IN THE SUPREME COURT OF PAKISTAN 
(APPELLATE JURISDICTION) 
 
 
PRESENT: MR. JUSTICE MIAN SAQIB NISAR, HCJ 
 
 
MR. JUSTICE EJAZ AFZAL KHAN 
 
 
MR. JUSTICE UMAR ATA BANDIAL 
 
 
CIVIL PETITION NO.2640 OF 2016 
(Against the judgment dated 31.5.2016 of 
the 
Islamabad 
High 
Court, 
Islamabad 
passed in ITR No.24/2008) 
 
 
M/s Shifa International Hospital, Islamabad 
 
…Petitioner(s) 
VERSUS 
 
Commissioner of Income Tax/Wealth Tax, Islamabad 
 
…Respondent(s) 
 
For the petitioner(s): 
Hafiz Muhammad Idrees, ASC 
 
 
For the respondent(s): 
Mr. Babar Bilal, ASC 
Ms. Shazia Bilal, ASC 
 
 
Date of hearing: 
02.02.2017 
… 
ORDER 
 
 
MIAN SAQIB NISAR, CJ.- The facts of the case are that 
the petitioner assessee is a public limited company and derives 
income from operating a hospital called “Shifa International Hospital”. It 
filed its return for the assessment year 2000-2001 declaring a net 
income of Rs.5,054,009/- and claimed 10% depreciation allowance 
qua the hospital building upon the income earned from the hospital, 
however, the Deputy Commissioner of Income Tax (Assessing Officer) 
allowed depreciation allowance only to the extent of 5%. Aggrieved, 
the petitioner filed a departmental appeal which was accepted by the 
Commissioner of Income Tax (Appeals) [CIT (Appeals)] vide order dated 
9.8.2004 and 10% depreciation allowance was allowed. The 
respondent-department challenged this order before the Income Tax 
Appellate Tribunal which affirmed the order of the CIT (Appeals). 
Civil Petition No.2640 of 2016  
-: 2 :-
However, the reference filed by the respondent before the learned 
High Court was allowed and it was held vide impugned judgment that 
the petitioner’s hospital though a building, did not fall within the 
definition of a “factory” or a “workshop” thus depreciation allowance 
of 5% as opposed to 10% as earlier held by the Assessing Officer was 
allowed. 
2. 
 
Learned counsel for the petitioner, while referring to 
judgments from the Indian jurisdiction reported as Commissioner of 
Income Tax Vs. Dr. B. Venkahta Rao (2001 PTD 1124) and 
Commissioner of Income-tax Vs. Dr. B. Venkata Rao [(1993) 202 
ITR 303] argued that a nursing home had been declared a “plant”, 
thus on the same footing the petitioner’s hospital should be 
considered a “factory” or “workshop”, entitling the petitioner to 10% 
depreciation allowance. 
3. 
 
Heard. In the instant case, we find that as per the 
provisions of Section 23 read with the Third Schedule of the Income 
Tax Ordinance, 1979 (the Ordinance) the petitioner is entitled to 
depreciation allowance upon the income derived from the hospital, 
however the extent thereof is the moot point and the relevant law in 
this context reads as under:- 
 
“23.  Deductions.- (1) In computing the income under 
the head "Income from business or profession", the 
following allowances and deductions shall be made, 
namely:- 
⁞ 
(v)  
in respect of depreciation including First Year 
Allowance or Reinvestment Allowance or Industrial 
Building Allowance of any such building, machinery, 
plant, furniture or fittings, being the property of the 
assessee, the allowance admissible under the Third 
Civil Petition No.2640 of 2016  
-: 3 :-
Schedule, except depreciation or First Year Allowance 
on assets given on lease shall be allowed against income 
from lease rentals only; 
⁞ 
 (xxii) ……………………………………………………… 
  
THE THIRD SCHEDULE 
(See Section 23) 
 
RULES 
FOR 
THE 
COMPUTATION 
OF 
DEPRECIATION ALLOWANCE 
 
 1. Allowances for depreciation.- (1) Where, in any 
income year, any building, machinery, plant or furniture 
owned by an assessee is used for purposes of any 
business or profession carried on by him, or in any 
income year commencing on or after the first day of 
July, 1982, any machinery or plant is given on lease by 
the assessee, being a scheduled bank, a financial 
institution or such modaraba or leasing company as is 
approved by the Central Board of Revenue for purposes 
of this Schedule, on such conditions as may be specified, 
an allowance for depreciation shall be made in 
computing the profits and gains of the business or 
profession of the assessee in the manner hereinafter 
provided. 
⁞ 
(4) ………………………………………………………… 
 
2. Rates of depreciation allowance.- (1) The allowance 
under rule 1 shall be computed at the rates specified in 
the Table annexed hereto:- 
 
