2010 P T D (Trib.) 541
[Income-tax Appellate Tribunal Pakistan]
Before Jawed Masood Tahir Bhatti, Judicial Member and Mrs. Zareen Saleem Ansari, Accountant Member
I.T.As. Nos. 93/KB, 94/KB of 2004 and 1332/KB of 2005, decided on 19/10/2009.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss.62 & 50---Assessment on production of accounts, evidence etc.---Disallowance---Commission---Trade discount---Amount paid to, distributor was disallowed by treating the same as commission liable to deduction of tax under S.50 of the Income Tax Ordinance, 1979---First Appellate Authority deleted such addition by treating such commission amount paid by the assessee as trade discount---Department contended that assessee had entered into "Distributorship Agreements" with various concerns across the country and the dealers conduct their business under the logo identifiable with assessee---Word `dealer' signifies that the "dealer" was not a buyer in the ordinary sense of word but that he was the person who sold the assessee's products to the real buyer---Dealer represented the assessee and this arrangement was a test for agent principal relationship within the meaning of Contract Act, 1872---Even if, it was trade discount, then it should reflect in the invoices/ledgers---Assessee itself described the transaction as "commission" in the agreement---Validity---Assessee failed to substantiate his claim with documentary evidence i.e. sale invoices and ledger account in which the discount amount had been reflected---If it was a trade discount then it should be reflected in the separate Ledger Account---Ledger Account did not reflect the trade discount, the claim of the assessee could not be accepted---No separate account was being maintained by the assessee and the substantial amounts of commission were paid in lump-sum---Assessee had indulged in transactions within the meaning of "commission" and failed to deduct tax under S.50 of the Income Tax Ordinance, 1979---Assessee with collusion of distributor had devised to evade tax, which could not be approved---Such tax evasion mechanism i.e. branding the transaction as trade discount could not be approved---Court was bound to implement the law in letter and sprit---Amount paid was commission---First Appellate 'Authority was not justified in treating the same as `trade discount' and its order was not sustainable in the eyes of law---Order of First Appellate Authority was ,vacated and orders of the Taxation Officer were restored on this ground.?
1994 PTD (Trib.) 1278 not relevant.
(b) Words and Phrases---
----`Commission'---Word "commission" generally signifies disbursement of an amount relatable to the amount involved in the transaction--Most significant character of `commission' is its receipt or lump sum payment in cash or in any other form to be categorized as "commission".
(c) Income Tax---
----Res judicata principle of---Applicability---Scope---Past history---Contention that in the preceding as well as in the subsequent years no such treatment was accorded could not be accepted as principle of res judicata would not apply in income tax proceeding as every assessment year was an independent proceeding and was decided on its own merit. ?
1965 PTD 283; 1992 PTD 523 and 2001 PTD 3090(b) rel.
(1966) 14 Tax 161 and 2002 PTD (Trib.) 769 not relevant.
(d) Income Tax---
---Profit and loss expenses---Element of personal and non-business expenses---Add backs---Deletion of---Validity---Deletion of add backs out of sundry and miscellaneous and printing and stationery was not justified as element of personal and non-business nature could not be ruled out---Keeping in view the nature and volume of business the add backs under such heads seemed be justified and the order of First Appellate Authority on this ground was vacated and the order of Taxation Officer was maintained by the Appellate Tribunal.?
(e) Income Tax---
----Bad debts---Deletion of disallowance---Validity---First Appellate Authority was not justified in .deleting such disallowance as no legal efforts had been made by the assessee to recover the amount so that the debts could not be held to be bad and irrecoverable---In absence of proper efforts to recover the same the disallowance made by the Taxation Officer was restored and the order of First Appellate Authority was vacated by the Appellate Tribunal.?
