Messrs DREAMLAND TRAVEL SERVICES (PVT.) LTD. VS DEPUTY COMMISSIONER OF INCOME TAX/WEALTH TAX
2007 P T D 178
[Lahore High Court]
Before Nasim Sikandar and Jawwad S. Khawaja, JJ
Messrs DREAMLAND TRAVEL SERVICES (PVT.) LTD.
Versus
DEPUTY COMMISSIONER OF INCOME TAX/WEALTH TAX
I.T.A. No.119 of 1999, heard on 03/10/2006.
Income Tax Ordinance (XXXI of 1979)---
----S. 12(18)---Sum not claimed as loan---Deeming such sum as income of assessee---Scope---Such addition could not be made in absence of assessee's such claim---Neither such addition could be made nor could defence taken by assessee be rejected without recording a finding of fact that such sum was injected in business and used as capital, circulating or otherwise; in other words, assessee's explanation could not be demolished only by ruling that alleged sum introduced in account of assessee was factually used in business, thus, could be treated as loan taken for catering capital needs of assessee.
Messrs Micropak (Pvt.) Ltd. v. Income Tax Appellate Tribunal, Lahore and 2 others 2001 PTD 1180 rel.
Ch. Anwar-ul-Haq for Appellant.
Ch. Jan Muhammad for Respondent.
Date of hearing: 3rd October, 2006.
JUDGMENT
NASIM SIKANDAR, J.---In this further appeal under section 136(1) of the late Income Tax Ordinance, 1979, as it existed at the relevant time, following questions are stated to have arisen out of the impugned order of the Income Tax Appellate Tribunal, Lahore Bench Lahore, dated 18-12-1998:--
(1) "Whether on the facts and circumstances of the case, the Tribunal was right in treating the two different accounts maintained by the appellant in the name of the Director recording huge verifiable transactions of sale of tickets and receipt thereof were representing loan from director?
(2) Whether on the facts and circumstances of the case, the Tribunal fell in error in changing the nature of trade transactions as of advance/loan account?
(3) Whether on the facts and circumstances of the case, a trade credit can be treated as loan for the purpose of section 12(18) of the Ordinance?
(4) Whether on facts and circumstances of the case any amount/advance received in the nature of trade could be treated as loan?
(5) Whether on the facts and circumstances of the case, when an amount has been deposited by a director through proper bank voucher directly on realization of advance for tickets, the same can be treated as loan in terms of section 12(18) of the Ordinance?,
(6) Whether on facts and circumstances of the case, the Tribunal was right in treating a bank "transfer" entry (i.e. transaction within the banks without cash involvement) as a cash loan falling within the preview of section 12(18) of the Ordinance?
(7) Whether on the facts and circumstances of the case, the provision of section 12(18) are applicable where it has been proved that the transaction was made on the specified date through bank?
(8) Whether on the facts and circumstances of the case, amount neither having been declared nor shown as loan can be treated as loan by the taxing authorities for the purpose of section 12(18)?
(9) Whether on the facts and circumstances of the case, had the Tribunal jurisdiction to remit the case to the Commissioner of Income Tax (Appeals) to record his finding on the issue of "Sale Promotion Expenses"?
(10) Whether on facts and circumstances of the case, when the Tribunal has failed to record any reasons to substantiate its finding, the learned Tribunal was justified in upholding the disallowance out of the profit and loss account expenses with the use of stock phrase that "the addition made out or profit and loss account under the head telephone and postage, printing and stationery and miscellaneous are reasonable and therefore call for no interference?
2. The appellant is a private limited company and during the assessment year in question viz. 1997-98 derived income from a travel agency. As against declared net loss of Rs.21,719, by way of the assessment order, dated 25-3-1998 the Assessing Officer computed the total income for the year at Rs.15,00,829. In the process an addition of Rs.10,12,000 as deemed income was made by invoking the provisions of section 12(18) of the late Ordinance. That amount, according to the Assessing Officer, was received by the company on 2-4-1997 as temporary loan in cash which attracted the said provisions of the late Ordinance. The assessee failed both before CIT(A) as well as the learned Tribunal.
3. All three forums, the Assessing Officer, learned CIT(A) and the learned Tribunal refused to accept the contention of the assessee that the amounts added towards income under the said provisions of the Ordinance in fact concerned the account maintained by the Chief Executive of the assessee-company for payments received by him directly from his personal clients for issuance of tickets. It was explained that the Chief Executive maintained two different accounts, one in which the payments were received and the other reflected the issuance of tickets. According to the above three forums, the amounts having been received without cross cheques the said provisions of the late Ordinance were attracted to the facts in hand.
4. After hearing the learned counsel for the parties we will readily agree with the learned counsel for the appellant that the issue raised in questions Nos. 1 to 8 as reproduced above already stands resolved against the revenue in our judgment reported as in re: Messrs Micropak (Pvt.) Ltd. v. Income Tax Appellate Tribunal, Lahore and 2 others (2001 PTD 1180). In that judgment recorded by this Bench it was inter alia held that an addition of the kind could not have been made unless the disputed amount was claimed as a loan by the assessee. Since admittedly the amount added by invoking provisions of section 12(18) of the late Ordinance was not claimed as a loan by the assessee company, the addition of the kind could not have been made. Also we had expressed the view that no addition could be made nor the defence taken by the appellants tax payers rejected without recording a finding of fact that these sums were injected in the business and were used as capital, circulating or otherwise. In other words the explanation made by the assessee could have been demolished only by ruling that the alleged amounts introduced in the accounts of the company were factually used in the business and therefore, could be treated as "loan" taken for catering the capital needs of the company. The exercise has admittedly not been done in the case in hand.
5. Therefore, for the various reasons recorded in the aforesaid judgment, we will return a negative answer to questions Nos.1 to 8. The questions Nos.9 and 10 are not pressed by the learned counsel for the appellant.
S.A.K./D-10/LQuestions answer.