COMMISSIONER OF INCOME-TAX VS KOHINOOR SUGAR MILLS LTD.
2001 P T D 2398
[Lahore High Court]
Before Nasim Sikandar and Jawwad S. Khjawaja, JJ
COMMISSIONER OF INCOME‑TAX
Versus
KOHINOOR SUGAR MILLS LTD
C.T.R. No.48 of 1995, heard on 25/04/2001.
(a) Income Tax Ordinance (XXXI of 1979)‑‑-
‑‑‑‑S.136‑‑‑Reference to High Court‑‑‑Surcharge‑‑-Taxes payable could be termed as retained income for the purpose of levy of surcharge.
Commissioner of Income‑tax v. Messrs Habib Sugar Mills Ltd. PLD 1993 SC 257 rel.
(b) Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑‑Ss. 23(1)(x) & 136‑‑‑Reference to High Court‑‑‑ auctions‑‑‑ ad debts‑‑ Amount written off as a consequence of arbitration award was disallowed by the Assessing Officer and treatment meted out was maintained m the first appeal‑‑‑Tribunal found that amount so written off was allowable deduction under S.23(1)(x) of the Income Tax Ordinance, 1979‑‑‑Tribunal was justified to reject the departmental plea that the claim of bad debt could not be allowed under S.23(1)(x) of the Income Tax Ordinance, 1979 as the income was originally assessable under S.30 of the Income Tax Ordinance, 1979‑‑ Finding of facts as recorded by the Tribunal was not challenged on any basis nor these were claimed to be against the material available on record‑‑‑Fact that original assessment ought to have been made under a different provision of the Income Tax Ordinance, 1979, as rightly found by the Tribunal, was immaterial as far as the issue of admissibility of bad debt was concerned.
Commissioner of Income‑tax v. Messrs Habib Sugar Mills Ltd.. PLD 1993 SC 257 rel.
Khawaja Muhammad Saeed for Petitioner.
Nemo for Respondent.
Date of hearing: 25th April, 2001.
JUDGMENT
NASIM SIKANDAR, J.‑‑‑This is a case stated by the Lahore Bench of the Income‑tax Appellate Tribunal. Following questions have been framed for our consideration and answer:‑‑‑
Question of Law for 1978‑79 and 1979‑80
".Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the taxes payable can be termed as retained income for the purpose of levy of surcharge?
Question of Law for 1984‑85
"(1)Whether on the facts and in the circumstances of the case the Tribunal was justified to hold the amount of Rs.3,018,838 written off as bad debt following arbitration award was allowable as a bad debt?
(2)Whether on the facts and in the circumstances of the case the Tribunal was justified to reject the departmental plea that the claim of bad debt could not be allowed under section 23(1)(x) of the Ordinance as the income was originally assessable under section 30 of the Ordinance." 2. As far as the first question framed for the years 1978‑79 and 1979‑80 is concerned, it needs to be replied in the affirmative in the light of the judgment of the Hon'ble Supreme Court of Pakistan in re: Commissioner of Income‑tax v. Messrs Habib Sugar Mills Ltd. reported as PLD 1993 SC 257.
3. The facts in the year 1984‑85 in brief are that while framing assessment, the Assessing Officer disallowed a sum of Rs.30,18,838 claimed to have been written of as a consequence of arbitration award. The treatment so meted out was maintained in first appeal. On. further appeal, however, the Tribunal after examining the peculiar facts of the case concluded that the amount written off was very well‑allowable as deduction under sub‑clause (x) of section 23 of the Income Tax Ordinance. Earlier it was noted that the concern to which the loan was advanced remained in financial constraints. Also that the arbitrator after hearing both the parties concluded that calcula tion of compound interest on loan advanced to the sister concern namely Messrs Koh‑i‑Noor Mills Limited was unjustified. The learned Tribunal also expressed the view that the Assessing Officer appeared under misconception about the applicable provisions of law. In this regard, the difference between the aforesaid provisions of Ordinance and their comparable provisions in the late Act of 1922 was also highlighted to make the point.
4. After hearing the learned counsel for the Revenue, we are of the view that the Tribunal has necessarily recorded a finding of fact that the amount written off as bad debt was justified in the facts of the case. Their observations with regard to the provisions of Income Tax Ordinance under which the assessment for the year was framed is also not open to exception. In the view of the Tribunal when the income was admittedly being computed from business under section 22 of the Income Tax Ordinance, the provisions of section 23 providing for deductions, were applicable. The Tribunal was also right in comparing the provisions of section 10(2) (xi) of the late Act of 1922 and sub‑clause (x) of section 23.
5. The finding of facts as recorded by the Tribunal are not challenged on any basis nor these are otherwise claimed to be against the material available on record. The fact that original assessment in the case ought to have beers made under a different provisions of the Income Tax Ordinance, as rightly found by the Tribunal was immaterial as far as the issue of admissibility of bad debts was concerned.
6. That being so, the question for the year 1978‑79 and 1979‑80, on the basis of the aforesaid judgment of the Hon'ble Supreme Court of Pakistan is answered in the affirmative. In the year 1984‑85 for the aforesaid reasons again our answer both the questions is in the affirmative.
C.M.A./M.A.K/C-87/LQuestions answered.