I.T.A. NO.568/KB OF 1998-99, DECIDED ON 27TH NOVEMBER, 1998. VS I.T.A. NO.568/KB OF 1998-99, DECIDED ON 27TH NOVEMBER, 1998.
1999 P T D (Trib.) 2172
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Mujibullah Siddiqi, Chairman and Muhammad Mahboob Alam, Accountant Member
I.T.A. No.568/KB of 1998-99, decided on 27/11/1998.
Income Tax Ordinance (XXXI of 1979)---
----Ss.24(c) & 50(7-B)---Deductions not admissible---Deduction of tax at source---Deduction of tax from rent paid was not made under S.50(7-B) of the Income Tax Ordinance, 1979 by the assessee---Claim for payment of rent was disallowed under S.24(c) of the Income Tax Ordinance, 1979 by the Assessing Officer, while the rental income was taxed in the hands of recipient---Validity---Held, if it was proved that rent paid had already suffered incidence of tax in the hands of recipient, no disallowance was to be made by recourse to provisions contained in S.24(c), Income Tax Ordinance, 1979 for the reason that the condition of payment of tax on the allowance or deduction would be taken to have been fulfilled.
1996 PTD (Trib.) 411 ref.
Hassan Alain for Appellant.
Mrs. Shaista Abbas, D.R. for Respondent
Date of hearing: 27th November, 1998.
ORDER
MUHAMMAD MUJIBULLAH SIDDIQUI (CHAIRMAN). ---The above appeal is directed against the order, dated 31-7-1998 by the learned C.I.T.(A), Zone V, Karachi in I.T.A. No.517/98 relating to the assessment year 1995-96. The relevant facts are that the appellant claimed to have paid rent to Civil Aviation Authority at Rs.8,50,050. The tax was not deducted under section 50(713) of the Income Tax Ordinance and, therefore, the claim was disallowed under section 24(c) of the Ordinance. The appellant being aggrieved preferred first appeal contending that although the appellant could not make deduction of tax from rent paid to the C.A.A. in accordance with the provisions contained in section 50(713) but the C.A.A. is a regular income-tax assessee borne on NTN 12-04-3356898 who have already paid tax on their rental income and as such the disallowance is not justified. Reliance in. this behalf was placed on the Tribunal, judgment reported as 1996 PTD (Trib.) 411 in which it is held that the recipient banks having paid taxes in Pakistan, the Assessing Officer was not justified in disallowing the claim of deduction on account of interest paid by the assessee companies under section 24(b). The learned C.I.T.(A) did not accept the contention and held that the facts of cited case were distinguishable. The contention that since rental income has already been taxed in the hands of recipient, therefore, the disallowance amounts to double taxation of income was not accepted for the reason that the law is specific and is to the effect that where a person is required to deduct or collect tax under section 50 and he fails to do so, then he is the assessee in default. The learned C.I.T.(A) further observed that in the absence of necessary evidence, that at the time of appellant's assessment the payee or lessor had cleared his tax liability, the addition was justified.
2. Being still dissatisfied the appellant has preferred this second appeal before us.
3. Heard Mr. Hassan Alam, Advocate for the appellant and Mrs. Shaista Abbas, learned representative for the Department. Mr. Hassan Alain has placed reliance on the various judgments of this Tribunal in which it has been held that the Legislature has provided in section 24(b) and (c) that the allowance or deduction should not be allowed unless on the allowances and deductions enumerated therein, tax has been paid or deducted and paid under section 50 as the case may be. The provisions, therefore, visualise two situations on fulfilment whereof the allowance or deduction shall be allowed. First is that, the tax on the allowance or deduction has been paid and the second is that the tax on the allowance or deduction is deducted and paid under section 50. If either of the condition is satisfied the fulfilment of the other condition is not to be insisted upon. It has therefore, been held by the Tribunal that if tax on any allowance or deduction has been paid by the recipient i.e. the original assessee, the deducting authority shall not be treated as assessee in default and the disallowance under section 24(b) and (c) shall not be made. The only liability which the deducting authority shall incur in such situation would be the charging of additional tax, under section 86 at the rate of 24 % per annum on the amount not paid for the period commencing from the date on which he was required to pay such tax to the date of the payment thereof. Thus of it is proved to the satisfaction of the Assessing Officer that the recipient, to wit, the original assessee has already paid tax on an amount which is being claimed as allowance or deduction no disallowance is to be made under section 24(c) notwithstanding the fact that the deducting authority failed to deduct toe tax under section 50. However, the initial burden of showing to the satisfaction of Assessing Officer that the allowance or deduction has already suffered incidence of tax is on the assessee.
4. In view of the above discussions we are of the considered opinion that the fair opportunity should be given to the assessee to prove that the rent paid to the C.A.A. has already suffered incidence of lax in the hands of original assessee i.e. C.A.A. If it is proved no disallowance is to be made by recourse of provisions contained in section 24(c), for the reason that the condition of payment of tax on the allowance or deduction would be taken to have been fulfilled. The assessment order on the point of disallowance of rent paid to the C.A.A. is, therefore, hereby set aside for de novo consideration. The assessee is directed to produce necessary evidence before the Assessing Officer for verification of the fact that the rent paid to the C.A.A. has already suffered incidence of tax. The Assessing Officer can verify the assertion and evidence produced by the assessee including any certificate from C.A.A. from the assessment record of the C.A.A. The N.T.N. of C.A.A. is already available on record. The appeal is allowed as above.
C. M. A./24/Trib ???????????????????????????????????????????????????????????????????????????????? Appeal allowed