Income Tax Act, 1922



Sections-31(2) and (2B)

The view taken by the High Court Division that there is no provision in the said Act for taking fresh evidence or materials at the appellate stage is not correct — We find that the appellate powers of the Appellate Joint Commissioner of Taxes are no different and no less than those of the Deputy Commissioner of Taxes. [Paras- 17 & 18]

Dhaka Vegetable Oil Industries Ltd. Vs. Commissioner of Taxes 5 BLT (AD)-171


In this case the National Board of Revenue has only issued a circular in exercise of its powers under section 5(8) of the said Act. The circular is in the nature of a direction upon Assessing Officers to appreciate evidence of certain materials produced before them in a particular manner, instructions which are binding on them. The only argument which was available with the Appellate Joint Commissioner of Taxes in avoiding the circular is that the assessments were already made when the circular had not yet been issued and therefore the assessments were a closed transaction. But obviously the assessments were not a closed transaction and the Appellate Joint Commissioner of Taxes had the whole question of assessment open before him. If there was a subsequent circular of the National Board of Revenue requiring the assessing officer to treat the evidentiary value of an audit report in a particular manner then that circular was as much binding on the Appellate Joint Commissioner of Taxes as upon the original assessing officer because the assessment had still not attained a finality. [Para-24]

Dhaka Vegetable Oil Industries Ltd. Vs. Commissioner of Taxes 5 BLT (AD)-171.

Income Tax Act, 1922


Income Tax
Act, 1922


Section—10 (2)(XVI)

The expenditure is a capital when it is in-
cuffed for securing capital assets or advantage of enduring benefit to the
business. But when it is spent for running the business, it becomes revenue

Commissioner of Taxes, Chittagong (South) Zone, Chittagong, Vs. Chittagong Jute
Manufacturing Company Ltd., 13 BLD (HCD) 384.

Raja Bijoy Singh Dudhuria Vs. C.I.T. (1933)UTR. 135; C.I.T. Vs. Travancore
Sugar and Chemicals Ltd. (1973)19 I.T.R 307; C.I.T. vs. S.M.T. Kamalabai
Juthalal (1977) 108 ITR 755; C.LT. Vs. Sitaldas Tirathdas, (1961)41 ITR






Sections — 2(6)(c) and 66

Taxable income—Amount received on
account of termination of sole distributorship cannot he treated as taxable

of Income Tax, Chittagong Zone Vs. M/s. K. Ralunan and Co. Lid; (BLI) (HCD)55


Sections — 2(9) and 5(5)

Person—Meaning of—’Person’ mentioned in
sub-section (5) of section 5 includes an association of persons or a firm or a
company or a local authority—Under clause (9) of section 2, ‘person’ includes
an individual, a Hindu- undivided family, a firm, an association of persons or
a body of individuals, whether incorporated or not, a company, a local
authority and every other artificial judicial person — Firm is a ‘person’ for
the purpose of Income— Tax Act.

Commissioner of Taxes Vs. M/s.M. Ismail and sons, 3BLD(AD)273


Sections —3, 6, 10 and 13


Assessment of Income Tax — Change of
accounting from mercantile system of accountancy to cash system whether can be
allowed — Whether tax is payable on income, profit or gains alleged to have
accrued or arisen or deemed to have accrued or arisen or whether tax is payable
on income, profit or gains actually received by the assesses makes no
difference for the Income Tax Department — There is no possibility of escaping
from taxation if cash method of accounting is restored to — There is nothing in
the Income Tax Act to show that assessee has to follow a particular method of
accounting or it cannot change the method of accounting so far followed — There
is no bar on changing over to a new system of accountancy. [Majority. Per
Munim. CJ. (Masud and S.M. Mohsen Au. JJ concurring)]

does not permit an assessee to show two kinds of incomes, one for the purpose
of depicting the correct picture of the business and the other for payment of
tax. finding of the Income Tax Authorities as well as the High Court Division
to this effect is found to have been based on t as stated by the assessee
itself in its accounts which were regularly maintained in this way. In the
circumstances, the Income Tax authorities are not only entitled, hut are also
hound under section I 3 to tax the total income as accruedIrrespective of the
question whether any part tion behind this condition is to discourage the of
the income has remained unrealised [Per Ahmed, J (dissenhing)]

