I T AS. NOS.5313/LB AND 5452/LB OF 1995 VS I T AS. NOS.5313/LB AND 5452/LB OF 1995
1997 P T D (Trib.) 2186
[Income-tax Appellate Tribunal Pakistan]
Before Ch. Muhammad Ishaq, Judicial Member and
Saleem Asghar Mian, Accountant Member
I.T.As. Nos.5313/LB and 5452/LB of 1995, decided on 05/08/1996.
Income Tax Ordinance (XXXI of 1979)---
----S.22---Income from business---Additions---Add backs---Both departments, against deletion of additions and assessee against add backs in different heads of accounts were in cross-appeals---Commissioner of Income Tax (Appeals) gave relief to assessee and additions were either deleted or modified being excessive and having verifiable nature ---Tribunal having upheld first appellate order, departmental appeal failed and that of assessee's succeeded.
Muhammad IqbalHashmi, A.R. for Appellant (in I.T.A. No.5313/LB of 1995).
Muhammad Akram Tahir, D.R. for Respondent (in I.T.A. No.5313/LB of 1995).
Muhammad Akram Tahir, D.R. for Appellant (in I.T.A. No.5452/LB of 1995).
Muhammad Iqbal Hashmi, A.R. for Respondent (in I.T.A. No.5452/LB of 1995).
Date of hearing: 5th August, 1996.
ORDER
CH. MUHAMMAD ISHAQ (JUDICIAL MEMBER) ---Cross Appeals in respect of the assessment year 1994-95 has been preferred by the department as well as the assessee to call in question the Order dated 14-8 1995 passed by the Commissioner of Income Tax (Appeals-I), Faisalabad.
2. We have heard the parties and perused the record.
3. The Department in its appeal has contested the deletion of the following additions:---
1. Rs.1,50,000 under the Head Miscellaneous Income.
2. Rs.57,000 under the Head Directors Salaries and Allowances.
3. Rs.1,76,000 under the Head Staff Welfare Fund.
4. Further, the Revenue has contested the restricting of the addition from Rs.3,80,000 to Rs.2,00,000 under the Head Repair and Maintenance from Rs.2,86,000 to Rs.1,00,000 under the Head 'Advertisements', reduction of the addition from Rs.1,50,000 to Rs.1,00,000 under the Head 'Motor Vehicle and Maintenance', reduction of the addition at Rs.62,000 to Rs.45,000 under the Head 'Travelling Expenses' and Rs.60,000 to Rs.40,000 in the Head 'Entertainment'.
5. The Assessee, ors the other hand, has contested the following add backs:
| | Claimed | Disallowed |
| 1 | Repairs and maintenance | 22,30,480 | 2,00,000 |
| 2 | Advertisement. | 19,85,445 | 1,00,000 |
| 3 | Office (City) Expenses | 2,50,184 | 60,000 |
| 4 | Motor Vehicles running & maintenance. | 5,36,725 | 1,00.000 |
| 5 | Commission, | 80,000 | 50,000 |
| 6 | Carriage outwards | 2,92,670 | 50,000 |
| 7 | Entertainment | 2,44,675 | 40,000 |
| 8 | Travelling & Conveyance | 2,86,100 | 45,000 |
| 9 | Printing & Stationery. | 39,757 | 9,000 |
| 10 | Misc. Expenses | 60,230 | 25,000 |
| 11 | Depreciation | 9,43,448 | 71,599 |
| 12 | Telephone | 2,80,399 | 42,060 |
6. The learned D.R. submitted that the appellant has not declared any Miscellaneous Income but he was assessed at an income of Rs.150,000 under the Head Miscellaneous Income'. The learned D.R. pointed out that there was no justification for the deletion of this income in view of the fact that the reply submitted by the Assessee to explain the- non-declaration of this income was irrelevant. If this being so, the Assessing Officer was duty-bound to formulate some basis for estimating the income under this Head. However, this was not done. The observations of the learned C.I.T., (Appeals) that the, Assessing Officer failed to, establish any income and also the basis thereof, therefore, it deserved to be deleted. This decision of the C.I.T. (A) appears to hold good. No exception, therefore, can be taken to this deletion, which is accordingly upheld.
