I.T.AS. NOS. 744/LB OF 1989-90, 745/LB OF 1985-86, 1009/LB OF 1986-87, 1010/LB OF 1988-89, VS I.T.AS. NOS. 744/LB OF 1989-90, 745/LB OF 1985-86, 1009/LB OF 1986-87, 1010/LB OF 1988-89,
1996 P T D (Trib.) 1099
[Income-tax Appellate Tribunal Pakistan]
Before Malik M. Tauqir Afzal, Judicial Member and Muhammad Mushtaq, Accountant Member
I.T.As. Nos. 744/LB of 1989-90, 745/LB of 1985-86, 1009/LB of 1986-87, 1010/LB of 1988-89, decided on 03/09/1995.
(a) Income-tax---
----Interest---Add-back---Validity---Assessee, an Association of persons---Loan was actually taken by the members of the A.O.P. and not the A.O.P. itself-- Add-back of interest on such loan by the Assessing Officer was justified in circumstances.
(b) Income-tax
----Addition---Validity---Assessee, a transporter ---Assessee, had claimed rent but no receipt in that respect was provided---Total claim of rent by assessee thus was rightly rejected by Commissioner of Income Tax (Appeals) in circumstances.
(c) Income-tax---
----Addition---Validity---Assessee a transporter---Claim of assessee that amount of rent paid for hired vehicles more than the actual amount tantamounts to concealment and liable to addition.
Muhammad Nawaz Khan, I.T.P. for Appellants (in I.T.As.Nos.744/LB of 1989-90 and 745/LB of-1988-89).
Mrs. Sabiha Mujahid, D.R. for Respondents (in I.T.As. No.744/LB of 1989-90 and 745/LB of 1988-89).
Mrs. Sabiha Mujahid, D.R. for Appellants (in I.T.As. Nos. 1009/LB of 1986-87 and 1010/LB of 1986-87/1988-89).
Muhammad Nawaz Khan, I.T.P. for Respondents (in I.T.As. Nos. 1009/LB of 1986-87 and 1010/LB of 1986-87/1988-89).
Date of hearing: 30th May 1995.
ORDER
MALIK M. TAUQIR AFZAL (JUDICIAL MEMBER). ---These are two appeals by the assessee and two appeals by the department for the Assessment years, 1984-85 and 1985-86. The appellate order in all the four appeals is one and the same. The grounds of all the appeals are identical and, therefore all the appeals shall be decided by one order.
2. The assessee is an A.O.P. and the source of income is that they are plying nine Flying Coaches from Lahore to Multan and back.
Assessment year 1984-85
The grounds for the assessee-appellant in I.T.A. No. 744 are:---
(1) That the C.I.T. (Appeals) is not justified in confirming;
(i) Trading account additions.
(ii) Add-backs under the head accidential expenses, staff salary and miscellaneous expenses.
(iii) That the I.T.O. has originally accepted interest and bank charges and had disallowed while passing the orders under section 132. As such the add-back is illegal and unjustified.
Grounds of Appeals Nos. 4 and 5 are of general nature, i.e. order is Arbitrary for and without any basis.
In Appeal No. 745 the grounds are:---
(1) That the learned C.I.T. (Appeals) is not justified in confirming;
(i) The trading account additions (ii) Disallowance of rent in toto (iii) Disallowance of interest of bank charges. C.I.T. is justified in confirming add-backs of Rs.20,000 out of total claim of Rs.47,000.
Rest of the two grounds of appeal are of general nature, i.e. order is arbitrary ..for and without any basis.
4. Grounds of Appeal No. 1009 by the revenue are that the reduction in maintenance expenses from Rs.3,70,000 to Rs.70,000 as made by the C.I.T. (Appeals) is unjustified specially in view of newly plied coaches.
(2) That the deletion of disallowance made under the head travelling and conveyance at Rs.50,000 is without any cogent reasons.
(3) That the learned C.I.T. (Appeals) is not justified to set aside the disallowance made by the I.T.O. under the head interest and bank charges. The disallowance was rightly made by the I.T.O. as the expenditure was pertaining to the Members of the A.O.P. not the A.O.P. itself.
5. The grounds of appeal in I.T.A. No. 1010 are:---
(1) That the learned C.I.T. (Appeals) is not justified to reduce the disallowance from Rs.50,000 to Rs.25,000 under the head Adda Commission.
(2) That the deletion of disallowances of Rs.2,70,000 as made by the I.T.O. under the head rent of coaches is unjustified and without any cogent reasons. The disallowance was on account of obvious concealment of rent. The C.I.T. (Appeals) has failed to appreciate the facts available on record.
6. The reduction made by the C.I.T. (Appeals) from Rs.1,00,000 to Rs.25,000 under head of repair charges is unjustified and uncalled for and is without any cogent reason.
7. For the charge year 1984-85, the declared receipt of the rent are at Rs.21,18,108. The number of vehicles were nine and the seats available per vehicle were taken by the I.T.O. at 20 instead of nineteen as declared by the appellant in view of the six folding seats available in each vehicle. The average charge from Lahore to Multan and back was accepted at Rs.115. Average working days declared by the assessee were accepted as 160 days per vehicle: After allowing vacancy at 15%, receipts were estimated at Rs.15,200.