(f)Income Tax ordinance (XXXI of 1979)---
---Ss. 62 & 2(24)---Income---Connotation---Assessment on production of accounts, evidence etc.---Voluntary contribution from associated foreign concern---Taxation of---Assessee contended that voluntary contribution was not received under any statute or contractual obligation; that payment was benevolent and constituted a gesture of goodwill on the part of foreign company to help assessee to improve its financial position and receipt was in the nature of a mere windfall; that it could not be said that voluntary contribution had a character of a revenue receipt; that Taxation Officer was not justified in treating the voluntarily contribution as income and that all receipts could not be income for the purposes of income tax statutes---Validity---Word "income" was not exhaustive but was merely inclusive having wide significance---Any sum which may be deemed to be income or income accruing or arising or received in Pakistan may be construed as income-- Term "income" could not be construed in a narrow and pedantic sense---Voluntarily contribution from associated undertaking was declared as income in the audited accounts whereas it was excluded by the assessee from the income in the computation of income---Such conduct of assessee could not be approved----Assesee could not take hot and cold in same breath---Further, such voluntary contribution was only supported by a photo copy of credit advice of bank and it was not supported by audited statement of accounts of foreign donor---There was a nexus between the receipt and the trading of foreign donor, as such "contribution" was liable to tax under the Income Tax Ordinance, 1979---Order of the First Appellate Authority was vacated and that of Taxation Officer was restored by the Appellate Tribunal.
Mrs. Samina Ayub Khan v. C.I.T., Rawalpindi PLD 1981 SC 85 rel.
1991 SMR 2374 = 1991 PTD 999; 1962 46 ITR 144; 1970 75 ITR 191; 1959 35 ITR 339; I.T.A. No.1973/KB of 1993-94 and 46 ITR 590 rel.
(g) Income Tax Ordinance (XXXI of 1979)---
----S.2(24)---Income---Term "income" which had been defined in S.2(24) of the Income Tax Ordinance, 1979 is inclusive definition---Term income not only includes those things which are included in S.2(24) of the Income Tax Ordinance, 1979, but also covers all such things which the term signifies according to its general and natural meaning.?
(h) Income Tax Ordinance (XXXI of 1979)---
----S.2(24)---Income---Explanation of----Income need not necessarily but the recurrent return from -a definite course, though it is generally of that character; it may consist of a series of separate receipts as for instance happens in the case of professional earnings---Question whether a particular kind of receipt is income or not would depend for its answer on the peculiar facts and circumstances of the case.?
(i) Interpretation of statues---
----Construction of law---Principles---Court must make every effort not to declare as redundant any part of statute and must, if necessary, stretch language so as to give the same meaning to justify its context and object---Law should be construed in accordance with intention expressed in the law.?
(j) Income Tax---
----Addition-Profit & Loss account--.Travelling and conveyance expenses---Claim of expenses on the basis of cash vouchers which were not open to verification---Certain expenses could not be termed as expenses---First Appellate Authority was not justified in deleting such add-back made out of travelling and conveyance expenses. ?
Farrukh Ansari and Rehmatullah Wazir, D.Rs. for Appellant.
Muhammad Naseem for Respondent.
ORDER
These three appeals have been filed by the department against two separate orders Nos. 1, 2 dated 7-11-2003 involving assessment years 2001-2002 and 2002-2003 and order No. 35 dated 25-7-2005 involving Tax Year 2003. These are taken up year-wise as under:
I.T.As. Nos. 93, 94/KB of 2004 (Assessment year 2001-2002 and 2002-2003) under section 62 of the Income Tax Ordinance, 1979
For these years the department has taken the following common grounds of appeal:-
"(1) That the learned C.I.T.(A) has erred in deleting the addition of Rs.209,210,000 made under section 24(c) by holding that the amount in question in the nature of a trade discount and not a commission.
(2) That the learned C.I.T.(A) has erred in deleting the disallowance of Rs,1,031,900 made out of Repair and Maintenance Expenses.
(3) That the learned C.I.T.(A) has erred in deleting the disallowance of Rs.617,500 made out of Sundry Expenses.
(4) That the learned C.I.T.(A) has erred in deleting the disallowance of Rs.3,603,500 made out of Advertising, Samples and Sales Promotion Expenses.
