I.T.As. Nos.1031/LB and 210/LB to 212/LB of 2001, decided on 30th September, 2003. VS I.T.As. Nos.1031/LB and 210/LB to 212/LB of 2001, decided on 30th September, 2003.
2004 P T D (Trib.) 1883
[Income‑tax Appellate Tribunal Pakistan]
Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member
I.T.As. Nos.1031/LB and 210/LB to 212/LB of 2001, decided on /01/.
th
September, 2003. (a) Income‑tax‑‑‑
‑‑‑‑Profit & Loss account‑‑‑Sale promotion expenses‑‑‑Such expenses allowed to the extent of 45 % were confirmed by the Appellate Tribunal.
I.T.As. Nos. 2801 and 281/LB of 2000 and I.T.A. No.5350/LB of 1997 rel.
(b) Income Tax Ordinance (XXXI of 1979)‑‑‑--
‑‑‑‑Ss. 108(b), 139, 142, 116 & 50(1)(4)‑‑‑Income Tax Rules, 1982, Rr.53 & 61‑‑‑Penalty for failure to furnish return of total income and certain statements‑‑‑Late filing of statements showing Nil tax deduction‑ Levy of penalty‑‑‑Validity‑‑‑Statements were available on record showing tax deduction at Nil‑‑‑Tax was not deductible on salaries paid to employees‑‑‑No payment was made to any party which attracted the provisions of S.50(4) of the Income Tax Ordinance, 1979‑‑‑Rule 53 of the Income Tax Rules, 1982 did not require furnishing of statement under S.139 of the Income tax Ordinance, 1979 in the circumstances‑‑ Assessee had also not committed any default under S.142 of the Income Tax Ordinance, 1979 as he did not make any payment to any party attracting deduction under S.50(4) of the Income Tax Ordinance, 1979‑‑ Penalties deleted by the First Appellate Authority were confirmed by the Appellate Tribunal.
I.T.A. No. 3412/LB of 1999 rel.
(c) Income Tax Ordinance (XXXI of 1979)‑‑‑-
‑‑‑‑S.12(18)‑‑‑Income deemed to accrue or arise in Pakistan ‑‑‑Advances‑ Business activity/transaction‑‑‑Addition was made on account of sum received in cash against purchase of tickets on behalf of parties on the ground that once advance is received other than crossed cheque, there was hardly any justification for going into the nature of the advance or for that matter finding out whether it was a trade/business advance or receipt of cash otherwise‑‑‑Validity‑‑‑For the purposes of purchase of ticket the buyer paid a sum while the ticketing agency handed over ticket after few days on fulfillment of the requirements of issuance and confirmation of the dates‑‑‑During that period, deposit remained in the custody of seller yet could not be termed as advance in the spirit of S.12(18) of the Income Tax Ordinance, 1979‑‑‑Nature of advance in fact was not advance in cash other than the ordinary business transaction which did not fall within the mischief of the provisions of S. 12(18), of the Income Tax Ordinance, 1979 and it was never the intention of the legislature‑‑‑Amount received against the purchase of tickets‑ could not be treated as advance in terms of .provisions of S. 12(18) of the Income Tax Ordinance, 1979.
PLD 1991 SC 280 ref.
2001 PTD 1180 and 1973 PTD 375 rel.
(d) Income Tax Ordinance (XXXI of 1979)‑‑‑--
‑‑‑‑S.12(18)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Advances‑ Sale of goods‑‑‑Transaction agreed between parties and money paid before transfer of goods did not amount to advance.
(e) Income Tax Ordinance (XXXI of 1979)‑‑‑--
‑‑‑‑S. 24(ff)‑‑‑Deductions not admissible‑‑‑Addition‑‑‑Addition made under S.24(ff) of .the Income Tax Ordinance, 1979 at Rs.72,000 was confirmed by the Appellate Tribunal since the amount of Rs.6000 per month was paid in cash‑‑‑Payment was to be made through cross cheque since the aggregate amount exceeded Rs.50,000 and transaction exceeded Rs.5,000 each as well.
Muhammad Bashir Malik for Appellant.
Muhammad Asif, D.R. for Respondent.
Date of hearing: 25th September, 2003.
ORDER
IMTIAZ ANJUM (ACCOUNTANT MEMBER).‑‑‑The assessee as well as the department are in cross‑appeals for the assessment year 1999‑2000 against the order, dated 30‑12‑2000 passed under section 62 of the Income Tax Ordinance. The assessee has contested the confirmation of additions made under section 12(18), 24(ff) and under certain heads of P&L account while the Revenue has assailed allowance of sales promotion expenses to the extent of 45 % of the gross commission against 42 % allowed by the Assessing Officer. Besides that two appeals pertaining to the same assessment year have also been filed by the Revenue against the order, dated 4‑11‑2000 whereby penalties imposed under section 108(b) for non submission of monthly statements under section 139 and 142 of the Income Tax Ordinance were ordered to be deleted. The appeals are being decided as under:‑‑
DEPARTMENTAL APPEALS
2. Briefly stated the facts of the case are that the assessee is a private limited company, derives income from travel agency. Return was filed declaring income of Rs.10,304 the Assessing Officer having noticed some discrepancies in the books of account mentioned in the body of assessment order, issued statutory notice which were complied with. The explanation furnished by the assessee, however, did not find favour with the Assessing Officer. Consequently total income was determined at Rs.3,61,431 including additions on account of sales promotion expenses, addition under section 12(18), under section 24(ff) and under certain heads of P&L account. Being aggrieved with the above said treatment the assessee preferred appeal before the learned CIT(A) who vide order, dated 30‑10‑2000 allowed sales promotion expenses (as 45 % as well as some relief in the P&L account under the head Postage and Telegram and Misc. expenses, while, additions made under sections 12(18), 24(ff) and out of P&L account were confirmed, hence the instant cross‑appeals by both the parties.