8. The assessment was framed as under:-
| Total number of vehicles. | = 9 |
| Total number of seats per vehicle claimed at 19 but taken at 20 considering availability of 6 folding seats in each vehicle | = 20 x 9 = 180 Seats |
| Average round fare per seat (Lahore-Multan) | =Rs 15 |
| Total daily refund fare for 9 coaches | Rs.115 x 180 = Rs.20,700 |
| (Gross) Less vacancy 15% | =Rs 3,105 |
| Net daily round fare for 9 coaches | =Rs.17595 |
| (Rs. 20,700 minus 2105) | |
| Average working days per coach have been shown by the assessee at | = 160 days |
| Total receipts for 9 coaches will therefore compute at 160 x 17595 | = Rs.28,15,200 |
| Less receipts shown by the assessee | = Rs.2118.180 |
| Balance for addition | Rs.6,97,020 |
| Less loss declared | = Rs.4,77,110 |
| | = Rs:2,19,910 |
9. Addition from P&L accounts
| Maintenance Expendition Total maintenance expenditure claimed at Rs.14,96,280 for 9 vehicles amounts to Rs.1,66,253 per vehicle. Compared with the total receipts of Rs.21,18,180 shown by the assessee for 9 vehicles maintenance expenditure amounts to 71 % of the receipts which is clearly exaggerated and highly inflated. Considering that the vehicles are new and this is the first year of their operation it would be reasonable to take maintenance expenditure at 40 % of the net receipts have been computed at Rs.28,15,200 computation above. This figure from the claimed expenditure of Rs.14,96,280 an add-back of Rs.3,70,200 would be called for under 'the head maintenance expenses. Taken as such | = Rs. 3,70,200 |
| 2. Parking Rent: Claimed at Rs.48,000 being unvouched Rs.18,000 is disallowed and added back. | =Rs. 18,000 |
| 3. Travelling and Conveyance; Claimed at Rs.26,549 being unverifiable Rs.15,000 is disallowed and added back. | =Rs.15,000 |
| 4. Accidental Expenditure Claimed at Rs.55,766 being unvouched and unverifiable Rs.15,000 is disallowed and added back. | =Rs.15,000 |
| 5. Staff salaries: Claimed at Rs.42,400 being unvouched and unverifiable Rs.10;000 is disallowed and added back. | =Rs. 10,000 |
| 6. Miscellaneous Expenditure Claimed at Rs.19,425 being unverifiable Rs.9,000 is disallowed and added back. | =Rs. 9,000 |
| 7. Interest and Bank Charges: Claimed at Rs.2,42,509 having wrongly been claimed as the loans have been taker. by the members. Thus, considered incorrect and added back. | =Rs.2,42,509 |
10. The party went in appeal and contention taken was that one vehicle bearing no LHK- 2751 was purchased in April 1984 and worked out for sixty days only. It was further agitated that the assessment was not in accordance with the notice under section 62. these contention of the assessee-appellant did not find fevour before the C.I.T (appeals)and the C.I.T(appeals) refused to interfere in the I..T.O,s treatment.
11. In the P&L Account the following additions were contested:---
Maintenance and expenses were claimed at Rs.15,96,280 which works out to Rs.166,253 per vehicle. The I.T.O. has allowed 40% of the receipt as maintenance expenses and addition was made at Rs.3,70,200. The C.I.T.(A) reduced it to Rs.70,000. The reduction is unjustified and the contention of the revenue that the reduction of Rs.3,00,200 has been made without any cogent reason carries weight and the order of the I.T.O. is maintained.
Travelling and Conveyance. ---Claimed Rs. 26,549 Disallowed Rs.15,000. Keeping in view the nature of the business, the addition deleted by C.I.T. is found correct and the contention of the revenue is rejected. As far as the disallowance made by the I.T.O. under the head interest and bank charges, the order of the learned C.I.T. (Appeals) is set aside and that of the I.T.O. is maintained as the loan was actually taken by the members of the A.O.P. and not p by the A. O. P. itself. Rest of all the add-backs are found justified and the request of the assessee-appellant is refused.
ASSESSMENT YEAR 1985-86
12. In this year the assessee appellant had declared receipts at Rs.27,10,580 and declared loss of Rs.958,031. The number of buses and route remain the same as last year. The buses of this year were taken over by Limited Company, so the working days remained 225 only and on that basis the I.T.O. has worked out an addition Rs.10,46,295. The C.I.T. made no reason for interference with the computation of the I.T.O. hence maintained it. In the P&L Account B following additions were contested before the C.I.T. Rent claimed at Rs.81,000. No rent receipt was provided, therefore, the total claim was disallowed. The treatment meted by the C.I.T. is justified and is confirmed.
13. ADDA COMMISSION: It has been claimed at Rs.22,68.000. Disallowance of Rs.50,000 was made being unverifiable which was reduced by C.I.T. (Appeals) to Rs.25,000. The treatment by C.I.T. (Appeals) is justified C and is maintained. The rent of coaches claimed at Rs.8,10,000 actually incurred at Rs.10,80,000 a difference has been added to the income. The addition has been deleted by the C.I.T. (Appeals) on a wrong basis. It is obviously a concealment and the same is maintained. On account of repair charges, the claim was Rs.4,95,000, disallowance of Rs.1,00,000 which has been reduced to Rs.25,000 by the C.I.T. is unjustified and the same is maintained. Rest of the grounds of both the parties for the charge year do not have any weight and are rejected.
14: All the appeals are disposed of to the extent and in the manner indicated above.
M.B.A./176/Trib Order accordingly.