R.As. Nos. 144/LB to 146/LB, 148/LB to 152/LB of 2005, decided on 24th April, 2006. VS R.As. Nos. 144/LB to 146/LB, 148/LB to 152/LB of 2005, decided on 24th April, 2006., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2784 (2006)

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

---Ss. 136, 24(c) & 50(5B)---Reference to High Court---Question "whether Appellate Tribunal was justified to uphold addition under S.24(c) of the Income Tax Ordinance, 1979, for alleged default of non-deduction of tax under S.50(5B) of the Ordinance in spite of the fact that owner of property fell outside the taxable territory of the country" was refused for reference to High Court as exempt status of Gilgat Agency had not been produced at the time of hearing of appeal and there was no reason for further reference of the question to the High Court.

CIT Peshawar v. Gul Cooking Oil and Vegetable Ghee (Pvt.) Ltd. PLD 2003 SC 614 =2003 PTD 1913 ref.

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

---Ss. 136 & 52---Reference to High Court---Question "whether Appellate Tribunal was justified to uphold action under S.52 of the Income Tax Ordinance, 1979 for alleged non-deduction of tax on payment made to Korangi Association"---Validity---Background of the issue was that amount was to be deducted from a person who lived in Gilgat Agency who was statedly exempt---Status of the said area stood determined and there was no question of non-deduction of tax and the assessee having been found as assessee in default as per law and rules, Reference of the question to High Court was refused by the Appellate Tribunal in circumstances.

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

----S. 136 & Second Sched: Part-IV, Cl.(3)---Reference to High Court---Question "whether Appellate Tribunal was justified to uphold that word "or" appearing in Cl. (3) of Part-IV of Second Schedule to the Income Tax Ordinance, 1979 between two distinct expressions "Banking Company" and "Financial Institutions" was not disjunctive" was proposed for the consideration of High Court as it was raised by the Appellate Tribunal.

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

----Ss. 136 & 52---Reference to High Court---Questions "whether Appellate Tribunal was justified in directing that dividend income and capital gain should be taxed at a reduced rate, whereas the same forms a part of the composite banking income and separate rate of tax is prescribed for income from banking business under the Income Tax Ordinance, 1979" was refused for reference to High Court on the ground that settled question should not again be referred to it the same had already been decided against the Department.

PLD 1997 SC 700 = 1997 PTD 1693; (2002) PTD (Trib.) 507 and (2004) 90 Tax 266 (H.C. Lah.) rel.

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

----Ss. 136 & 52---Reference to High Court---Question "whether Appellate Tribunal was justified to hold that interest credited to suspense account was not liable to tax" was refused to be referred to High Court as the same had already been decided by a High Court of the country and there was absolutely no reason for its reference to other High Court.

Habib Bank Ltd. v. CIT I.T.A. No. 279 of 1999 rel.

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

----Ss. 136 & 80D---Reference to High Court---Question "whether Appellate Tribunal was justified to direct to charge tax under S.80D of Income Tax Ordinance, 1979 on turnover excluding dividend"-Validity-Dividend had been found as not to be a turnover in various judgments and the present case had only followed the said findings given earlier---Appellate Tribunal did not agree with the Department that a question could be referred even if it did not properly arise out of the order of the Appellate Tribunal---Not for the reason of earlier judgments but also the issue did not arise out of the order of the Appellate Tribunal---Appellate Tribunal refused to refer the same to High Court.

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

----S. 136---Reference to High Court---Question---Construction of---Framing of a legal question should not be in the form of allegations but should bring out the real controversy involved between the parties.

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

----S. 23(1)(x)---Deductions---C.B.R. Letter C. No. 13(26)-IT/1/74, dated 2-7-1975---`Bad debts' and `doubtful debts' are not two different kinds of debts; legislature, in Income Tax Ordinance, 1979 used the word `bad debt', which could not be interpreted to mean not including doubtful debts.

Hong Kong and Shanghai Banking Corporation v. CIT (1955) 28 ITR 199 rel.

I.T.A. No. 2328 and 2623/KB of 1992-93, dated 16-6-2000 per incurrium.

(i) Interpretation of statutes---

----Redundancy cannot be assigned to any provision of law.

Pakistan Lyallpur Samundri, Transport Co. Ltd. v. CIT, Lahore Zone, Lahore 1980 PTD 69 rel.

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

----S. 23(1)(x)---Deductions---Loans and advances---Stock-in-trade---Banking business--Loans and advances given to clients represent stock -in-trade or circulating capital---Any irrecoverable loan/advance was thus even otherwise a trading loss and allowable deduction.

Arunachalam Chetliar v. CIT 4 ITR 173; CIT v. Nanital Bank Limited 55 ITR 707 (SC) and CIT v. Veerabhadra Rao 102 ITR 604 rel.

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

---S. 23(1)(x)---Deductions---Irrecoverable bad debts---Determination of---Assessing Officer was duty bound to determine the quantum of irrecoverable bad debts---Assessing Officer needed to perform his duty as per law and not on whims and surmises.

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

----S. 23(1)(x)---Deductions---Bad debts---No legal action for recovery---Effect---Bad debts were allowable deductions in the case of banks as per their regularly employed method of accounting, even where suits were 'pending or no legal action for recovery had been taken.

1976 PTD 237; CIT v. Grindlays Bank Limited Karachi 1991 PTD 569; Li re: Muslim Commercial Bank Ltd. 2006 PTD (Trib.) 356 and CIT Central Zone (C) Karachi v. ADBP 1992 PTD 39 rel.

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

----S. 23(1)(x)---Deductions---Bad debts---Prematurely written off---Allowability---Bank---Concept of prematurely written off could not be invoked to disallow bad debts (which also include doubtful debts), as their regular method of accountancy which was according to law, permitted such deductions and offer any recovery or reversal in the year of realization.

(n) Income Tax Ordinance (XLIX of 2001)---

----S. 29---Income Tax Ordinance (XXXI of 1979), S. 23(1)(x)---Income Tax Ordinance (XI of 1922), 10(2)(xi)---Bad debts---Conditions for allowability---Bank---Conditions laid down for allowability of bad debt as deduction in a tax year in the case of financial year were the same as envisaged in S.10(2)(xi) of the Income Tax Ordinance, 1922 and S.23(1)(x) of the Income Tax Ordinance, 1979 i.e. that debt should be in relation to money-lending business chargeable to tax; that the debt or part of debt is written off in the accounts of the person in the tax year and that there are reasonable grounds for believing that the debt is irrecoverable.