(5) That the learned C.I.T.(A) has erred in deleting the disallowance of Rs.378,450 made out of Printing and Stationery Expenses.
(6) Without prejudice to grounds Nos.4 to 5 above, the C.I.T.(A) has erred in deleting these disallowances on the basis of past history when every assessment is an independent entity."
2. For the assessment year 2002-2003 the department has also agitated the deletion of add back of Rs.4,97,000.
3. Brief facts of the case are that the assessee/respondent is a Private Limited Company and deriving income from manufacturing and sale of agro-chemicals. Return of income for the assessment year 2001-2002 has been filed under section 55 declaring income at Rs.31,456,105 along with statement under section 143-B showing commercial imports at Rs.46,843,331. Notices under sections 61 and 62 of the Income Tax Ordinance, 1979, were issued and complied by the assessee. Vide notice under section 62 of the Income Tax Ordinance, 1979 the assessee was confronted inter alia issues of discount and rebate and so also disallowances out of repair and maintenance, sundry expenses, advertisement and samples .and sales promotion expenses and printing and stationery expenses. The reply of the assessee was found unsatisfactory by the Taxation Officer who while finalizing the assessment under section 62 of the Income Tax Ordinance, 1979 disallowed the amount paid to the distributor by treating the same as commission which is liable to deduction of tax under section 50 of the Income Tax Ordinance, 1979. Further, the disallowances were also made out of Profit and Loss Account Expenses. Being aggrieved from the order of the Taxation Officer the assessee preferred appeals before the learned C.I.T.(A) who vide order mentioned supra, treated the commission amounts paid by the assessee as trade discount and deleted the additions made by the Taxation Officer for both the years under consideration.
4. For the Tax year 2003 the assessee/respondent has assailed the order of the Taxation Officer passed under section 221(1) of the Income Tax Ordinance, 2001 before the learned C.I.T.(A) on the grounds of non-deduction of Rs.49,674,000 from income allegedly received from associated undertaking and disallowances of Rs.2,069,000 made out of Travelling, Conveyance and Entertainment expenses. Being aggrieved with the order of the Taxation Officer the Taxpayer filed appeal before the learned C.I.T.(A) and the learned C.I.T.(A) allowed the claim of deduction of Rs.49,674,000 in the computation of income being voluntary contribution received from associated undertaking. The learned C.I.T.(A) has also deleted the disallowances out of Travelling and Conveyance and Entertainment expenses vide Order No.35 dated 25-7-2005. Hence, present appeals have been filed by the department.
5. Mr. Farrukh Ansari and Mr. Rehmatullah Wazir, the learned Representatives for the Department have appeared on behalf of the Department and supported the order of the Taxation Officer.
6. Regarding treating the amounts paid to the dealer it was submitted by the learned DRs that the Taxation Officer has rightly treated the same as commission. The assessee/respondent has entered into "Distributorship Agreements" with various concerns across the country and the dealers conduct their business under the logo "Sohni Dharti" which is identifiable with assessee/respondent. It was further g submitted that the very word dealer signifies that the "dealer" is not a buyer in the ordinary sense of the word but that he is person who sells the assessess's products to the real buyer. The dealer represents the company and this arrangement is a test for agent-principal relationship Within the meaning of Contract Act. For the sake of argument even if it was trade discount, as alleged by the learned counsel for the respondent/ assessee then it should reflect in the invoices/ledgers. It was further argued on behalf of the department that the assessee/respondent itself described the transaction as "commission" in the "Agreement" vide para.7 which speaks post sales incentives on achievement of more than 75% of sales and it is payable in bulk. It was vehemently contended that reliance placed by the C.I.T.(A) on the judgment of the Tribunal reported as 70 Tax 23 (Trib.) clearly speaks that the substance of the Agreement requires prime consideration. In the Agreements the conduct of the dealer is manifest which shows relationship of assessee/respondent with dealer as that of the Principal and Agent. Moreover, the invoices do not reflect discount. Therefore the Taxation Officer was justified in making the additions under section 24(c) of the Income Tax Ordinance, 1979 by treating the same as commission on which tax has to be deducted under section 50 of the Income Tax Ordinance, 1979.