Hoque Building Finance Corporation Vs. The Commissioner of Income Tax, Dhaka
North Zone, Dhaka, 5BLD(AD)239

(1936) IV ITR 420; (1967) 19 DLR 53(SC); 1962) 44 ITR 22; (1945) 13 ITR 224 —


Section — 4(3)(i)

Income tax— Exemption — Income derived
from business carried on behalf of a trust wholly for charitable purposes.

income derived from a property held under the trust for religious or charitable
purposes shall be exempt from payment of any income tax, provided such
exemption shall not apply to any income derived from the business carried on by
such trust unless such business is carried on by the trust solely for religious
or charitable purposes. If, however, the business is carried on exclusively by
the trust, in such circumstances, such business itself must be held to be under
the trust and the incomes derived there from are liable to be exempted from
payment of any income tax under section 4(3)(i) of the Act.

Welfare Trust Vs. Commissioner of Income Tax, Dacca Zone, 1BLD (HCD)105

PLD l963(SC)209; (1980)8 BTD 100; (1964)53 ITR 176 Cited.


Section — 4(3)(i)

Exemption from income tax — Whether
income from a business held and carried on by or under a trust is exempted from
income tax — Income from property held in trust wholly for religious or
charitable purpose is exempted from income tax — But income from a business
carried out by the trust since 195 1 not exempted though the income of such
business is wholly applied for religious or charitable purpose unless such
business is carried on in the course of the carrying out the purpose of the
trust or institution. The intention behind this condition is to discourage the
trust or the institution from entering into business with its properties unless
such business is directly related to the objectives of the trust or the
institution — It is the income of such business which is exempt from taxation —
Proviso to section 4(3)(i) inserted by amendment in 1951 drastically
restricting the scope and the field of the general exemption under the main
provision of the law being imposed by the conscious act of the makers of the
law is not within the power of the Court to dilute the restriction by liberal
interpretation ignoring the language of the statute — But. after omission of
this proviso in 1973 by an amendment now all incomes ftom property, whether a
business or not, if held in trust, is totally exempted from income tax.

of Taxes, Dhaka (East) Zone Vs. Gaus—I—Pak—I—Azam Welfare Trust, 4BLD(’AD,)265

7 I.T.R. 415; 44 I.T.R. 828; 1944 I.T.R. 385; VIII B.T.D 100 (AD); PLD 1963
(SC) 209; ITR Vol. LIII — 167(1964): — Cited.


Sections —6 and 24

Set off of Loss in assessing income tax
— Loss or profits or gains in any year made any of the heads mentioned in
section 6 is allowed to be set off against income, profits or gains under any other
head. The provision of section 24 does not contain any reference to a loss
sustained by an assessee as capital loss’ — If a loss caused by the cyclone is
‘a loss’ as referred to in section 24. this can be set off — Provisions of
sub-section (2A) provide for including the loss of the nature sustained by the
assessee under the head ‘Capital Gains’ and the provisions of sub-section (2B)
provide for carrying forward such loss to be set off against capital gains for
the year.

of Income Tax, Dhaka Vs. M/s. United Shipping Lines Ltd; 3BLD (AD)242


Section — 9(2)

Assessment of Tax — Basis fli It is the
determination of bonafide annual iIue of the puperty — Th. Authority is t
determine the sum for which the landlord could let out the premise having regard
to the prevailing circumstances — There is nothing to show that the Income Tax
officer was not aware of all the facts when he determined the annual value of
the house in question and completed the assessment — If the Estate Agents
sub-let the house making good profit themselves, that profit cannot be included
in the income of the assesses — appellant.

