COMMISSIONER OF INCOME-TAX, CENTRAL ZONE, LAHORE VS INTERHOME IMPERIAL INTERNATIONAL LIMITED, LAHORE
2001 P T D 1286
[Lahore High Court]
Before Nasim Sikandar and Jawad S. Khawaja, JJ
COMMISSIONER OF INCOME-TAX, CENTRAL ZONE, LAHORE
Versus
Messrs INTERHOME IMPERIAL INTERNATIONAL LIMITED, LAHORE
C.T.R. No. 29 of 1991, heard on 14/11/2000.
(a) Income-tax Act (XI of 1922)---
----S.10(2)(xvi)---Interpretation of S.10(2)(xvi), Income-tax Act, 1922-- Provision of S.10(2)(xvi) of the Act only prohibited claiming and allowing of an expenditure which was in the nature of capital expenditure or represented personal expenses of the assessee---Assessing Officer having failed to object to the expenses on the ground that these were not expended wholly and exclusively for the purpose of such business, profession or vacation; the disallowance could not be made.
(b) Income-tax Act (XI of 1922)---
----S.10(2)(xvi)---Allowable deduction---Provisions of S.10(2)(xvi), Income tax Act, 1922 did not lay down that an expenditure was allowable only if there was any income.
Muhammad Ilyas Khan for Petitioner.
Nemo for Respondent.
ORDER
NASIM SIKANDAR, J.---This is a case stated by the Lahore Bench of the Income Tax Appellate Tribunal. The question framed for our consideration and answer reads as under:---
"Whether on the facts and in the circumstances of the case, the Tribunal was justified in setting aside the assessment with the directions to allow the expenditure incurred on procuring business when there was no income for computation?
2. The assessee-respondent in the two assessment years under review viz. 1977-1978 and 1978-1979 returned loss of Rs.1,77,505 and Rs. 4,69,561 respectively. The Assessing Officer found that the loss in both years comprised of profit and loss- account expenses while no business income was returned in both years.The explanation put forth by the company that they could not procure business in both years was rejected. Accordingly the claimed loss was refused to be allowed.
3. The learned first appellate authority maintained the order of the Assessing Officer and concurred that their being no business, no expenses were admissible.
4. A Single Bench of the Tribunal, however, refused to accept the interpretation placed by the Revenue Officers on the provisions of section 10(2)(xvi) of the repealed Income Tax Act. He was of the view that the said provisions only prohibited claiming and allowing of an expenditure which was in the nature of capital expenditure or represented personal expenses of the assessee. According to the learned Member, the Assessing Officer having failed to object to these expenses on the ground that these were not expanded wholly and exclusively for the purpose of such business profession or vacation, the disallowance could not be made.
5. Heard the learned counsel for the Revenue. We are of the view that interpretation of learned Tribunal of the aforesaid provisions of law/Act is in accordance with law. Also we will agree with the learned Tribunal that the case law relied 'upon by the first appellate authority while maintaining the disallowance was clearly distinguishable. The provisions of section 10(2)(xvi) certainly did not lay down that an expenditure was E allowable only if there was any income. Learned counsel for the revenue has not been able to controvert the findings of the learned Tribunal from any authoritative pronouncement Also he has not been able to challenge the proposition as addressed by the learned Tribunal that it was not essential for every company to be in a position to procure business immediately on its in corporation. That generally it takes some time for newly born companies to procure business. Particularly in the kind of business for which the Assessee-company was registered. It was to carry out the work as contractors, professional engineers, architects and consultants. In such branch of business a fresh entrant will not normally to be in a position to take off immediately.
6. Be that as it may, since the aforesaid provisions of late Act of 1922 nor any other provision required earning of income as a condition precedent for allowing of an expense, we will agree with the findings as well as the basis of the findings as recorded by the learned Tribunal.
7. Answered in the affirmative.
M.B.A./C-56/LReference answered.