SUMMARY

Whether unabsorbed depreciation from prior years can be adjusted against "Income from Other Sources" under the Income Tax Ordinance, 2001.Court's RulingYES, unabsorbed depreciation can be adjusted against "Income from Other Sources".The Appellate Tribunal's order is upheld, and the Reference Application is dismissed.________________________________________Critical Findings1. Income Classification:o Interest from bank deposits (earned on electricity bill collections) is business income forFESCO (an electricity distribution company).o Reason: Income is incidental to FESCO's core business operations and derived from itsstatutory functions.2. Legal Provisions:o Section 56(1): Business losses (including unabsorbed depreciation) can be set off againstany head of income.o Section 57(4): Unabsorbed depreciation is an "admissible expense" deductible against income under any head.3. Distinguished Precedent:o CIT v. Khairul Hayat Amin & Co. Ltd. (2000 PTD 363) is inapplicable.In that case, in...