7. On the other hand, Mr. Mahamad Naseem Advocate, the learned counsel for the respondent/assessee has supported the order of the learned C.I.T.(A). He assailed the orders of the Taxation Officer on the same lines as he did before the learned C.I.T.(A). He has argued that in Pakistan there is a common trade practice to enter into Agreement by way of dealership Agreement which does not mean that there is a relationship of agent-principal within the meaning of the Contract Act. It was further vociferously argued that the assessee/respondent that in the past no such disallowance was made by the department and assessee's version and it is well settled law that assessee's past history is the best guide line for determining the fact. Further reliance was placed on the case laws reported as (1966) 14 Tax 161 (Karachi H.C.) and 2002 85 Tax 65 (SC of India) (sic). Referring to Tax. Year 2003 the learned counsel submitted' that the case was selected for Total Audit but in that year too, the department accepted version of the assessee-respondent and no such addition was made. Therefore, assessee enjoys acceptance of treating the same as trade discount. The parties to whom trade discount has been paid are all companies or firms of repute, registered with the Income Tax Department and -they have paid tax on these trade discounts invariably. He further submitted that the Tribunal in case law reported as 1994 PTD (Trib) 1278 has knocked down the addition made by treating the 15% deduction allowed to the distributor from the sales figures as a trade discount and was not a commission and held that provisions of sections 50(4A) and 52.were not-attracted in case of assessee-company. He, therefore, pleaded that same treatment may be accorded to the assessee-respondent as the facts are being in line with the reported judgment of the Tribunal which covers all the points of the case.
8. Regarding deletion of disallowances out of Repair & maintenance expenses, Sundry Expenses, Advertisement and Samples Promotion Expenses and Printing and Stationery, the learned D.Rs have supported the orders of, the Taxation Officers for both the years. It was argued that the disallowances were rightly made by the Taxation Officers either keeping in view the history of the case or personal and non-business use. Therefore, the learned C.I.T.(A) was not justified in deleting these add backs.
9. Mr. Muhammad Naseem, the learned counsel for the assessee/respondent on the other hand, argued that the learned C.I.T.(A) has rightly deleted the above disallowances as the same are not excessive and keeping in view the nature and quantum as well as the past history of the assessee' produced before us.
10. We have heard the learned representatives of both the parties and have also gone through the record of the case.
11. The arguments of the learned A.R. for the assessee-respondent are found factually and legally incorrect for the following reasons:-
?From the conduct of the business of the assessee-respondent with dealer it is unambiguously clear that the dealer acts as an agent who act on behalf of principal i.e. assessee-respondent and dealer sells the assessee-respondent's products to actual buyers.
?The assessee-respondent Agreement with its dealer further envisages vide para 7(a) that "the distribution commission shall be fifteen percent (15%) of Trade Price."
?The 'dealer' uses the same logo i.e. "Sohni Dharti" as used by the assessee-respondent.
?The Agreement further provides vide para. 12 that the Dealer is bound to sell the only products of the assessee-respondent and will not be allowed to sell the products of the assessee? respondent to other dealers of same or other territories/region. Therefore, it is unequivocally clear that the dealer is not an independent dealer or buyer rather it is acting on behalf of the principal and there exists relationship of agent and principal. The violation of above terms may entail cancellation of the Agreement.
?From the foregoing facts and terms of agreement it is established that there remains relationship of an Agent and Principal between the assessee-respondent and the dealer sells the products of the assessee-respondent after taking commission.
?The learned counsel for the assessee-respondent has failed to substantiate his claim with documentary evidence i.e. Sale invoices and ledger account in which the discount amount has been reflected.
