I.T.A. NO. 1027/LB OF 1998, DECIDED ON 10TH MARCH, 1999 VS I.T.A. NO. 1027/LB OF 1998, DECIDED ON 10TH MARCH, 1999
1999 P T D (Trib.) 2315
[Income-tax Appellate Tribunal Pakistan
Before Shariq Mahmood, Accountant Member and Muhammad Tauqir Afzal Malik, Judicial Member
I.T.A. No. 1027/LB of 1998, decided on 10/03/1999.
(a) Income Tax Ordinance (XXXI of 1979)
----Second Sched. Part I, cl. (118-E) & Second Sched., Part IV, cl. (8), S.13, Chaps. XI & XII---Unexplained investments---Exemption---Investment in purchase of shares---Enquiry---Contention that a company exempt from income-tax under cl. (118(E)) of the First Part of the Second Sched of the Income Tax Ordinance, 1979 was immune from enquiry into the amount invested in purchase of shares was not relevant as substituted cl. 8 of Part IV of the Second Sched to the Ordinance extended the exemption only in respect of provisions of S.13, Chap. XI or Chap. XII of the Income Tax Ordinance, 1979.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss.12 (18), 62, Second Sched., Part IV, cl. (8), & Second Sched., Part I, cl. (118-E)---C.B.R. Circular No.11 of 1992, dated 4-5-1992---C. B. R. Circular No. 12 of 1992, dated 10-5-1992---Addition---Share deposit money ---Assessee, a limited company---Share deposit money was not received by assessee by cross cheque---Share deposit money also exceeded the Authorised Capital---Assessing Officer treated share deposit money as loan and added same under S.12(18), Income Tax Ordinance, 1979-- Validity---Income-tax Appellate Tribunal remanded the case to determine as to whether share deposit money fell under definition of "loan" or not and Assessing Officer should have kept into consideration the utilisation of the amount from the date it was received as share deposit money till the date, shares were allocated against same and whether interest was paid or not.
1995 PTD (Trib.) 1178 ref.
Muhammad Boota Anjum, D. R. for Appellant.
Nemo for Respondent.
Date of hearing: 3rd December, 1998.
ORDER
SHARIQ MAHMOOD (ACCOUNTANT MEMBER).---In the assessment year 1993-94 a private limited company filed return declaring nil income. The Assessing Officer observed that the company, incorporated on 18-11-1991, had authorised capital of Rs.5, 00,000 (50,000 shares of Rs.10 each), the paid-up capital was Rs.3,000 (300 shares of Rs.10 each) and share deposit money of Rs.53,06,200. It was further observed that the amount shown as share deposit money had not been received through cross cheques. Accordingly a notice under section 62 was issued confronting the assessee on the point that the share deposit money exceeded the authorised capital and as such invoking of section 12(18) was proposed.
2. The assessee, in reply, did not agree with the proposal maintaining that section 12(18) was not applicable, as share deposit money could not be treated as loan. He also intimated that the authorised capital had been increased and shares had been issued against the share deposit money. The Assessing Officer did not concur with the explanation as during- year under review (ending 30-9-1992) the authorised capital of company was Rs.5,00,000 only. On the other hand the company, through a resolution passed on 10-2-1994, intimated to the Registrar of Companies increasing the share capital. This resolution, under section 94 of the Companies Ordinance, 1984, could only come into force when notice to this effect had been sent to the Registrar. When according to the Assessing Officer, for the period ending 30-9-1992 the company's authorised share capital was Rs.5, 00,000 only it could not, receive any deposits against issuance of shares for which it was not authorised. He, thus, treated the same as a loan and added it under section 12(18). The assessee's explanation:
"The terms loan, share capital, redeemable capital, advances, deposits, prepayments, accounts payable, accrued liabilities and provision for liabilities and provision for liabilities have been separately and distinguishably defined by the Companies Ordinance. 1984 and 4th and 5th Schedules specifically deals with the grouping, classification, presentation and disclosures of capital and liabilities. The non-compliance of which attracts, the penalty provisions. Therefore, the advances, deposits, prepayments and share capital cannot be treated as loans or vice versa. The wrong grouping classification and treatment is in contravene with the provisions of the Companies Ordinance, 1984 and attract the penalty provision. Therefore, the share deposit money cannot be treated as loan. Hence the provisions of section 12(18) are not applicable.
--- was discarded.
3. Appeal was preferred against the above order where objection to the addition under section 12(18) was taken. The arguments already advanced at the time of assessment were repeated. It was also argued that under the provisions of clause (8) of Part IV of the Second Schedule the investment in the acquiring of shares in a company exempted under clause 118(c) of Part 1 of the Second Schedule (as it was in the case of the assessee) could not be called into question. Deposit of share money was a valid contract between two free consenting parties and the Revenue could not intervene or change its nature. In the light of Circulars Nos. l l and 12 of 1992, dated 4-5-1992 and 10-5-1992 respectively the provisions of section 12(18) were not applicable in this case. Reliance was also placed on cases like 1095 PTD (Trib.) 1178 in support of the plea that section 12(18) could not be invoked in this case. The First Appellate Authority did not agree with the findings of the Assessing Officer and directed that the addition be deleted being unsustainable under law.
4. The learned D.R. calls for the vacation of the impugned order maintaining that there was no justification in the same. It was submitted that as on 30-9-1992 the assessee was not authorised to receive any share deposit money as it was obvious from the facts of case. Any amount received by the company, other than through cross cheque; was a loan and as such section 12(18) attracted. He emphasised the fact that though a resolution was passed subsequently in February, 1994 but it was only relevant to that period and every year being a separate entity the action taken for 1993-94 was justified.
5. The assessee/respondent was not present in spite _ of service of notice. Appeal is being disposed of vide Rule 20(2) of the I.T.A.T. Rules, 1981.
6. The orders of the authorities below and the argument& in support of the issues in appeal has been considered and examined. There is no dispute regarding the figures or the relevant dates. The issue is whether the amount (Rs.53, 06,200) lying with the company on 30-9-1992 was a loan which fell within the mischief of section 12(18) or not. This question of fact has not been examined or looked into. The arguments that a company exempt from income-tax under Cl. (118(E)) of the First Part of the Second Schedule is immune from enquiry into the amount invested in purchase of shares is not relevant as the substituted clause (8) of Part IV of the Second Schedule extends this exemption only in respect of provisions of section 13, Chapter XI or Chapter XII. As such applicability of this clause is not relevant. Against reference to Circulars Nos.11 and 12 of May, 1992 are applicable for the assessment year 1991-92 only, Further, no nexus has been drawn between the assessee's case and the above reported decision. We are, therefore, of a the opinion that a clear cut finding on fact whether the amount was a loan or not has neither been examined or given by the Assessing Officer. The assessee/respondent by absenting itself on date of hearing has not been able to support the impugned decision. We would, therefore, deem it fair and appropriate to remand the case back to the Assessing Officer to see whether the said amount falls under the definition of loan or not. In doing so he should keep into consideration the utilisation/utility of the amount from the date it was received as share deposit money and till the date shares were allocated against it. This should be vendible from the hooks of accounts of the company. It would also be worth considering that whether any charge like interest etc. was created or paid against these deposits. After carrying out necessary enquiries and action and keeping in view the facts of case an order based on merit according to the law should be passed.
7. The order is remanded to the Assessing Officer
M.B.A. /27/Tax (Trib.)Order remanded.