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

----S. 10(2)(vii)---Fixed assets of assessee compulsorily acquired by Bangladesh

Government ---Assessee, Held , was entitled to claim such loss as deduction.

United Liner Agencies of Pakistan v. Commissioner of Income-tax 1988 PTD 277 fol.

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

----S. 42(2)---Object, scope and application.

Commissioner of Income-tax v. Pfizer Laboratories 1989 PTD 612 fol.

(c) Income Tax Ordinance (XXI of 1979)---

----S.136(2)---Income Tax Act (XI of 1922), S.66(1)(2)---Reference application having been dismissed under S.66(1) of the Act as barred by time, could not be treated as one under S.66(2) of the Act---Such application, therefore, would not he under S.136(2) of the Ordinance.

Commissioner of Income-tax v. Asbestos Cement Industries Ltd. 1988 PTD 227 fol.

Shaik Haider for Applicant. Khawaja Mansoor for Respondent.

Date of hearing: 2nd May, 1991.

JUDGMENT

NASIR ASLAM ZAHID, J:-- In this application filed by the Commissioner of Income-tax under section 136(2) of the Income-tax Ordinance, 1979 answer to the following questions has been sought:-

"(1) Whether on the facts and in the circumstances of the case,, the Tribunal was justified in allowing the loss of fixed assets amounting to Rs.1,18,79,220 claimed by the assessee under section 10(2) (vii) of the Income Tax Act of 1922 ?

(2) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that subsection (2) of section 42 of the Income Tax Act of 1922 is applicable in this case ?

(3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in deleting the add back of Rs.47,00,000?

(4) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Reference Application was barred by 21 days specially when the order in appeal was passed after repeal of the Income Tax Act of 1922 and after promulgation of the Income Tax Ordinance of 1979 ?

We have heard Mr. Shaik Haider, learned counsel for the department and Mr. Khawaja Mansoor, learned counsel for the respondent/assessee.

2. The respondent, a public limited company, in its return submitted for the assessment year 1974-75, claimed loss of fixed assets amounting to Rs.1,18,79,220/- under section 10(2)(vii) of the Income Tax Act, 1922, but that was disallowed by the Income-tax Officer. While making the assessment, the Income-tax Officer found that the respondent had obtained raw material from their foreign associates at higher prices than commonly available in the open international market. The Income-tax Officer worked out the difference between the market and the purchase price at Rs.47,00,000 and the same was taxed under section 42(2) of the Income Tax Act, 1922. The respondent went in appeal before the Appellate Assistant Commissioner, who confirmed the order of the Income-tax Officer regarding East Pakistan losses and on the point relating to section 42(2), order was set aside and direction was given to examine the case denove. The respondent, not being satisfied, took the matter in further appeal before the Income-tax Appellate Tribunal. The Tribunal allowed the appeal of the respondent on both the issues. The department filed an application under section 136(1) of the Ordinance before the Tribunal but the same was dismissed as time barred. In these circumstances, the department has filed this application under section 136(2) of the Ordinance.

3. Mr. Shaik Haider, learned counsel for the department, submitted that the question relating to allowance of East Pakistan losses under section 10(2) (vii) of the Income Tax Act was considered and decided by a Division Bench of this Court in the case of United Liner Agencies of Pakistan v. Commissioner of Income-Tax (1988 PTD 277) in the affirmative in favour of the assessee.

It was further submitted that, as regards the second question under section 42(2), there is, a decision of this Court in the case of Commissioner of Income-tax v. Pfizer Laboratories Limited (1989 PTD 612), in which decision, in similar circumstances it was held that section 42(2) was attracted. According to Mr. Shaik Haider, question No.2 was therefore, wrongly decided by the Tribunal and, as a consequence, question No.3 was also wrongly decided. According to Mr. Shaik Haider, on the question of limitation, there is a decision of a Division Bench of this Court in the case of Commissioner of Income-tax v. Asbestos Cement Industries Ltd. (1988 PTD 227) which goes in favour of the respondent.

4. Mr. Khawaja Mansoor, learned counsel for the respondent, submitted that this Court may only answer the question relating to limitation on which 1988 PTD 227 supports the respondent. According to the learned counsel for the respondent, as on the question of limitation, the reported decisions of this Court are in favour of the respondent, it is not necessary to decide the other questions. Mr.Shaik Haider for the department, on the other hand, pointed out that these questions are already before the Supreme Court in appeals filed in other cases and as the department proposes to file petition for leave to appeal in the Supreme Court in this case also in regard to the questions on which the decision will be against them in view of the earlier decisions of this Court, other questions may also be answered. In our view, it would be appropriate that all the questions raised in this application are answered.

5. The submission of Mr.Shaik Haider that the questions are covered by the earlier reported decisions of this Court cited by the learned counsel could not be controverted by Khawaja Mansoor. We agree with the judgments of this Court in 1988 PTD 277, 1989 PTD 612 and 1988 PTD 227. In the circumstances, question No.1 relating to East Pakistan losses is answered in the affirmative. As regards second question relating to section 42(2), our answer is in the negative. As a consequence, our answer to the third question is also in the negative. The last question relating to limitation is answered in the affirmative.

There will be no order as to costs.

M.B.A./C-230/K???????????????? ?????????????????????????????????????????????????????Reference answered.