VS, 2010 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 734 (2009)

Income Tax Ordinance (XXXI of 1979)---

----S.62---Assessment on production of accounts, evidence etc.--Transport business---Receipt from Pakistan and Northern Areas---Proportion of---Re-assessments were finalized by adopting 50% receipts from Pakistan and 50% from Northern Areas---First Appellate Authority directed to adopt receipts equal to 35% on account of transport activities etc,. carried on by the taxpayer in Pakistan and the same ratio should also be adopted for allowing expenses, making add backs etc.---Validity---Exact formula of assessment was calculation on the basis of distance, because receipts were proportionate to distance---Receipts from distance covered in Pakistan were taxable and in the same proportion expenses were to be allowed also---If a vehicle departs from a city/point A and its ultimate destination was point B situated in Northern Areas, the receipts of distance covered in Pakistan were to be computed---Similarly vice versa, if a vehicle starts its journey from Northern Areas and goes to any destination in Pakistan, same formula of receipt from respective distance was to be applied-Orders of both the authorities below were vacated and sent the case back to Assessing Officer for fresh adjudication.

Zahid Hussain, A.C.M.A. for Appellant (in I.T.As. Nos.70/IB to 74/IB of 2009).

Tariq Iqbal, D.R. for Respondent (in I.T.As. Nos.70/IB to 74/IB of 2009).

Tariq Iqbal, D.R. for Appellant (in I.T.As. Nos.148/IB to 152/IB of 2009).

Zahid Hussain, A.C.M.A. for Respondent (in I.T.As. Nos.148/IB to 152/IB of 2009).

ORDER

These ten cross-appeals; five each by the assessee and the Department are contested against the combined Order Nos.226 to 230 dated 16-12-2008 passed by the learned CIT(A-I), Islamabad for the titled years on the following common grounds:-

Assessee's Appeals

"(i) That the learned CIT(A) was not justified to order assessment on percentage basis, when actual route wise accounts are maintained and acknowledged by CIT(A).

(ii) That the learned CIT(A) was not justified to apply percentage of 30% on receipts being Pakistan source for all the years under appeal, as percentage of Pakistan source receipts changes every year.

(iii) That the learned CIT(A) has not mentioned in his order how the figure of 30% has been revised at.

(iv) That the learned CIT(A) was not justified to allow expenses on percentage basis when route wise expenses are maintained.

(v) That the learned CIT(A) was not justified to tax cargo bookings (Transportation of food grains) are awarded and paid in Northern Areas of Pakistan and are not taxable in Pakistan.

(vi) That the learned CIT(A) has not given any findings about other "income generated in Northern Areas of Pakistan.

Department's Appeals

"(i) That the learned CIT(A) was not justified in directing to adopt receipts equal to 30% on account of transport activities, etc. carried on by the taxpayer in Pakistan and the same ratio should also be adopted for allowing expenses, making add backs etc. whereas, according to comparative figures worked out by the Assessing Officer receipts from Pakistan based operations constitute greater than 60% of the total receipts.

(ii) That the assessing officer has already been allowed sufficient relief on account of income while framing re-assessment as compared to original assessments.

2. Brief Facts leading to these appeals are that the assessee-Company is wholly owned by Federal Government of Pakistan, engaged in providing transportation facilities in Northern Areas and Rawalpindi. Original assessments for all the years under consideration were made as per following details:-

Being aggrieved the assessee challenged original assessment orders by filing appeal before the learned CIT(A) who confirmed the original assessment orders. The taxpayer then filed, further appeals before the learned ITAT who vide its orders in I.T.As. Nos.11 to 16/IB/2006 and I.T.A. No.529/IB of 2006 dated 23-12-2006 remanded the case back to the Taxation Officer for fresh proceedings. Re-assessments were finalized through the impugned orders by adopting 50% receipts from Pakistan and 50% from Northern Areas. This treatment of the Assessing Officer was challenged before the learned Commissioner of Income Tax (Appeals) who after discussing the detail facts of the case directed the Taxation Officer to adopt receipts equal to 30% on account of transport activities etc. carried on by the Taxpayer in Pakistan. The learned Commissioner Appeals also directed the Assessing Officer the same ratio should also be adopted for allowing expenses, making add backs etc. Being dissatisfied, both the assessee as well as the Department have come up in cross-appeals before the Tribunal.

3. The learned AR of the assessee contends that the learned CIT(A) was justified to order assessment on percentage basis when actual route wise accounts are maintained and acknowledged by the Commissioner of Income Tax (Appeals). He further contends the Commissioner (Appeals) was not justified to apply percentage of 30% on receipts being Pakistan source for all the years under appeal as percentage of Pakistan source receipts changes every year and he did not mention any reason how the figure of 30% had been arrived at. The learned AR also contends the learned First Appellate Authority was not justified to allow expenses on percentage basis when route wise expenses are maintained and that he was it correct to tax cargo bookings (Transportation of food goods) are awarded and paid in Northern Areas of Pakistan and not taxable in Pakistan. The learned Commissioner was also not justified to not give any findings about other income generated in Northern Areas of Pakistan. The learned AR prays the appropriate relief may be given to the assessee on the facts and circumstances of the case.

4. On the contrary the learned DR only reiterates the grounds of appeals and contends that the Taxation Officer after discussing the detail facts of the case and after taking lenient view, determined the ratio of receipts and expenses for both Pakistan Areas and Northern Areas at 50%. Hence, the learned CIT(A) was justified in directing to adopt receipts equal to 30% on account of transport activities etc. carried on by the taxpayer in Pakistan and the same ratio should also be adopted for allowing expenses making add backs etc. whereas, according to comparative figures worked out by the Assessing Officer receipts from Pakistan based operations constitute greater than 60% of the total receipts. He prays that ratio adopted by the Assessing Officer on both the counts be restored.

5. We have heard the respective submissions of both parties and gone through the facts of the case. Formula of estimated percentage is not exact methodology of assessment. Exact formula of assessment is calculation on the basis of distance, because receipts are proportionate to distance. Receipts from distance covered in Pakistan are taxable and in the same proportion expenses are to be allowed also. If a vehicle departs from a city/point A and its ultimate destination is point B situated in Northern Areas, the receipts of distance covered in Pakistan are to be computed. Similarly vice versa, if a vehicle starts its journey from Northern Areas and goes to any destination in Pakistan, same formula of receipt from respective distance is to be applied. I also remember that even FBR has also directed to make the assessment accordingly. In these circumstances we vacate the orders of both the officials below and set aside the case back to the Assessing Officer for fresh adjudication.

6. As a result, all the cross appeals stand disposed of accordingly.

C.M.A./175/Tax(Trib.)Order accordingly.