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

----S. 23(1)(x)---Deductions---Bad debts---Bank---Pendency of suits for recovery and non-initiation of legal action for recovery were no basis to infer that bad debt claimed by a bank was "recoverable".

CIT, Central Zone C, Karachi v. Grindlays Bank Limited Karachi 1991 PTD 569 rel.

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

----S. 23(1)(x)---Deductions---Bad debts were allowable deduction in the case of financial institutions if under regularly employed system of accounting, the amount claimed is debited to the Profit and Loss Account and the corresponding credit entry is made even in a suspense or had and doubtful debts account (called provision for bad debts as per format prescribed by the State Bank of Pakistan or Security Exchange Commission of Pakistan as the case may be) and that the total of such amount for each year is deducted in the Balance Sheet from the amount of debts outstanding and (iii) when any amount is recovered subsequently, any excess allowance made previously is assessed as income.

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

----S. 23(1)(x)---Deductions---Bad debts---Estimations---Human estimates are necessarily fallible, the bank's claim and/or its books of account cannot be rejected merely because it maintains a system of, accounts, which permits it, in the event of windfall from the debtor, so to say, to reverse the earlier entries writing off a debt as irrecoverable.

2000 PTD (Trib.) 1898 rel.

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

----Ss. 136 & 23(1)(x)---Reference to High Court---Question "whether Appellate Tribunal was justified to allow the provision of bad debts in contravention to the provision of S.23(1)(x) of the Income Tax Ordinance, 1979 wrongly assuming that creation of provision for bad debts are synonymous and failing to appreciate that even in case of written off bad debts, the condition of irrecoverability of the same as determined by the Assessing Officer is a prerequisite for any allowance under S.23(1)(x) of the Income Tax Ordinance, 1979" proposed by the Department for reference to High Court was rejected by the Appellate Tribunal by following the rule of consistency.

R.A. No.349/LB/2002 and 1997 PTD 71 rel.

(2005) 92 Tax 162 (Trib.) per in curium.

2002 PTD (Trib.) 1898; (2002) 85 Tax 245 (Trib.); 2003 PTD (Trib.) 1189; R.A. No. 349/LB of 2002; 2006 PTD (Trib.) 356; 2002 PTD (Trib.) 1898; I.T.As. Nos.42 to 44/KB of 1977-78 - Order, dated 14-6-1978; LT.As. Nos. 1897 to 1899/KB of 1973-74 - Order, dated 17-2-1977 and I.T.A. No. 776/KB of 1975-76 re-afirm.

Dr. Ikram-ul-Haq, A.R. for Appellant (in R.As. Nos.144/LB to 146/LB of 2005).

Javed Iqbal Rana, I.A.C./D.R. for Respondent (in R.As. Nos.144/LB to 146/LB of 2005).

Javed Iqbal Rana, I.A.C./D.R. for Applicant (in R.As. Nos.148/LB to 152/LB of 2005).

Dr. Ikram-ul-Haq, A.R. for Respondent (in R.As. Nos.148/LB to 152/LB of 2005).

ORDER

1. These applications have been filed at the instance of the Applicant-Bank as well as the Revenue seeking reference of the various questions of law to Hon'ble Lahore High Court stated to have arisen out of this Tribunal's Order, dated 2-4-2005 passed in I.T.A. No.966 to 968, 205, 5961 and 5962/LB of 2004 and I.T.A. No.1427 to 1429, 575 and 6640/LB of 2004 pertaining to the assessment years 1998-99 to 2002-2003.

2. The questions proposed by the Applicant-Bank for the assessment years 2001-2002, 2001-2002 (under section 52/86) and 2002-2003 are as under:

[Assessment Year 2001-2002]

(1) "Whether on the facts and in the circumstances of the case, the Tribunal was justified to uphold addition under section 24(c) for alleged default of non-deduction of tax under section 50(5B) in spite of the fact that owner of property falls outside the taxable territory of the country?"

[Assessment Year 2001-2002]

(under section 52/68)

(2) "Whether on the facts and in the circumstances of the case, the Tribunal was justified to uphold action under section 52 for alleged non-deduction of tax on payment made to Korangi Association?

[Assessment Year 2002-2003]

(3) "Whether on the facts and in the circumstances of the case, the Tribunal was justified to hold that word "or" appearing in clause (3) of Part-IV of Second Schedule to the Income Tax Ordinance, 1979 between two distinct expressions "Banking Company" and "Financial Institutions" is not disjunctive?"

3. The Department has also proposed the following questions for reference to the Hon'ble High Court:--

[Assessment Years 1998-99, 1999-2000, 2000-2001 and 2001-2002]

(1) "Whether under the facts and in the circumstances of the case, the learned ITAT was justified in directing that dividend income should be taxed at a reduced rate, whereas the same forms a part of the composite banking income and separate rate of tax is prescribed for income from banking business under the Ordinance?"

[Assessment Year 2002-2003]

(2) "Whether under the facts and in the circumstances of the case, the learned ITAT was justified in directing that dividend income and capital gain should be taxed at a reduced rate, whereas the same forms a part of the composite banking income and separate rate of tax is prescribed for income from banking business under the Ordinance?"

[Assessment Years 1998-99, 1999-2000, 2000-2001 and 2001-2002]

(3) "Whether on the facts and circumstances of the case the learned ITAT was justified to hold that interest credited to suspense account is not liable to tax?"

[Assessment Years 1999-00, 2000-2001, 2001-2002 and 2002-2003]

(4) "Whether under the facts and circumstances of the case the ITA was justified to allow the provision of bad debts in contravention to the provision of section 23(1)(x) of the Income Tax Ordinance, 1979 wrongly assuming that Creation of provision for bad debts are synonymous and failing to appreciate that even in case of written off bad debts, the condition of irrecoverability of the same as determined by the Assessing Officer is a prerequisite for any allowance under section 23(1)(x) of the Income Tax Ordinance, 1979?"

[Assessment Year 2000-2001]

(5) "Whether under the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was justified to G direct to charge tax under section 80D on turnover excluding dividend?"