3. We have heard both the parties and have gone through the orders of the authorities below. As far as allowance of sales promotion expenses @ 45 % is concerned, the same does not call for any interference as the expenses to the extent of 45% were allowed in view of the judgment of Tribunal vide I.T.A. No.2801 and 281/LB of 2000 dated 21‑10‑2000. A copy of another judgment of the ITAT passed vide I.T.A. No. 5350/LB of 1997, dated 20‑11‑2001 in the case of instant assessee was also produced before this Court according to which appeal filed by the department on same matter was rejected. For the same reasons we decline to interfere on this issue.
4. As far as appeals of the Revenue against deletion of the penalty imposed under section 108(b) for default of statement under section 1191 of the Income Tax Ordinance, 1979, are concerned, the facts as per assessment order are that the assessee company was under legal obligation to deduct tax under section 50(1) and 50(4) and deposit the same into Government Treasury and submit monthly statement for the month of July, 1998 under section 139 and 142 of the Income Tax Ordinance, 1979 read with rules 53 and 61 of the Income Tax Rules, B 1982. Since the assessee had failed to fulfill the above requirement of the law the Assessing Officer issued notice under section 116 which remained un complied with. However statements under sections 139 and 142 were filed on 28‑1‑1999 which were late, hence the Assessing Officer proceeded to impose penalties under section 108(b) of the Income Tax Ordinance, 1979 at Rs.34,600 and Rs.34,700 respectively which were challenged in first appeal. During appeal proceedings the learned CIT(A) observed that statements under sections 139 and 142 of the Ordinance were available on record showing tax deduction under section 50(1) and 50(4) at Rs. Nil. It was also observed that on salaries paid to the employees tax under section 50(1) was deductible. Similarly no payment was made to any party which attracted the provisions of section 50(4) of the Ordinance. The learned CIT(A) further relying upon the judgment of the ITAT vide. ITA No.3412/LB/1999, dated 27‑4‑2000 C wherein it has been held that in such circumstances rule 53 does not require furnishing of statement under section 139 hence penalty was not exigible. It was further held that the assessee has not committed any default under section 142 as he did not make any payment to any party attracting deduction under section 50(4). Penalties imposed under section 108(b) of the Ordinance were accordingly deleted. In the facts and circumstances discussed above the decision of the learned CIT(A) is in order, therefore, does not call for any interference.
ASSESSEE'S APPEAL
5. As mentioned in para. 2 the assessee has challenged addition under section 12(18). We have observed that the same was made for non submission of plausible explanation with regard to "advance" of Rs.1,84,478 received from customers in cash. In the opinion of the Assessing Officer, since the advance in question was received other than by crossed cheque in terms of provisions of section 12(18) this sum was liable to be treated as deemed income. Full amount was added towards income. The learned CIT(A) confirmed this treatment. The learned A.R. of the assessee while contesting this treatment has reiterated the arguments advanced before authorities below emphasizing that sum received in cash was against purchase of tickets on behalf of certain parties which fact has not been dislodged by both the authorities below. The transaction, therefore, was like any other ordinary business activity. The Assessing Officer obviously feel in grave error while treating this advance other than with reference to the trade of the appellant and as such not caught by mischief of provision of section 12(18).
6. The learned D.R. while opposing the arguments advanced by the learned A.R. has stated that through amendment in the provisions of section 12(18) advance received in cash has also been brought within the ambit of this section. Therefore, in the facts and circumstances discussed in detail by the Assessing Officer and commend upon the learned CIT(A) it is absolutely clear that advance received other than through crossed cheque has to be treated in terms of the provisions of section 12(18) without any tag of encumbrances through ifs and butts based on assumptions. Elaborating his point of view the learned D.R. has relied upon a reported judgment cited as PLD 1991 SC 280 highlighting the principle that while interpreting provisions of law the Courts must not look into the text for what has not been expressed. On the strength of this judgment the learned D.R. submitted that once advance is received other than crossed cheque, there is hardly any justification for going into the nature of the advance or for that matter finding out whether it was a trade/business advance or receipt of cash otherwise.