Vs. The Commissioner of Income Tax, Dhaka (North Zone), Dhaka, 3BLD (AD) 113

9 ITR 695 — 696 (PC); 14 ITR (Bom) 298; 20 ITR (1951)162; 83 ITR 70 — discussed


Assessment of Tax

Its genuineness—In the absence of any
business activities on the part of the lessee the department got reasonable
grounds to doubt the genuineness of the claim as to the sublease—If by an
enquiry, activities of the lessee are found to include business the lessee may
be separately assessed as such—For this purpose remand is necessary.

Vs. The Commissioner of Income Tax, Dhaka (North Zope Dhaka 3BLD (AD)113

9 ITR 695 — 696 (PC); 14 ITR (Born) 298:20 ITR (195 1)162; 831TR700—Discussed.


Sections —9, 16, 23 and 66

Assessment of Income Tax—Whether the
Tribunal was justified to include in the assesse’s name the income of the house
in the names of his sons and wife—A heavy burden lies on the taxing authorities
to prove that the persons in whose name the property stands are not the real
owners—The assessee has absolutely no burden to show that the properties
standing in the names of his sons and wife are not his properties.

E.R. Chowdhury Vs. Commissioner of the Taxes, Chittagong (South Zone), Chitlogong,
5BLD (HCD) 312

(1942)10 ITR 308;(1956) 30 764; (1954) 26 I.T.R. 775 (SC):26l 736; (1936)
I.T.R. 108; 1944 1.T.R. (1954) 26 I.T.R. 249; 26 ITR 736: –Cited.


Section — 10(2)( VII)

Income tax—Whether compensation awarded
is taxable—In 1962 in the wake o( compulsory acquisition the legislature houg
it fit to amend the law—The amendment deemed the amount of compensation aft
computation of the difference between ordinal cost and written down value to be
profits of the previous year — For profits and gains of business carried on by
an assesse, the tax shall be payable under the head ‘business’.

Electric Supply Ltd. Vs. The Commissioner of Income Tax, Chittagong Zone,
Chittagong, 3BLD(AD) 174

(1951)XIX ITR 406; AIR 1954 (SC 253; AIR 1956 (SC)33; 1927A.C.327 —Cud


Section — 10(2)(XVI)

Expenditure by the assessee—The
expenditure incurred by the assessee is to be looked from the business
expediency of a, business house and not from the point of vie of the revenue.
It is the business house which is in the best position to know what should be
the expenses for the assessee Company going on running.

Commissioner of Taxes, Chittagong (South) Zone, Vs. MIs. Pahartali Textie and
Hosiery Mills. Pahartali, Chitagong, 12BLD (HCD) 410


Sections — 1O(2)(VI), 59(1)(e) Assessment
of Income Tax
— Initial depreciation allowance is allowable under Rule 9(1)
but the same cannot be allowed to a nonlocal Shipping Company after amendment section 2(b) of the Income Tax Act by the
Finance Act of 1967 — Addition depreciation allowance can be allowed to a
non-local Shipping Company under Rule 9(2) if the shi1 was installed after
lst.April, 1948 and before 1st July, 1965 and amendment of 1967 doe not affect
the same as the amendment is no retrospective Rule 9(2) is not ultra vires as the
same has been framed under the Rule making poet- under section 59(1)(e) of
Income Tax Act — High Court departed from all cannons of interpretation in
declaring the Rule ultra vires when the point was neither raised nor debated.

Everett Orient lines Inc. Vs. Commissioner of. Income Tax, 3BLD (AD) 39


Section — 13

Assessable Income — Computation of —
The assessing officer has been given the power to reject the accounts of the
assessee — He is competent to change the basis of gross profits as calculated
by the assessee and raise it to a higher percentage— He is only required to
record with reasons that the system of accounting employed by the assessee does
not reflect true income.