?If it is trade discount then it should be reflected in the separate Ledger Account. The Ledger Account does not reflect the trade discount therefore, the claim of the assessee-respondent cannot be accepted.
?No separate account is being maintained by the assessee-?respondent and the substantial amounts of commission are paid in lump-sum.
?As regards reliance by the learned counsel for the assessee?-respondent on the case law reported as 1994 PTD (Trib.) 1278 does not lend support to the assessee-respondent. In the case relied upon by the A.R. of the respondent, it has been held by the Tribunal that the substance of the transaction should be kept in mind. Undoubtedly in the case in hand the assessee-respondent has indulged the transactions which in our opinion completely fall within the scope of "commission".
?It is also unequivocally clear that the payment of a sum is "commission" as visualized in section 50(4A) of the Income Tax Ordinance, 1979 consequently hit by the mischief of the provision. The kind of payment is such which squarely falls within the scope of "commission". The word "commission" generally signifies disbursement of an amount relatable to the amount involved in the transaction. The most significance character of commission is its receipt or lump sum payment in cash or in any other form to be categorized as "commission".
?As far as plea of the assessee-respondent that in the proceeding as well as in the subsequent years no such treatment was accorded by the department, the same cannot be accepted as E principle of Res Judicata does not apply in Income Tax as every assessment year is an independent proceedings and is decided on its own merit. There is no dearth of case law on this principle of law, if one can need the case laws reported as 1965 PTD 283, 1992 PTD 523 and 2001 PTD 3090(b) can be referred.
12. From the foregoing reasons we are of the considered opinion F that the assessee-respondent has indulged in the transactions within the meaning of "commission" and the assessee-respondent has failed to deduct tax under section 50 thereon. It seems the assessee-respondent with collusion of distributor has devised to evade tax, which cannot be approved. Such tax evasion mechanism i.e. branding the transaction as trade discount cannot be approved. The Court is bound to implement the law in letter and sprit.?????
13. In view of what is discussed above, we have arrived at irresistible conclusion that the amounts paid for both the years is commission. Therefore, the learned C.I.T.(A) was not justified in treating the same as trade discount and his order is not sustainable in the eyes of law. Hence, the orders of the learned C.I.T.(A) is vacated and orders of the Taxation Officer are restored for both the years under consideration on this ground.
14. As regards deletions of additions out of Profit and Loss Account expenses we find that the Taxation Officer has made the disallowance/disallowances out of Advertisement expenses for the year 2000-2001 which was deleted by the C.I.T.(A) and no appeal has been filed by the department against such deletion. Therefore, addition under the head Advertisement Expenses has rightly been deleted by the C.I.T.(A) for the years under consideration. The order of the learned C.I.T.(A), therefore, does not require any interference which is hereby maintained for both the years under consideration on this issue.
15. The deletion of add backs out of Repair and Maintenance, by the learned C.I.T.(A) is maintained. However, deletion of add backs out of Sundry & Miscellaneous and printing and stationery is not justified as element of personal and non-business nature cannot be ruled out. Further keeping in view the nature and volume of business the add backs under these heads made by the Taxation Officer seem to be justified and the order of the learned C.I.T.(A) on this ground is vacated and the order of the Taxation Officer is maintained for both the years under consideration in this respect.
16. As regards disallowing of Rs.4,97,000 out of bad debts relating to assessment year 2002-2003, we are of the view that the learned C.I.TT.(A) was not justified in deleting the same. No legal efforts have been made by the assessee-respondent to recover the amount so that the debts could not be held to be bad and irrecoverable. In the absence of proper efforts to recover the same the disallowance made by the Taxation Officer for the year 2002-2003 is restored and the order of the learned C.I.T.R.(A) is vacated.
17. Both the departmental appeals stand disposed of as above.
ITA No.1332/KB of 2005 (Tax year 2003)
under section 221(1) of Income Tax Ordinance, 2001
18. For this year the action of the learned C.I.T.(A) has been assailed on the basis of following grounds of appeal:--
(1) That the learned C.I.T.(A) has erred in allowing claim of deduction of Rs.49,674,000 in respect of `voluntary contribution from associated undertaking'.
