I.T.A. NO. 1572/KB OF 1997-98, DECIDED ON 30TH APRIL, 1998. VS I.T.A. NO. 1572/KB OF 1997-98, DECIDED ON 30TH APRIL, 1998., 1998 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 3475 (1998)

Income Tax Ordinance (XXXI of 1979)---

----S. 164---Unilateral relief---Double taxation---Unilateral relief ---Assessee had branches in Azad Kashmir ---Assessee filed income-tax Return in Azad Kashmir--- Income was assessed on the higher side than the declared income by the Assessing Authority of Azad Kashmir ---Assessee also filed return in Pakistan including the income declared in Azad Kashmir---Double tax relief was allowed on the basis of returned income in Azad Kashmir and not on the basis of assessed in Azad Kashmir by the Assessing Authority of Pakistan as 'the difference of declared income and assessed income in Azad Kashmir was not doubly taxed---First Appellate Authority confirmed the assessment order on the ground that relief would be allowed under S.164 of the Income Tax Ordinance, 1979 on the basis of doubly taxed income and such doubly taxed income referred only to such income as had been suffered tax both in Pakistan and the country in which it had accrued and arisen---Any income suffered incidence of tax in the other country but that had not suffered incidence of tax in Pakistan would not be deemed to be doubly taxed and no relief would be allowed in respect of such income.

Muhammad Qadeer, C.A. for Appellant.

Misri Ladhani, D.R. for Respondent.

Date of hearing: 30th April, 1998.

ORDER

MUHAMMAD MUJIBULLAH SIDDIQUI (CHAIRMAN). ---The above appeal is directed against order dated 1-12-1997 by the learned C.I.T.(A), Zone-1, Karachi in I.T.A. No.113 of 1997, relating to the assessment year 1991-92.

2. Heard Mr. Muhammad Qadeer, C.A., learned representative for the appellant and Mr. Misri Ladhani, learned representative for the department..

3. The sole objection raised on behalf of the appellant is to the non acceptance of relief as sought by the appellant under section 164 of the Income Tax Ordinance, 1979. The ground of appeal is not properly drafted, however, the facts giving rise to this appeal shall make the issue clear. The relevant facts are that the appellant has its branches in Azad Kashmir also and in the assessment year 1991-92 the appellant declared income to its return of total income relating to operation in Azad Kashmir, filed in Azad Kashmir at Rs.35,02,509. The income was assessed at` Rs.74,64,659 The income was thus enhanced by Rs.39.62,150. The appellant in its return of total income filed in Pakistan included the amount of Rs.35,02,509 in its declared total income which related to the operation in Azad Kashmir. Thus the amount of Rs.35,02,509 suffered incidence of tax in Pakistan as well as Azad Kashmir. The assessing officer in Pakistan while completing the assessment order did not allow double income-tax relief under section 164 of the Income Tax Ordinance, 1979. The appellant, therefore, submitted rectification application praying that relief under section 164 of the Income Tax Ordinance for the taxes paid in Azad Kashmir may be allowed. The assessing officer held that the returned income in Azad Kashmir was Rs.35,02,509 on which the tax was paid at Rs.23,11,656. This amount was subjected to tax in Azad Kashmir and Pakistan both. So far the remaining amount is concerned it was taxed in Azad Kashmir only and not in Pakistan. therefore the income of Rs.39,62,150 was not doubly taxed and as such relief will be allowed on the basis of income which is doubly taxed only and not on the basis of average rate of tax on the entire amount of tax at Rs.49,62,676 paid in Azad Kashmir. The assessing officer thus allowed relief under section 164 by taking into consideration the returned income in Azad Kashmir and the amount of tax paid thereon at 85.23,11,656,

4. Being aggrieved with the treatment given by Assessing Officer, the appellant preferred first appeal assailing the treatment for the reason that the relief ought to have been allowed not on the basis of returned income in Azad Kashmir but on the basis of assessed income in Azad Kashmir. The main contention before the learned C.I.T.(A) was that the relief should be allowed on the basis of income which arose/accrued in Azad Kashmir amounting to Rs.74,64,659. The learned C.I.T.(A) did not accept the contention and held that section 164 of the Income Tax Ordinance, 1.979 clearly envisages that the relief would be allowed on the basis of "such doubly taxed income." The learned C.I.T.(A) further observed that, "such doubly taxed income" refers only to such income as has suffered tax both in Pakistan and the country in which it had accrued and arisen. He further held that if any income has suffered incidence of tax in the other country but it has not suffered incidence of tax in Pakistan then it will not be deemed to be doubly taxed and no relief shall be allowed in respect of such income and the tax paid thereon, under section 164 of the Income Tax Ordinance. The contention was, therefore, repelled. Being still dissatisfied the appellant has preferred this second appeal before us.

5. Mr. Muhammad Qadeer, learned representative for the appellant has reiterated the same contention before us as raised before the learned two officers below. He has, however, conceded to the effect that the amount of Rs.35,02,509 is the only income which has suffered incidence of tax in Pakistan as well as Azad Kashmir. So far the amount of Rs.39,62,150 which is the difference of declared income and assessed income in Azad Kashmir has been subjected to tax in Azad Kashmir only and not in Pakistan. Thus as a matter of fact, he is not able to deny that the amount of Rs.39,62,150 has not been doubly taxed and the amount of Rs.35,02,509 is the only amount which has been doubly taxed. So far the contention that the entire income arising or accruing outside Pakistan ought to have been considered for the purpose of allowing relief for double taxation is concerned, it is fallacious on the face of it because the difference of declared income and assessed income, in Azad Kashmir has not been doubly taxed, which fact has been admitted. Section 164 of the Income Tax Ordinance, 1979 provides relief to double taxation of income by virtue of being taxed in Pakistan and outside Pakistan also. No relief is envisaged under section 164 in respect of any income accruing or arising to any assessee outside Pakistan, which has been subjected to tax outside Pakistan only and on which tax is not payable in Pakistan or tax has not been paid in Pakistan. The reason being that such income shall not be, such doubly taxed income" as specifically provided in section 164.

6. For the foregoing reasons the orders of the learned two officers below are hereby maintained. The objection raised on behalf of the assessee is without substance.

7. The appeal stands dismissed accordingly.

C.M.A./555/Trib.Appeal dismissed.