I.T.AS. NOS.6066/LB OF 1991-92, 2629/LB OF 1992-93, 4416/LB OF 1994 AND 12/LB OF 1995 VS I.T.AS. NOS.6066/LB OF 1991-92, 2629/LB OF 1992-93, 4416/LB OF 1994 AND 12/LB OF 1995
1997 P T D (Trib.) 2396
[Income-tax Appellate Tribunal Pakistan]
Before Inam Ellahi Sheikh, Accountant Member and Syed Mumtaz Alam Gillani, Judicial Member
I.T.As. Nos. 6066/LB of 1991-92; 2629/LB of 1992-93 4416/LB of 1994 and 12/LB of 1995, decided on 06/08/1996.
Income Tax Ordinance (XXXI of 1979)---
----S.22---Income from business---Expenses, disallowance of ---Assessee declared loss---Declared receipts were accepted whereas add-backs were made in direct and administrative expenses---First Appellate Authority set aside assessment for reconsidering the issue of expenses---Assessing Officer re-assessed assessee while giving some relief---Common issues in all appeals before Tribunal were disallowance in expenses---Held, increase in claim of salaries and other expenses was not exactly proportionate to increase in revenue---Tribunal set aside assessment on the issue of such additions for de novo consideration.
Shaukat Amin, F.C.A. for Appellant (in I.T.As. Nos.6066/LB, 4416/LB of 1991-92 and 2629/LB of 1992-93).
Javed Rehman, D.R. fair Respondent (in I.T.As. Nos.6066/LB, 4416/LB of 1991-92 and 2629/LB of 1992-93):
Javed Rehman, D.R. for Appellant (in I. T. A. No. 12/LB of 1996).
Shaukat Amin, F.C.A. for Respondent (in LT.A.. No.12/LB of 1996).
Date of hearing: 11th-June, 1996.
ORDER
INAM ELLAHI SHEIKH (ACCOUNTANT MEMBER).---By this order we proceed to decide four appeals in the case of a private limited company deriving income from the operation of close circuit television systems at Railway Station and Air Ports. The assessee's appeals arise out of two orders dated 12-12-1991 and 30-11-1992 recorded by the learned CIT(A) Zone-III, Lahore, and order dated 20-10-1994 recorded by the learned CIT(A) Zone-I, Lahore whereas the departmental appeal arises out of the order dated 20-10-1994. The common issues in these appeals are disallowances in expenses.
2. The assessee declared loss of Rs.114,678 in the assessment year 1990-91 whereas for the assessment year 1991-92 comprising a period of 18 months loss was shown at Rs.54,887. The declared receipts were accepted in both the years whereas add-back were made in the direct expenses and the administrative expenses. The assessing officer determined the income at Rs.148,018 in the assessment year 1990-91 and at Rs.616,375 in the assessment year 1991-92. The first appellate authority allowed some relief in the expenses in the first year under consideration whereas in the second year the assessment was set aside to reconsider the issue of expenses except for the deferred capital expenditure. 1n the reassessment proceeding, the assessing officer made the assessment at Rs.576,375 in the assessmentyear 1991-92, after allowing some relief in the expenses.
3. The parties have been heard and the relevant orders perused. The appeals are decided in the following manner:
Assessment year 1990-91.
The main grievance of the assessee in this year is the disallowance of salaries by the assessing officer at Rs.80,000 which was curtailed by thefirst appellate authority to Rs.50,000, out of a claim of Rs.266,736. The assessing officer has given an observation that the assessee failed to supply the copies of national identity cards of 14 persons out of total employees of 68. The plea of the learned A.R. of the assessee is that the company only paid salaries aggregating Rs.21,000 to such 14 employees as they were working on temporary and work charge basis. As per the assessment order the assessee had claimed such direct salaries at Rs.50,230 in the immediately preceding year. The learned A.R. of the assessee stated that this increase may have been caused by the expansion which was going to benefit the Company in future. No basis have been evolved by the assessing officer or the learned CIT(A) for fixing the disallowance. In the immediately precedingyear the Tribunal has deleted certain round additions. The assessee has declared receipts in this year at Rs. 18,02,791 as against receipts of Rs.717,196 declared last year. Thus, the increase in the claim of salaries is not exactly proportionate to the increase in revenue. However, it has to be seen whether the expenditure is verifiable and incurred for the purposes of business of the company. Hence we set aside the assessment on the issue of the addition for de novo consideration. The assessing officer is directed to examine the total amount of claim in respect of such 14 employees. If the contention of the assessee is found to be correct; then this expenditure should be allowed. In any case, no ad hoc addition should be made.