4. From the above description, it appears that the issues are common in various years.

5. So far as the Applicant-Bank's Questions are concerned, the first question which is in respect of non-deduction of tax from the Gilgat Branch, the claim of the A.R. is that this is a substantial question of public importance. The Income Tax Law does not apply on the territories which have been annexed, hence the withholding provisions will also not be applicable. The Assessing Officer has disallowed the claim of the rent by holding that no tax has been deducted therefrom, which obviously was not legally possible for the tenants who refuse to accept the rent being otherwise exempt from the chargeability of the income tax in their territory . In his opinion, it is purely a legal issue. The question merits opinion of the Hon'ble High Court in the light of the latest judgment of the Supreme Court in "CIT, Peshawar v. Gul Cooking Oil and Vegetable Ghee (Pvt.) Ltd." reported as PLD 2003 SC 614 = 2003 PTD 1913.

6. The D.R. says that the issue has been decided by the Hon'ble Tribunal after due consideration of facts, circumstances and legal position. He further said that this was on the basis of a clarification issued by the Law Division on representation by the C.B.R. that no exemption in such cases is available.

7. Since neither at the time of hearing of the appeal nor before us, the exempt status of the Gilgat Agency has been produced, there was obviously no reason for acceptance of the contention of the appellant. The Law Division has also given a legal opinion on the issue. There is no reason for further reference of this question to the Hon'ble High Court.

8. The other question which relates to the action under sections 52/86 also is on the basis of same facts and circumstances of the case. The point of view of the A.R remains that the scope of the provisions does not apply to such payments. The background is the same that the amount was to be deducted from a person who lives in Gilgat Agency, hence was statedly exempt. The tax now deducted obviously cannot be of any benefit either' to the bank or the said assessee. It was, therefore, urged that the question with reference thereof be referred for interpretation of scope of the provision to which the learned D.R. has strong reservations. We have already discussed in the para. above that the status of the said area stands determined. There was, therefore, no question of non-deduction of tax and the assessee having been held as assessee-in-default as per law and rules reference of the question to the High Court is unnecessary.

9. This leaves us to the 3rd Question which is in respect of the assessment year 2002-2003. It says that the word "or" as used in Clause-3 of Part-IV of the Second Schedule to the Income Tax Ordinance, 1979 between two distinct expressions "Banking Company" and "Financial Institution" is not disjunctive. Since this question has already been sent by us to the Hon'ble High Court in some earlier cases, this matter can also be referred. In this case, however, since we have already referred this case to the High Court, we do not find any reason for not sending the same. The questions, therefore, is proposed for the consideration of the Hon'ble High Court as it is. The statement of facts which gives rise to the above question is as follows:

STATEMENT OF THE CASE

[ASSESSMENT YEAR 2002-2003]

The Applicant-Bank is a Public Limited Company incorporated in Pakistan on 28-9-1991 having its registered office at Lahore. It was set up to conduct banking business. The Return of total income for the assessment year 2002-2003 was filed in Income Tax Company Zone-I, Lahore showing income of Rs.544,340,000 in the Computation Chart annexed with the Return, the Applicant-Bank itself offered for tax excess perquisites amounting to Rs.3,036,000 under section 24(i) of repealed Income Tax Ordinance, 1979. The Assessing Officer while making assessment of income under section 62 of the repealed Ordinance calculated excess perquisites amounting to Rs.3,823,370 in excess of amount already offered for. tax in return of income and subjected to tax. The Applicant-Bank preferred first appeal before the learned CIT(A) against taxation of excess perquisites who summarily rejected the appeal vide Order, dated 2-9-2004 on the point of addition of excess perquisites under section 24(i) with the observation that authorized representative of the Applicant-Bank gave the same arguments which were given before the Assessing Officer and which were properly rebutted by him. Subsequently, the Applicant-Bank went into second appeal before the Income Tax Appellate Tribunal against the Appellate Order of learned CIT(A) where it was argued that in view of the Clause (3), Part-IV of the Second Schedule to the Repealed Ordinance, provisions of section 24(i) of the repealed Ordinance are not applicable in the Applicant-Bank's case. Clause (3) of Part-IV of Second Schedule to the repealed Ordinance reads as under:--

"The Provisions of Clause (i) of section 24 shall not apply to any expenditure incurred by a banking company or a financial institution owned and controlled by the Federal Government on the provision of perquisites,' allowances or other benefits to any employee in pursuance of any law."

It was argued that the word "or" as used in this Clause is disjunctive and condition of owned and controlled by the Federal Government is to be read with the financial institutions and not with the banking company. The ITAT decided this issue in its order, dated 2-4-2005 whereby the contention of the Applicant-Bank was not accepted with the following observations:--

"The contention of AR of the assessee is not correct as word owned and controlled by the Federal Government refers to both banking company as well as financial institution. Thus, the interpretation of the AR of the assessee cannot be accepted. The assessee company though a banking company does not fall under Clause-3 of Part-IV of Second Schedule to the Income Tax Ordinance, 1979".

10. It is the above finding on the basis of which the A.R. wants us to refer the question of law to the Hon'ble High Court to which we have already agreed. The question speaks as follows:--

"Whether on the facts and in the circumstances of the case, the Tribunal was justified to hold that word "or" appearing in clause (3) of Part-IV of Second Schedule to the Income Tax Ordinance, 1979 between two distinct expressions "Banking Company" and "Financial Institutions" is not disjunctive?"

11. We now come to the questions proposed by the Department. Question No.1 of the Department which is in respect of the assessment years 1998-99, 1999-2000, 2000-2001 and Question No.2 which is in respect of 2002-2003, in fact, are dealing with one issue. The opinion of the Tribunal which was originally based upon a judgment of the ITAT, Peshawar has later been confirmed by the Hon'ble High Court as well as the Supreme Court in certain cases. The conclusion of the Tribunal with K regard to the question Nos.1 and 2 is at Paras. 7 and 10 of its order is after reliance upon PLD 1997 SC 700 = 1997 PTD 1693, 2002 PTD (Trib.) 507 and another judgment of the Tribunal. In the presence of the finding by the Supreme Court of Pakistan, there is obviously no question of sending the same to the High Court. In this regard, one can refer (2004) 90 Tax 266 (H.C. Lah) wherein the Hon'ble High Court has held that settled question should not again be referred. More so, when the same has been decided against the Department and the Tribunal's order is very well in consonance thereof.