(2) Without prejudice to ground No.2, above the C.I.T.(Appeals) has erred in holding that the amount of Rs.49,674,000 received "from associated undertaking is not income of the assessee.
(3) That the learned C.I.T.(A) had erred in deleting the dis?allowance of Rs.2,069,000 made out of Travelling Conveyance and Entertainment expenses."
19. Mr. Farrukh Ansari and Mr. Rehmatullah Wazir the learned D.R. have argued the case. It was argued on behalf of the department that the Taxpayer-respondent has claimed an amount of Rs.49,674,000 as 'voluntary contribution from associated undertaking as reduction from taxable, income which is not correct. It was further submitted that the Taxpayer-Respondent with collusion of its associated concern has made arrangements to lessen the legitimate tax liability. It was submitted by the learned D.R. that the definition of term "income" in section 2(29) is inclusive and not exhaustive. Therefore, the term income not only includes those things which are included in section 2(29), but also covers all'' such things which the term signifies according to its general and natural meaning. It was further submitted that the voluntary contribution from foreign Associated undertaking was declared as income in the audited accounts whereas it was excluded from the income in the computation of income. It was further submitted that the claim of voluntary contribution was only supported by a photo copy of credit advice of Citi Bank. It was not supported by the audited accounts of foreign donor company.
20. Mr. Muhammad Naseem, the learned counsel for the Taxpayer-Respondent has supported the order of the learned C.I.T.(A). He has submitted that the respondent received a voluntary contribution from Bayer Corp. Science S.A. The amount was not received under any statute or Contractual obligation which entitled the respondent to claim and receive the said amount. The payment was benevolent and constituted a gesture of goodwill on the part of the 'foreign company to help the respondent to improve its financial position and the receipt was in the nature of a mere windfall. He, therefore, submitted that it thus cannot be said that the voluntary contribution has a character of revenue receipt and the Taxation Officer was not justified in treating the voluntary contribution as income and that all receipts cannot be "income" for the purposes of the income tax statute. The object of the taxing statute is to tax "income" and not receipts. In support of his arguments he placed reliance on the following case laws:
(i) 1991 SCMR 2374 = 1991 PTD 999 (ii) 1962 46 ITR 144 (iii) 1970 75 ITR 191 (iv) 1959 35 ITR 339 and (v) I.T.A. No.1973/KB of 1993-94
21. We have heard the learned representatives of both the sides at length and have also gone through the relevant case laws cited at Bar.
22. From perusal of the record we -find that a huge amount has been received from the Associated Foreign Concern. According to the learned A.R. this amount was received voluntarily without being there any legal obligation or liability upon them to do the same. The associated concern had made payment voluntarily in order to save their international reputation. We are afraid we cannot subscribe with these arguments of the learned counsel for the assessee-respondent. The term "income" which has been defined in section 2(29) of the Income Tax Ordinance is inclusive definition. The term income not only includes those things which are included in section.2(29); but also covers all such things which the term signifies according to its general and natural meaning.
23. The term "income" has been defined in a numerous case laws by the superior appellate forums. The apex Court in a case law reported as 1981 PLD 85 SC, in the case of Mrs. Samina Ayub Khan v. CIT Rawalpindi wherein their lordship have held that "income need not necessarily but the recurrent return from a definite course, though it is generally of that character. It may consist of a series of separate receipt as for instance happens in the case of professional earnings. In the last analysis, the question whether a particular kind of receipt is income or not would depend for its answer on the peculiar facts and circumstances of the case."
24. We may further observe that the word "income" is not exhaustive but is merely inclusive having wide significance. Any sum which may be deemed to be income or income accruing or arising or received in Pakistan may be construed as income. The term "income" cannot be construed in a narrow and pedantic sense. The alleged voluntary contribution from Associated undertaking was declared as income in the audited accounts whereas it was excluded by the assessee?-respondent from the income in the computation of income. This conduct of the taxpayer-respondent cannot be approved. The taxpayer-respondent cannot take hot and cold in same breath. We may further observe that even the alleged claim of voluntary contribution was only supported by a photo copy of credit advice of Citi Bank. It was not supported by the audited statement of accounts of foreign donor company.