TABLE 
Class of 
asset 
Description 
Rate per cent of 
the   written down 
value 
1 
2 
3 
BUILDING 
I 
Building (not otherwise 
specified) 
5 (general rate) 
Civil Petition No.2640 of 2016  
-: 4 :-
II 
Factory or 
workshop 
(excluding godowns and 
Offices) 
10 
IIA 
Residential quarters for 
labour 
10 
 
Section 23 of the Ordinance read with Rule 1 of the Third Schedule to 
the Ordinance (the Schedule) allows for depreciation allowance with 
respect to any building, machinery, plant, furniture or fittings, being 
the property of the assessee, while computing income under the head 
“income from business or profession”, as provided in the Schedule 
under which three categories of buildings and their respective 
percentage rates have been specified, i.e. (i) 5% for a building (not 
otherwise specified); (ii) 10% for a factory or workshop (excluding godown and 
offices); and (iii) 10% for residential quarters for labour. A bare reading 
of the aforesaid provisions makes it clear that the type of building 
specified in Entry I of the Schedule is of a generic nature, i.e. a 
building which is not otherwise specified with particularity. However 
Entries II and IIA of the Schedule are exceptions to Entry I, as they 
have been otherwise specified with particularity. The effect of this is 
that from the generic category “buildings” in Entry I for which the 
general rate of depreciation allowance is 5%, other types of buildings 
are set apart with particularity, i.e. factory or workshop (excluding 
godown and offices) and residential quarters for labour, for which a rate 
of 10% depreciation allowance is provided. Since it is the petitioner’s 
case that its hospital is not a “building”, but a “factory” or “workshop” 
under Entry II of the Schedule and thus liable to 10% depreciation 
allowance, therefore we are restricting ourselves to a discussion of 
Entries I and II, and not IIA of the Schedule. Here we find it relevant 
to discuss the ordinary meanings of the terms “building”, “factory” 
Civil Petition No.2640 of 2016  
-: 5 :-
and “workshop”, as they have not been defined anywhere in the 
Ordinance, to determine which category a hospital might fall in. The 
Concise Oxford Dictionary (New Ed. 1982) defines the aforesaid three 
terms as follows:- 
 
“Building:- permanent fixed thing built for occupation 
(house, school factory, stable, etc.). 
Factory:- building(s) and equipment for manufacturing, 
workshop. 
Workshop:- room or building in which manufacture is 
carried on.” 
 
Whereas Chambers 21st Century Dictionary (1997 Ed.) defines them 
as under:- 
 
“Building:- a structure with walls and a roof, such as a 
house. 
Factory:- a building or buildings with equipment for the 
large-scale manufacture of goods. 
Workshop:- a room or building where construction and 
repairs are carried out.” 
 
4. 
 
From the ordinary dictionary meanings, it is clear that a 
“factory” and “workshop” fall within the definition of a “building”, 
thus if Entry II did not exist, all buildings, including factories and 
workshops would fall under Entry I entitling assessees to the general 
rate of 5% depreciation allowance. However, as mentioned above, 
Entry II creates an exception to Entry I by providing otherwise for two 
specific types of buildings, i.e. a factory or workshop (excluding godown 
and offices) for which the rate of 10% depreciation allowance is to apply. 
It is settled law that the provisions of a fiscal statute are to be strictly 
construed and applied, hence a hospital whilst being an enclosed 
Civil Petition No.2640 of 2016  
-: 6 :-
structure is undoubtedly a building, however, by no stretch of 
imagination can it be considered to fall within the definition of a 
factory or workshop, as it is not a building where goods are 
manufactured, repaired or assembled. Therefore, the petitioner is 
only entitled to depreciation allowance at the general rate of 5% 
instead of 10% as claimed by it.  
5. 
 
As regards the Indian judgments relied upon by the 
learned counsel for the petitioner, these judgments are from a foreign 
jurisdiction and may be relevant in understanding and resolving the 
issues before us but they have no binding effect upon the Courts in 
Pakistan. We are of the opinion that they are also distinguishable 
from the instant case as the provisions of law analysed therein are 
not pari materia to the law of our country being examined in this 
case, besides the facts of those cases are entirely different as they 
pertain to the question of whether a nursing home fell within the 
purview of “plant” and not a “factory” or “workshop”.  
6. 
 
In the light of the above, we opine that the view set out 
by the learned High Court is correct being based upon proper 
appreciation of the law. No case for interference has been made out. 
Dismissed accordingly. 
 
 
 
CHIEF JUSTICE 
 
 
 
JUDGE 
 
 
 
JUDGE 
Islamabad, the 
2nd February, 2017 
Approved For Reporting 
Waqas Naseer/*