COMMISSIONER OF INCOME-TAXI WEALTH TAX, FAISALABAD VS MOHSIN & CO, RICE DEALER, LAHORE ROAD, CHINIOT
2002 P T D 1858
[Lahore High Court]
Before Naseem Sikandar and Muhammad Sair Ali, JJ
COMMISSIONER OF INCOME-TAXI WEALTH TAX, FAISALABAD
versus
Messrs MOHSIN & CO, RICE DEALER, LAHORE ROAD, CHINIOT
P.T.R. No. 177 of 2001, decided on 25/02/2002.
Income Tax Ordinance (XXXI of 1979)---
----Ss.12(18) & 136(1)---Appeal to High Court---Deemed Income-- Determination---Principle---Question of fact---Amount received as loan- Dispute was that a particular amount introduced in the books of accounts of a firm as capital contribution was in fact a loan---Such amount was not treated as loan under the provisions of S.12(18) of the Income Tax Ordinance, 1979, by the Assessing Officer while the Appellate Tribunal was of the view that said amount did not attract the provisions of S.12(18) of the Income Tax Ordinance, 1979---Validity---Question raised in the reference was a question of fact which could not be converted into one of law by merely using the phraseology which was usual to framing of question of law---No amount could be deemed as income of assessee by reference to the provisions of S.12(18) of the Income Tax Ordinance, 1979, unless the same was claimed as a loan against the manner contained in the provisions---Where the amount was never claimed as a loan its addition towards income of the firm was unjustified---Reference was dismissed in limine.
Mian Yousaf Umar for the Revenue.
ORDER
NASEEM SIKANDAR, J.---The Commissioner of Income -tax/Wealth Tax, Faisalabad Zone, Faisalabad -through this reference under section 136(1) of the Income Tax Ordinance, 1979 seeks entertainment of the following questions which are stated to be of law having arisen out of an order of the Tribunal, dated 23-12-2000.
QUESTIONS:
"(i) Whether on the facts and in the circumstances of the case the learned Tribunal was justified in treating cash deposits in the books of accounts maintained in the name of partners of a firm as amounts introduced in capital?
(ii) Whether sequence of credit and debit entries respecting cash deposits by partners do not suggest nature of transactions as loan?
(iii) Whether on the facts and in the circumstances of the case the learned Tribunal was justified to delete the addition of Rs.3,60,000 made under section 12(18) of the Income Tax Ordinance, 1979?"
2. The assessee/respondent is a registered firm. During the period relevant to the assessment year, 1994-95 the firm declared income from rice husking and the sale thereof at Rs.34,230.34. Instead an assessment was framed at Rs.4,05,601. The amount so computed included an addition of Rs. 3,60,000 made with reference to the provisions of section 12(18) of the Income Tax Ordinance, 1979.
3. The petitioner failed in first appeal as far the aforesaid addition was concerned. Learned First Appellate Authority/A.A.C., Faisalabad on 8-11-1999 observed that since the impugned amount was not processed through banking channel it was hit by the mischief of section 12(18) of the Ordinance and, therefore, the Assessing Officer was justified to treat the relevant entry in the books of accounts as loss by the partners in terms of the said section.
4. On further appeal a Division Bench of the Tribunal, however, thought otherwise. They expressed the view, that based upon the record available, the amount introduced as capital by the partners did not attract the provisions of section 12(18) of the Ordinance. Therefore, it was directed to be-deleted.
5. After hearing the learned counsel for the Revenue we are of the view that the aforesaid questions as framed do not raise any substantive question of law or controversy to be resolved by this Court. According to the learned Members of the Tribunal the amounts finally added towards income of the firm by reference to section 12(18)' were in fact capital contributions of the members. Also that the deed of partnership did not prohibit any such contribution and, therefore, the capital so introduced could not be taken: as a loan to be hit by the mischief of the aforesaid provisions of the Ordinance.
6. The issue involved in the given situation if a particular amount introduced in the books of accounts of a firm as capital contribution is in fact a loan is necessarily a question of fact which cannot be converted into one of law by merely using the phraseology which is usual to framing of questions of law.
7. Also in a recent judgment recorded on 6-2-2001 in ITR 491 or, 2000 this Court has observed that no amount could be deemed as income of an assessee by reference to the said provisions unless it was claimed as a loan against the manner contained in the said provisions. In the present case since the amount was never claimed as a loan its addition towards income of the firm could hardly be sustained.
8. Therefore, we will refuse to entertain the question and dismiss this reference in limine.
Q.M.H./M.A.K./C-157/L
Reference dismissed.