12. Question No.3 of the Department which is in respect of the assessment years 1998-99, 1999-2000, 2000-2001 and 2001-2002 has been reported by the learned A.R. to be already settled in favour of the Banks by the Sindh High Court. re: "Habib Bank Ltd. v. CIT (ITA No.279 of 1999). In view of the same, there is obviously no question for referring this again to the High Court. It has further been informed that the Department has not filed leave to appeal against the said order and for all practical purposes, it has attained finality. Without going into the discussion, whether it is final or not, we even otherwise feel that the question having already been decided by a High Court of the country, there is absolutely no reason for its reference in other High Courts of the country. We, therefore, refuse to refer the same as well.

13. Question No.4 filed by the Department needs more dilation and debate, hence we leave the same for the time being and decide the Question No.5 first.

14. Question No.5 deals with the charge under section 80D on turnover excluding Dividend in case of Banks. This question is only in respect of the assessment year 2001-2002. In our opinion, the learned D.R. is not right in saying that the matter is of a substantial nature and should be referred to the Hon'ble High Court. The Dividend has been held as not to be a turnover in various judgments and the present case has only followed the said findings given earlier. We have further gone through our judgment and do not find any patent reason that gives rise to a question like this. The learned D.R. was asked to tell us as to how the said question arises out of our judgment. He said that this being a continuation of the proceedings and the matter being evident and obvious, otherwise must be sent as it relates to a lot of companies especially the Banking Institutions. We cannot agree with the learned D.R. that a question can be referred even if it does not properly arise out of the order of the ITAT. No findings have been given by the learned CIT(A) on the issue in the order, dated 2-9-2004 for the year under discussion. Not for the reason that we have any doubt about our judgment but also that the issue does not arise out of the ITAT's order, hence we regret to refer it.

15. Coining back to the Question No.4 which is, in fact, the main issue and is in respect of the assessment years 1999-2000 to 2002-2003 i.e. four years. The same requires further dilation for the reason of a conflicting judgment given by a learned Division Bench of the ITAT. It can be dilated in the manner hereafter.

16. The question proposed by the Department regarding allowance of bad debts reads as under:

"Whether under the facts and circumstances of the case the ITAT was justified to allow the provision of bad debts in contravention to the provision of section 23(1)(x) of the Income Tax Ordinance, 1979 wrongly assuming that creation of provision for bad debts are synonymous and failing to appreciate that even in case of written off bad debts, the condition of irreoverability of the same as determined by the Assessing Officer is a prerequisite for any allowance under section 23(1)(x) of the Income Tax Ordinance, 1979?".

17. The question as framed by the Department alleges some "legal contravention" and "wrong assumption" on the part of Tribunal but does not elaborate what is declared as synonymous with what and how contravention of law and wrong assumption was made. This shows misreading and misunderstanding on the part of Department while filing reference application in important cases like the present one. Framing of a legal question should not be in the form of allegations but should bring out the real controversy involved between the parties. The framing of question in the form of a charge-sheet against ITAT deciding by themselves that the same is in contravention to the provisions coupled with poor drafting badly reflects on the Department.

18. The learned D.R. emphasized that there have been conflicting decisions of the Tribunal on this issue, and, therefore, a larger Bench should be constituted by recalling the order. He presented copies of orders passed in Standard Chartered Bank in I.T.As. Nos. 2328 and 2623/KB of 1992-93, dated 16-6-2000 (unreported) and in the case of The Bank of Punjab in I.T.As. Nos.45, 46 and 6362/LB of 2004 reported as (2005) 92 Tax 162 (Trib.).

19. Opposing the arguments, the learned A.R. contended that question proposed by the Department is argumentative and liable to be rejected as was done in Reference Application bearing R.A. No.349/LB of 2002 in the case of Prime Commercial Bank Limited. He pointed out that latest decision on the issue is in the case of Prime Commercial Bank Ltd. (I.T.As. Nos. 43, 44 and 6641/LB of 2004) wherein the Tribunal after discussing the case of The Bank of Punjab reported as (2005) 92 Tax 162 (Trib.) rejected the plea for proposing a larger Bench as the matter is sub judice before the Hon'ble Lahore High Court and any contrary order would amount pre-empting the jurisdiction of. Hon'ble High Court.

20. He also objected to the plea of learned D.R. of re-calling of order which he said was totally misconceived under a reference application.

21. We have examined the issue with specific reference to judgment relied upon by DR in the case of Bank of Punjab (I.T.As. No8.45, 46 and 6362/LB of 2004 reported as (2005) 92 Tax 162 (Trib.). We asked the learned DR to specify the portion of the said order justifying recalling the order in the present case, which he failed to do so. In (2005) 92 Tax 162 (Trib.) the earlier judgments passed by the Tribunal as detailed below have been held to be as per incurium:--

(i) 2002 PTD (Trib.) 1898; (ii) (2002) 85 Tax 245 (Trib.); (iii)2003 PTD (Trib.) 1189; (iv) R.A. No.349/LB of 2002 and (v) 2006 PTD (Trib.) 356.

22. The main reason given in (2005) 92 Tax 162 (Trib.) for above finding is that in earlier cases it was held that the banks alone could decide which loans/advances were to be written Off as bad debts, whereas it is the sole prerogative of the Assessing Officer to determine their irrecoverability. It appears that Judgments declared as per incurium have not been properly examined in (2005) 92 Tax 162 (Trib.) In this judgment not a single case mentioned above was discussed to substantiate the finding and for declaring them as per incurium. The observation that in these cases the correct ratio of Sindh High Court's order in the case of National Bank of Pakistan reported as 1976 PTD 237 has not been appreciated is also without any direct discussion.

23. In the main judgment i.e. in the case of Union Bank Limited reported as 2002 PTD 1898 (Trib.) it was explicitly held that claim made under the head `provision for bad debts' was in substance amounted to "bad debts actually written off in the books of accounts' as held by Hon'ble Sindh High Court in the case of National Bank of Pakistan reported as 1976 PTD 237. It is pertinent to mention that the judgment hi National Bank case was later on followed by the ITAT in the case of Grindlays Bank and was approved by the High Court reported as CIT, Central Zone C, Karachi v. Grindlays Bank Limited Karachi (1991) 64 Tax (H.C. Kar.). In the case of Grindlays Bank the issue of irrecoverability was decided in the favour of the bank though suits for recovery were pending as well as in some cases no legal action for the same was taken. On the basis of regularly employed method of accounting `provision for bad debts and doubtful debts' was allowed by the ITAT and was endorsed by the High Court in the said case. It appears that this position escaped the kind attention of honourable members in (2005) 92 Tax 162 (Trib.)

