2024 PTD 1009 PESHAWAR-HIGH-COURT

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Citation Name: 2024 PTD 1009 PESHAWAR-HIGH-COURTBookmark this Case COMMISSIONER OF INCOME TAX/WEALTH TAX COMPANIES ZONE, PESHAWAR VS ISLAMIC INVESTMENT BANK LTD, PESHAWAR CANTT. Ss.11(1) & 133(5)---Reference---Word 'accrues or arises'---Sticky loan---Accounting system---Interest, maintaining of---Dispute was with regard to method of maintaining accounts by respondent / banks whereby interest against sticky loans were debited to a separate account (mark-up suspense account)---Plea raised by authorities was that same interest should be offered for calculating income tax liability as accrued income of that tax year---Validity---Mere fact that interest becomes receivable to a bank against its sticky loan does not necessarily become its income when banks are maintaining their accounts on mercantile base or even maintaining a hybrid method of accounting---Such interest becomes subject to impost of tax when it is offered for taxation by bank or lending institution as per mercantile practice---High Court declined to interfere in observation of Appellate Tribunal Inland Revenue that taxpayer had a choice to adopt or maintain a third system of maintaining its account i.e. hybrid method where elements of both the systems were present and was a recognized method of accounting---Word 'accrues or arises' as it occurred in S.11(1) (a) (ii) of Income Tax Ordinance, 1979, for the purpose of counting total income by a banking company or lending institution was to be applied keeping in view recognized accounting method adopted by the institution and thus interest entry debited in account of customer relating to non-performing assets would be subject to impost of tax when the same had actually become recoverable and as such was offered for taxation by the bank---Reference was disposed of accordingly.

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