I.T.As. Nos.141/LB and 142/LB of 2006, decided on 25th February, 2006. VS I.T.As. Nos.141/LB and 142/LB of 2006, decided on 25th February, 2006., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1936 (2006)

Income Tax Ordinance (XLIX of 2001)---

----Ss. 153(1)(c), 153(6) & 115(4)---C.B.R. Circular No.1 of 2005, dated 5-7-2005---C.B.R. Circular No.11 of 1991, dated 30-6-1991---Payments for goods and services---Persons not required to furnish a return of income---Carriage contractors---Assessee instead of filing statement filed returns claiming refund---Assessing Officer observed that deduction of tax on payments in case of carriage contractors was the full and final discharge of tax liability and claim of refund could not be entertained---First Appellate Authority directed the Assessing Officer to give effect to the tax deduction as in accordance with C.B.R. Circular No.1 of 2005, dated 5-7-2005 withholding tax on all types of services was adjustable and directed to issue refund as claimed---Validity---While accepting appeal of the assessee, First Appellate Authority had fully justified his action---Appellate Tribunal endorsed his view that Assessing Officer was quite unjustified while rejecting the claim of refund by treating the tax deducted as full and final discharge of tax liability---First Appellate Authority had rightly given a judicious direction, which did not warrant any interference---Departmental appeals were dismissed by the Appellate Tribunal being devoid of legal substance.

(2005) 91 Tax 263 (Trib.) ref.

2004 PTD 2749 rel.

Anwar Ali Shah, D.R. for Appellant.

Sh. Zafar-ul-Islam for Respondent.

ORDER

The instant departmental appeals pertaining to assessment years 2003 and 2004 have been filed against the consolidated impugned order, dated 30-11-2005 recorded by CIT(A) Multan, whereby the following common issue has been raised as per memo. of appeals for adjudication:

"That the CIT(A) was not justified to bring carriage contractors in the ambit of services as Income Tax Ordinance, 2001 is silent about the definition of carriage contractors."

Brief facts of the case are that assessee instead of filing statement under section 115(4) of the Income Tax Ordinance, 2001 filed returns for disclosing net income at Rs.738,000 claiming refund of Rs.62,456 each for the assessment years 2003 and 2004. The Assessing Officer observed that since, deduction of tax on payments in case of carriage contractors is the full and final discharge of tax liability under section 153(1)(c) read with section 153(6) of the Income Tax Ordinance, 2001, therefore, assessee's claim of refund could not be entertained.

Feeling aggrieved, the assessee preferred appeal before the CIT(A) Multan, who accepted the appeal of the assessee by directing the Assessing Officer to give effect of the tax deducted under section 153 of the Income Tax Ordinance, 2001, as in accordance with the Circular No.1 of 2005 withholding tax on all types of services was adjustable and directed him to issue the refund as claimed.

The learned DR has vehemently argued that the relief allowed by the first appellate authority is arbitrary and contrary to facts of the case. He has further contended that while bringing the carriage contractors in the ambit of services, the learned CIT(A) has ignored this material aspect of the case that Income Tax Ordinance, 2001 is silent about definition of carriage contractors. In order to further strengthen his view point, he has read over the para 6(II) & (III) of Circular No.l1 of 1991, which is reproduced as under:--

(ii) Services???? Rendered.---This includes the services rendered, whether through a contract or otherwise, by professionals such as medical practitioners, legal practitioners, accountants and consultants etc;

(iii) Contracts.---This includes all types of contracts including civil, mechanical and electrical works, labour contracts and carriage contracts, etc., but does not include contracts for supply of goods and service rendered which have been separately provided for in the subsection (4)."

He, therefore, prays for vacation of the impugned order of CIT(A) on the issue under consideration and restoration of the treatment meted out by the assessing authority.

In rebuttal, at the very outset, the learned AR has strongly objected the defective nature of departmental appeal, because no prayer for acceptance of appeal is given in the appeal. Therefore, according to his view, the departmental appeal merits dismissal solely on this ground. Next, on merits of the case, he has contended that Circular No.11 of 1991, which is the sole basis of assessment order is totally irrelevant as it pertained to repealed Income Tax Ordinance, 1979. He has further argued that assessee filed correct revised return and no question for final discharge of liability arises in the case. It is also asserted by him that services rendered in the case were completely out of the purview of presumptive tax regime. In support of his arguments, he has placed reliance upon reported judgment cited as (2005) 91 Tax 263 (Trib.) along with copies of return as well as Tax Audit report pertaining to year, 2003. He has maintained that deduction at 2% was in accordance with Law and the impugned order of CIT(A) is supported by Law and cogent reasons in the light of reported cases mentioned therein. In the end, he has fully supported the impugned order recorded by CIT(A) being judicious and fair and has urged for dismissal of departmental appeal.

We have heard the arguments advanced on behalf of rival parties and also carefully gone through the relevant record available on file along with reported judgments referred by learned AR of the assessee. We do not find ourselves in agreement with the contentions raised on behalf of the Department, which are weightless being not supported by any dictum of Law. The learned DR has sought vacation of the impugned order on the basis of assumptions and presumptions, which cannot be allowed. We are of the considered opinion that while accepting appeal of the assessee learned CIT(A) has fully justified his action by placing reliance on the treatment given by ITAT in its reported judgment cited as 2004 PTD 2749 and latest Circular No. 1 of 2005, which fully supports his action. We also fully endorse his viewpoint that Assessing Officer was quite unjustified while rejecting the claim of refund by treating the tax deducted as full and final discharge of tax liability under section 153(1)(c) read with section 153(6) of the Income Tax Ordinance, 2001. On the contrary, the learned CIT(A) has rightly given a judicious direction, which has been impugned before us, which does not warrant our interference. Consequently, the departmental appeals are dismissed being devoid of legal substance.

C.M.A./66/Tax (Trib.)????????????????????????????????????????????????????????????? Appeal rejected.