Commissioner of Income Tax Vs. Harendra Kumar Sil, 3BLD (AD) 48


Section — 13

Assessment of income tax — Rejection of
trading account and estimate of gross profit — Rejecting the accounts and
resorting to estimate there must be a clear finding by the assesing officer
that from the accounts as maintained by the assessee, incomes, profits and
gains cannot properly be deduced — If the finding is based on materials, then
the estimate made by the assessing officer, cannot be ‘aid to he arbitrary — In
proviso there are two parts on the basis of which the Deputy Commissioner Taxes
could apply his discretion under section 13 of the Income Tax Act — (i) If no
method of accounts has been regularly employed; (ii) If from the method
employed in the opinion of the Deputy Commissioner of Taxes, the income profits
and gains cannot be properly deduced there from—On the basis of either of the i
o. the Deputy Commissioner can exercise hi discretion and determine the
according to his best judgment.

Khawaja Handloom Factory Vs. 11w Coimmissioner of Taxes, South Zone, Dhaka.
4BLD (HCD)38

(1970) 75 I.T.R. 260: i)75 II R. 721 ;( I 970)71.T.R.33;34DLR(Al) 298;–Cit.d.


Sections — 13 and 66

Determination of rate of gross profit
Whether rate of gross profit of preceding the assessment year can be called a
comparable case — The case of each assessment ear in an independent proceeding
— The question of rejection of accounts and the question of determination of
rate of goss profit cannot be considered in isolation as the rejection of
accounts called for an estimate of total income and determination of the rate
of gross profit — These are questions of fact and not of law.

Radha Gobinda Balaranz Shah V. Commissioner of Taxes, East Zone, Dhaka, 4BLD
(HD) 123

12 I.T.R.393; 26 ITR 373; 37 ITR 151; 66 ITR 462; AIR 1955 Punjab 42: 27 DLR
566; 35DLR (AD) 56; 34DLR298 —Cited.


Sections — 13 and 66(1)

Income Tax Appellate Tribunal—Income
Tax Appellate Tribunal is the final fact finding authority and normally it
should record its conclusion on every disputed question raised before it,
setting out its reasons in support of its conclusions. But, in failing to
record reasons, when the Appellate Tribunal agrees with the views expressed by
the Appellate Asstt. Commissioner and has no other ground to record in support
of its conclusion, it does not act illegally or irregularly, merely because it
does not repeat the grounds of the Appellate Asstt. Commissioner on which the
decision was given against the assessee or the department.

Khawaja Handloom Factory Vs. The Commissioner of Taxes, South Zone, Dhaka, 4BLD
(HCD) 38

27 DLR (Dhaka) 566: 63 ITR (I 967) 411(415)—Cited.


Section — 15C

Exemption of investment allowance
Whether bonus shares issued by the Company can b treated as investment of the
assessee —Though the assessee did not directly invest any mone and bonus shares
are deemed to be an income in the hands of the company the bonus shares were
contributed by the assessee shareholder — As the assessee did not encash the
bonus shares and retained them the same should be treated as investment by him
for the purpose of exemption.

Commissioner of Taxes, Dhaka (North) Zone Vs. Abdul Aziz, 4BLD (HCD) 89

(1974)93 ITR 369; (1964) 52 ITR 567; BTD(1979)30 (46); (1921) 1, K.B. 64; :27T.C.205—Cited.


Section — 15(c)

Bonus Shares — Whether an assessee can
claim rebate or exemption from tax on account of investment in bonus shares —
Bonus share will be a part of the income accruing to the company — Necessarily
it has nothing to do with the total income of the assessee — As it is not a
part of his total income the question of his investment does not arise — He ‘is
not entitled to exemption or rebate from tax.

of Income Tax (North Zone), Dhaka Vs. Abdul Aziz, 5BLD (AD)46


Sections — 18A and 23

Additional tax — Question of separate
notice for imposing additional tax — The Deputy Commissioner of Taxes is under
obligation to work out the additional tax that is payable — The law does not
provide for another notice for the purpose in as much as it is the continuation
of the same proceeding and not a different proceeding.

