VS Mian Mukhtar Ahmed for, 2008 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1731 (2008)

Income Tax Ordinance (XXXI of 1979)---

----S.80-C---Tax on income of certain contractors and importers---Import of raw sugar for own consumption---Due to technical problem of processing total raw sugar was not utilized in own manufacturing and was sold to other Mills---Assessing Officer observed that raw material sold attracted the levy of tax under S.80-C of the Income Tax Ordinance, 1979 as the assessee did not utilize such raw sugar for personal consumption---Assessee contended that the raw sugar was not marketed as a commercial item and it was not sold in open market but in fact the same was transferred to other Sugar Mills for industrial process and the provisions of S.80-C of the Income Tax Ordinance, 1979 was not applicable---First Appellate Authority, after examining the history of the case, directed for acceptance of the trading accounts but upheld the action of Taxation Officer regarding levy of tax under S.80-C of the Income Tax Ordinance, 1979---Validity---Assessee had history of acceptance of accounts and trading results which had been upheld at the level of Appellate Tribunal---Order of First Appellate Authority with regard to acceptance of trading result was in conformity with the history of the taxpayer and was confirmed by the Appellate Tribunal---With regard to levy of tax under S.80-C of the Income Tax Ordinance, 1979, the emphasis in the provisions is on the word "own consumption"---Taxpayer sold out the total imported raw sugar and not used same for its own consumption which required levy of S.80-C of the Income Tax Ordinance, 1979 as not utilized for own consumption---Order of First Appellate Authority was not interfered by the Appellate Tribunal.

Farrukh Ansari, D.R. for Appellant (in I.T.A. No.614/KB of 2004).

Mian Mukhtar Ahmed for Respondent (in I.T.A. No.614/KB of 2004).

Mian Mukhtar Ahmed for Appellant (I.T.A. No.617/KB of 2004).

Farrukh Ansari, D.R. for Respondent (I.T.A. No.617/KB of 2004).

ORDER

These two cross appeals are filed by the Legal Division, Large Tax Unit and the taxpayer separately against the order of learned CIT(A) in this case. The grounds of appeals taken by the Department are as under:

That the learned CIT(A) has erred in deleting the addition of Rs.23,143,805, made the declared gross profit by estimating sales at Rs.2,069,600,000 and application of GP rate at 10%.

Without prejudice to ground No.2 above, the CIT(Appeals) was not justified in directing to accept the trading results of the assessee. It is contended that declared result were rejected on valid grounds and the defects in the account remained unrebutted.

Without prejudice to Ground Nos.2 and 3, the CIT(A) has erred in relying upon the past history of the assessee to accept the trading results. It is contended that rule of re-adjudication is not applicable to income tax proceedings and every year is an independent year.

2. The only ground of appeal filed by the taxpayer is as under:--

That the learned Commissioner of Income Tax (Appeals) has erred in stating that the sale of imported raw sugar of 26.594 tons is covered, under section 80-C and rightly taxes under section 80-C.

That the facts are that your appellant has imported raw sugar 74,000 tons valuing Rs.1,112,385,066 for its own use but due to technical problems of processing at the same plant along with cane sugar and short recovery, 26,594 ton was not utilized in own manufacturing and therefore, was sold to other Mills. The raw sugar was not marketed as a commercial and it was not sold in open market but in fact the same was transferred to other Sugar Mills for industrial process and therefore, the provisions of section 80-C of the Repealed Income Tax Ordinance, 1979 is not applicable. The Assessing Officer be kindly directed not to tax the sale of raw sugar valuing Rs.469,384,499 under section 80-C.

3. Brief facts of the case are that the taxpayer is a public limited company running a Sugar Mill and is involved in the production and sale of sugar. During the year under consideration the taxpayer also imported raw sugar from abroad for necessary processing and sale as well. During the year under consideration the taxpayer filed return of income declaring loss of Rs.28,28,912 which return was subsequently revised and revised return was filed declaring loss of Rs.1,38,8,772. Various notices were issued by the Taxation Officer and assessment was finalized by estimating sales and application of G.P. rate and making other necessary additions. The Taxation Officer also discussed the import of raw-material by the taxpayer and found that out of the total raw-material imported raw sugar of Rs.26,594 ton attracted the levy of tax under section 80-C as the taxpayer did not utilize this sugar for the personal consumption. The taxpayer went to appeal before the learned CIT(A) who after examining the case history of the taxpayer directed for acceptances of the trading accounts but upheld the action of Taxation Officer regarding levy of tax under section 80-C. It is against this that the department as well as the taxpayer has filed the appeals. The taxpayer agitates levy of Tax under section 80-C and the department agitates against the acceptance of result of the taxpayer by the learned CIT(A).

4. At the time of hearing Dr. Farrukh Ansari, appeared on behalf of the department and Mr. Mian Mukhtar appeared on behalf of the taxpayer.

5. The taxpayer has history of acceptance of account and trading results which has been upheld at the learned tribunal level also as such the order of the learned CIT(A) with regard to the acceptance of trading results is in conformity with the history of the taxpayer and is confirmed.

Insofar as the plea of the A.R. of the assessee is concerned regarding levy of tax under section 80C of the Income Tax Ordinance, 1979, it would be appropriate to reproduce the relevant section 80-C along with its proviso.

(2) The amount referred to in subsection (1) shall be the following namely:

(a) Where the person is a resident.

(i) the amount representing payments on which tax is deductible under subsection (4) of section 50, other than payments on account of services rendered [by doctor, 'lawyers, accountants, auditors, architects, surveyors, actuaries, engineers, advisors and consultant];

[(ia) the amount representing payments from which tax .is deductible under subsection (4-A) of section 50].

6. The reading of the above section reveals that the emphasis in this proviso is on the word "own consumption". The taxpayer had imported a total quantity of 74,000 Tons out of which 26594 Tons were sold out and not used for own consumption, this therefore, does requires levy of 80(C) on the sugar which was not utilized for own consumption. We have heard the parties and examined the legal and factual position. The order of the learned CIT(A) calls for no interference and is upheld.

7. The appeals succeed to the extent discussed above.

C.M.A./56/Tax(Trib.)Order accordingly.