24. In the case of Union Bank (supra), the cases of National Bank and Grindlays Bank were discussed and followed. Nowhere in the said judgment was it held that the quantum and factum of bad debts could only be determined by the banks as alleged in (2005) 92 Tax 162 (Trib.) On the contrary it was mentioned that banks would not go for writing off its debts just to take tax benefit as in the process they would lose the entire amount of debt. No prudent bank will ever resort to such a practice, especially when criterion for bad debts is strictly prescribed and monitored by the State Bank of Pakistan. Secondly as soon as any recovery/reversal is made in respect of such bad debts the same is offered for tax and in this way no fraud is inflicted on the Revenue. This dictum is laid down by the Sindh High Court in the case of National Bank of Pakistan (supra) and was followed in Union Bank case. The following of this dictum in the case of Union Bank (2002 PTD 1898) has been misconstrued/misinterpreted in the case of Bank of Punjab (2005) 92 Tax 162 (Trib.). Since the DR has repeatedly requested for recalling of order on the basis of judgment in the case of Bank of Punjab (I.T.As. Nos.45, 46 and 6362/LB of 2004) it seems appropriate for us to dilate upon the issue in detail to remove confusion and controversy prevailing after this order.

25. In the case of Union Bank Ltd. (supra), the Department filed Miscellaneous Application No.582/LB/2000 requesting for rectification of mistake on the plea that there were earlier judgments of ITAT giving a contrary view which were not brought to the notice of ITAT at the time of hearing. The miscellaneous application was rejected vide order, dated 28-1-2002 holding that since reliance was placed on judgments of higher Courts, especially on (1967) 34 Tax 158 (H.C. Kar.) re. CIT v. National Bank of Pakistan, "the application of a judgment of the ITAT was beyond any question". In 2006 PTD (Trib.) 356 re: Muslim Commercial Bank Ltd., this position was reiterated as under:--

"In any case, the following two cases of Sindh High Court at Karachi have a binding force under the Article 201 Constitution of Pakistan:

(a) CIT v. National Bank of Pakistan 1976 PTD 237.

(b) CIT v. Grindlays Bank Ltd. 1991 PTD 569.

These two cases have been followed by the learned ITAT in the Union Bank's case (2002 PTD 1898). The Department, in this case, later on filed Miscellaneous Application that there were other conflicting judgments of ITAT which was rejected by the learned ITAT with the remarks that since reliance in 2002 PTD 1898 is made on the binding judgment of High Court the conflicting judgments of ITAT have no bearing. The Department was unable to show any contrary judgment of High Court".

"The matter has been thrashed out in detail and reference has been made to many earlier judgments from Pakistan and India. In this regard, the main judgment was of Sindh High Court i.e. (1967) 34 Tax 138. At no stage during the previous judgments or hearing of this case any order supporting the view of the Department has been produced. On the other hand, our view now has been followed in dozens of judgments even if the Department's view was to be projected, the set aside was not the answer. Even otherwise, the ratio decidendi of the judgment was binding and the CIT(A) should have accepted the same in its actual spirit. Our finding have further support from another judgment of the Sindh High Court reported as (1992) 65 Tax 135 (H.C.) in the case of CIT Central Zone (C) Karachi v. ADBP which has also given similar view. There is, therefore, no reason to agree with D.R."

26. As regards judgment of ITAT in the case of Standard Chartered Bank .in I.T.As. Nos. 2328 and 2623/KB of 1992-93, dated 16-6-2000 which the D.R. has relied, the main thrust is on the point that in section 10(2)(xi) of Income Tax Act, 1922, the words used were "bad debts" and "doubtful debts" whereas in section 23(1)(x) of 1979, Ordinance, the expression is "bad debt" alone and therefore earlier judgments are no more relevant. It s pertinent to mention that expression `bad debt' or `doubtful debts' were held to be contemplating the same kind of debts and hence interchangeable in Hong Kong and Shanghai Banking Corporation v. CIT (1955) 28 ITR 199. The Central Board of Revenue itself accepted this legal position in Letter C. No.13(26)-IT/1/74, dated 2-7-1975 as under:--

"It may, however, be noted that as held in the case cited Hong Kong and Shanghai Banking Corporation v. CIT (1955) 28 ITR 199 "the expression "bad and doubtful debts" does not contemplate two kinds of debts but refers to the same class of debts, viz., debts of which the chance of recovery is nil or slender."

27. In view of above position of law that `bad debts' and `doubtful debts' are not two different kinds of debts, the Legislature in the 1979, Ordinance Used the word `bad debt', which could not be interpreted to mean not including doubtful debts as held in Standard Chartered Bank's case (I.T.As. Nos. 2328 and 2623/KB of 1992-93, dated 16-6-2000).

The judgment in Chartered Bank's case (supra) was due to overlooking the binding precedents and C.B.R.'s owh admission of the same. Needless to say that judgment relied upon by the department is against the judicial pronouncements of higher Courts and C.B.R.'s above referred instructions and hence per incurium.

28. The issue of bad debts and its allowability in the hands of banks vis-a-vis provisions of Income Tax Act, 1922 and Income Tax Ordinance, 1979 was discussed in detail in the case of Union Bank Ltd. (2002 PTD (Trib.) 1898) and was later on followed in a number of judgments which have wrongly been declared as per incurium in the case of Bank of Punjab (supra). In fact, this issue was decided by the ITAT in the following cases much before the judgment of Standard Chartered Bank and Union Bank Limited:

(i) I.T.As. Nos. 42 to 44/KB of 1977-78 - Order, dated 14-6-1978.

"The first objection, which is common to all the three years under appeal, relates to the non-allowance of provision for bad and doubtful debts claimed in different sums in these years. This issue stands clinched in favour of the assessee by an unreported decision of the High Court of Sindh and Balochistan in ITC No.36 of 1969. The facts and circumstances of these cases, it is admitted by both the representatives of the parties, were similar to those mentioned in the above noted decision of the High Court. Following the High Court decision, we would hold that the claim of the assessee, on account of bad debts in all the three years in question, is admissible under section 10(2)(xi) of the Act and would accordingly knock off the add backs in question."

(ii) I.T.As. Nos. 1897 to 1899/KB of 1973-74 - Order, dated 17-2-1977.