Commissioner of Taxes (East) Zone, Dháka Vs. M/s Mallick Brother, 6BLD (AD)196

PLD 1964(SC) 410, (distinguished); 1949 LT.R. 209 — Cited.


Section — 23

tax —Assessment of j- Capital receipt and revenue receipt — Whether amountby
the assessee on account of termination of title agency is a capital revenue
receipt — In determining whether 4 particular receipt is a capital receipt or
nue receipt the nature of the transaction h be ascertained —. If it is a
remuneration of assessee then it is a revenue receipt — The income of the
assessee went up to a much hi figure in the following year. Hence it could said
that the termination of the agency question had resulted in the destruction of
profit — making structures of the assessee the amount was paid as compensation
termination of the agency resulting in ter nation of the assessee’s business
itself it the compensation paid will be capital red — Since termination of the
agency has brought the assessee’s business practically stand still nor has it
destroyed the p making apparatus of the assessee, the am received will be
revenue receipt and capital receipt.

Commissioner of Taxes, Dhaka M/s. Macneil and Kilburn Lid; 7BL (AD)160

A.LR. 1932(PC) 138; 1980 BTC 242; 36 LT.R. 174; 21 TC 608; 15 I.T.R. 91 29
I.T.R. 910: 22 I.T.R. 195: AIR. 1953 U 170; 22 I.T.R. 195 AJ.R. 1953 All 1Tl
A.I.R. 1965 (SC) 65; A.I.R. 1966 (SC) 34: I.T.R. 167—Cited.


Section — 26A

Renewal of registration of firm
Application after expiry of time limit — Income T Officer may entertain an
application after ex— piry of the date specified if he is satisfied if the firm
was prevented by sufficient cause 1mm ma-king the application within prescritime
limit — Assessee to show cause for der — Income Tax Officer has no obligation
to calI upon assessee to show cause — Suffici1 cause is to be shown by the
assessee firm and there is no obligation on the pail of the In- Section — 23
come Tax Officer to ask the assesse to Income tax —Assessment of j- Capital re-
cause by the renewal should not be rein ceipt and reenue receipt — Whether
amount on account of delay — income Tax Rules. Received by the assessee on
account of termini’s to sub-rule (2) of Rule 6

Radha Gobinda Balaram Shah Vs. Commissioner of Taxes, East Zone, Dhaka, 4BLD
(HCD) 138

(1962)46 ITR 458; (1970) 75 ITR 309 — Cited.


— 29, 45 and 46

— Assessment of tax made by agreement with the assessee under MLR
32 of 1969 of excess income declared in 1969—Administrative review of such
assessment not maintainable—Assessment is final and tax assessed becomes a debt
due to the Government when demand for the same is made.

of Taxes and others Vs .M/s. Mallick Brothers, 1BLD(AD)286

13 I.T.R. 285 — Cited.


Section — 34A

Assessment of tax — Jurisdiction of reporting
— Application of section 34A of Income Tax Act to assume jurisdiction and power
under this section can be exercised only when assessment was erroneous and pre judical
to the interest of revenue — There must be some materials for finding that the
order of the Income Tax Officer was such — was mere observation to that effect
is not sufficient to assume his jurisdiction.

Vs. The Commissioner of Income Tax, Dhaka (North Zone), Dhaka, 3BLD (AD) 113

9 ITR 695 — 696(PC); 14 ITR (Born) 298; 20 ITR (1951)162; 831TR700—discussed.


Section — 34(2A)

Reopening of assessment — Notice of
reopening assessment if can be issued after 8 years of assessment—Whether it is
barred by limitation—Notice for reopening of an assesment can be issued at any
time notwithstanding that at the time of issuance of such notice We period of 8
years had expired—Reassessment of tax upon such notice cannot be called in question
on the ground of limitation.

