed with no order as to costs.

M.B.A./C-234/KApplication dismissed.