' TANZIL-UR-REHMAN, J.--This is an application under Section 136 (2) of the Income-tax Ordinance, 1979 filed by the Commissioner of Income-tax Central Zone-A, Karachi.
2. Two questions reproduced below allegedly arise out of the Tribunal's order as stated in the statement of facts:
1. "Whether, on the facts and in the circumstances of the case, the sum of Rs,10,27,365 for the assessm ent year 1971-72 claimed as extra reserve for an un-expired risk in fire, marine and miscellaneous accounts were liable to he allowed having been incurred beyond the permissible limit of 40% under the Insurance Act and Rules and/or deductable as laid out wholly and exclusively for the purpose of business under Section 10 (2) (xvi) of the Income-tax Act?
2. Whether, on the facts and in the circumstances of the case, the learned Tribunal was justified in holding that Income-tax paid on interest and dividends by the assessee-company is an allowable expenditure under Section 10 (2) (xvi) of the Income-Tax Act?"
3. The assessee, namely, New Jubilee Insurance Company Limited, were engaged in general insurance business, as well as life insurance. During the assessment year 1971-72 under consideration, the assessing officer disallowed a sum of Rs,10,27,365 which had been claimed, by the assessee, in excess of the limit of 40% allowed under the Insurance Act and the Rules, in the matter of Reserve for un-expired risks. This addition was, however, deleted by the learned Appellate Assistant Commissioner of Income-tax, relying on some earlier decisions of the Tribunal, including those, in the case of the same assessee. The learned Income-tax Appellate Tribunal maintained the said order of the Appellate Assistant Commissioner, while disposing of the second appeal, filed by the Department. An application filed under Section 66 (1) of the Income-tax Act was also rejected by the learned Appellate Tribunal, who refused to refer to the High Court, the question of law arising out of their order, as, according to them, the issue had already been adjudicated upon, in view of a decision of the Sindh High Court reported as (1980) PTD page 73, in the case of Eastern Federal Union Insurance Company.
4. The assessing officer had also added back to the income of the assessee an amount of Rs,2,06,003 which represented Income-tax deducted, at source, on the interest and dividends earned by the assessee in the year under consideration. The learned Appellate Assistant Commissioner in his order disposing of the first appeal, inter alia, observed that, Section 10 (7) of the Income-tax Act of 1922 excluded the operation of Section 18 (4) of the Act, and hence, according to him, the addition made by the assessing officer, was not warranted by law. The' learned Income-tax Appellate Tribunal confirmed the order of the learned Appellate Assistant Commissioner, on this point also, and further refused to refer to the High Court, the question of law arising out of their order, observing, inter alia, that, the question as framed did not arise from their order.
5. An application under Section 66 (1) of the Income-tax Act of 1922 (since repealed) was moved before the learned Income-Tax Appellate Tribunal, but, as stated above, it was rejected by an order dated 28-3-1981. Now, the above application under Section 136 (2) of the Income-tax Ordinance of 1979 has been filed by the Department.
6. Both the learned counsel concede that the question No,1 has already been decided by several judgments of this Court, the latest being Commissioner of Income Tax Central Zone 'B', Karachi vs. Central Insurance Co. Limited. (1989 PTD 128) by a Division Bench, which in turn relied on Commissioner of Income Tax Central, Karachi v. New Jubilee Insurance Co. Ltd. (PLD 1982 Kar. 684) wherein after considering a number of decisions the learned Bench observed as follows:
7. From the foregoing we conclude that the Income Tax Officer is bound to accept balance of profits as disclosed by the accounts submitted by an assessee to the Collector of Insurance under Section 15 (1) of the Insurance Act, 1938 and accepted by him, except that the Income-tax Officer is entitled to exclude expenditure other than expenditure permissible under the provisions of section 10 of the Act and that the amount set aside as reserves for unexpired risks is not "expenditure" within the meaning of rule 6 of the First Schedule and section 10 of the Income-tax Act."
' We have no reason to take a different view. The first question is, therefore, decided against the applicant. However, Mr. Sheikh Haider submits that the Department has taken the matter to the Supreme Court.
8. As regards question No,2, Mr. Ali Athar submits that it does not arise out of order of the Tribunal.
Mr. Sheikh Haider has not been able to satisfy us that it does arise out of the impugned order.
However, the Department seems to be wrong in adding the tax paid in advance under section 18-A of Income Tax Act to the income of the Assessee computing for tax purposes whereas by virtue of section 10 (7) of the Income Tax Act (since repealed), the provision of section 18 (4) is not attracted to the facts of the case. The learned Tribunal has rightly upheld the order of the learned Assistant Commissioner. The second question is, therefore, also decided against the Department.
' In result, both the questions are decided against the Department and the appeal is accordingly dismissed