Income Tax Ordinance (XXXI of 1979)---

----First Sched. Part III---Provision/liability for tax falls within the purview of the expression "for meeting working capital requirements" and was to be excluded from the total income for levy of surcharge.

1988 PTD 66 fol.

Shaikh Haider for Applicant.

Muhammad Ali Seena for Respondent.

Date of hearing: 28th January, 1992.

JUDGMENT

MAMOON KAZI, J.---The learned Income Tax Tribunal while deciding the Second Appeal of the parties held that the provision/liability for tax falls within the purview of the expression "for meeting working capital requirements" as used in Part III of the First Schedule and hence it is to be excluded from the total income for levy of surcharge. The department was not satisfied with the same and, therefore, following question has been referred to this Court for determination:--

"Whether in the facts and circumstances of the case, the Appellate Tribunal was justified in holding that provision/liability for tax falls within the purview of the expression `for meeting working capital requirements' as used in Part III of the First Schedule and hence it is to be excluded from the total income for levy of surcharge."

2. We find that the question referred to in the present case has already been answered in the case of Commissioner of Income Tax v. Pakistan Tobacco Company Ltd. etc. 1988 PTD 66, in this case a Division Bench of this Court held as under:---

"From the above inferred definitions of the words, "working capital", "current liability" and "current assets", it is evident that Macmillan Dictionary of Accounting by R.H. Parker has excluded provisions for taxation and proposed dividend from the ambit of current liabilities. The other books have not referred to the above aspect. It may be observed that the exclusion of the above two items may be justified in a case of a new set-up, in which working capital would not require any provision for the taxation and for the proposed dividends as till the time the factory goes into production for a business operate profitably the question of payment of any income-tax or dividend would not arise. The other reason may be that the learned author had in mind only the items which are either in liquid form or are readily liquidable and can be used for earning profit in day to day business. But there seems to be "working capital", namely, that it is the difference between current assets and liabilities. In some of the above-cited definitions of the term "current liabilities" the provision for taxation has been included. We are also inclined to hold that the current liabilities will include a liability to pay inter alia advance tax, and, therefore, falls within the ambit of working capital requirement. As pointed out hereinabove. Mr. Shaikh Haider, Advocate for the applicant department has put too much emphasis on the factum that at least the amounts of advance tax be treated as working capital requirement in terms of above proviso relating to 10 per cent surcharge, as it is no longer in the coffer of the company. The question whether a particular amount is available or is not available depends on the treatment of that amount in the books of account. If any payment is shown on account, technically and in accounting balance it remains vested in a company. The provisions of section 18-A read with sections 21, 22, 22-A, 23 and 23-B clearly indicate that any amount of tax payable under section 18-A remains on account of payment till the time the assessment order for the relevant year is passed by the Income Tax Officer and the tax liability is adjusted partly or wholly against the amount of income tax paid in advance. In this behalf reference may be made to subsections (5) and (5-A), which provide for payment of interest by the Government to an assessee and subsections (7) and (8) of section 18-A, which empower the Income Tax Officer to levy additional tax at the rate of 2% per annum on the short amount of income-tax not paid. It may also be pointed out that subsection (9-A) of section 18-A gives an option to an assessee, who does not pay on the specified date any instalment of tax which is required to pay under subsection (i) to file an estimate or revised estimate of the tax payable by him. This provision also re-inforces the conclusion that any amount payable under section 18-A is merely on account of payment and for the purposes of account this is to be shown as such."

3. As the question has already been determined by another Division Bench of this Court, we decide the case accordingly that is to say, in the affirmative.

M.B.A./C-256/K???????? ?????? ???????????????? ??????????? ?????????Reference answered in the affirmative.