(a) Income Tax Ordinance (XXXI of 1979)---

----Ss.23(1)(xviii) & 136---Reference---Expenditure for renovation of shops---Partly unverifiable---Permitting round disallowance of 10% out of the claimed expenditure on renovation of shops---Validity---Where actual incurring of the expenditure and the fact that it was verifiable was never questioned by the Revenue Authorities, there was no justification for the Tribunal to make a direction to disallow the expenditure to the extent of 10% for a reason which was factually not correct---Round disallowance was against the record, as there was no evidence available on record to hold that expenditure claimed was partly unverifiable- Reference was answered in the negative.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss.23(1)(xviii) & 136---Income-tax Act (XI of 1922), S.10(2), (xii), (xv) & (xvi)---Maxim "generalibus specialia derogant"---Applicability-- Expenditure incurred on foreign, training, disallowance of ---Validity-- Rule generalibus specialia derogant would apply only where subject- matter of law was similar--- No similarity of subject-matter between cls. (xii), (xiv), (xv) & (xvi) of S. 110(2) of the late Income-tax Act, 1922, said rule was not attracted---Tribunal was not justified in holding that the expenditures were inadmissible under S.23(1)(xviii) of the Income Tax Ordinance,. 1979--Reference was answered in the negative.

Commissioner of Income-tax East Pakistan, Dacca v. Messrs The Engineers Ltd., Dacca PLD 1967 SC 524 rel.

Mahmood Mirza for Appellant.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 31st January, 2002.

JUDGMENT

NASEEM SIKANDAR, J.---Through this judgment we intend to dispose of C.T.R. Nos.79, 80, 82 and 101 of 11998.

2. At the instance of the Commissioner of Income Tax, Lahore a Division Bench of the Income Tax Appellate Tribunal (Lahore Bench) has stated the following questions of law which were claimed by the Revenue to have arisen out of their consolidated order recorded on 16-2-1992:--

Assessment Year 1986-87

Whether on facts and in the circumstances of the case, there is any evidence to support the finding of the Tribunal that the expenditure on account of shop renovation was partly un verifiable. If there is no such evidence, whether the disallowance of any part of the expenditure is lawful.

Assessment Year 1988-89

(i)"Whether on facts and in the circumstances of the case, the Tribunal was right in confirming the disallowance of expense of 88.37,524, Rs..9,700 and Rs. 10,000 incurred in giving presents to retiring employees as an incentive for meritorious service and whether expenditure voluntarily incurred was not admissible under section 23(I) (xviii) of the Income Tax Ordinance, 1979?

(ii)Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the voluntary expenditure of Rs.23,985 incurred by the Company on the decoration and illumination of shops at the occasion of national celebrations of Eid Milad-ul-Nabi and Independence Day was not admissible within the meaning of section 23(1) (xviii) of the Income Tax Ordinance, 1979?

(iii)Whether on facts and in the circumstances of the case, the Tribunal was right in holding that voluntary expenditure of Rs. 57,203 incurred by the Company on account of Hajj of a serving employee and his wife (incurred every year) was not admissible within the meaning of section 23(1)(xviii) of the Income Tax Ordinance, 1979?

(iv)Whether on facts and in the circumstances of the case, there is any evidence to support the finding of the Tribunal that the expenditure on account of shop renovation was partly unverifiable. If there is no such evidence whether the disallowance of any part of the expenditure is-lawful?

Assessment Year 1-989-90

(i)"Whether on the facts and in the circumstances of the case, there is any evidence to support the finding of the Tribunal that the expenditure on account of shop renovation was partly unverifiable. If there is no such evidence, whether the disallowance of any part of the expenditure is lawful?

(ii)Whether on facts and in the circumstances of the case, the Tribunal was right in holding that expense of Rs.19,532 on account of travel abroad (fare and accommodation expense) of its employees in connection with attending seminars, workshop and short courses for updating their knowledge and technique was inadmissible under section 23(1) (xviii) of the Income Tax Ordinance, 1979?

3. The petitioner-Company is engaged in manufacturing of foot-ware and rubber goods which are partly exported and partly sold in the local market through a net-work of retail shops. During the period under- consideration the petitioner-Company was operating more than 200 shops on which considerable expenditure for repair and renovation was made. Out of the total expenditure claimed in the four assessment years the Assessing Officer capitalized 1/3rd of the expenditure and allowed depreciation thereupon.

4. Learned First Appellate Authority maintained the treatment meted out to assessee. The Tribunal, however, did not approve further capitalization after noting that the assessee had itself capitalized part of the total expenditure on account of its being enduring the nature. However, learned Tribunal directed disallowance of the expenditure to the extent of 10 % of the claim "on account of part unverifiable nature of expenses."

5. In the year 1989-90 the assessee claimed a sum of Rs.19,73,532 as expense on foreign training of its employees. The Assessing Officer disallowed the claim on the ground that the assessee had not obtained the approval from the-Central Board of Revenue as envisaged in sub clause (xv) of subsection (1) of section 23 of the Ordinance. The claim of the assessee that expenditure was allowable under the provisions of clause (xviii) of subsection (1) of section 23 was also not accepted.

6. Learned Tribunal maintained that view. It was held that if the contention of the learned counsel for the assessee was accepted then clause (xv) of subsection (1) of section 23 became meaningless. Also that it was a special kind of expenditure which was covered by clause (xv), and therefore, could only be allowed if the condition laid in that clause was fulfilled.- Noting that the assessee has not obtained the required approval of C.B.R. with regard to the scheme for training, the expenditure on foreign training of employees was found admissible notwithstanding the possibility that the assessee had incurred this expenditure for the purpose of business.

7. After hearing the learned counsel for the parties, we are of the view that a round disallowance of 10% out of the claimed expenditure on renovation of shops etc. was totally unjustified. Learned counsel for the petitioner is correct in pointing out that actual incurring of the expenditure and the fact that it was verifiable was never questioned by the Revenue Authorities. Therefore, there hardly appears any justification for the Tribunal to make a direction to disallow the expenditure to the extent of 10% for a reason which-was factually not correct. It is stated at the bar that neither in the earlier nor in the subsequent years such disallowance was never made by the Revenue. It is pointed out that in the immediate preceding year viz. 1985-86 and the succeeding years 1991-92, 1992-93 and 1993-94 similar disallowances were knocked out by the Tribunal and the Revenue did not agitate the matter any further.

8. Be that as it may since the reason advanced by the Tribunal to make a direction for a round disallowance is against the record, our I answer to the questions in the four assessment years involved is in. the negative, to the effect that there was no evidence at all available on record to hold that expenditure claimed' was partly unverifiable.

9. In the year 1989-90 the question of disallowance of the expenditure incurred on foreign training as rightly pointed out by the learned counsel for the petitioner stands resolved by the Hon'ble Supreme Court of Pakistan in re: The Commissioner of Income-tax, East Pakistan, Dacca v. Messrs The Engineers Ltd., Dacca (PLD 1967 SC 524). Their Lordships in the course of their judgment concluded that the rule generalibus specialia' derogant applied only where subject-matter of the law was similar. According to their Lordships there being no similarity of subject-matter between clauses (xii), (xiv), (xv) and (xvi) of section 10(2) of the late Income-tax, Act, 1922, the aforesaid rule was not attracted. Accordingly our answer to the questions has to be in the negative. To the effect that the Tribunal was not justified in holding that the aforesaid expenditures were inadmissible under section 23(1) (xviii) of the Income Tax Ordinance, 1979.

10. Reference is disposed of accordingly.

Q.M.H./M.A.K./B-74/L

Order accordingly.