"This method of accounting (and the admissibility of the provision) was upheld by the learned Judges of the Karachi High Court in the Appellant's own case vide I.T.A. No.36 of 1969 decided on 19-12-1975 and reported as (PLD 1976 Kar. 1025). The Representative for the Appellant then placed on record Central Board of Revenue's letter C. No.12(26)-ITR/74, dated 2-7-1975 wherein after discussing the impact of the various rulings of the superior Courts of Indian Jurisdiction, Commissioner of Income-tax was directed to issue necessary instructions for the guidance of the Assessing Officer. Such instructions were considered necessary because Court's had held that under the provisions of clause (xi) of section 10(2) of the Act, assessee is engaged in banking and money-lending business were entitled to deduction of such sums in respect of loans made in the ordinary course of business as were though irrecoverable. The only aspect to be seen and watched was that the claim for irrecoveries did not exceed the amount actually written off in the books. Therefore, according to the Board, the Banks were clearly within their rights to claim deduction under section 10(2)(xi) if the chose, by debiting the `provision' to the account and crediting Suspense a/c (or such other account maintained irrecoverable loans). The Board had finally ordered that the Reference Application in the case of National Bank of Pakistan should be withdrawn. In this background the Appellant's Representative submitted that the disallowances in the year-under-appeal were clearly uncalled for and needed to be deleted. The Department Representative however, insisted that the Board's letter could not withdraw the powers conferred on the Assessing Officer by law. According to the Departmental Representative the Board had simply observed that the amount to be actually allowed depended on the discretion of the Assessing Officer who was to satisfy himself that the claim for Bad and Doubtful Debts represented only irrecoverable loans. Therefore, it was incumbent on every assessee to produce evidence so as to help the Assessing Officer in arriving at a judicious conclusion and only those debts could be allowed as bad, of which, there were no chances of recovery or the chances slender. However, in the particular facts and circumstances of the case, the systems of accounts followed by them and the method of right off accepted by the Department in earlier years we find no basis for the disallowances and order for the acceptance of the claim." [Underlined for emphasis].

(iii) I.T.A. No.776/KB of 1975-76

"The assessee claimed bad debts amounting to Rs.20,39,608 out which Income-tax Officer disallowed Rs.11,41,828. The primary reason for the disallowance was that the assessee had not filed the latest position of each of the debts. Before us, the learned authorized representative Mr. F. Hashimi of A.F. Ferguson and Company making his submission, in an engaging manner, stated that the Income-tax Officer was not to look into the latest position of the debt but to the position prevailing in the year of account. In other words the events that had ever taken after the year could not be taken into consideration for determining the irrecoverability of the debts. He further argued that the law did not demand that the debts should have been written off in the books of accounts and for this proposition of law be cited the Karachi High Court's decision in the appellant's case, cited as 1976 34 Taxation Page-158. Elaborating his argument further

Mr. Hashimi averred that the financial position of the Banks will not be truly reflected if doubtful and possibly irrecoverable debts are not claimed as bad debts. The Tribunal had allowed such claims for 1968-69, 1969-70 and 1970-71 by their order, dated 17-2-1977 in I.T.As. Nos. 1897/1898/1899/KB of 1973-74. We therefore find no reason for the disallowance during the year and consequently we delete the addition. [Emphasis added].

29. In the above cases, the provision of bad debts was allowed on the basis of well-settled case-law and instructions of the C.B.R. It is, therefore, clear that Union Bank Ltd. (2002 PTD (Trib.) 1898) was not the first case adjudicating this issue. It was wrongly assumed in (2005) 92 Tax 162 (Trib.) that deviation was made in Union Bank's case vis-a-vis ratio decided in National Bank's case (supra) by the honourable Sindh High Court. In fact, the correct position of law was followed in case of Union Bank as was done in the abovementioned cases. The legal position enunciated in the said case as elaborated above was in conformity with cases decided by the higher Courts, ITAT and as per C.B.R.'s own instructions.

30. As regards the issue of determination of "irrecoverability" of bad debts, it is to be noted that this expression does not mean the loss forever as law itself provides in section 25(aa) that in case of any recovery or reversal the resultant income will be chargeable to tax in the year of realization. If deduction was allowable only after final settlement or enforcement of decree by competent Court, there would have been no need for section 25(aa). It is a cardinal principle of law that redundancy cannot be assigned to any provision of law Pakistan Lyallpur Samundri, Transport Co. Ltd. v. CIT, Lahore Zone, Lahore 1980 PTD 69. In the banking business, loans and advances given to clients, represent stock-in-trade or circulating capital. Any irrecoverable loan/advance is thus even otherwise a trading loss and allowable deduction Arunachalam Chetliar v. CIT 4 ITR 173, CIT v. National Bank Limited 55 ITR 707 (SC) & CIT v. Veerabhadra Rao 102 ITR 604. The banks are not required to actually square up the accounts of the parties to claim this deduction (C.B.R.'s C. No.13(26)-IT/I/74, dated 2nd July, 1975).

31. The judgment in the case of Bank of Punjab (2005) 92 Tax 162 (Trib.) has overlooked the ratio of National Bank of Pakistan's case wherein the Hon'ble Sindh High Court made the following observations:

"I am not able to understand how a direction to maintain accounts in a certain manner would be against the statute, as it is not contended that the Circular of the Central Board of Revenue contains directions which would, for example, lead to fabrication of accounts."

* "But, in my opinion, it would be more accurate to say that the question will always be of the estimate of the ' facts and circumstances of a case, and because human estimates are necessarily fallible, the respondent's claim and/or its books of account cannot be rejected merely because it maintains a system of accounts, which permits it, in the event of windfall from the debtor, so to say, to reverse the earlier entries writing off a debt as irrecoverable."

32. In (2005) 92 Tax 162 (Trib.) the judgment of honourable Sindh High Court 1976 PTD 237 re: CIT v. National Bank of Pakistan has not been read in totality and only one line was picked up that onus to prove irrecoverability is on the taxpayer to declare earlier binding precedents of ITAT as per incurium. There is no cavil about the legal provision that it is the duty of the Assessing Officer to determine the quantum of irrecoverable bad debts as held by Hon'ble High Court. However, the Assessing Officer needs to perform his duty as per law and not on whims and surmises. The following explicit observations of the Hon'ble Sindh High Court re: National Bank's case were also overlooked in (2005) 92 Tax 162 (Trib.):

"I agree with these observations of the learned, author, and, in my humble opinion, the Income Tax Officer erred in holding that the respondent's entries about its bad debts "show that the debts have been written off in the accounts provisionally." The reference drawn by the Income Tax Officer is both incorrect and contrary to long established practice, and I agree with the Tribunal's view, the moreso, as it does not involve any loss to the exchequer."