Commissioner of Taxes Vs. M/s. M. Ismail and sons, 3BLD (AD) 273


and 66B

Income Tax — Assessment of — Question
of violability The assessee company exactly knew what was all about — Mistake,
defect want of form shall not make the assessm void unless the assessee is
prejudiced — The assessee could not make out a case of prejudice and therefore
no objection could be taken to the assessment order.

of Taxes, Chittagong Zone, Chittagong Vs. M/s. Metropolitan Tanneries Ltd; 4BLD



Sa1ary of the Judges of Supreme Court—Salary
income of the Judges of the Supreme Court is exempted from taxation by
President’s Order 21 of 1973 and it cannot be included for the purpose of
taxation while computing total income.

assessee is a Judge of the Supreme Court of Bangladesh. The salary income of
the Judges of Supreme Court is exempted from taxation by President’s Order No.
21 of 1973 and it cannot be included for the purpose of taxation while
computing total income. But the Deputy Commissioner of Taxes while assessing
the income of the assessee by the misapplication of a notification (SRO. Nq.
440/ L/176 dated 18.12.76 vide item No. iii) issued under section 60 of the
Income Tax Act, 1922 erroneously included the salary income of the Judge while
computing the total income. Such notification is included for other class of
persons and can have no manner of application when it involves the question of
assessment of the assessee who is a Judge of the Supreme Court of Bangladesh.
The reason is that the Constitution came into force on the 16th December, 1972
and the President’s Order No.21 of 1973 was promulgated in pursuance of
paragraph 3 of the Fourth Schedule of the Constitution read with Article 147
which settled the terms and conditions of ser ice t the Judges of the Supreme
Court. Accordingly, the terms and conditions of service of a Supreme Court
Judge were sanctioned by constitutional provision and the P.O. 21 of 1973b
having the backing of constitutional provision achieved the status of
sub—constitutional legislation and such constitutional legislation cannot he
displaced by notification in exercise of the powers confirmed by sub-section
(1) of Section 60 of the Income Tax Act which is a statutory law but no
notification under such law controls the sub-constitutional legislation.

Commissioner of Taxes Vs. Mr. Justice Shahabuddin Ahmed, 10 BLD (AD) 145


Section — 66

Income tax matter: Tribunals Jurisdiction
.—In Income Tax matters it is for the Tribunal to decide questions of fact, and
in a reference -under section 66 of the Act, the High (‘ourt Division, not
constituted as a Court of appeal. exercises an advisory jurisdiction only and
lays down the law in the facts found by the Tribunal. Where the High Court
finds that there is no evidence to support the finding of fact of the Tribunal,
or finding of the Tribunal is so unreasonable or perverse that no person acting
judicially and properly instructed as to the relevant law could have arrived at
it, then in such circumstances, there would arise a question of law which can
be agitated before the High Court Division. The question of the applicability
of a section of the Act to a particular set of facts or its construction is
always a question of law.

Mackinon Mackenzie and Company (Pakistan)
Ltd. Vs. Commissioner of Taxes, Chittagong (South) Zone, Chittagong, 12


Section — 66(1)

Absence of Party in reference-its effect—If
the party at whose instance the reference is made fails to appear at the
hearing, it is no duty of the Court suo motu to decide the questions and
delkver the judgment. Since the preliminary condition of the sub-section is not
satisfied in such a case, the consequent obliratIon of deciding the questions
of law dcliv- of criig a judgment does not also arise.

Dhaka Steel Works Ltd. Vs. The Commissioner of Taxes, Dhaka (North Zone),
Dhaka, 12BLD(HCD)334


Section — 66(7)

Stay realisation of tax—Where there is
no specific conferment of power to stay realisation of tax till decision of the
questions of law referred to the High Court Division, it, in its advisory
jurisdiction, in a proper case, can order stay of realisation of tax in order
to prevent injustice. In a proper case, it can order stay of realistion of tax
in order to prevent the reference from being rendered nugatory’ in the event of
its final success.

Petroleum Ltd. Vs. The commissioner of Taxes, (East Zone), Presently Taxes Zone
—3, Dhaka, 12BLD (HCD)634

98 I.T.R. 39; 29 I.T.R. 222; 71 I.T.R. (SC) 815—Cited.