25. As far as case laws relied upon by the learned counsel for the Taxpayer-Respondent the same do not lend support. The case laws are either distinguishable or irrelevant with the facts of the case. In the first case law relied upon by the learned counsel reported as 64 Tax 37 (SC Pak) the losses borne by the foreign shareholders hence they are legally bound to make the losses suffered by the company. However, in the instant case no loss was suffered by the taxpayer-respondent. Further the case law relied upon by the assessee-respondent revolves around exemption under section 4(3)(vii) of the Income Tax Act in respect of causal receipts. Hence the case law relied upon by the learned counsel is entirely distinguishable. As far as case law reported as 46 ITR 144 (SC India) CIT v. Messrs Shoorji Vallabhdas & Co. the petition was not decided on merit but departmental reference was dismissed owing to delay and lathes on the part of the department. In the case law reported as 46 ITR 590 (Bombay High Court) the Honourable Court held that if the fund is unutilized and used for non-business purposes like payment of income-tax in the foreign country, there is no profit and the difference in the exchange value could not be assessed to income tax. Hence the facts are entirely distinguishable from the facts of the assessee-respondent's case. Case law reported as 75 ITR 191 (S.C. India) also does not support the view point of the learned counsel as it was held in that case that the receipt which the assessee by mistake credited it to the profit and loss account hence the same was not held to be income of the assessee. The other case laws are also distinguishable and irrelevant.
26. We may further observe that Courts must make every efforts not to declare as redundant any part of statute by law and must, if necessary, stretch language so to give the some same meaning justified to be its context and object. The law should be construed in accordance with intention expressed in law. In this view of the matter we are of the considered opinion that there is a nexus between the receipt and the trading of the company i.e. Bayer Crop Science, as such the "Contribution' is liable to tax under the Income Tax Ordinance. The order of the learned CIT(A) on this ground is vacated and that of the Taxation officer is restored.
?
27. Before parting with this issue we may further observe that the amount received by the Taxpayer-Respondent falls within the category of "income". Just to control and curb this collusive acts the Legislators have enacted section 108 in Income Tax Ordinance, 2001. The purpose of the said section 108 is to discourage the increasing trend of collusive transactions between associates, which are non-arm's lengthy transactions.
28. As regards deletion of add backs out of Travelling was find that the Taxpayer has claimed an amount of Rs.3,39,89,000, the Taxation Officer however, after examining the ledger accounts and copies of vouchers found that the expenses to the tune of Rs.20,00,000 were claimed on the basis of self-made cash vouchers which were not open to verification. The instances of unverifiability with voucher Nos. and date-wise mentioned by the Taxation Officer in his order at pages Nos. 4 and 5. Some of expenses like Vouchers No. 0073 amounting to Rs.2,09,100 again an amount of Rs,2,09,100, and further amounts of Rs.403,132 on 10-11-2002, Rs.60,104, paid vide cash ledger dated 21-11-2002 and Rs.67,041 paid vide cash ledger dated 14-11-2002 cannot be termed as payment to tax by any stretch of imagination as alleged by the Taxpayer and also made the basis for deletion of add back by the learned C.I.T.(A). The learned C.I.T.(A) was not justified in deleting such add back made out of Travelling and conveyance. The order of the learned C.I.T.(A) on this ground is, therefore, vacated and that of the Taxation Officer making add back is maintained. However, the deletion of the add back out of entertainment expenses by the learned C.I.T.(A) is proper and is maintained.
29. The departmental appeal stands disposed of to the extent and manner as indicated above.
C.M.A./168/Tax (Trib.)??????????????????????????????????????????????????????????????????????? Order accordingly.