33. The criteria laid down by the Hon'ble Sindh High Court in the above case regarding determination of irrecoverability of bad debts are:

* The allowance under this clause is necessarily based upon a mere estimate. Ultimately, a larger or smaller portion of the debt or loan may be recovered than was estimated to recoverable at the time of making the allowance under this clause. In such a case the excess would be taxed as profit of the year in which it is realized, to make up for the excessive allowance in an earlier year.

* The Income Tax Officer erred in holding that the respondent's entries about its bad debts "show that the debts have been written off in the accounts provisionally."

* The argument that unless all the measures to recover the debts are exhausted the claim is not admissible hence rejected.

34. In the case of CIT, Central Zone C, Karachi v. Grindlays Bank Limited Karachi 1991 PTD 569 facts were as under:--

The respondent is a non-resident banking company. For the assessment year 1976-77 it claimed Rs.35,25,785 as bad debts. The Assessing Officer disallowed Rs.31,09,478 on the ground that the suits were filed for sum aggregating Rs.13,85,652 which were pending and, therefore, there was still hope for recovery. For as sum of Rs.17,23,826 the claim was rejected on the ground that no legal action was taken for recovery of that amount. (Emphasis added).

35. The Hon'ble High Court upheld the order of ITAT for allowing the bad debt even where suits were pending and there was still hope of recovery as well as where no legal action for recovery was taken. The criterion of irrecoverability is thus not what was presumed by the Assessing Officer that it should have been a loss forever. The legal position in the light of three cases of Sindh High Court namely CIT v. National Bank of Pakistan 1967 PTD 237, CIT, Central Zone C, Karachi v. Grindlays Bank Limited Karachi 1991 PTD 569 and CIT Central Zone (C), Karachi v. ADBP 1992 PTD 39 relied upon and discussed in 2006 PTD 356 is very clear that bad debts are allowable deduction in the case of banks as per their regularly-employed method of accounting, even T where suits are pending or no legal action for recovery has been taken.

36. The position was explained as early as in 1946 by the Central Board of Revenue vide Circular No.l1-D of 1946, dated 24-4-1946 as under: --

"The words "actually written off in the books of the assessee" mean accounted for or adjusted according to the system of accounts followed by him. In the mercantile system of accounting, the amount claimed will generally be debited to the P&L Account or to any other reserve made previously but not allowed as deduction in the assessment. The corresponding credit entry should ordinarily be in the account of the debtor reducing the debt accordingly. It should be clearly understood that the partial writing off of a debt in the account of the debtor reducing the debt accordingly. It should be clearly understood that the partial writing off of a debt in the account of the debtor does not mean that the assessee's right to receive the full debt is or should be extinguished. The liability of the debtor and the right of the assessee to recover the amount written off remain unaffected by the method of accounting followed by the assessee, and the main point to which the Income Tax Officer has to apply his mind is whether in the circumstances of each case the amount written off is justified. It is, however, possible that the corresponding credit entry, according to the system of account followed by an assessee, may not be made in the account of each debtor but in a suspense or bad and doubtful debts account, the total of such amounts for each year being deducted in the Balance Sheet from the amount of debts outstanding. In such a case it will be necessary for the Income Tax Officer to keep an effective watch to see:

(1) that when the debt is wholly and finally written off, the amount that has already been allowed as a deduction is not doubly claimed, and

(2) that when any amount is recovered subsequently, any excess allowance made previously is assessed as income under the proviso to this clause.

37. The guidelines given by the C.B.R. above and reaffirmed in C. No.13(26)-IT/I/74, dated 2-7-1975 are based on judicial pronounce ments discussed above. It is explicit from C.B.R.'s instructions that in the case of banks the concept of premature write off cannot be invoked to disallow bad debts (which also include doubtful debts), as their regular method of account, which is according to law, permits such deductions and offer any recovery or reversal in the year of realization. Judgment in the case of National Bank of Pakistan 1976 PTD 237 which has been followed in Union Bank Ltd. (2002 PTD (Trib.) 1898), provides that best guide as to what is `irrecoverable' in the following words:

"...Now apart from showing that the debts written off were, in fact, irrecoverable, the question was of the manner in which the requisite entries were maintained by the respondent in its records and like most of the banks, the respondent has maintained accounts in accordance with the directions contained in a circular issued by the Central Board of Revenue on the 24th of April, 1946Relying, inter alia, on the Central Board of Revenue Circular, the Income Tax Appellate Tribunal, to which I will refer as the Tribunal, allowed all these appeals..."

38. The above passage of Sindh High Court judgment in National Bank's case endorses the C.B.R.'s instructions of 24th April, 1946. C.B.R. reaffirmed the same in C. No. 13(26)-IT/I/74, dated 2-7-1975 instructing the subordinate officers to withdraw references if any on the basis of this verdict. The position of law has not changed since its inception as far as financial institutions are concerned as in their case money lent in the ordinary, course of business constitute stock-in -trade any loss is, even otherwise admissible as trading loss. In the new Income Tax Ordinance, 2001, section 29 has the same parameters as were contained in section 10(2)(xi) of the Income Tax Act, 1922 and section 23(1)(x) of Income Tax Ordinance, 1979. The new section reads as under:--

(29) Bad debts.---(1) A person shall be allowed a deduction for a bad debt in a tax year if the following conditions are satisfied, namely:

(a) The amount of the debt was---

(i) previously included in the person's Income from business chargeable to tax; or

(ii) in respect of money lent by a financial institution in deriving income from business chargeable to tax;

(b) the debt or part of the debt is written off in the accounts of the person in the tax year; and

(c) there are reasonable .grounds for believing that the debt is irrecoverable.

(2) The amount of the deduction allowed to a person under this section for a tax year shall not exceed the amount of the debt written off in the accounts of the person in the tax year.

(3) Where a person has been allowed a deduction in a tax year for a bad debt and in a subsequent tax year the person receives in cash or kind any amount in respect of that debt, the following rules shall apply, namely:--

(a) Where the amount received exceeds the difference between the whole of such bad debt and the amount previously allowed as deduction under this section, the excess shall be included in the person's income under the head "Income from Business" for the tax year in which it was received; or

(b) Where the amount received is less than the difference between the whole of such bad debt and the amount allowed as a deduction under this section, the shortfall shall be allowed as a bad debt deduction in computing the person's income under the head "income from Business" for the tax year in which it was received.