The next grievance of the assessee in direct expenses is regarding audio visual expenses claimed at Rs.50,503. An addition of Rs.15,000 was made out of those claim. This expenditure was claimed at Rs.28,187 in the immediately preceding year. Considering the increase in revenue, the claim in this year seems to be reasonable and is allowed in full. In repairs and maintenance an addition of Rs.10,000 was made out of a claim of Rs.31,243. Last year this expenditure was shown at Rs.9,582. The plea of the learned A.R. of the assessee is that the assessing officer made no efforts to verify this expenditure. This addition is reduced to Rs.5,000 in this year. In travelling and conveyance, an addition of Rs.10,000 was made out of a claim of Rs.48,816. The assessee had claimed this expenditure at Rs.1,452 last year. The increase is not proportionate to the increase in revenue. Hence no interference is made. An addition of Rs.2,000 was made in the entertainment expenses claimed at Rs.8,335. Last year this claim was madeat Rs.103 only. Hence, no interference is called for.
In the administrative expenses again, the main grievance is in salary and allowances. The plea of the learned A.R. of the Assessee is that the assessing officer did not ask for any details. The issue is also remanded back to the assessing officer for de novo consideration. In the vehicle running expenses an addition of Rs.10,000 was made out of claim of Rs.36,548. This addition does not call for any interference. An addition of Rs.5,000 was made in the travelling and conveyance expenses claimed at Rs.16,070. No detail is available to interfere in this addition. An addition of Rs.5,000 was made in the entertainment expenses claimed at Rs.15,581. Being an administrative expenditure the claim appears to be reasonable and is allowed in full.
The assessee claimed an amount of Rs-408,417 on account of deferred costs of amortisation which was treated as capital expenditure by the assessing officer. However, the history of this account is not available. Hence this issue is remanded back to the assessing officer for de novo consideration.
Assessment year 1991-92
In the first appeal bearing I.T.A. No.2629/LB of 1992-93 pertaining to this year, the assessee has agitated the disallowance of deferred cost amortisation amounting to Rs.199,180. This issue is again remanded back to the assessing officer in this year for de novo consideration.
The assessee's claim of direct salaries of Rs.1,286,364 in this year was curtailed by Rs.300,000 by the assessing officer and the first appellate authority fixed the addition at Rs.1,50,000 against which both the parties have filed cross appeals. It may be mentioned here that the income declared in this period covers 18 months. As already mentioned above, the assessee had claimed such salaries at Rs.266,736 in the immediately preceding year when receipts were declared at Rs.18,02,791. The assessing officer has again pointed out that the copies of I.D. cards of 16 employees have not been furnished. However, no basis has been evolved for fixing the addition of Rs.3,00,000 by the assessing officer or at Rs.1,50,000 by the learned CIT(A). Following the decision in the assessment year 1990-91, the addition in this year is also set aside with the same directions as given earlier. In the travelling and conveyance expenses, an addition of Rs.35,000 was made out of claim of Rs.1,15,448 and the learned CIT(A) fixed such addition at Rs.20,000. Both the parties have challenged this addition fixed by the first appellate authority. However, no case has been made out to invite any interference by the either party. Hence, the order of the learned CIT(A) on this issue is maintained. In the same account in the administrative expenses, the assessing officer made an addition of Rs.40,000 out of a claim of Rs.1,51,181 and the learned CIT (A) fixed the addition at Rs.20,000. Again this addition calls for no interference at this stage. The assessee claimed administrative salaries at Rs.8,42,319 and the assessing officer made an addition of Rs.30,000. The addition was made with similar remarks as Liven earlier. This addition is also set aside for de novo consideration. An addition of Rs.40,000 was made in vehicle running expenses claimed at Rs.147,409. No interference is made in this add back. An Addition of Rs.7,000 was made in the entertainment expenses claimed at Rs.21,490. In view of the increased activity, this claim is allowed in full and the addition is deleted.
All the four appeals are decided accordingly.
C.M.S./387/Trib. Order accordingly.