7. An addition of Rs.87,000 was made against the claim of Rs.8,56,080 in respect of the Directors Salaries and Allowances of which Rs.3,79,320 were paid to three lady directors. The Assessing Officer allowed salaries to two lady directors namely Mst. Azra Perveen and Mst. Nasreen Akhtar but the salary of the third Lady Director namely Mst. Salma Bibi at Rs.87,000 was not allowed. The learned D.R., pointed out that since there was no role of this Lady Director, the same was rightly disallowed. The discharge of functions by the Lady Director was accepted and allowed in the preceding years. The learned CIT (Appeals) allowed the salary of this Lady Director as well on this basis. We have not been shown anything contrary to this effect. This impugned order, therefore, is accordingly upheld.
8. Rs.1,76,000 were added in respect of Staff Welfare Expenses against the assessee's claim at Rs.9,45,763. This addition was deleted by the learned CIT (A) on the ground that the assessee had furnished copy of details of the expenses duly incurred. Because of assessee's legal entitlment to this expenses we feel that no wrong to the Revenue has been done by allowing this deletion in the impugned order which is accordingly upheld,
9. In the Head Repairs and Maintenance, the claim of the assessee was disallowed to the extent of Rs.2,00,000. It is recorded that in the assessment year's 1991-92, the disallowance under this Head was at Rs.3,61,000 against the claim of Rs.14,37,747 which addition was confirmed by the C.LT.(Appeals) in appeal. The learned A.R. has stated that the I.T.A.T. reduced this addition to Rs. 30,000 Placing reliance on the effect of the earlier decision of the I.T.A.T., we restrict the addition to Rs.50,000 in this Head. Order of the C.I.T. (Appeals), therefore, is modified accordingly.
10. In the Advertisements Expenses, a claim of Rs.19,85,445 was made of which Rs.2.g6.000 were disallowed, The learned A.R. submits that the claim is fully verifiable and no specific defects have been pointed out. The learned CIT (Appeals) restricted the claim to Rs.1,00,000. In view of the submission of the learned A.R., we restrict the addition to Rs.15,000 only. The order of the learned CIT (A) is accordingly modified.
11. City Office Expenses were claimed at Rs.2,50,184 of which Rs.75,000 were disallowed. The learned CIT(Appeals) restricted the addition to Rs.60,000. Although, there is an element of un-verifiability of claim, yet the addition appears to be rather excessive. Accordingly, the addition is restricted to Rs.20,000. The Order of the learned CIT (A) is accordingly modified:
12. In the head 'Motor Vehicle Running and Maintenance, the claim of a sum of Rs 5,36,725 against which Rs.1,50,000 were disallowed which were reduced by the first appellate authority to Rs.1,00,000 on the basis of the quantum of business. The addition appears to be excessive in view of the verifiable nature of the claim. Therefore, the addition is restricted to Rs.25,000. The Order of the learned CIT (Appeals) is modified accordingly.
13. Carriage outwards' addition which was reduced to Rs.50,000 by the learned C.I.T.(Appeals) has been contested as being excessive. No reason has been advanced to show as to how the addition is excessive. The addition is, therefore, accordingly upheld.
14. A sum of Rs.1,80,000 was claimed as the Commission of which Rs.50,000 has been disallowed. In view of the verifiable nature of the claim as no instances of un-verifiability are quoted, the addition is deleted altogether.
15. In the head 'Travelling and Conveyance', no interference is called for as the element of personal nature was not negated by the assessee.
16. In the Head Telephone Expenses, a sum of Rs.42,060 was disallowed out of a claim of Rs.2,80,399. In this Head also, there is an element of personal use but the addition appears to be little excessive. It is directed to be restricted to Rs.35,000 (Rs. thirty five thousands only). The order of the Learned CIT (Appeals) is modified accordingly.
17. In the Depreciation Account, as sum of Rs.71,599 was disallowed against the claim of Rs.9,43,448. The learned A.R. submits that the disallowance is rather excessive because of the verifiable nature of the claim. Accepting the contention of the learned counsel, we are inclined to reduce the disallowance from Rs.71,599 to Rs.35,000. The order of the learned CIT(Appeals) is modified accordingly.
18. In the Printing and Stationery Head, a claim of Rs.39,757 was lodged of which Rs.9,000 has been disallowed. The learned A.R. submits that the claim is fully verifiable. Accordingly, we restrict the addition to Rs.4,000. The Order of the CIT (Appeals) is modified accordingly.
19. In view of the foretasted reasons, the appeal of the department fails while that of the assessee succeeds only to the extent and the manner indicated above.
C.M.S./335/Trib. Order accordingly.