7. The facts of addition briefly mentioned supra and arguments put forth by both the parties have been carefully considered by us. At the onset we are unable to agree with the observations of the learned D.R. that going into the nature and mode or advance is not necessary, merely, on the assumption that all types of advances received in cash are caught by the mischief of provisions of section 12(18) which practically tantamount bringing all types of advances such as token money. "Zar‑e -Pashgee" pertaining to a transaction of purchase and sale between the two parties etc. into the ambit of section 12(18) which does not appear to be the intention of the legislature. Since there no escape from this logical and legal position the nature and node of a transaction commencing with the initiation and culmination of a transaction in the ordinary course of business cannot be ignored. In support of this viewpoint we have derived lot of strength from the earlier judgments reported as (2001) 83 Tax 451. The ratio decided through this judgment though is in the context of the provisions of section 12(18) regarding "loan" its claim or shown to have been claimed, yet the Honourable. High Court has laid down the principle that unless the amount of loan is received cash is recorded in the books of account as loan or shown as loan only then the provisions of section 12(18) will come into operation. This principle applied in the given circumstances leads to the obvious conclusion that unless assessee shows or claims said amount as an advance, it cannot be treated in terms of provisions of section 12(18). Moreover a transaction agreed between parties and money paid before transfer of goods does not amount to be an advance. In this case for the purposes of purchase of ticket the buyer paid a sum while the ticketing agency hand over ticket after few days on fulfillment of the requirements) of issuance and confirmation of the dates etc. We, therefore, opined that although, during that period, deposit remained in the custody of seller yet cannot be termed as advance in the spirit of section 12(18). In arriving at this conclusion we are fortified from judgment reported as (1973) 29 Tax 242 (H.C.) = 1973 PTD 375. The Honourable High Court while deciding the issue regarding sale of shares held that share deposit money is not an advance being transaction of sale which cannot be termed as advance even shares are transferred at a later stage. The relevant para wherefrom speaks as follows:‑‑
"In the case before us, the Company admittedly made an offer to sell the shares in dispute by a resolution passed by the Board of Directors on the 28th February, 1958. By this resolution new shares were offered to the existing shareholders and this resolution was put into effect so far as so that even the price aggregating Rs.71,86,800 for the acquisition of these shares was duly deposited in the coffers of the company by the existing share‑holders who accepted the offer. There was, therefore, an offer by the company to sell the shares, an acceptance of the offer by the existing shareholders and the payment of the consideration to the company for the purchase of the shares. All formalities or a contract as envisaged under section 5 of the Sale of Goods Act were therefore, complete and the goods being existing goods stood transferred to the shareholders to whom they were allotted as from the date‑that shareholders accepted the offer made to them."
8. Now reverting to the facts of this case the amount treated as cash was paid by three parties for purchase of air tickets. The required tickets were purchased by the appellant/assessee against the amounts already mentioned. There is no dispute regarding tickets purchased and delivered. In simple terms as soon as the amount was paid it was for the purchase of air tickets and in any event that tickets were purchased on their behalf which may take a day or a week or still longer period is the question whether the transaction stood completed or not" The above stated position may be compared with routine transactions such as a person went to medical store and asked for a medicine. On checking it is reported that the required medicine is not available which may be provided from the stocks at some other place or on fresh arrival of the stock. Now in this case if the person make the payment and collect medicine after 7 days, does the payment made constitute the advance in cash or is the transaction of purchases and sale completed between the two parties? We think that as soon as the payment is received for a specific transaction and the recipient of the cash undertakes to provide or deliver the required goods, the transaction stands completed regardless of, the timing of the delivery of goods against which payment received in cash. In a nutshell, it may be described that a transaction of purchase/sale stands simultaneously completed between the purchaser and the seller the moment it delivered. Notwithstanding what has been elaborated through the example discussed above, it is not the case of the Revenue that the advance was claimed as advanced by the respondent; assessee or for that matter it Was shown as advance without indication of the same being an amount for purchase of air tickets particularly when it is undisputed fact that the tickets were purchased and delivered.
9. Now in the facts and circumstances of the case the provisions of law and the case‑law reported as (1973) 29 Tax 242 (H.C.)= 1973 PTD 375 (H.C.), we are of the considered opinion that the nature of advance in the facts is not advance in cash other than the ordinary business transaction which to best of our appreciation is not caught by the mischief of the provisions of section 12(18) and it was never the intention of the legislation. Keeping in view the facts and factors mentioned above we hold that the amount received against the purchase of tickets cannot be treated as advance in terms of provisions of section 12(18).
10. However, addition made under section 24(ff) at Rs.72,000 is confirmed since amount of rent i.e. Rs.6,000 per month was paid in cash which attracts section 24(ff) of the Income‑tax Ordinance, 1979. In the light of section 24(ff) the payment was to be made through cross cheque I since the aggregate amount exceeded Rs.50,000 (i.e. Rs.72,000) .and the transactions exceeded Rs.5,000 (i.e. Rs.6,000) each as well. The learned A.R. of the assessee was unable to controvert the above facts hence we decline to interfere on this matter also.
11. As regards P&L add backs, these were confirmed by me learned CIT (A) keeping in view the history of the case as well as reasonability of the additions. No interference is required.
12. As a result, appeal of the assessee against the order tinder section 12(18) is accepted while of the department stands rejected.
C.M.A./77/Tax (Trib.)Assessee's appeal accepted.