I. T. AS. NOS. 1064/LB AND 1717/LB OF 1996 VS I. T. AS. NOS. 1064/LB AND 1717/LB OF 1996
1997 P T D (Trib.) 2258
[Income-tax Appellate Tribunal Pakistan]
Present: Ashfag Ahmad, Accountant Member and Abdul Rashid Qureshi, Judicial Member
I.T.As. Nos. 1064/LB and 1717/LB of 1996, decided on 26/06/1996.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss.22 & 80-D---Income from business---Company---Expenses regarding vehicles used by Directors---Levy of turnover tax under S.80-D, Income Tax Ordinance, 1979---Assessee was burdened with levy of turnover tax by including excise duty and sales tax under S.80-D of the Income Tax Ordinance, 1979---Validity---Assessee had failed to supply details of excise duty paid---Turnover tax under S.80-D was rightly levied.
(b) Income Tax Ordinance (XXXI of 1979)---
----S.23(v) & Third Sched.---Depreciation---Claim of depreciation on vehicles used by Directors of Company was rightly disallowed.
(c) Income Tax Ordinance (XXXI of 1979)---
----S.22---Income from business ---Assessee returned trading results---Results being better than earlier years were upheld in circumstances.
Mahmood Ahmad for Appellant.
Date of hearing: 11th June, 1996..
ORDER
ASHFAQ AHMAD (ACCOUNTANT MEMBER). ---These cross appeals for the assessment year 1994-95 filed by the assessee as well as by the Department against the order of the CIT(A). The assessee has contested the order of the CIT(A) on the following grounds:
(1)That the learned CIT(A) erred in confirming the followingadditions:
(1)Selling and distribution expenses Rs.700,000.
(2) Administrative expenses Rs.250,000.
(2)That the learned CIT(A) grossly erred in ignoring the depreciation allowance which is a statutory allowance.
(3)That the learned CIT(A) grossly erred in confirming the levy of turnover tax by including excise duty and sales tax.
On the other hand the Department is in appeal on the following grounds;
(1)Rejection of declared results.
(2)Relief in profit and loss account:
(i)selling and distribution.
(ii)Administrative expenses.
2. The brief facts of the case are that the assessee a private limited company, derives income from running a beverage company taken on lease. Return was filed to declare a loss of Rs.1,126,405. In response to notice under section 61 the A.R. of the assessee produced the books of account. The assessee declared sales at Rs.58,513,456 yielding G.P. rate of 30.58%. The Assessing Officer for a number of reasons mentioned in the body of the assessment order rejected the declared version and estimated the sales at Rs.19,200,000 to which a G.P. rate of 32% was applied. The assessee claimed expenses under the head selling and distribution .expenses at Rs.13,839,286 out of which Rs.1,500,000 were disallowed as these were not open to verification. Administrative expenses were claimed at Rs.2,159,853 out of which Rs.521,110 were disallowed as some of the expenses were not verifiable. Depreciation was claimed at Rs.1,320,500 normal as well as initial depreciation as per schedule in respect of vehicles/trucks. As depreciation was also claimed in respect of cars used by the directors the I.T.O. disallowed a sum of Rs.6,00,000. Accordingly, the assessment was finalised at an income of Rs.2,802,839.
3. The assessee being aggrieved preferred an appeal before the CIT(A) who accepted the declared version of the assessee whereas the additions under the heads selling and distribution and administrative expenses were reduced to Rs.7,00,000 and Rs.250,000 respectively.
The assessee's appeal is disposed of as under:
4. The reduction allowed by the learned CIT(A) to Rs.700,000 and Rs.250,000 in respect of selling and distribution expenses and administrative expenses respectively is in order and calls for no interference as necessary relief has been allowed by the CIT(A). The add backs are accordingly confirmed.
5. The I.T.O. has rightly disallowed the depreciation on motor vehicles used by the Directors. No interference is called for in this respect.
6. The CIT(A)'s action in confirming the levy of turnover tax by including excise duty and sales tax is also in accordance with law. The appellant-company has also not furnished details of excise duty paid. Therefore, the tax under section 80-D was rightly levied. The appeal of the assessee being devoid of merit is accordingly dismissed.
Departmental appeal.
7. The D.R. was absent despite the fact that he had sought adjournment on 6-6-1996 to prepare the case which was allowed. During the course of the hearing the A.R. of the assessee urged that the appellant had taken over a sick unit and this was the first year of the assessee's business, and not a single specific defect has been pointed out by the I.T.O. with regard to purchases. It was also urged that the assessee had cited the case of prominent leading beverage company at NTN 07-20-177209 wherein G.P. rate at 28.94% was accepted by the Department. It was argued by the A.R. that this parallel case has been cited in the body of the order but has not been discussed while applying a higher G.P. rate in the case of the assessee. It was also pointed out by him that as per order of the CIT(A) after adjustment of the lease money G.P. rate works out to 35.3%a which is higher rate declared by any beverage company. The A.R. further stated that the I.T.O. has not attacked the sales version of the appellant at any point. In this context he stated that there are number of reported cases of which he cited the following:
(1)Improvement in sales and G.P. rate, no evidence regarding under statement of sales in respect of locally purchased goods addition not justified. (1981) 44 Tax 78 (Trib.)
(2)Failure to maintain stock register but profit rate declared was not ridiculously low---book version not liable to be rejected CIT v. Chaudhry Brothers (1980) 42 Tax.
(8) We have heard the A.R. and also perused the order of the CIT(A). While directing the acceptance of the trading results the CIT(A) has observed.
"It was further argued that rate declared by the appellant was even better than the rate declared by the lessor company in the earlier years. Lease money amounting to Rs.2,815,636 is debited to the trading account whereas this should have been properly claimed in the P&L account. After adjustment of the lease money G.P: would work out at 35.3 % which is better than the rate declared by the lessor company in the past or applied by the Department."
9. Taking the above facts into consideration, the order of the CIT(A) and the arguments and case laws cited by the A.R. we have no hesitation in rejecting the Departmental appeal on this issue. With regard to the P&L expenses we have already confirmed the same in the appeal filed by the appellant and, therefore, no interference is made in this regard.
10. The appeal of the Department is rejected.
M.B.A./313/Trib. Appeal rejected.