Income Tax Ordinance (XXXI of 1979)---

----First Schedule, part III, Cl.(a) (before amendment)---Assessment year 1978-79---Tax liability or tax payable being requirement of working capital would need to be excluded from the total income for the levy of surcharge.

The Commissioner of Income-tax v. Pakistan Tobacco Co. Ltd. 1988 PTD 66 fol.

Waheed Farooqui for Applicant. Nasim Ahmed Khan for Respondent.

Date of hearing: 2nd May, 1991.

JUDGMENT

NASIR ASLAM ZAHID, J: -- This is an application under section 136(2) of the Income Tax Ordinance, 1979, filed by the Commissioner of Income Tax, 1979, raising the following questions:--

(i) Whether on the facts and circumstances of the case the Tribunal was justified in holding the application (under section 136(1) of the Ordinance) of the applicant as time-barred?

(ii) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in holding that the tax liability or tax payable is requirement of working capital and therefore, needs to be excluded from the total income for the levy of surcharge?

2. For the assessment year 1978-79, the Income Tax Officer levied surcharge @ 10% on the amount representing tax payable by the respondent for this year. Respondent's appeal was allowed by the Commissioner of Tax (Appeals) as regards the levy of the aforesaid surcharge and the appellate order in this regard was confirmed by the Income Tax Appellate Tribunal in the appeal filed by Department. Reference Application filed by the Department under section 136(1) of the Income Tax Ordinance, 1979, was dismissed by the Tribunal as time-barred. In these circumstances, the Department has filed this application under section 136(2) of the Ordinance. We have heard Mr. Waheed Farooqi for the Department and Dr. Nasim Ahmad Khan for the respondent/assessee.

3. Learned counsel for the parties submitted that this Court may not answer the first question relating to limitation as both parties want a decision on this second question which relates to the merits of the case. On the second question, it is informed that there is a decision of a Division Bench of this Court in the case of Commissioner of Income-tax v. Pakistan Tobacco Co. Ltd. 1988 P T D 66 in which this very question was considered and answered ins the affirmative in favour of the assessee and against the department.

4. As neither party wants the question relating to limitation being answered, we refrain from making any observation in this regard. The other question relating to levy of surcharge has been decided correctly by the Tribunal. In the case of Pakistan Tobacco Co. Ltd. 1988 P T D 66, the following provision relating to surcharge in First Schedule Part III to the Income Tax Act as substituted by the Finance Amendment Ordinance, 1978, was under consideration:--

Part III

RATESOF SURCHARGE

(a) In the case of every company

10. per cent of the income and super tax payable on total income as reduced by so much of the income as has been retained for the purchase of capitalization or for meeting working capital requirement.

The aforesaid provision was substituted by Finance Ordinance, 1980, with effect from assessment year 1981-82. It was held that taxes payable are `retained income' for purpose of the aforesaid provision before its substitution by the Finance Ordinance, 1980. We agree with the decision in 1988 P T D 66.

5. The question of law having been correctly decided by the Tribunal, we find no merit in this application under section 136(2) of the Income Tax Ordinance, 1979, which is dismissed with no order as to costs.

M.B.A./C-237/K Application dismissed.