VS, 2009 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 996 (2008)

Income Tax Ordinance (XXXI of 1979)---

----Ss.80C(2)(a)(i) & 143-B---Tax on income of certain contractors and importers-Software engineering services---Assessment was framed in a manner that receipts claimed to be covered under the normal tax regime were taken as chargeable under presumptive tax regime under S.80C of the Income Tax Ordinance, 1979 and created tax demand @ 5% on local sales---Assessee's contention that receipts were as a result of software engineering services which did not fall in the presumptive tax regime but were liable to be charged under normal tax regime but such contention was turned down by urging that providing software services were other than the payments on account of services rendered---First Appellate Authority directed to charge tax on local receipts under normal law by excluding it from presumptive tax regime---Validity---Provisions of law exactly supported the contentions of assessee that the services rendered in software engineering was not covered within the presumptive tax regime as such services were other than specified therein---Other factors also proved that the treatment accorded by the department being inconsistent with exactly identical business in which the department had itself made the taxability under normal tax regime for exactly similar nature of receipts---Department had itself issued exemption certificate, exempting the assessee from tax deduction, the payments made to the assessee as recipient, thus accepted the taxability under normal tax regime---Order of First Appellate Authority was upheld by the Appellate Tribunal and departmental appeal being devoid of merit, was dismissed.

(2005) 91 Tax 263 ref.

Systems (Pvt.) Ltd. (NTN 07-054707331); 2005 PTD (Trib.) 668 and ITAT's Order, dated 7.1-2006 in I.T.A. No. 6875/LB of 2004 rel.

Dr. M. Akram Khan, D.R. for Appellant.

Abdul Hameed Ch., F.C.A./A.R. for Respondent.

Date of hearing: 3rd June, 2008.

ORDER

EHSAN-UR-REHMAN, (JUDICIAL MEMBER).---This depart-mental appeal is directed against first appellate order, dated 29-3-2006 recorded by the learned CIT/WT, Appeals Zone-IV, Lahore pertaining to the assessment year 2002-2003.

2. Relevant facts in brief are that income tax return for income chargeable under the normal tax regime and the prescribed statement under section 143-B for the presumptive tax regime were duly filed. The assessment was framed in a manner that the receipts claimed to be covered under the normal tax regime were taken as chargeable under the presumptive tax regime under section 80C, thus created tax demand Q 5% on local sales of Rs.98,18,800. The contention of the assessee that receipts are as a result of software engineering services which do not fall in the presumptive tax regime but are liable to be charged under the normal tax regime was turned down by contending that providing software services are other than the payments on account of services rendered.

3. The learned First Appellate Authority has allowed the relief as claimed with directions of charging to tax the local receipts under the normal law by excluding it from the presumptive tax regime. Recording of such directions has brought the department in appeal before us. The learned D.R. has submitted, that by excluding the rendering of software services from the scope of normal tax regime is not legally proper. The contention that from impugned year the charging of local receipts under presumptive tax regime is legal and proper, in reply when his attention was drawn to the express provisions of section 80C(2)(a)(i) which there is exclusion clause by specifying it as other than the professional services rendered by doctors, engineers, lawyers, Accountants, Auditors, Architects, Advisors and Consultants etc. So as to whether keeping in view such ousting provisions, the providing of software services is duly covered in the "other than" categories also specified in section 80C(2)(a)(i). No substantial reply was given. The learned A.R. firstly referred to order of this Tribunal cited as (2005) 91 Tax 263 (Trib.) to support the stance of taxability under the normal law. The learned A.R. also produced a photocopy of exemption certificate issued by Commissioner of Income Tax exempting deduction of tax for the payments on account of software system and related services to the respondent assessee.

4. The learned A. R. argued that in the preceding and succeeding years, such local receipts have been charged to tax under the normal law. Thereafter, the learned A.R. has submitted that, treatment accorded to the respondent assessee by the department was exceptionable because in the case of other exactly and similar types of business i.e. Systems (Pvt.) Ltd. (NTN 07-05-1707331), in this very impugned order, such receipts have been taxed under the normal law. The learned A.R. produced before us copies of the following orders:--

(i) Assessment Order, dated 30-6-2003 for the assessment year 2001-2002 in respect of the instant respondent-assessee;

(ii) Assessment Order, dated 30-6-2003 for the assessment year 2001-2002 in respect of the instant respondent-assessee;

(iii) Assessment Order, dated 30-5-2003 for the assessment year 1999--2000 in respect of the instant respondent-assessee;

(iv) Assessment Order for the assessment year 2002-2003 in respect of Messrs Systems (Pvt.) Ltd. Lahore having NTN 07-05-01707331;

(v) 2005 PTD (Trib.) 668;

(vi) 1TAT's order, dated 7-1-2006 in I.T.A. No. 6875/LB of 2004 for the assessment year 2001-2002 in the case of Messrs Coopers and Lybrand, Lahore.

5. We have heard the learned representatives and perused the available orders.

6. Apart from the provisions of law which are exactly supporting the contentions of the respondent assessee that the services rendered in software engineering is not covered within the presumptive tax regime as being services other than specified therein. The other factors which are also proving that the treatment accorded by the department being inconsistent, firstly as well as importantly in other cases with exactly identical business at NTN Number 07-05-1707331 in the same assessment year, the department has itself made the taxability under the normal tax regime for the exactly similar nature of receipts; and secondly the department has itself issued exemption certificate, exempting the payers from tax deduction, the payments made to the respondent/assessee as recipient, thus accepting the taxability under Normal Tax Regime. So keeping in view the discussion (supra), we do not feel any reluctance in not upholding the order passed at first appellate stage. The departmental appeal being devoid of merits is dismissed accordingly.

C.M.A./26/Tax (Trib.)Appeal dismissed.