39. An analysis of above section shows that conditions laid down for allowability of bad debt as deduction in a tax year in the case of financial year are the same as envisaged in section 10(2)(xi) of the Income Tax Act, 1922 and section 23(1)(x) of income Tax Ordinance, 1979:---

(a) debt should be in relation to money-lending business chargeable to tax.

(b) the debt or part of debt is written off in the accounts of the person in the tax year; and

(c) there are reasonable grounds for believing that the debt is irrecoverable.

40. As regards the expression "written off in the account of the person", there is consensus in all the judgments discussed above that charge to Profit and Loss Account is proper fulfilment of this condition. In respect of "irrecoveability", the judgment by Hon'ble Sindh High Court in the case of CIT, Central Zone C, Karachi v. Grindlays Bank Limited, Karachi 1991 PTD 569 is an authority. In the said judgment the High Court endorsed the ITAT's finding that pendency of suits for recovery and non-initiation of legal action for recovery are no basis to infer that bad debt claimed by a bank is "recoverable". It is noteworthy to mention that Grindlays Bank judgment is based on the judgment of National Bank's case and both the judgments when juxtaposed confirm that bad debts are allowable deduction in the case of financial institutions if:--

under regularly-employed system of accounting, the amount claimed is debited to the P&L Account and the corresponding credit entry is made even in a suspense or bad and doubtful debts account (called provision for bad debt as per format prescribed by the State Bank of Pakistan or SECP as the case may be);

the total of such amount for each year is deducted in the Balance Sheet from the amount of debts outstanding; and

when any amount is recovered subsequently, any excess allowance made previously is assessed as income.

41. The above legal position emerging from statutory provisions, binding precedents and C.B.R.'s instructions leaves no doubt that findings given in The Bank of Punjab in I.T.As. Nos.45, 46 and 6362/LB of 2004 reported as (2005) 92 Tax 162 (Trib.) on the issue of provision for bad debts and debts pertaining to earlier years are misconceived and based on misreading of earlier judgments of ITA, statutory provision, C.B.R.'s instructions and binding judgments of High Court. In the matter of bad debts, as held by Hon'ble Sindh High Court in the case of National Bank (supra), the question will always be of the estimate of the facts and circumstances of a case, and because "human estimates are necessarily fallible, the bank's claim and/or its books of account cannot be rejected merely because it maintains a system of accounts, which permits it, in the event of windfall from the debtor, so to say, to reverse the earlier entries writing off a debt as irrecoverable". This is exactly what was held in Union Bank's case reported as 2002 PTD 1898 (Trib.).

42. In view of above, we are left with no alternative but to declare judgment on the issue of provision of bad debts and debts pertaining to earlier years in I.T.As. Nos.45, 46 and 6363/LB/2004 (2005) 92 Tax 162 (Trib.) as per incurium and to re-affirm the view expressed in the following judgments as per law:

(i) I.T.As. Nos.42 to 44/KB of 1977-78, (ii) I.T.As. Nos.1897 to 1899/KB of 1973-74; (iii) I.T.A. No.776/KB of 1975-76, (iv) 2002 PTD (Trib.) 1898, (v) (2002) 85 Tax 245 (Trib.),(vi) 2003 PTD (Trib.) 1189, (vii) R.A. No.349/LB/2002 and (viii) I.T.As. Nos. 1066 to 1073/LB of 2004 - (2005) 91 Tax 484 (Trib.).

43. This is where an apparent contradiction needs to be highlighted because the Judgment reported in the case of The Bank of Punjab in I.T.A. No.5531/LB of 1998, the learned Accountant Member while speaking for the Bench and declaring the judgment of the Tribunal reported as (2002) PTD 1898) as per incurium held that allowance of the provision for bad debts is the prerogative of the Assessing Officer. It is he who may either allow or disallow and the assessee is to satisfy him. However, in the later part the accrued interest on the same bad debts had been deleted.

44. This amount of accrued interest on the bad debts was charged in the Balance Sheet directly without bringing the same in P&L being on the bad debts written off. The learned Bench has, however, set aside the issue of disallowance of the provision of bad debts while consequential interest thereon has been deleted. This finding is not in harmony with the finding on the issue of bad debt.

45. In fact, this has never been the case of the Department that the Assessing Officer inquired about the claim and determined from record that certain specific amounts are recoverable and that the same are not bad as yet. The controversy which above judgments have decided and is prevailing in these cases also is whether a `provision' amounts to actual written off or not? The answer to which in the 'case of banks by us have always been is that it is equal to actual writing off. We have never held that the Assessing Officer is debarred of checking the validity or that he cannot determine the correctness. In that case, this would have been more an issue of fact and not of law.

46. Consequently, the question proposed by the Department is rejected as was done in R.A. No.349/LB of 2002 by following the rule of consistency as explained by the Hon'ble apex Court in 1997 PTD 71. In Reference Application, R.A. No.349/LB of 2002 it was opined as under:

"We have gone through the relevant record with the help of learned AR as well as D.R. The Assessing Officer has considered this claim to be a provision, which has accordingly been treated by the CIT(A). The Tribunal, however, found that both the officers below were not justified in holding that this was a provision. This was an actual written off and in this regard the reliance of the Tribunal was on the judgment reported as (1967) 34 Tax 158 authored by learned Mr. Justice Durab Patel as the then he was of Sindh High Court. This, therefore, is a factual controversy that whether the amount was a provision or not which cannot be referred to the High Court."

47. We reaffirm the above position in this case and also hold that there is no justification for constituting a Larger Bench or recalling of order as asked by DR because earlier judgment in the case of Union Bank (2002 PTD 1898) which was followed in many other cases of banks' was strictly in accordance with law enunciated by the superior judiciary.

48. The upshot of above discussion is obvious. All the questions raised by the Department are rejected. Similarly, except for 2002-2003, assessee's questions also are considered as not worth-consideration of the Hon'ble High Court. The question which we hereby refer for 2002-2003 raised by assessee-Bank speaks as follows:--

"Whether on the facts and in the circumstances of the case, the Tribunal was justified to hold that word "or" appearing in clause (3) of Part-IV of Second Schedule to the Income Tax Ordinance, 1979 between two distinct expressions "Banking Company" and "Financial Institutions" is not disjunctive?"

[The Documents mentioned in the Appendix hereinafter will form part of the Paper Book].

C.M.A./111/Tax (Trib.)Order accordingly.